Reckitt sweetens drop in sales volumes with $1.2 billion buyback

By Richa Naidu

LONDON (Reuters) - Reckitt, maker of Dettol and Lysol cleaning products, on Wednesday missed third-quarter like-for-like sales expectations as volumes declined, but said it would start a 1 billion pound ($1.2 billion) share buyback programme "imminently".

Its shares were down 2.3% in early trade, among the worst performers on London's blue-chip FTSE 100.

Major consumer goods companies have hiked prices since the COVID-19 pandemic to make up for higher costs, prompting an increase in competition from cheaper brands as shoppers look for better deals.

In Reckitt's case, even as volumes for its health business rose, they continued to decline at its hygiene segment.

The company's third-quarter sales volumes were also up against a tough comparative period from last year, when the recall of a rival U.S.-based company's infant formula boosted sales of Reckitt's Enfamil products there.

"It's not a uniform picture in our portfolio and actually health has been very resilient," said CEO Kris Licht, who started the job on Oct. 1.

"I'm going to stay away from declaring exactly when we'll cross over into positive volume territory but we are very encouraged by the trends we are seeing."

Reckitt said quarterly like-for-like net sales rose 3.4%, behind the 3.7% growth analysts had expected in a company-supplied poll.

"The third-quarter miss is a bit surprising as the 15.7% volume decline in third-quarter nutrition is a lot bigger than the 7.1% tough volume comparison they had last year," Bernstein analyst Bruno Monteyne said.

Rival consumer products makers that have raised prices over the past two years have said in recent weeks that sales volumes could soon see improvements.

P&G, for instance, which makes household and personal products, said volumes would stabilise and start to pick up through the rest of the year.

The price/mix for Reckitt's products, which include Nurofen tablets and Durex condoms, rose 7.5%. Volumes declined 4.1% compared with last year.

"The negative was the drop in volumes in the nutrition division. This was much worse than expected," Tineke Frikkee, a portfolio manager at Waverton Investment Management, said. "The positive surprise was the 1-billion-pound share buyback."

The buyback programme will take place over the next 12 months.

($1 = 0.8218 pounds)

(Reporting by Richa Naidu; Editing by Helen Popper and Mark Potter)