Reckitt's Q1 VMS Results Exceed Expectations Driven By Sales In China
Executive Summary
Reckitt’s VMS product sales exceeded expected 4% to 5% Q1 growth due to strong sales in China. Company also increased 2022 guidance due to a strong start.
Reckitt Benckiser Group PLC reported sales of its vitamin, mineral and supplement products grew in the mid-teens on its Move Free and our Neuriva health brands in China, driving overall health category sales up 20.6%.
“Our brands are doing extremely well digitally, as we see strong sell-out through e-commerce,” said CEO Laxman Narasimhan during the UK firm's first-quarter earnings briefing on 29 April .
Net revenue from e-commerce grew 13% like for like (LFL), a measurement which excludes the impact of acquisitions, disposals and discontinued operations at a constant exchange rate.. Initially, Reckitt’s medium-term goals for its VMS sales were to grow at 4% to 6%, contributing to an expected overall growth in its health category.
Reckitt's Q1 Category Results
Source: RB
The Slough, England-based company predicted “solid sales gain” given a low cough, cold and flu season from 2021’s first quarter. (Also see "Euro Q1 Consumer Health Earnings Preview: Sanofi, Reckitt, GSK And Bayer" - HBW Insight, 17 Apr, 2022.)
In February 2022, Reckitt moved VMS to its heath business from its its nutrition category; its health category includes intimate wellness and personal care brands, OTC drugs and hygiene line Dettol. (Also see "Reckitt Restructure Seeks To Maximize Dietary Supplement Growth" - HBW Insight, 22 Feb, 2022.)
Sales of products in Reckitt’s health category were up €1.402bn ($1.75bn), an increase of 20.6% like-for like. Health sales made up 41% of its net revenue.
For the quarter, Reckitt reported net revenue of €3.424bn ($4.275bn), a reported decrease of 2.3% but an increase of 5.1% LFL. Produce volume increased by 0.3%, impacted by the decline in Lysol product volume.
Due to a “strong start,” Reckkit increased its LFL outlook to the upper end of its 2022 guidance of 1% to 4%.
Russia's Invasion Of Ukraine Impacts Inflation
Reckitt announced it was transferring ownership of its Russian business on 13 April, building on the decision to freeze capital investments, advertising, sponsorships and promotions in the country. In 2021, Ukraine and Russia combined accounted for 3% of net revenue. (Also see "Reckitt To Exit Russia In Response To War" - HBW Insight, 20 Apr, 2022.)
Reckitt's Q1 Region Results
Source: RB
Additionally, Russian's invasion of Ukraine has caused high levels of inflation, causing Reckitt to increase its inflation guidance to low to high teens, Narasimhan said. “Since February, we've seen about €250 million [$312.17m] extra costs in relation to inflation,” he said during the call. “We're now facing inflation of close to high teens, which is around €1 billion [$1.25bn] of cost of goods sold.”
In North America, net revenue grew 3% LFL to €1.55bn ($1.94bn), with its OTC growth offset by expected declines in its Lysol products. Reckitt also reported net revenue of €1.162bn ($1.451bn), 1 5.7% growth LFL compared to 2021’s first quarter. In Europe and Australia/New Zealand, net revenue grew 8.3% LFL to €1.107bn ($1.382bn) from broad-based growth across markets.
Reckitt completed its sales of the Dermicool rash remedy line to India’s Emami and its E45 skin care brand to Sweden’s Karo Pharma Aktiebolag during the quarter. (Also see "Reckitt Divests Dermicool To India's Emami" - HBW Insight, 29 Mar, 2022.)