Reckitt Benckiser Group plc (RBGPF) Q1 2024 Earnings Call Transcript

Reckitt Benckiser Group plc (OTCPK:RBGPF) Q1 2024 Earnings Conference Call April 24, 2024 3:30 AM ET

Company Participants

Richard Joyce – Head, Investor Relations
Kris Licht – Chief Executive Officer
Shannon Eisenhardt – Chief Financial Officer

Conference Call Participants

Guillaume Delmas – UBS
Celine Pannuti – JPMorgan
Iain Simpson – Barclays
Victoria Petrova – Bank of America
Tom Sykes – Deutsche Bank
Fulvio Cazzol – Berenberg
David Hayes – Jefferies
Jeremy Fialko – HSBC
Emma Letheren – RBC
Chris Pitcher – Redburn Atlantic
Bruno Monteyne – Bernstein

Operator

Ladies and gentlemen, welcome to the Reckitt’s Q1 Trading Update. My name is Neil and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Richard Joyce, Head of Investor Relations. Richard, please go ahead.

Richard Joyce

Thanks, Neil and good morning and welcome to everyone joining Reckitt’s Q1 trading update. Our CEO, Kris Licht; and our CFO, Shannon Eisenhardt, will take you through some prepared remarks, followed by usual Q&As.

Before we start, I’d like to draw your attention to the usual disclaimer in respect of forward-looking statements, contained on Page 6 of our RNS published this morning. So now, I am pleased to hand over to Kris.

Kris Licht

Thank you, Richard. Good morning to everyone and welcome to our 2024 Q1 trading update. We had a good first quarter, with our net revenue performance in line with our expectations and as communicated in February. After a period of significant price-led growth, we are pleased to see volume growth across many of our power brands, including Dettol and Lysol, Durex, Finish, VMS, and our non-seasonal OTC brands.

Our large innovation platforms continued to drive growth. Our premium thermoforming products have been instrumental in delivering high single-digit growth in Finish for the quarter. Lysol laundry sanitizer and the recently launched Lysol Air Sanitizer helped deliver double-digit like-for-like growth in Lysol. In Intimate Wellness, our recently launched Durex Invisible and other thin-feel condoms are driving growth in the business.

From a geographic perspective, Europe delivered mid single-digit net revenue growth with broad-based volume growth across Health and Hygiene, offset by declines in seasonal OTC brands. I am pleased with how our developing markets businesses are performing. We delivered strong mid single-digit volume growth in the quarter led by our two largest markets in that region, India and China. North America saw growth in our hygiene brands, offset by the rebasing of our U.S. Nutrition business and the expected tough comparatives in our seasonal OTC brands.

We are increasing cash returns to shareholders with the recently announced acceleration in our ongoing share buyback program. We expect to announce the next program in July. We continue to make progress on our strategic agenda and I look forward to updating you further on this at our half year results in July. With these Q1 results, we are on track to deliver our full year guidance.

Shannon will now provide you with further detail on our Q1 trading performance and our full year outlook.

Shannon Eisenhardt

Thank you, Kris and good morning. As Kris mentioned, we have made a good start to the year in line with our expectations and consistent with the guidance we communicated at our 2023 results presentation.

For the quarter, we delivered 1.5% like-for-like net revenue growth with a more balanced contribution from price, mix and volume. The improving volume trends we saw through 2023 continued. Our combined Hygiene and Health portfolios grew volume by 1.4%. This was offset by the expected volume decline from the continued rebasing in U.S. Nutrition. Price/mix growth was 2%, driven by both carryover pricing from last year and selective new pricing actions in the quarter.

