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Reckitt Benckiser gets Q1 lift from strong disinfectant sales, ups FY'20 outlook

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Reckitt Benckiser gets Q1 lift from strong disinfectant sales, ups FY'20 outlook

Reckitt Benckiser Group PLC on April 30 said like-for-like sales in the first quarter of 2020 rose 13.3% on the back of a big jump in disinfectant demand in response to the COVID-19 pandemic and that it expects better performance for the full year than previously forecast.

The British maker of Lysol, Dettol and Harpic said sales rose 13.3% to £3.54 billion on a like-for-like basis and 12.3% on a reported basis, driven by improving market share in its health and hygiene businesses. The company had been expected to report sales of £3.29 billion for the quarter, according to consensus analyst expectations provided by Reckitt.

"We have made an encouraging start on our journey to rejuvenate sustainable growth at Reckitt Benckiser," said CEO Laxman Narasimhan on a call with analysts. "At this early stage of the year, we expect to perform better than our earlier expectations, but would caution against being too positive as there are many uncertainties ahead." The company said it expects to incur higher operating costs, especially in its supply chain, in response to the pandemic.

The company previously guided for 2020 like-for-like sales growth to be higher than the 0.8% achieved in 2019.

Narasimhan added: "The brands most positively affected by COVID-19 are Dettol and Lysol where higher penetration and frequency of use has led to exceptional and sustained growth. Given their exposure, this has mainly benefited North America, parts of Europe and some of our developing markets, including China, where Dettol has a strong presence, and India. Higher penetration has also benefited several of our vitamins, minerals and supplements products where we have seen exceptional growth across South America."

In morning trading on the London Stock Exchange, Reckitt's shares rose 4.9% to 6,718 pence.

The company's hygiene business reported sales growth of 12.8%, powered by double-digit growth in North America, Europe and Latin America. The health business, which made up 61% of revenue in 2019 and includes cough and cold remedies, reported a 13.6% growth in sales. The standout was over-the-counter products, which rose about 33%, led by strong demand for Mucinex in North America and Nurofen in Europe. The laggard was infant and child nutrition, which slipped 1.6% as a result of weaker performance in China.

The company, which beat EPS expectations in 2019, said its medium-term outlook for mid-single-digit organic revenue growth and mid-20s margin by 2025 remained unchanged.

"There are four trends that are shaping our business, which are brought into even greater focus with what is happening around us today," Narasimhan said. "First, urbanization and global warming continue to drive hygiene as the foundation of health. Pressures on state-funded health care are driving demand for self-care to release pressure on health systems. Sexual health and ... our big societal issues that are growing demand for effective protection and related products. And an aging and growing population is driving demand in infant and adult nutrition."

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