April 22 (Reuters) - Dettol soap maker Reckitt reported a 1.3% growth in like-for-like net revenue for its core business on Wednesday, missing market expectations due to weak pricing in the U.S. and
Reckitt misses revenue forecast, warns on margins on oil price shock
By Yadarisa Shabong and Richa Naidu
Reckitt's Financial Performance and Market Challenges
April 22 (Reuters) - Reckitt missed quarterly like-for-like revenue forecasts and warned of lower first-half margins, citing high oil prices and a weak cold and flu season, knocking the Dettol maker's shares as much as 7% lower to their lowest since late 2024.
Global Economic Pressures Impacting Reckitt
Consumer goods companies including Reckitt are navigating economic sanctions, weak consumer sentiment and the prospects of higher costs and supply disruptions as a result of the Iran war.
Muted Growth Across the Sector
"The results showed broad-based muted growth which is something we expect to see from other staples companies this quarter," said Harsharan Mann, consumer sector hub lead at Aviva Investors, which is a Reckitt shareholder.
Revenue and Regional Performance
Reckitt posted like-for-like net revenue growth of 1.3% in its core business for the three months to March, compared with 2.9% forecast by analysts in a company-compiled poll.
Western sanctions took their toll on its Russian business, the effects of the Iran war were felt in the Middle East and a weak cold and flu season in the U.S. and Europe and new taxes on condoms in China also proved challenging for Reckitt.
Outlook and Margin Forecasts
Maintaining 2026 Forecasts Amid Margin Pressure
The maker of Durex condoms and Finish cleaning products maintained its 2026 forecasts even though first half margins are expected to be about 200 basis points lower than a year earlier.
That assumes no further impact on Reckitt's emerging markets business from the Iran war beyond the first half.
Commodity Prices and Consumer Demand
"While challenging to forecast, if commodity prices remain at significantly elevated levels throughout the year we would anticipate an impact on consumer demand as a result of pressure on household budgets," Reckitt said.
Refocusing on Core Business
REFOCUSING ON CORE BUSINESS
Emerging Markets and Growth Concerns
JPMorgan analyst Celine Pannuti said Reckitt's expectation for second-quarter emerging markets performance to mirror the first quarter was disappointing, given the region has driven growth for its core business.
The results cast doubt on whether the company can achieve its annual targets, Pannuti said in a note.
Reckitt's shares have underperformed those of its consumer goods competitors over the past three months.
Product Performance and Regulatory Environment
Sales growth of Durex in China was flat in the first quarter, Reckitt said, mainly due to the value added tax of 13% imposed on condoms and contraceptive pills.
CEO Kris Licht said he did not expect regulatory changes in China to limit the scope for growing that business sector.
Supply Chain and Production Updates
Reckitt finance chief Shannon Eisenhardt also sought to ease concerns about the supply of condoms, saying that the group has not seen any shortages or had any challenges so far in its ability to source necessary materials.
Malaysia's Karex, the world's top condom producer, said earlier this month that it planned to raise prices if supply chain disruptions drag on due to the Iran war.
Strategic Focus and Future Plans
Reckitt has over the past few years been refocusing on its core business, housing brands such as Durex, Lysol cleaning products and cough medicine Mucinex, after the $4.8 billion sale of its Essential Home business in December.
It is still considering options for its litigation-hit baby formula business Mead Johnson, which reportedly attracted interest from Danone in recent weeks.
(Reporting by Yadarisa Shabong in Bengaluru and Richa Naidu in London; Editing by Sonia Cheema, Muralikumar Anantharaman and Alexander Smith)
