Dettol maker Reckitt warns of surging costs

Inflation has accelerated in recent months, forcing Reckitt to look at its prices.

August Graham
Tuesday 27 July 2021 09:09
Dettol and Lysol boomed from 16% to 25% of Reckitt’s sales (Matt Alexander/PA)
Dettol and Lysol boomed from 16% to 25% of Reckitt’s sales (Matt Alexander/PA)

The maker of Dettol said that demand for its cleaning products has fallen from its pandemic peak as inflation began eating into profits.

Reckitt said that its costs rose at a faster rate in the second quarter of the year as commodity prices increased.

“Cost inflation accelerated in the second quarter and it will take time to offset this headwind with productivity and pricing actions being implemented in the back half of the year and early next year,” said chief executive Laxman Narasimhan.

The company is also seeing sales of Dettol and Lysol decline from their pandemic highs.

But the decline is dwarfed by the two brands’ astronomical boom during Covid.

At this point in 2019 Dettol and Lysol made up 16% of Reckitt’s revenue. They now account for a quarter of revenue.

Although the products are “rebasing”, Reckitt said, “both brands are more relevant with consumers than pre-pandemic and are therefore structurally better positioned to grow into new places and new spaces in the future”.

Net revenue dropped 4.5% to £6.6 billion in the first six months of the financial year. Operating profit fell 16% to £1.4 billion.

“The markets are dynamic, reflecting several factors which we are closely monitoring, including the prevalence of Covid strains and government guidelines such as new lockdowns and social distancing,” Mr Narasimhan said.

“Although the third quarter will be slower due to strong prior year comparators, as the world gradually opens up and socialisation returns, cold and flu trends indicate a moderate season which should strengthen performance in the fourth quarter.”

Reckitt becomes the latest in a long line of companies to warn of inflation.

Last week Unilever said that costs were soaring faster than at any point over the last decade.

Much of the inflation is likely to be passed on to customers. Reckitt said that it was trying to offset costs with “pricing actions” and productivity efforts.

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