Britain's Reckitt Benckiser Group expects to boost sales and profit margins this year amid strong demand for its health and cleaning products and as it raises prices to offset surging raw material and other costs.
Shares in the maker of Lysol disinfectants and cold remedy Lemsip jumped 5% after it beat underlying revenue growth forecasts for the final quarter of last year, with the spread of the Omicron coronavirus variant helping to spur demand.
Reckitt's full-year earnings fell about 12% and its adjusted operating margin dropped 160 basis points amid soaring energy, transport and other costs. But the company forecast margins would rise this year, in part as it increases prices.
"Reckitt delivered a solid full-year result, and a reassuring 2022 outlook should not only be supportive today but also puts the turnaround story on fast track," JP Morgan analyst Celine Pannuti said.
Cost Pressures
Consumer goods companies face an array of cost pressures and are trying to work out how much they can pass onto customers without hitting sales volumes.
Rival Unilever warned last week its margins would fall this year, although it managed to hold them broadly steady in 2021.
Reckitt reported an 11% increase in cost inflation for last year. "We expect (it) to be higher than that in 2022," chief financial officer Jeff Carr said on a call with journalists.
The company is paying more for soap noodles, plastics, tinplate and "anything related to crude oil," he said, adding logistics were also a major challenge.
"That's been up strong double digits - an over 20% increase in logistical costs, ocean freight being one of the key drivers," Carr said.
Outlook
Reckitt said it was targeting like-for-like net revenue growth of 1-4% this year. That's after an increase of 3.3% in the fourth quarter of 2021, which beat the 1.9% growth expected by analysts in a company-supplied poll.
The revenue figures exclude Reckitt's infant nutrition business in China, the sale of which was announced in June, and other businesses sold or acquired recently.
Read More: Reckitt Mulls Sale Of Baby Food Business: Report
Full-year adjusted earnings fell 11.8% to 288.5 pence per share, just missing analysts' average forecast of 289.9 pence.
Two years ago, Reckitt announced a new strategy to promote sustainable growth that included investing in R&D and better managing its brand portfolio.
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