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FTSE: Dettol-maker warns prices of several consumer products will remain high

Products produced by Reckitt Benckiser; Vanish, Finish, Dettol and Harpic, are seen in London February 12, 2008.  Reckitt Benckiser, the world's biggest household cleaning goods maker, is set to report a high-teen percentage growth in full-year profit on Wednesday amid expectations that it may raise its sales forecast. REUTERS/Stephen Hird   (BRITAIN)
Reckitt Benckiser makes many household cleaning products including Vanish, Finish, Dettol and Harpic. Photo: Stephen Hird/Reuters

Reckitt Benckiser (RKT.L) fell more than 3% on Wednesday despite raising the lower end of its sales growth target for the year.

The consumer goods company, which owns brands such as Dettol, Durex, and Strepsils, saw sales rise over the period thanks to higher prices and increased demand for baby food in the US due to a temporary shortage.

Product prices rose 12% in its latest quarter, but it saw some customers still switch to more expensive products. It expects inflation on the cost of goods sold to remain in the high teens for the full year, it said.

It now also expects like-for-like sales growth of between 6% and 8% for 2022, up from a previous range of 5% and 8%.

Third-quarter like-for-like revenue rose 7.4%, above the 6.1% growth expected by analysts in a company-supplied poll.

However, volumes declined slightly as rising inflation took its toll. This affected spending on consumer items. Excluding Lysol sales, which were boosted by COVID-19 at this time last year, they declined 1%.

In the health business, sales climbed 10.7%, led by over-the-counter brands such as Mucinex, Nurofen and Strepsils, and the company’s Intimate Wellness portfolio of Durex and KY.

Meanwhile, like-for-like growth in nutrition was up 24.7%, driven by mid-single digit growth in developing markets.

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"Reckitt delivered another quarter of broad-based growth amidst challenging market conditions, as we continue to innovate and improve on our in-market execution,” Nicando Durante, chief executive, said.

"We have an excellent portfolio of trusted, market-leading brands in high margin, high-growth categories and a strong culture of ownership and delivery. My priority is firmly focussed on continuing to execute on our strategic path, to deliver sustainable mid-single digit growth, and mid-20s adjusted operating margins by the mid-2020s."

Reckitt added that it has forecast higher levels of investment in the second half of the year, compared to the first six months. It believes it will face a tougher inflationary environment as favorable first-half hedge positions are renewed at higher rates.

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Adam Vettese, analyst at social investing network eToro, said: "The expectation for inflation to remain in the ‘high teens’ for its products till its year end is alarming for consumers already facing 14%+ food price inflation in the UK.

“Consumer essentials is a good place to be right now for the business, but there will likely be a breaking point at which consumers begin to cut back even on essential items. The challenge then for Reckitt is for it to stare down the cost-of-living crunch and make it through to the other side without losing custom.”

Watch: How does inflation affect interest rates?