Lemsip and Durex maker Reckitt grows on higher prices and baby formula shortage
The business was boosted as one of its rivals had to recall baby formula in the US.
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Your support makes all the difference.The maker of Durex condoms, Lemsip and other products saw its sales drop last year, but more than made up for that by hiking its prices, it revealed on Wednesday.
Reckitt said it had swung back into a pre-tax profit in 2022, boosted by problems at one of its biggest rivals in the US baby formula market.
The company ramped up production of its milk replacement products after Abbott Laboratories recalled its products amid health concerns.
Prices soared as a result and Reckitt’s nutrition business in the US saw its sales rise by 40%, it revealed on Wednesday. The shortage added an extra 2.5% to the overall growth of the multinational business last year.
Price hikes have been the aim of the game over 2022 for Reckitt and it’s worked
The business said that prices had risen significantly over the year, with its price mix rising by 9.8%.
Revenue rose 9.2% to £14.5 billion in 2022 while the company swung to a pre-tax profit of £3.1 billion, up from a £260 million loss a year earlier.
Chief executive Nicandro Durante said: “Reckitt delivered a year of strong growth in net revenue, earnings and free cash flow conversion amidst a continued challenging environment. We are now 28% larger than we were in 2019.”
When taking out the unusual impact of the baby formula shortage in the US, Reckitt expects revenue to grow in the “mid-single digits” this year.
It expects sales of its disinfection products such as Lysol and Dettol to start growing again this year.
These products became much more popular during the pandemic, and are still selling around 40% more than they were before Covid-19 hit.
Hargreaves Lansdown analyst Matt Britzman said: “Price hikes have been the aim of the game over 2022 for Reckitt and it’s worked, as sales growth was slightly ahead of consensus after a decent beat over the fourth quarter.
“Lysol sales have been a drag on volumes over the year, as demand normalised from the highs seen over the pandemic.
“The positive news is that the rebase is significantly ahead of pre-pandemic levels and trends were positive over the year, it’s pretty clear now that heightened hygiene awareness is here to stay – a long-term tailwind for Reckitt’s products.”