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Reckitt shares slump as Covid cleaning demand fades

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Reckitt - Stephen Hird/Reuters
Reckitt - Stephen Hird/Reuters

Shares in Reckitt Benckiser, which owns brands including Dettol and Nurofen, plunged to their lowest level since the pandemic first struck as a Covid sales bounce for disinfectant and cleaning products faded.

Reckitt Benckiser slipped 9pc to £56.75, the lowest levels since March 2020, making the company the biggest faller on the FTSE 100.

The consumer goods company said sales of its disinfectant brands, such as Dettol and cold and flu medicine, declined in mid-single digits during the first half of 2021 as it struggled to match strong comparators from last year when the world was gripped by the first wave of Covid infections.

Laxman Narasimhan, chief executive of Reckitt, said he expected the hygiene business to slide during the back end of the year as people become less anxious about germs.

He said: "What we are seeing is greater germ sensitivity outside of the home, rather than inside. Inside is getting back [to where it was previously], levels outside of the home are still high. They're coming down as well, as people get more comfortable with vaccination and the fact that people believe they are protected with it."

Reckitt warned it was also taking a hit from cost inflation, which Mr Narasimhan said was at the highest level the company had seen. Costs were up by between 8pc and 9pc for the year.

He said Reckitt plans to offset this by next year through productivity and pricing actions.

Mr Narasimhan said: "The intention is to remain competitive [on pricing], and this is a local market-by-market decision. We don't want to lose competitiveness."

Reckitt swung to a pre-tax loss of £1.9bn during the first six months of the year from a profit of £1.4bn a year earlier. The losses were due to a £3bn charge related to a write-down on the value of its infant nutrition business in China which it sold to private equity firm Primavera last month.

Despite demand for hygiene products slipping during the first half, Reckitt highlighted bright spots in its portfolio including hair removal cream brands such as Veet, which posted double digit online growth as restrictions on socialising were eased.

The reopening of restaurants and bars also spurred sales of cleaning brand Vanish which returned to growth during the period.

Mr Narasimhan said the slump in the share price reflected the fact there were "many moving parts" in the business.

"I can appreciate that we've got multiple moving parts, externally with Covid, with the autumn flu season, and so some people may feel that they can't really see what the improvements are in the business. In some ways, it really clouds what's happening."

Separately on Tuesday, analysts at Peel Hunt downgraded Moonpig from buy to hold despite annual sales and profits doubling in its first set of results since listing on the stock market.

The online card seller posted a 113pc increase in revenues to £368m in the year to April 30, while adjusted pre-tax profit more than doubled to £92m from £44m a year earlier.

However, Peel Hunt said “the outlook statement didn’t inspire us”. They added: “This is still a good company but the valuation is stretching, and without material upgrades to consensus it’s hard to see much progress from the shares.”

It forecasts revenue of between £250m and £260m this financial year, a decline of up to 32pc on the year.

Moonpig's shares fell 10pc in early morning trading to 382p, valuing the company at £1.4bn.

Chief executive Nickyl Raithatha said he remained confident that shoppers will continue to buy cards and gifts online but admitted there was still uncertainty over what the “new normal” looked like.

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