* Q1 sales up a record 13.3%
* Forecasts stronger than expected 2020 performance
* Production in some categories ramped up 50%
* Shares up 3.2%
(Adds analyst quote, comparison with peers, shares)
By Siddharth Cavale
April 30 (Reuters) - Reckitt Benckiser achieved
record sales growth in the first quarter and predicted a
stronger than expected performance in 2020 as customers stocked
up on Lysol disinfectants, Mucinex cough syrup and Dettol soap
ahead of the coronavirus lockdowns.
The boom in demand has come as the company had been battling
intense competition in the health and hygiene industry. In
February, Reckitt had announced plans to spend 2 billion pounds
over the next three years to spur growth.
Reckitt's sales increase was also bigger than at Dove soap
maker Unilever and Dawn detergent producer Procter &
Gamble, which also are getting a boost from people buying
more soap during the crisis.
"We have seen strong consumer demand, particularly in March
and April but the split between defensive buying and higher
levels of underlying consumption is unclear," Chief Executive
Laxman Narasimhan said in a statement.
"At this stage, it is uncertain how quickly this will change
in the months ahead," he said. Narasimhan said demand could ease
over the next few months as consumers work through soap and
disinfectant stock in their cupboards.
The company's shares, up 5% so far this year, rose 3.2% in
early trading.
"A blowout first quarter even better than expected with
pantry loading and increasing usage in many of RB's categories,"
Jefferies analyst Martin Deboo said.
Reckitt said its 2020 performance would be better than its
forecast, which called for steady progress towards
mid-single-digit sales growth and adjusted operating margin
declines of about 350 basis points.
First-quarter like-for-like sales rose 13.3%, easily beating
analysts' estimates of 5.3% provided by the company.
The growth marked the strongest sales increase since the
company was formed in 1999 through the merger of Reckitt &
Colman Plc and Dutch firm Benckiser NV.
Like-for-like sales in Reckitt's hygiene business that sells
Lysol disinfectants and Finish dishwashing pods rose 12.8%,
while they rose 13.6% % in its Health business that sells
Mucinex cough syrups and Dettol handwash.
Last week, Reckitt warned people against using disinfectants
to treat the coronavirus, after U.S. President Donald Trump
suggested researchers try putting disinfectants into patients'
bodies.
GROWTH PLAN
CEO Narasimhan's three-year, 2 billion pound ($2.49 billion)
investment plan, unveiled in February, includes cutting costs
and focusing more on Greater China with the aim to return
Reckitt to mid-single digit sales growth.
On Thursday, the company said the plan was underway, but
some investments would be pushed back to start later in the
year.
Investments are being diverted to making more hygiene and
cleaning supplies and buying equipment and raw material, to help
increase production, which in some cases is already up 50%.
In May, for example, the company will produce all the
sanitizer it made in 2019, Narasimhan said.
Reckitt's net revenue rose 12.3% to 3.54 billion pounds in
the three months ended March, beating analysts' average estimate
of 3.29 billion pounds.
($1 = 0.8033 pounds)
(Reporting by Siddharth Cavale in Bangalore; Editing by Sriraj
Kalluvila/ Saumyadeb Chakrabarty/Jane Merriman)
Unilever (ULVR)
