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On 13 February 2013 the share price of Reckitt Benkiser (LSE:RB.) was up 2.9% to 4454.00 following the release of its 2012 annual results. This morning, 22 April 2013, RB’s share price reached 4760.00 in early trading before backing off to 4678.00 by mid-afternoon. ADVFN had reported on the earlier date that Reckitt Benkiser was a company with a plan. Upon today’s release of their first quarter results, it appears that their plan is working.
The company announced a 7% overall increase in year-on-year revenue for the first quarter, boosted by a 20% increase in the pharmaceuticals segment and a 30% increase in the health products category. The company admitted that it had some outside help with “a higher incidence of influenza in the U.S.,” boosting the consumption Mucinex and Strepsils. The report lumps Europe and North America (ENA) together for geographic reporting, so it is difficult at this time to ascertain how much of the 5% growth of ENA came from U.S. flu sufferers. But, as they will tell you, “Five percent is nothing to sneeze at.”
RB experienced revenue growth in all of its geographic reporting areas, including 8% in Latin America and the Pacific (LANPAC), and 5% in Russia, the Middle East and Africa (RUMEA). ENA contributed 56% of the core net revenue, followed by LAPAC with 28% and RUMEA with 16%. Having recognized the contribution of a widespread cold and flu impact as a basis for at least some of the growth in ENA, the growth in the other regions was spurred by “a combination of powerbrand rollouts, innovation, distribution, and penetration expansion.” The company particularly noted the success of Durex, Gaviscon, Vanish, and Airwick brands in key growth markets.
The company’s strategy to build its Health and Hygiene categories seems to be paying off, as those categories delivered 13% and 9% like-for-like growth. In addition to 13% growth, the Health category contributed 27% of the company’s core net revenue with £597 million. The Hygiene category generated an additional £1,025 million or 46% of the core net revenue. Although the Health category revenue was off slightly compared to the previous quarter’s £606 million, it was well in excess of the final quarter of 2011 at £546 million. Hygiene was 14% above the 2012 4th quarter mark of £897 million.
CEO Rakesh Kapoor said “We are pleased with a strong start to the year, with our Health and Hygiene brands leading RB’s growth across all geographies. Growth was driven from a combination of innovations, increased Brand Equity Investments and better in market executions.” In particular, he cited strong individual product performances by Mucinex, Strepsils, Nurofren, Durex, Dettol and Suboxone film. The market share of the latter rose to 69% during the quarter as the preference for a film-based sublingual medication has gained popularity over the tablet form. The company also helped its own cause by voluntarily withdrawing the tablet form of Suboxone. Nonetheless, RB will attempt to cover all its bases by marketing a generic tablet form of the medication.
The Reckitt Benkiser story will be interesting to watch over the next several quarters as it continues along the path of transforming its structure and strengths to take better advantage of evolving market opportunities.
