Reckitt Benckiser Sales Beat Estimates as Retailers Stock Up

Updated on
  • Shares rise as much as 6.7%, steepest gain since October 2013
  • Company expects cold-remedy destocking in first half of 2016

Reckitt Benckiser Group Plc, the maker of Durex condoms and Nurofen painkillers, reported fourth-quarter sales growth that beat analyst estimates as retailers stocked up on cold remedies during a slow flu season.

Revenue advanced 7 percent on a so-called like-for-like basis, beating the 4.4 percent median estimate of analysts surveyed by Bloomberg. The company also announced estimate-beating full-year profit and forecast further growth in 2016, sending the shares up the most in more than two years.

“These were great results,” James Edwardes Jones, an analyst at RBC Capital Markets, said in a note. “If investors are looking for places to hide from the current market volatility they could do worse than RB.”

Fourth-quarter growth was led by the consumer-health division, even as fewer people came down with flu,the company said. While there was less demand from consumers for remedies such as Strepsils lozenges, sales of such products to retailers were strong, it said. RB expects the increase in stores’ inventory to reverse in the first half of 2016.

Investors can expect the consumer-health unit to outperform medium-term market growth of 4 percent to 6 percent, Kapoor said on a conference call with analysts, just not at a double-digit pace. Divisional sales rose 14 percent in 2015.

The shares rose as much as 6.7 percent to 6,364 pence in London, the steepest intraday gain since October 2013. They were up 6.1 percent at 10:46 a.m.

The company forecast further sales growth in 2016. Like-for-like net revenue will increase by 4 percent to 5 percent, Chief Executive Officer Rakesh Kapoor said in a statement. Operating margins are set to show “moderate” expansion over the medium term, Reckitt Benckiser said, reiterating its previous guidance.

The Slough, England-based company is seeking to expand in healthcare -- its fastest-growing business that also includes Mucinex and Gaviscon medicines -- as sales of those products outpace demand for food and homecare brands. Kapoor has said he’s keen to make acquisitions in the sector, which is fragmented and likely to consolidate.

“It is possible that there will be aggregation” in the consumer-health industry and RB would review targets if they came up for sale, Kapoor said Monday.

* 2015 sales 8.87 billion pounds, estimate 8.82 billion pounds
* 2015 adjusted operating profit 2.37 billion pounds, estimate 2.28 billion pounds
* 2015 adjusted operating margin up 210 basis points to 26.8 percent
* Final dividend 88.7 pence a share, BDVD forecast 70 pence