Moving on to some brief highlights by business. Our Hygiene business grew 7.1% on a like-for-like net revenue basis. Volume growth was 2.9%, continuing the sequential volume improvement we saw in 2023. This positive volume growth was led by power brands, including Finish, Lysol, Vanish and Harpic. As part of our ongoing ERP upgrade around the world, we implemented SAP in Brazil at the end of the quarter. In order to ensure continuity of supply, the timing of our shipments was impacted. This resulted in a 2% net revenue and volume benefit to our Hygiene business in the quarter, and this will unwind in Q2. Price/mix was 4.2%, driven by a combination of carryover pricing from last year, selective pricing actions in year and positive mix as Finish consumers continued to trade up to our superior thermoforming innovations. Key drivers of net revenue growth were high single-digit growth in Finish and low double-digit growth in Lysol. Lysol grew across all key segments, as we benefited from distribution gains in wipes and drove penetration in both laundry sanitizers and air sanitizers.

Turning to Health, which delivered 1% like-for-like net revenue growth in the quarter. Similar to our Hygiene business, we saw strong volume growth across much of the portfolio, including Durex, Dettol, VMS and Gaviscon. As expected, our seasonal OTC brands, including Mucinex and Strepsils, saw volume declines as they lapped prior year retailer inventory rebuild from a historically high cough, cold and flu season. Overall, our Health volumes were broadly flat in the quarter. Price/mix was plus 1% in the quarter, with growth across many brands offset by some pricing actions in Dettol which we discussed last year. In addition, a relatively soft end to this flu season has impacted late Q1 and early Q2 orders as retailers managed their inventory levels.

In Nutrition, we delivered like-for-like net revenue decline of 9.9% in the quarter with a negative 9.4% decline for volume and a negative 0.5% from price/mix. The drivers of like-for-like revenue decline in the quarter are in line with what we communicated in February, as we continue to lap high market shares in the U.S. driven by the competitor supply issue in 2022. With a more normalized competitive pricing environment in the U.S., we have seen stability in our non-WIC value market shares. We maintained our market leadership position at an average of just under 40% share.

Turning now to our group results across geographies. As Kris mentioned, we delivered mid-single-digit growth across Europe and developing markets. Volumes in Europe were broadly stable, excluding the impacts from seasonal OTC brands. And we saw volume growth in developing markets, led by India and China. North America saw growth in our hygiene brands. This was more than offset by the rebasing of our U.S. Nutrition business and the expected tough comparatives in seasonal OTC brands.

Moving to our outlook for 2024. We are on track to deliver for the year; and reiterate our outlook of like-for-like net revenue growth between 2% to 4%, comprised of mid-single-digit growth for our Health and Hygiene portfolios and mid single-digit to high single-digit decline for our Nutrition business. We reiterate our expectation for adjusted operating profit to grow ahead of net revenue for the full year. As I shared in February, the phasing of both our revenue and profit delivery will be second half weighted.

Finally, as previously communicated, we have accelerated the third tranche of our ongoing share buyback program. We expect to complete this in July and, to date, have purchased around £600 million of our shares. Additionally, we expect to announce the commencement of our next share buyback program in July.

Kris, back to you.

Kris Licht

Thanks, Shannon. Before we get to Q&A, I know a number of you will have questions around the NEC litigation, so let me walk you through where we are today. Litigation will continue in the coming weeks and months. This includes post-trial motions on the Watson case and a new trial currently scheduled to begin on September 30, ‘24, in St. Louis, Missouri. These near-term events do not change our overall outlook, and we remain confident in our position.

To reiterate what we have previously said. Enfamil premature products are safe and provide life-saving nutrition for premature babies under the guidance of medical professionals who administer and specify our products. We strongly reject any assertion that any of our products cause Necrotizing Enterocolitis and that there was any failure to warn users of risk. The science does not support a causal connection between any Mead Johnson product and NEC. We have no plans to stop providing the product, as that would be detrimental to the care of preterm babies and their families. Safety is and will remain our #1 priority across our entire product portfolio. And we are not seeing any wider impact on the equity of our nutrition brands from this litigation.

