Reckitt Benckiser boss says 'commodities price hike in a short period' is a concern

CONSUMER GOODS major Reckitt Benckiser group has warned that its margins will be squeezed this year due to higher costs.

The FTSE-listed company also missed second-quarter sales growth estimates as growth slowed in demand for products such as Lysol disinfectants and Finish dishwashing detergents.

The firm’s chief executive Laxman Narasimhan has said that it was facing between 8 per cent and 9 per cent rise in the cost of commodities.

Historically, it is some of the highest inflation we have seen in a short period of time, he added.

“It’s coming pretty much across the board, but in particular oils, surfactants, logistics, freight, for example, are clear areas that we have highlighted. The company would work out how the rising costs would feed through to price increases for its products on a country-by-country basis," Narasimhan told The Guardian. 

“This is a local market-by-market decision. You can look at where you stand versus competitors, look at what we can afford, we don’t want to lose competitiveness and so you’ll end up making that call literally market-by-market. We expect that we won’t be able to offset all commodity inflation by the end of this year, but we hope to do so by next year."

Reckitt said it now expects its 2021 adjusted operating margins to fall to between 22.7 per cent and 23.2 per cent from 23.6 per cent in 2020.

The company said it would take time to offset the inflationary headwinds with productivity and pricing action being implemented in the second half of the year and early 2022.

Reckitt posted a £1.82bn first-half operating loss, due to a £3bn charge it incurred on the sale of its infant nutrition business in China announced last month.

The pandemic boosted Reckitt's sales to record levels last year, but there are signs that momentum is easing as vaccinations gather pace and stay-at-home restrictions in developed economies are lifted.

Reckitt said brands including Finish, Airwick, Harpic, and Veet, which make up 70 per cent of its sales, are growing, but at slower rates than last year, while brands like Durex, Vanish and Nurofen are returning to growth as market conditions normalise.