COVID-19: FMCG major RB's performance outlook 'uncertain' for H2 2020

British FMCG major RB Plc -- which owns health and hygiene brands Dettol, Lysol and Harpic -- on Tuesday said its performance outlook for developing markets, including India, in the second half of 2020 remains uncertain amid the coronavirus pandemic.

The company, which saw an uptick in sales in the country in May and June with easing of lockdown restrictions, said that the coronavirus pandemic has created very strong demand for its hygiene products, including dettol.

India is presently passing through intermittent lockdowns and restrictions have been imposed by authorities at local levels in several parts of the country, which is again impacting overall demand and supply lines, RB (Reckitt Benckiser) said.

The company said its developing markets' like-for-like net revenue was up 7.1 per cent in the quarter with "strong growth in Latin America, Middle East and South Asia, and India saw growth in May and June as lockdown eased, although the outlook remains uncertain".

Besides, the company has also reported a strong 62 per cent growth in the demand of its popular hygiene brand Dettol in the first half of 2020 in developed and emerging markets.

"Dettol grew very strongly in both developed and emerging markets, led by COVID-19 demand, fuelling greater product penetration and frequency of use across the UK, India and Greater China, in particular," said RB in its earning statement for the first half of 2020.

It further said that in some markets including India, Dettol has become the leading soap brand during the pandemic period.

"Dettol became the number one soap brand in India, the United Arab Emirates, Saudi Arabia and Malaysia," it added.

In the first half (January-June), RB on a total Group basis, bringing Hygiene and Health together, reported a net revenue of 6,911 million pounds, representing 11.9 per cent growth on a like-for-like (LFL) basis. It had a strong volume growth of 11 per cent and its total estimated e-commerce sales grew over 60 per cent, the company said.

"Within this, we delivered improved estimated underlying growth of 3-4 per cent, together with an estimated 9-10 per cent tailwind from COVID-19 related volume demand, partially offset by the deferral of net revenue for certain shipments of 1.4 per cent," said RB Plc.

Its gross margin improved by 70 bps to 60.9 per cent largely due to product mix effects and lower oil-related costs.

"These were partially offset by a marked increase in COVID-19 related costs needed to ensure safe working practices across the business. The impact of the deferral of shipments, as disclosed above, was negligible on gross margins," it said.

Its CEO Laxman Narasimhan said: "The first six months of 2020 have been underpinned by resilience, agility and strong execution. I'm incredibly proud of the effort of our people who have worked tirelessly, while staying safe, with focus and dedication in an environment that's been changing daily." On the full-year outlook, the company said, "2020 performance is now expected to be better than April expectations, although the outlook for the balance of 2020 remains uncertain." "Our underlying revenue performance (pre-COVID-19) has been ahead of our early expectations for the year and overall, including favourable tailwinds from COVID-19, we now expect high single-digit growth for the year as a whole," said RB.

For the second half, net revenue growth is expected to reflect the benefit of COVID-19 tailwinds for Dettol and Lysol, improving trends in IFCN (Infant and Child Nutrition (IFCN)), offset by likely ongoing uncertainties of pantry-unloading and ongoing headwinds caused by social distancing, it added.

RB owns several brands which include Clearasil, Enfa, Lysol, Veet, Dettol, Air Wick, Durex, Mortein, Cillit Bang, Nurofen, Nutramigen, Scholl, Strepsils, Vanish and Harpic.

The FMCG giant saw a decline in sales of its condoms brand Durex in the January-June period. "Durex saw modest declines as 'stay at home' and 'social distancing' effects impacted demand in both Europe and developing markets, after solid growth in the first two months of the year," it said. PTI

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