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Reckitt feels the impact of rising commodity prices

Reckitt made £6.5bn in revenue over the past six months

Reckitt (LON:RKT), the FTSE 100 consumer goods group, confirmed the impact of inflation on its Q2 results as commodity costs rose sharply.

The manufacturer of Dettol and other such cleaning products said its sales slowed down as the high levels of demand seen at the beginning of the pandemic eased off.

Reckitt made £6.5bn in revenue over the past six months, which was just below analysts’ expectations.

The company’s balance sheet was buoyed by the sale of its Chinese infant formula business for approximately £1.5bn in June.

Reckitt confirmed a loss before tax during H1 of £1.94bn, a swing from a £1.44bn profit the year before.

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Its operating profit margins narrowed 2.9% in H1 to 21.6%, down to rising commodity prices, Reckitt said.

“Cost inflation accelerated in the second quarter and it will take time to offset this headwind with productivity and pricing actions being implemented,” chief executive Laxman Narasimhan said.

Over the course of the past year Reckitt recorded record sales levels as demand for cleaning products and cold and flu brands soared.

As consumers tended to remain at home during the pandemic, cooking and washing more, demand for the related good increased.

“Overall demand in the disinfectant category remains significantly higher than pre-Covid levels and the two-year stacked growth of our hygiene portfolio is up 34.1 per cent, compared to a normal growth rate, pre-Covid, of around four per cent,” Narasimham said.

The company is expecting the coming quarter to be a bit slower in comparison with strong results from 2020 and the year before.

“We are encouraged by the progress we have made to strengthen the foundations of the business and reposition ourselves for sustainable growth. We expect to exit 2022 with a revenue growth run rate in the mid-single digits as we make our way towards our medium-term adjusted operating profit margin target in the mid-20s by the mid-20s,” Narasimham said.

The Reckitt share price is down by 9.28% during the morning session.

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