By Alexander Marrow
LONDON, Oct 27 (Reuters) – Dettol maker Reckitt lowered its annual revenue forecast on Tuesday and reported revenue growth below analyst expectations in the third quarter, hampered by a challenging consumer environment and manufacturing constraints in its North American market.
The company, which makes Durex condoms and Lysol cleaning products, reported like-for-like net revenue growth of 3.3% in its core business for the quarter ended September 30, compared with a 3.6% forecast by analysts in a company-compiled poll.
Its shares slumped 7.1% in early trading.
“North America was below our expectations,” said CEO Kris Licht. “While consumer demand for Lysol remains strong, temporary manufacturing constraints limited our ability to fully meet demand.”
Like-for-like revenue in North America fell 1.3% in the quarter. Reckitt lowered its guidance range for net revenue growth to 3.5% to 4.5% from 4% to 5%.
Reckitt’s growth was built on pricing, with volumes up 0.1% and pricing rising 3.2% for the core business. The company said it had implemented selective pricing to address higher input costs arising from the war in the Middle East.
Emerging markets have been a key growth engine for consumer goods companies including Reckitt and Unilever, helping cushion the impact of higher costs and disruptions stemming from conflict in the Middle East.
Reckitt’s emerging market revenue growth of 8% was below analyst expectations of a 9.1% rise, with China delivering a rare quarter of single-digit growth as sales growth in vitamins, minerals and supplements faded.
Reckitt expects to complete the divestment of its Russia Hygiene business this year. Excluding that unit, emerging markets grew 9.8% and the core business 3.9%.
The main culprit for the miss was the Lysol manufacturing issue, which will be seen as disappointing and a new negative, Barclays analyst Warren Ackerman said in a note.
“Reckitt continues to see volatility quarter to quarter and the market will be looking for more consistency,” Ackerman said.
(Reporting by Alexander Marrow; Editing by Emelia Sithole-Matarise)
