Reckitt owns Nurofen

The Covid-driven spike in demand for cleaning and hygiene products should have made Reckitt Benckiser one of the big winners from the pandemic. Instead, shares have been on the floor – until better-than-expected sales momentum this week led to hopes its troubles are over.

The Dettol maker raised its full-year revenue forecast after a stronger third quarter than forecast, as sales volumes and pricing both increased in the period.

Group net revenue grew by 3.3% on a like-for-like basis in the three months to the end of September, as it racked up volume growth of 1.6% despite pushing through price/mix improvements of 1.7%. In particular, Reckitt drove price increases through its nutrition division and developing markets.

Meanwhile, overall trading was boosted by continued 2.9% growth in its hygiene division despite the loosening of Covid restrictions, and 3.6% growth in organic health sales due to “sharp” improvement in cold & flu and Durex sales as lockdowns ended and consumer behaviour returned towards normal.

Nutrition like-for-like growth was 3.8%, with growth in each of the three regions. But reported net revenue in the division continues to be a drag for the group – it fell 20.6%, reflecting lower revenues in its since-sold China business.

As a result of this performance, Reckitt said it expected like-for-like net revenue growth for FY 2021 in the range of 1%-3%, despite a slowdown in the fourth quarter as Covid-related demand for Lysol is expected to fall.

“The sale of its troubled Chinese infant formula business along with wider operational efficiencies has helped address Reckitt’s uneven performance,” said Hargreaves Lansdown. “Health and hygiene sales are also proving stickier than expected as it becomes clear we’re going to be living with the virus for longer than some anticipated.”

Barclays added: “Given Reckitt’s weak share price performance ahead of numbers, and widespread investor nervousness about input costs, we think these results are likely to be well received.”

However, Bernstein urged caution over the level of future Lysol and Dettol demand and the severity of the upcoming cold and flu season, meaning “visibility remains limited”.

Reckitt shares jumped 5.8% on Tuesday to 5,789p on the upgraded forecast and were up to a three-month high of 5,958p by Thursday. However, the shares remain 14% down year on year and almost 25% down on their level in summer 2020 after it warned of the impact of rising costs in July.