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Highlights
- Reckitt Benckiser shares advanced more than 7% on Tuesday
- Shares recorded the biggest single-day gain in the last 20 months
- Stronger-than-expected trading in Q3 2021 lifted investors’ confidence
Shares of Reckitt Benckiser Plc (LON: RB) advanced more than 7% on Tuesday, 26 October, registering the biggest single-day gain since March of 2020 after the Slough-headquartered consumer goods corporation raised the full-year forecast. With a stronger-than-expected trading period in the third quarter of the present calendar year, Reckitt Benckiser realised a significant increase in demand for products due to the start of the cold and flu season.
Even with an expectancy of a softer fourth quarter, the company has anticipated a like-for-like (LFL) net revenue growth in the range of 1-3% for the full FY 2021.
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According to the data available with the London Stock Exchange, the stock of Reckitt Benckiser topped the 101 constituents of the benchmark FTSE 100, amassing a gain of over 7% with the investors accumulating the shares.
Reckitt Benckiser shares (26 October)
Source: EODHD/Others
This has been the biggest single-day appreciation in Reckitt Benckiser shares in the last 20 months. The stock recorded a gain of 8.09% on 17 March 2020.
However, Reckitt shares are trading well below the respective 52-week high and pandemic peak as the company continues to face the supply side challenges and the rising cost of raw materials. Massive volumes were seen in the shares of Reckitt Benckiser as the stock exchanged over 1.15 million hands, translating into a total traded turnover of more than £55 million, as at 14:25 BST.
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With the recent uptick in the share prices, Reckitt Benckiser stands as the 15th most valued company on the London Stock Exchange in terms of market capitalisation.
Other major FTSE 100 gainers include Whitbread Plc (LON: WTB), B&M European Value Retail SA (LON: BME), Compass Group Plc (LON: CPG), Barratt Developments (LON: BDEV) and International Consolidation Airlines SA (LON: IAG). The stock of Reckitt Benckiser emerged as one of the major positive points contributors to the index.
In the corresponding quarter, the group has realised a LFL growth of 3.3% in the net revenues, effectively balanced between the volume and price/mix providing an encouraging start to the cold and flu season. The adverse foreign exchange action and negative M&A impact partly counterbalanced the LFL growth, as a result of which the net revenue in the July-September period dropped by 6.8% to £9,873 million.
On a LFL basis, the hygiene, health and nutrition segments reported a growth of 2.9%, 3.6% and 3.8%, respectively. The persistent growth in the uptake of Finish and Air Wick supported the quarter, even as the slight decline in the sale of Lysol offset the overall earnings from the Hygiene segment.
With the onset of the cold and flu season, there was a lower decline in the sale of Dettol, adequately supported by the momentum in Intimate Wellness. On the other hand, the nutrition segment was hit by low revenue from instant formula and child nutrition (IFCN) China.
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With the ongoing hurdles in the frequency of sale from brick-and-mortar stores due to residual restrictions across various regions in the world and the conditional reluctance of going out, the company recognised an ecommerce LFL growth of 23%.
According to Reckitt Benckiser, the three major geographic regions contributed substantially in the overall growth during the quarter. The brands which are less prone to the ongoing Covid activity and its repercussions continued to grow with an average of mid-single digits. As these brands represent nearly 70% of the product portfolio, the corporation has been anticipating to close the year on a positive note.
With a weaker value of Great Britain pound (GBP) against the United States dollar (USD), the euro, and many other counterparts, the resultant foreign exchange conversions reduced the net revenue by 5.1%.
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Even with an encouraging demand for cold and flu relief products in the early season, the sales trend remains uncertain due to the ever-expanding bottlenecks as many leading economies including the United Kingdom and China report sharp resurgence of infections. Not only this, the input price inflation has been a major hurdle for almost every other corporation as they are struggling to maintain their profitability levels while the cost of goods continue to surge, in line with the increase in the factory-gate prices.
The company is expecting an adjusted net finance expense in the range of £240 and 260 million and the adjusted tax rate of 22% for the full FY 2021 with the trading period remaining dynamic over the upcoming months. The company remains on track to deliver margin improvement in the next calendar year, as well as exiting the FY22 with mid-single growth in the net revenue on a LFL basis.
Irrespective of a Covid-proof portfolio of products, the ongoing pandemic challenges have materially disrupted the demand and subsequent sale patterns for the disinfection and cold and flu relief products.