In closing and to summarize our Q1 trading update. We had a good start to the year and in line with our expectations. We are pleased to see volume growth across many of our power brands, including Dettol and Lysol, Durex, Finish, VMS; and our non-seasonal OTC brands. Our successful innovation platforms are a key driver of that growth. We are on track to deliver our full year guidance. And we are well placed to deliver shareholder value creation from our portfolio of market-leading brands, our earnings model and our strong free cash flows.

Thank you. And with that, we are happy to start questions.

Question-and-Answer Session

Operator

Thank you very much. [Operator Instructions]

Richard Joyce

Thanks, Neil. Alright, well, first question we’ve got is from Guillaume Delmas of UBS. Go ahead, Guill.

Guillaume Delmas

Thank you, Richard and good morning, Kris and Shannon. I’ve got two questions. The first one is your – on your Health division. Would you be able to say what your like-for-like sales growth would have been in Q1 excluding the seasonal OTC offering? Because it seems, Intimate Wellness, Dettol, VMS, non-seasonal OTC, all that performed quite well, so curious to know what was the performance ex-seasonal OTC. And then also, consistent with what one of your large competitors said last week: So you were affected by some retailers’ inventory destock late in the quarter. Wondering here if you could quantify this impact or, I guess, more importantly, provide some color on how it will affect your second quarter. As in, could it be meaningful enough to prevent your Health division from returning to mid-single-digit like-for-like from Q2?

And then my second question is on Nutrition because, at the time of your full year results, you were guiding for a low-teen decline in the first half of the year. Q1 was arguably the quarter with the toughest comparator, and yet you did slightly better than that low-teen decline, so here I’m wondering. What did drive this better-than-expected performance? Especially because Latin America seems to have been adversely impacted by some unfavorable shipments are phasing and also some destocking there. So basically why a better Q1 despite LATAM and would it be fair to assume a sequential, albeit probably very modest, in Q2 mostly driven by a bounce in Latin America? Thank you very much.

Kris Licht

Thank you, Guillaume. Okay, I’m going to answer your first question and I’ll hand it to Shannon on the next two. So in terms of Health, look. I don’t think we’re going to break this down numerically, but you can see. In scan data, you can see that the seasonal difference is significant as we expected. It was a record season last year. And there was also a significant rebuilding of trade inventory in Q1, so it’s a significant shift, which does, yes, mean that our non-seasonal Health business did extremely well. And that’s why I wanted to flag the volume growth that we’re seeing, which is broad-based across our brands both in non-seasonal OTC but also in Durex and in Dettol in the Health portfolio. And obviously, as I mentioned, Lysol and Finish and other brands in Hygiene are showing very good volume growth. So, we are not going to necessarily quantify that, but I can tell you that it would certainly be in the mid-single digits, if not better. And Shannon, over to you on the next two questions.

Shannon Eisenhardt

Sure. So the follow-up question, I think, you had on Health was around whether we would continue to see retailer inventory management impacting Q2. And so the answer would be we do expect that we’ll continue to see that have an impact in Q2 with the year. However, we expect that, as we move forward, we will see sequential improvement in our Health results quarter-on-quarter through the year. Then on your Nutrition questions, I think there were really two. I’d start by saying we absolutely had strong trading performance in our Nutrition business in Q1. And I’d also call out one quarter doesn’t make a year. Having said that, what drove our over-delivery in the U.S. was really related to our Nutramigen business; and the fact that, coming out of the recall in Q4, we were restarting shipments of Nutramigen to consumers and had the ability to refill that pipe. We had strong supply performance that allowed that and we are seeing strong consumer demand for Nutramigen in the U.S.

On LATAM, I would just, first, note it’s a relatively small business. We did call out the results in Q1. We had one consumer who we saw doing some destocking as they were managing – or customer, I apologize, as they were managing their inventory levels. And we had a change in a distributor within LATAM. We absolutely expect LATAM to pivot back to growth as we exit the year.

Guillaume Delmas

Okay. Thanks.

Richard Joyce

Alright, next online, we’ve got Celine Pannuti from JPMorgan. Go ahead, Celine.

