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Reckitt Benckiser lifts guidance on hygiene boom

Enthusiasm for disinfectants helped drive up sales, while condoms are also being bought in greater numbers
October 20, 2020
  • High hygiene and health demand drive third-quarter sales growth of 6.9 per cent
  • Reckitt Benckiser now expects net revenue growth in the “low double digits” this year, instead of a high single-digit lift
IC TIP: Buy at 7,384p

Unsurprisingly, the coronavirus pandemic has encouraged most consumers to pay greater attention to their personal hygiene. People are increasingly washing their hands to ward off the virus – more than eight times a day in the UK, according to a July study by Citron Hygiene, compared with five times a day before the pandemic, when nearly half of consumers had never used hand sanitiser. The hygiene obsession has translated into roaring sales growth for Reckitt Benckiser (RB), manufacturer of hygiene, health and nutrition products, which secured quarterly net revenue of £3.5bn.

Hygiene was the group’s main source of revenue growth over the period. Demand for its Lysol disinfectant contributed to a divisional sales uplift of 12.4 per cent, while Reckitt’s Finish dishwashing brand also experienced a boost – a probable outcome of increased working from home and school closures. Reckitt’s health products matched the group’s overall sales growth of 6.9 per cent. Disinfectant brand Dettol, which sits within this grouping, has followed similar trends to the hygiene portfolio. 

But condoms have also helped to spur health product growth. The group has placed sexual health among its priorities for rejuvenating its brand, and as restrictions on social mingling were rolled back in key markets over the summer, Reckitt witnessed an improvement in sales for its Durex condoms. Durex has gained traction in China and India, two target growth markets for Reckitt. The product has been subject to an increased spending programme across the group, and Reckitt recently launched its thinnest condom in China, which has received good early feedback. 

Personal care products like Veet hair removal, which sit within Reckitt’s health bracket, also fared well over the period. Increased homeworking has weighed on some beauty and personal products this year, in a trend that was also observed by Unilever (ULVR) at its half-year results in July. Sales of over-the-counter health products fell by a tenth over the quarter.

There was also a decline in nutrition sales. Reckitt’s infant formula products have been hampered by restrictions on movement, including between Hong Kong and China, while an anticipated fall in birth rates is expected to put pressure on infant nutrition sales next year.

The tightening of restrictions on movement and mingling could claw back Reckitt’s gains in areas such as contraception and personal care. But there’s no sign of dimming enthusiasm for hygiene products, which made up 42 per cent of the company’s net revenues over its third quarter – by far its biggest contributor. Buy at 7,384p.

Last IC View: Buy, 7,648p, 26 Jul 2020