Pandemic Drives Reckitt Benckiser's Swing to 2020 Profit, Boosts Prospects for 2021 -- Second Update

By Matteo Castia

--Reckitt Benckiser swung to profit in 2020 on higher revenue, boosted by strong hygiene sales amid the coronavirus pandemic

--Together with hygiene items, a demand surge is expected for flu-relief and sexual-wellbeing products as society reopens

--The company bought the Biofreeze pain-relief brand from Performance Health for an undisclosed amount

Reckitt Benckiser Group PLC continues to benefit from the coronavirus pandemic as high demand for hygiene products drove a swing to net profit in 2020, and prospects of growth in its drugs and sexual-wellbeing businesses increase as the reopening of society approaches.

"Increased demand for Dettol and Lysol provided the opportunity for expansion into a total of 41 markets during the year," the company said, adding that sales blossomed amid a demand surge in the hygiene division as consumers battle with the fear of contagion.

The consumer-goods giant--which houses Dettol, Harpic and Durex among its brands--made net profit of 1.19 billion pounds ($1.68 billion) for the year, compared with a net loss of GBP3.68 billion in 2019. Pretax profit was GBP1.87 billion, compared with a loss of GBP2.11 billion a year earlier, it said.

Revenue rose to GBP13.99 billion from GBP12.85 billion the prior year. In the fourth quarter, revenue rose to GBP3.57 billion from GBP3.32 billion in the year-earlier period, it said.

The group's hygiene division increased its revenue by 22% during the fourth quarter to GBP1.59 billion, and by 16% to GBP5.82 billion for the full year. On a like-for-like basis, revenue from the hygiene division jumped 26% on year during the fourth quarter and 20% in the full year.

Reckitt Benckiser said it expects demand for Mucinex, Nurofen and Strepsils flu-relief products to rise as schools reopen and mobility increases. Similarly, the reopening of society is likely to boost the already recovering group's sexual-wellbeing business, it added.

As mobility and social interactions increase, we expect our sexual-wellbeing business to rebound," the company said, adding stronger demand is already being seen in countries managing post-lockdown conditions.

Reckitt Benckiser said it expects like-for-like revenue for 2021 in a range from flat to 2% growth, including a strong first quarter and continued underlying progress toward its mid-single-digit sustainable-growth target, as it benefits from considerable investments.

It said that during the year it has invested a record high GBP745 million in building capabilities to strengthen execution and customer service, digital and brand building and sustainability.

The productivity program exceeded expectations and delivered savings of over GBP400 million, driving an increase in the company's projected productivity savings to GBP1.60 billion from GBP1.30 billion, it added.

"We will deliver further growth for hygiene and germ protection, as we work to hold on to the penetration gains achieved, while growing in new places, channels and categories, strong growth in sexual-wellbeing and start seeing the benefits of our growth investments in other areas, including the wider hygiene, consumer health and nutrition categories," Reckitt Benckiser said.

The company warned that pandemic-driven lower birth rates in 2020 and 2021 will contribute to a short-term slowdown for its infant-formula business.

Already back in 2019, a lower birth rate was one of the reasons behind Reckitt Benckiser's disappointing performance for infant formula in China, which contributed to a GBP5.04 billion impairment leading to a swing to net loss that year.

The board declared a final dividend of 101.6 pence, taking the full-year payout to 174.6 pence, flat on year.

Also Wednesday, the company said in a separate release that it has entered into a definitive agreement with Performance Health--a company owned by Madison Dearborn Partners--to acquire the Biofreeze pain-relief brand for an undisclosed amount.

"The brand taps into the growing global trend for wellness and self-care and aligns with our strategy to build our U.S. health footprint into new spaces and places," Chief Executive Laxman Narasimhan said. Completion is expected to occur in the second quarter of the year, Reckitt Benckiser said.

In another separate release Wednesday, the company said it is selling the Scholl footcare brand to Boston-based private-equity firm Yellow Wood Partners. While no financial details of the transaction were disclosed, Reckitt Benckiser said it anticipates the deal to complete in the third quarter of this year. Reckitt Benckiser had acquired Scholl as part of its acquisition of SSL International in 2010. The proposed sale also includes the Amope, Krack and Eulactol footcare brands, the company said.

Write to Matteo Castia at matteo.castia@dowjones.com

(END) Dow Jones Newswires

February 24, 2021 05:37 ET (10:37 GMT)

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