Celine Pannuti

Alright. Good morning. Thank you for taking my questions. Two. The first one is on the volume recovery that we have seen in the Health division. So it was quite encouraging to see that sequentially. Can you talk about where this volume growth came from and with how confident you are that the innovation that you’ve put through the execution will sustain this kind of gradual volume recovery?

And my second question is regarding to NEC, the litigation there; and referring as well to the call that we had, I think, several weeks ago with some of your experts. My – I want to understand. You were mentioning at the time that the litigation was with Mead Johnson, so would it be a solution for you to split the business and, yes, trying to segregate Reckitt’s value from this litigation? And/or what are your thought about accelerating potentially a settlement?

Kris Licht

Okay. So Celine, thank you for the questions. Let me tackle the first one here, first. So look. The volume performance in Health outside of non-seasonal OTC is quite broad-based, which is positive and also not a surprise to us. As you remember, I’m sure, volumes in Health have been resilient through the inflationary period. And we have seen a lot of growth in different franchises and in different markets. And that is the picture that’s continuing, so really the outlier in the Health portfolio at this moment is the normalization, if you will, of OTC volumes, following that record season last year, and the pipe fill associated with that. So it’s very broad-based. Now I mentioned in my remarks that innovation driver of this. It’s a major driver. And if you think about the innovation platforms that we’ve launched behind our Durex franchise and our Durex franchise across many markets – and I would probably highlight here in particular China, which is really working very well for us, where we have a number of large innovation platforms and new materials that we’ve introduced over the last 24 months that continue to drive strong growth. We are seeing innovation working for us in other parts of the portfolio as well in Health. In non-seasonal OTC, Gaviscon is a very successful franchise and we have seen good innovation contributing to that growth. In the non-seasonal parts of the Nurofen portfolio, we have very good innovation in places like Europe that are really working for us, so it’s broad-based, and that gives us confidence.

As I’ve said before, the way we think about innovation platforms is we want them to be permanent additions to our business, so this is not about launching a bunch of new SKUs and then they cycle in and out of the shelf. It’s about placing new elements of business into our portfolio that’s accretive, that solve new problems for consumers; and that’s what we’re doing broadly across the company. I’m very pleased with the progress, so far, but this job is not done. And we have a number of innovations and a number of new platforms that we continue to invest in and that we will be launching over the next 12 months, so more to come on that front, but I’m pleased with how that is going, so far.

Your second question, on NEC. Look. I think, as we’ve said before, this isn’t – we’re in the early stages of what is a large and complex litigation. I think we need to – while I certainly understand that everyone would like to resolve this matter – and of course, I don’t disagree with that at all, but it is not prudent, I think, to speculate right now on structural moves that we may or may not consider. I can tell you that we are spending a lot of time thinking about how to best navigate the litigation, how to prevail in the litigation. And we remain confident that we will prevail because the science is clear. The benefits of what we do every day is clear. And I think you’re seeing more voices come to the table as well in the marketplace that are serious voices based on science, based on concern for premature babies and their families, most recently the leading non-profit representing parents with kids that unfortunately have NEC. And the NEC Society has, I think, said some sensible things. And I think we’ll hear sensible things from other parts of the U.S. and the marketplace, and I welcome that.

So I can’t share with you today many new specifics on the NEC litigation. As I said in my remarks, there are not so many new developments, but we are completely committed to keeping you fully informed on that as new things develop and as we make further choices in terms of how we best represent the interests of Reckitt shareholders.

Celine Pannuti

Thank you.

Richard Joyce

Alright, thanks, Kris. Okay, next on the line, we’ve got Iain Simpson from Barclays. Go ahead, Iain.

Iain Simpson

Thank you, very much. Two for me, if I can. Firstly, when did non-WICs Nutrition stabilized in the U.S.? And have volumes sequentially stabilized alongside value? And secondly, can you give us some color on which brands drove that mid-single-digit developing market volume growth?

