(Reuters) – Reckitt Benckiser <RB.L> 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 <ULVR.L> and Dawn detergent producer Procter & Gamble <PG.N>, 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.
(Reporting by Siddharth Cavale in Bangalore; Editing by Sriraj Kalluvila/ Saumyadeb Chakrabarty/Jane Merriman)
