(Reuters) -Consumer goods company Reckitt raised its annual revenue forecast on Thursday after second-quarter net sales growth topped expectations as strength in emerging markets offset weakness in
Reckitt lifts revenue outlook on strong Asia growth, shares surge
By Yadarisa Shabong
(Reuters) -Consumer goods company Reckitt raised its annual revenue forecast on Thursday after second-quarter net sales growth topped expectations, sending shares soaring, as strength in China and India offset weakness in North America and Europe.
Shares jumped as much as 11% to their highest level since early 2024 and were among the biggest gainers on the pan-European STOXX 600 index.
Reckitt, the maker of Durex condoms and Lysol cleaning products, is pivoting to focus on its 11 so-called "power brands" under CEO Kris Licht, as the sector is faced with weak demand and fierce competition.
The company reported like-for-like quarterly net revenue growth of 1.9%, above the 1.7% forecast in a company-compiled consensus.
It also announced a new 1 billion pounds share buyback over the next 12 months.
Growth in North America and Europe lagged expectations, hit by a challenging consumer environment and the expected shelf reset of its flu medicine Mucinex due to reformulation.
Licht said there was some stabilisation in those regions in the second quarter, but consumption remained "suppressed".
"Even though consumption is a bit lower in our categories, we're still seeing some growth, and people are still spending. It's just much more measured," he said, referring to North America and Europe.
But strong sales in China, India and good growth in Brazil, Colombia, Indonesia and Malaysia made up for weakness in developed markets.
Chinese consumers were responding well to new innovation behind the Dettol brand, Licht said.
OUTLOOK
Reckitt raised the like-for-like 2025 net revenue growth forecast for its core business to above 4%, from a 3% to 4% range previously.
"A beat and raise is a rare occurrence in this market," said analysts at JPMorgan in a note.
Reckitt now expects overall group like-for-like net revenue growth of 3% to 4% for the year, up from the previous 2% to 4%.
The share price was last up 9%, heading for its biggest one-day percentage gain since November 2008.
Last week, Reckitt sold a majority stake in its Essential Home business to Advent for $4.8 billion. It is also exploring options for its Mead Johnson unit, which faces several baby formula lawsuits in the U.S.
The U.S. litigation may have some impact on timing of the eventual exit of Mead Johnson, Licht said.
Essential Home and Mead Johnson, which are considered non-core, underperformed during the quarter.
Reckitt posted operating profit of 1.71 billion pounds ($2.32 billion) for the six months ended June 30, beating analysts' average expectations of 1.66 billion pounds.
Some investors worry Reckitt is more exposed than rivals to U.S. tariffs due to lower U.S. manufacturing capacity compared to Haleon and Unilever.
Once its new factory in the U.S. state of North Carolina becomes operational in 2027, the share of local U.S. sales could rise to 75% from 57%, Reckitt has previously said.
Licht said he is considering further U.S. investments to "increase capacity and support innovation."
($1 = 0.7368 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Vijay Kishore and Rachna Uppal)