Richard Joyce

When did the Nutrition business stabilize in the U.S.?

Kris Licht

So I mean I think, Iain, you’re asking when did non-WIC stabilized. So I think, in terms of share performance, what we’re seeing at the moment is a fairly stable picture now. And that is what happened in Q1, yes. I want to make sure that I’m answering your question. Is that your question?

Iain Simpson

That’s correct. I’m just interested how many months of sequential share stability we’ve had in U.S. non-WIC…

Kris Licht

Okay. Well, we’ve had a few puts and takes from the Nutramigen in and out, so to speak, of the market, so that would have caused the syndicated data to show a slight share decline early in the quarter and then a share recovery later, but effectively it’s stable…

Iain Simpson

Alright. Which brands drove developing market volume growth, please?

Kris Licht

Yes. So the brands that I mentioned are the brands that grew also in developed markets and – I mean across developed and developing markets. So in terms of developing markets, we saw a lot of strength in Durex. We saw strength in Dettol volumes and in non-seasonal OTC. So we’ve also seen good volume performances from Harpic and from Vanish, so it’s broad-based.

Richard Joyce

Good. Thanks, Iain. Alright, let’s move on to the next question. We’ve got Victoria Petrova from Bank of America. Go ahead, Victoria.

Victoria Petrova

Thank you very much and congratulations on the results. I have three very short questions. First one is on Hygiene. You had 7.1% growth in the first quarter one-off, one-offs in this context? My second question is on margins. And I know it’s too early in the first quarter, but should – you said that margins will be also kind of more beneficial in terms of progress through the year. How should we think about it, especially in the context of your Nutrition business? Should we expect significantly lower margins – margin in the first half of the year versus the second half? And my third question is very technical. When do you expect any first news on your appeal in the context of Ms. Watson verdict? Thank you so much.

Shannon Eisenhardt

Great. I’ll jump in here, Victoria. So first, your question on Hygiene. As you quoted, we did deliver the 7.1% like-for-like Hygiene in Q1. I wouldn’t articulate it as we expect any slowdown. I’d just remind you that 7.1% included a 2-point benefit that was purely timing but related to that SAP implementation in Brazil. So the underlying 7.1% was really 5.1%. And we would expect, as we shared in our guidance for the year, that our Hygiene business will deliver mid-single-digit growth across the year. From a margin standpoint, really no comment today given it’s just a trading update. Although, I do want to make the point that we shared in February and that I shared again today that we expect the phasing of our margin growth and margin delivery to be back half weighted, so very consistent with what we said around top line. We shared that same guidance around bottom line in February and wanted to make sure that, that was clear. And then as far as the new news on NEC, I’ll pass that over to Kris.

Kris Licht

Thank you, Shannon. Look. As you can probably appreciate, it’s not appropriate for us to comment on specific cases that are undergoing litigation, so I can’t speak to specific outcomes and cases, but I can say that we are completely committed to giving you timely information. And any information that we receive and that we think is material and important, such as the kinds of questions you’re asking, we will share with you in a very timely fashion. So I’m sorry. I can’t speak to the specifics on that, but I hope you understand.

Victoria Petrova

Thank you.

Richard Joyce

Thanks, Victoria. Alright, now on to Tom Sykes from Deutsche Bank. Go ahead, Tom.

Tom Sykes

Thanks, everyone. You’ve mentioned Dettol volumes a lot, but you also mentioned that pricing had come down. Was Dettol actually in totality in like-for-like growth, please? Then also, just in the developing markets business, I mean, and in OTC, you pick out – sorry, Health ex OTC. You pick out sexual health, Durex. How did Russia perform in this? And any update on that, please? And maybe just on the guidance on the margin improvement in total. And I guess that’s EBIT margin. Is there any view that your EBITDA margin would also improve, please? Thanks.

