Reckitt Benckiser revenue grows as product prices hiked

Reckitt Benckiser (Bangladesh), a British multinational company, is reporting revenue growth again, likely due to their move of raising product prices, according to an equity note about the company by EBL Securities Ltd – a leading stockbroker firm.

The publicly traded company has reported 7.55 per cent revenue growth in nine months [Jan-Sep 2023].

The company had reported revenue de-growth in 2020, and stagnant revenue growth in 2021 as the revenue of Reckitt Benckiser normalised from the boom the company experienced during Covid-19 crisis.

The listed multinational said its operating expenses dropped significantly in the quarter under review, thanks to lower marketing costs, which created a positive impact on earnings.

Reckitt Benckiser has a wide array of product portfolios that include Finish, Lysol, Veet, Dettol, Air Wick, Durex, Mortein, Strepsils, Vanish, Trix, Mr Brasso, DermiCool, Harpic, and others.

Depreciating taka, rising raw material expenses, and increased freight costs have brought down the company’s gross profit margin (GPM) by 955 basis points (2021: 54.6 per cent, 2022: 45 per cent).

Although, GPM of Reckitt Benckiser has recovered by 377 basis points in 9m’23, it is still way below the pre-pandemic level of 53 per cent to 57 per cent, according to the equity note.

It noted that the currency depreciation, rising raw material costs, and rising freight costs have adversely impacted Reckitt Benckiser’s margin in 2022 and 2023, and if these challenges persist, they will continue to undermine the company’s profitability.

The household and toiletries segment contributes to more than 90 per cent of the total revenue for Reckitt Benckiser.

EBL Securities said that the company has also improved its working capital position owing to improvements in inventory turnover ratio (2021: 3.84, 2022: -4.71, 2023: 9 months: -5.38) and account payable turnover ratio (2021: 1.35, 2022: -1.25, 2023:  9 month -1.13).

Bangladesh is going to graduate from the Least Developed Countries (LDC) list in 2026 and has the goal of achieving middle-upper income status by 2031. Per capita income in Bangladesh has increased fivefold from 2009 to 2023.

Reckitt Benckiser can be expected to tap into the increasing demand for healthcare and hygiene related products owing to the growing middle class and increasing health consciousness, according to the equity note printout.

The company has increased the capacity of its household and toiletries segment by 3,552 liters in 2021.

Capacity utilisation for pharmaceuticals, and household and toiletries (tonnes) has gone down in 2021 and 2022, while capacity utilisation for household and toiletries (thousand litres) increased in the same period.

Reckitt Benckiser has been paying sound cash dividends over the years. But in 2022, it cut its cash dividend sharply to 980 per cent, the lowest since 2019. The company disbursed a 1,650 per cent cash dividend in 2021, the highest ever for any company listed on the Dhaka bourse.

The multinational company’s blockbuster brand is Dettol. Hand wash, soap, sanitizer, liquid disinfectant, and body wash are produced and marketed under this brand name. Its other key revenue driver is Harpic.

Reckitt Benckiser’s Veet is one of the key depilatory brands in the country, catering to both female and male populations. Its pharmaceutical products, Strepsils and Moove, are also the key products manufactured and marketed.

Listed on the Dhaka Stock Exchange in 1987, Reckitt Benckiser shares closed at Tk 5,007.70 per share at the bourse’s trading floor on Thursday.

Reckitt Benckiser Ltd, UK, the parent company of Reckitt Benckiser Bangladesh, is the largest shareholder with 82.96 per cent holding. The Bangladesh government and Sadharan Bima Corporation also own 3.77 per cent and 1.67 per cent respectively, of the total shares.