Reckitt's sales beat estimates on higher prices, infant formula

© Reuters. FILE PHOTO: A worker inspects boxes of Reckitt's Dettol handwash at a distributor?s warehouse before loading them onto a truck for delivery to retailers in Mumbai, India, September 17, 2021. REUTERS/Francis Mascarenhas

By Richa Naidu

LONDON (Reuters) - Reckitt Benckiser, maker of Dettol and Lysol cleaning products, on Wednesday marginally beat full-year like-for-like net revenue expectations, helped by higher prices and its nutrition and health businesses.

The company said it would target like-for-like net revenue growth of mid-single digits for 2023, excluding the substantial boost its 2022 sales received from the recall of a rival's infant formula.

Abbott Laboratories (NYSE:ABT) early last year recalled dozens of infant nutrition products in the United States after customers complained of infants contracting bacterial infections.

Reckitt, its biggest rival at the time, ramped up production to fill the supply gap left by Abbott, helping to drive full-year like-for-like net sales growth of about 23% in its nutrition business.

The impact from the shortage added about 17.5% to the unit's growth, Reckitt said.

Reckitt's shares rose 3%.

"Reckitt may have delivered enough this morning," Tineke Frikkee, a fund manager at Waverton Asset Management, said. "The fourth-quarter was ahead of expectations on a strong U.S. cough & cold season."

Frikkee said the rise in Reckitt's stock value also represented a "relief bounce", with shares being weak ahead of earnings because the market had been worried about a rise in interest cost and tax.

PRICE/MIX

Overall, the price/mix for Reckitt's products, which include Nurofen tablets, cold remedy Lemsip and Durex condoms, rose 9.8%, helping the company make up for a 2.2% decline in sales volumes due to its business in North America.

Consumer goods companies, from Procter & Gamble (NYSE:PG) to Unilever (NYSE:UL) and Clorox (NYSE:CLX), have for several quarters raised prices to make up for rising raw material, supply chain and energy costs.

Higher prices have prompted some consumers to shift away from big brands and embrace cheaper private label products made by retailers, including Walmart (NYSE:WMT), Tesco (OTC:TSCDY) and Carrefour (EPA:CARR).

But Reckitt executives said on a call with reporters that commodity costs "have peaked" and that price hikes would be "much" lower this year.

"We think instead of 17%, (input costs) will be somewhere in the single-digit level for 2023," Reckitt's interim Chief Executive Nicandro Durante added.

The company said full-year like-for-like net revenue increased by 7.6%, edging ahead of analysts' expectations of a 7.5% rise, according to a company-provided consensus. Full-year adjusted earnings rose 16.8% to 3.44 billion pounds.

Some analysts and investors were disappointed that Reckitt did not name a new CEO to replace Laxman Narasimhan who surprised the market in September when he said he would step down by the end of the month to lead Starbucks (NASDAQ:SBUX).

"Disappointingly though no news on CEO. We will hear sometime in the first half of this year, which seems very slow," Frikkee said.

($1 = 0.8294 pounds)