Shannon Eisenhardt

Okay. So Kris and I are going to take turns here. I’ll start with your Dettol question. So you’re correct. Dettol was in volume growth, which is fantastic. From a like-for-like, there’s some phasing, timing phasing, that we’re comping from the front half of last year which has Dettol in a small decline from a like-for-like net revenue standpoint for Q1. I think your next question was on Russia, which I’ll pass back to Kris for that.

Kris Licht

Yes. I mean, from a trading standpoint, Russia was not a major driver of our performance in the quarter. I think you also asked about Durex in particular. And I would say Durex is in broad-based growth. And it’s really great to see how successful our Intimate Wellness franchise is broadly across markets, especially the largest markets that matter most to that business; and China. Actually, if I was to highlight a main driver of this performance, China has really posted some outstanding performance in recent quarters behind Intimate Wellness.

Shannon Eisenhardt

And then your last question was around our guidance on EBITDA and whether that was the same as the guidance we’ve given for EBIT margin. And yes, it is. And I’ll just repeat: Both our net revenue and our margin or profit guidance is that it will be back half weighted, which we shared in February and again shared this morning.

Tom Sykes

Thank you.

Richard Joyce

Okay, thanks, Tom. Alright. Now we’ve got Fulvio Cazzol from Berenberg. Go ahead, Fulvio.

Fulvio Cazzol

I’ve got a couple. You called out China and India a few times. I was just wondering if you can share or remind us how big these markets are as a percent of Reckitt’s group revenues and if you can also share what the like-for-like sales growth in these two businesses or these two countries were in the quarter. And then my second question is just generally on the industry pricing environment. I mean, have you seen any signs of higher promotional intensity across any of your categories or countries? Or is it still fairly robust, the general pricing environment? Thank you.

Kris Licht

Okay, let’s take those in turn. So I’ll actually start with your last question. Look. I would say that we haven’t seen a lot of promotional intensity pick up. We are seeing, I will say, a return to normal trading, normal promotional activity. During the inflationary period, we did not see as much promo activity, as I’m sure you know. And I think all we’re seeing at the moment is a return to normal promotional activity and promotional depths and levels. I mean look. This is a nuanced picture, so I’m giving you the aggregate view. Of course, there is always going to be some variance in a single market and a single category, etcetera, but broadly speaking, we are not seeing anything that is of concern and anything that we think creates risk. Of course, we are in a moment of transition out of the inflationary period, into, as we can see in our results today, a more balanced algorithm. So, that’s something that we expect to continue. We want that to continue. And this is an issue that we are watching quite closely. But as we said, we are not seeing anything that is causing us to be concerned at this moment in our large markets.

Shannon Eisenhardt

And then I will take your first question, around China and India. So, we aren’t going to share specific numbers around those countries. What I would say is they are our two largest countries within our developing markets. And they both delivered, as Kris said, strong growth in Q1.

Kris Licht

And I can just add to that. I did share some statistics that were longer term statistics during our presentation at CAGNY. And I think it’s important to just call out that we have been very successful in China and India over the years, and they are among our top five markets. And it’s a part of our portfolio that I think is very good, because it gives us exposure to high growth at meaningful scale, and I expect that to continue.

Fulvio Cazzol

Great. Thank you very much.

Richard Joyce

Now we have David Hayes from Jefferies on the line. Go ahead, David.

David Hayes

Hey. Thanks. Good morning. So, just two from me – three from me actually, if I can quickly. So firstly, just on the cold and flu season and the dynamics in March and April. It sounds like it was up you may calling out this weaker season, so is it notably down in April? And we should think about that still having an effect in the second quarter in terms of that dynamic of year-on-year? The second question is just to be able – there is a strategic agenda update at the first half results, I think you mentioned earlier. Can you just give us a sense of what that will cover? Is that something that’s being formulated now? Will it involve mid-term guidance expectation changes, new approaches and processes, or is it just going to be a sort of a very incremental update on the current strategy? And then the final, quick one, just on WIC contract renewals. Is there any WIC contracts that are due for a – or going through a process of renewal or review and that we might hear about over the next nine months or so? Thank you.

