A rush to buy disinfectant and cleaning products sent sales at consumer goods group Reckitt Benckiser soaring in the first half as its chief executive said Covid-19 would bring lasting changes to households’ behaviour.
The maker of Dettol and Lysol disinfectants, Cillit Bang cleaning products and Nurofen painkillers said like-for-like net revenue growth, a key metric for the sector, was 11.9 per cent, up from 1 per cent a year earlier and above the 10.6 per cent that analysts had expected.
“The world has changed beyond recognition in 2020. Covid-19 is likely to be with us for the foreseeable future and, as a society, we are embedding new hygiene practices to protect our way of life,” said Laxman Narasimhan, chief executive.
He said that while demand levels would fall back from peak levels, he expected the new preoccupation with cleanliness would remain. “We expect many of the changes that [the pandemic] has necessitated to endure . . . we know that when behaviours last for more than 60 days they become embedded in our daily habits.”
The rise in demand has relieved pressure for RB, where Mr Narasimhan took over late last year after a period of underperformance.
In February, the group took a £5bn writedown on the acquisition of baby formula maker Mead Johnson and said it would sacrifice margins this year to invest in growth areas.
But pandemic-related demand has boosted margins and will enable more investment in areas such as marketing in the second half of the year than previously planned, said Mr Narasimhan.
“Our supply chain has withstood the challenge of unprecedented demand,” he added.
Hygiene products led the rise in sales, with 16.1 per cent like-for-like net revenue growth.
The company said it had also created a new professional service business “from a standing start”, signing deals with Hilton Hotels, Delta Air Lines and Avis Budget Group to provide products such as disinfectant.
Other areas of the business, such as Durex condoms and Scholl footcare products, experienced “modest” declines as people stayed at home and put in place social distancing to combat the virus.
RB said its full-year expectations had improved because of opportunities related to the pandemic, with net revenue growth set to come in the “high single digits” for the full year. Adjusted operating profit rose 6.4 per cent to £1bn in the first half.
Ecommerce sales shot up by more than 60 per cent to make up about 12 per cent of revenues in the first half as lockdowns pushed consumers to shop from home.
“RB are having a great year, there is no doubt, but we expect longer-term questions to resurface as [the fourth quarter] approaches,” said Martin Deboo, analyst at Jefferies.
Shares in the group were down 1.22 per cent to £76.26 in early morning trading on Tuesday. Mr Deboo said this reflected high expectations in the company’s share price, which has risen almost 24 per cent since the start of the year, and less upbeat guidance for 2021.