By Neil Maidment
LONDON (Reuters) – Reckitt Benckiser’s focus on health and hygiene products is paying off, the consumer goods group said on Monday, as demand for brands such as Durex condoms and Dettol disinfectants helped it to nudge up its annual sales forecast.
The British firm, which also makes Cillit Bang cleaners and Finish dishwasher tablets, has been concentrating on high-margin health and hygiene products to take advantage of ageing Western populations and rising incomes in emerging markets.
Last year, for example, it bought U.S. group Schiff Nutrition, taking it into the $30 billion vitamins and supplements market.
“Our focus on health and hygiene power brands is working, if you look at our improved growth rates over the past 18 months they all demonstrate that we are making the right strategic choices,” Chief Executive Rakesh Kapoor told Reuters.
First-half sales rose 6 percent at constant exchange rates to 5 billion pounds ($7.7 billion), in line with forecasts, driven by a strong performance in key emerging markets like Brazil, India and China. Adjusted earnings rose 7 percent to 118.3 pence a share.
Sales in its health division, which makes 27 percent of core revenue, led the way, growing 31 percent thanks to a severe flu season in the United States and a strong performance from brands like Nurofen painkillers in a number of markets.
Revenue from hygiene products rose 6 percent, while home-related products were up 1 percent.
Reckitt said it was confident of achieving full-year group revenue growth at the upper end of a 5 to 6 percent range and raised its interim dividend by 7 percent to 60 pence per share.
“Reckitt’s growth prospects are remaining good and it is one of the few staples in Europe where growth expectations could surprise further on the positive side,” Deutsche Bank analyst Harold Thompson said in a note.
At 1000 GMT, Reckitt shares were flat at 4,629 pence.
Kapoor, who took over from long-term CEO Bart Becht in 2011, said acquisitions would continue to play a role in strengthening the business in areas like China and Latin America, and in complementing its hygiene and health portfolio. He declined to say if any deals were imminent.
The company also outlined a range of new products for the second half of the year, including a new Vanish stain remover soap bar for emerging markets and Durex Embrace, two so-called “pleasure gels” that provide a warming and tingling feeling.
Reckitt added it remained upbeat about demand for its heroin addiction drug Suboxone, despite competition from cheaper versions in tablet form.
Shares in the company were hit this month when U.S. healthcare provider CVS CareMark dropped the dissolvable film version of Suboxone from its list of covered medicines in favour of cheaper tablets.
Some analysts fear Suboxone’s profit could fall sharply if other healthcare providers follow suit.
Reckitt, which stopped selling the tablet version of the drug in the United States in March, said the film version’s clinical benefits remained attractive to many healthcare providers, adding it had maintained its total share of prescriptions, which continued to increase at low double digit percentage rates in the United States.
“We do not expect to maintain in full the current market share of the film but we unquestionably have a very valuable product with very good IP (intellectual property) protection that is going to be around and robust for a very long time,” Chief Financial Officer Adrian Hennah said.
($1 = 0.6506 British pounds)
(Editing by Kate Holton and Mark Potter)