Shannon Eisenhardt

Okay. So, I will try and take your first question, around cold and flu season. So, we do expect to see an impact in our Q2 results from the continued inventory destocking in the U.S. as we are seeing some key customers there manage their inventory levels. And I will say that we expect to see, as we look forward for our health business through the year, sequential improvement in those results as we move through the upcoming three quarters.

Kris Licht

On the strategy update, I mean we will do that at the half year, so we are not going to sort of preview that today. We are very committed to our strategic direction. We are very comfortable with it, as is the Board. And so I am not going to say much further about that, but we do intend to provide an update. And we will get back to you at the half year with all of that. In terms of WIC, no, there are no large contracts coming up. And so I don’t expect that you will have any significant news on that in the near future.

David Hayes

Okay.

Richard Joyce

Thanks David. Now, we have got Jeremy Fialko from HSBC. Go ahead, Jeremy.

Jeremy Fialko

Hi. Good morning. Just a couple of clarifications and then one question. So, the two clarifications are, first of all, on these NEC post-trial motions. I think when you held the original call straight off the initial Illinois verdict, I think you talked about kind of a one-month to two months timeline on those sort of post-trial motions. Is that still your expectation, or has it actually sort of extended a bit? Second clarification, just on health, are you indicating a like-for-like performance broadly similar to Q1 given you have this destock impact in Q2? And then final one is on pricing over the balance of the year. So, you were at 2% in Q1. Now, if you look over the balance of the year, potentially you can have slightly better mix because there is less of an OTC negative impact, but at the same time, you are still lapping some pretty high price comps or price rises that you put through last year. So, can you talk about how you would expect the pricing component of your organic growth to trend over the subsequent quarters, whether you would expect it to still sort of trend down towards around flat? Thanks.

Kris Licht

Okay. So, let’s take those in turn. I will start with the NEC question. We have no real update on that. We still expect these post-trial motions to continue along the timeline that we set out. And again we are not fully in control of that timeline either, as I am sure you know, so – but we don’t have any new information on that to share at this moment. Again, if we do get important information on timings of that, we will be transparent with you and share that with you in a timely fashion. Shannon, over to you on the other two.

Shannon Eisenhardt

Sure. Alright. So, first question was around health, we are not going to give quarterly guidance on the health business. What I would say is we are comfortable with where consensus is sitting for health for half one and for the full year and so we reiterated that guidance earlier in the morning. And then on your question around the impact of pricing and our expectation, I would say we expect to see similar impact from price/mix as we look forward across the year. And so I don’t expect that, if your question was does that go down to zero within the year, I do not expect to see that.

Jeremy Fialko

Okay. Thanks for that.

Richard Joyce

Thanks Jeremy. Alright, next on the line, we have got Emma Letheren from RBC. Go ahead, Emma.

Emma Letheren

Hi. Thank you for taking my question. Given your margins are ahead of peers and the several negative unexpected events that have happened over time at Reckitt, I am wondering if you have put any thoughts to the possibility that your business is over-earning and would actually benefit from some additional investments to improve that resilience. Thank you.

