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UPDATE 4-Reckitt lifts sales view as coronavirus spurs demand for Dettol, Lysol

Tue, 20th Oct 2020 07:08

* Reckitt raises full-year sales outlook

* Products including Dettol, Lysol in demand

* Shares rise 2% in early trade
(Adds detail, analyst comments)

By Martinne Geller

LONDON, Oct 20 (Reuters) - Reckitt Benckiser reported
a much bigger-than-expected rise in third-quarter sales on
Tuesday and raised its full-year outlook, as the coronavirus
pandemic lifts demand for cleaning products such as Dettol and
Lysol.

The British company also said it may achieve its plan to
rejuvenate sales following years of difficulties earlier than
expected.

"While there is still more work to do, I'm pleased to say
that RB today is in much better shape than it was a year ago,"
Chief Executive Laxman Narasimhan, who has been in the role for
a year, told reporters.

He is banking on longer-term elevated use of soap and
disinfectants beyond the pandemic, as well as the roll-out of
products into new countries and areas, such as on public
transport and in hotels.

Reckitt shares were up nearly 2% at 0954 GMT. They had
fallen 8% over the past three months to trade at 23 times
expected 2021 earnings, a discount to European peers, according
to JP Morgan Cazenove analysts.

The company said quarterly sales on a like-for-like basis
rose 13.3%. Analysts on average expected a 9.5% increase,
according to a company-provided consensus.

For the full year, Reckitt now sees a low double-digit rise
in like-for-like growth, up from a prior forecast of high
single-digit growth. It may be able to meet its medium-term
target for mid-single-digit growth a year early. Last year's
growth was just 0.8%.

Third-quarter like-for-like sales rose 19.5% in the hygiene
business, 12.6% in its health business, and 4.1% in its
nutrition business.

While relieving overall pressure on a company that has faced
intense competition for several years, the COVID-19 pandemic is
hurting sales in some areas.

Social distancing has pressured Durex condoms, while the
company said reduced birth rates this year and next should weigh
on its baby formula, which includes Enfamil. Social distancing
is also likely to result in a weak flu season, which will impact
cold remedies like Mucinex, it said.

Despite the strong numbers, Bernstein analysts were cautious
about the medium term, due to "below-average growth prospects
beyond a COVID world ... and the brand-equity pressure implied
in having a new margin target".

Reckitt is preparing to sell some of its personal care
brands, including Veet hair removal cream and Clearasil acne
cream, Reuters reported last month.

Analysts also wonder if Reckitt might eventually sell its
baby formula business, which has struggled since it was acquired
in 2017. When asked about further sector consolidation, CEO
Narasimhan said: "This is an industry we're watching closely ...
but we have nothing new to share".

($1 = 0.7739 pounds)
(Reporting by Martinne Geller; editing by Jason Neely/Keith
Weir/Susan Fenton)

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