Kris Licht

Okay. Let me take that question. Look. This is a question that we have some experience analyzing and discussing, because as you may recall, this is a while ago, but back in the period pre-COVID, there was a time when the company did in fact over-earn. And we have been in the business of reinvesting in the company and reigniting growth since that period of time. And what’s so encouraging to see is that our investments in innovation, in our pipeline and in our commercial execution is bringing results and driving volume growth at a time when that is really something we are looking for in our business. So, I am very pleased that those investments are translating to performance. And I think we have more of that performance in our future and more of those returns on those investments coming. In terms of over-earning, look, we have no interest in over-earning, but it is the case that we have a truly excellent portfolio of premium brands. And our earnings model is very attractive. It has historically been very attractive. It remains very attractive. But we understand that the most important thing here when you have a P&L like this, earnings model like this, is to drive sustainable growth and volume-driven growth. And that’s exactly what we are focused on. If we see areas for further investment where we can accelerate that growth, we will not hesitate to invest in those areas. And that’s not a throwaway comment. That’s really something that we are assessing. There are places in our business where I do think we can invest more, but I don’t think it will require any kind of significant adjustment to our earnings model or our margins. Many of the places where we can and will invest in the business for greater growth generate near-term returns as well, so that’s a positive, that’s a plus. But there are areas where we want to continue to invest. Our OTC franchise has historically been very successful. It’s an area where we are investing and we will continue to invest. Intimate wellness is a successful franchise. We will continue to invest in that. Our growth in Finish is good and our premiumization in Finish is very good, and we will continue to invest in that. And overall, I expect that we will continue to invest in our supply chain to make it even more resilient and agile than it is today. So, I would say absolutely an attractive portfolio that should generate high margins, and it is. And we will not at all entertain any ideas that we would push our margins to a level where we can’t drive sustained growth.

Richard Joyce

Alright. Thank you. Thank you, Emma. Alright. Next on the line, we have got Chris Pitcher from Redburn Atlantic. Go ahead, Chris.

Chris Pitcher

Thank you very much. Just a couple of questions for me, please. Forgive me if I’ve missed it. Have you given an actual like-for-like sales performance for the total OTC portfolio in Q1 and if not, could you? And then secondly, just on Dettol, you talk about a bit of a price reset. Dettol pricing has been an issue for a few years now. I remember, when you initially did your first margin reset, part of that was to fund the Dettol price reset. Can you just give us a bit more color on how you are improving your price monitoring, your execution around Dettol? And what is it that’s causing the problem? Is it competitors moving quicker? What are you missing? I just want to get a bit more confidence that Dettol is back in the right range now, particularly in important markets across South Asia. Thanks.

Shannon Eisenhardt

So, I will take your first question. We haven’t shared like-for-like sales for our OTC portfolio. And that’s not a data point that we are comfortable sharing or that we intend to share at that level. And then Kris, I will pass Dettol to you.

Kris Licht

Yes, sure. Look, firstly, I think it’s important that we say that Dettol has been an extremely successful franchise and a clear winner in its markets in disinfectants through the COVID pandemic. So, the household penetration gains that we realized with Dettol were among the top of the consumer goods industry during that time. So, this is a very successful franchise. The franchise has grown well and is growing volume, as we talked about at the moment and also gaining share in its key markets. The most important markets for Dettol are markets like India and China, and I talked about the strength there before. Now, in terms of why do we often talk pricing in the Dettol franchise and why do we sometimes find that we need to make adjustments to be competitive, as you referenced, in certain markets, it’s because it’s an intensely competitive place. As you know, in Dettol we have a big bar soap franchise. That’s a very price-sensitive place to be. It’s also a very strategically important place to be because it’s where we bring people into our franchise and then we trade them up from there. That’s our whole model, and so it’s important to be price competitive in a segment like bar soap. Sometimes we find us that we are not competitive enough, and then we will make adjustments. And that’s sort of the nature of competition in that space. I would not say that we have any systemic issues with pricing in Dettol. Actually the franchise has been and is currently trading well and is successful. And it’s a great part of our portfolio, but it’s intensely competitive and we have to remain competitive. And in a competitive market like that, anytime you make any kind of misstep, you get penalized. So – and that’s not unique to us and it’s not unique to Dettol, it’s true for everyone competing in that space.

Chris Pitcher

Thank you very much.

Richard Joyce

Okay. Thanks. And then we have got one final question from Bruno Monteyne from Bernstein. Go ahead, Bruno.

Bruno Monteyne

Hi. Good morning. Kris, my first question is for you. You tend to refer towards the science, in the NEC cases, which is clearly on your side. But what I don’t understand is, if I look at other corporate litigation cases, science wasn’t always that important. I mean many of these companies weren’t equally sure about scientific kind of being on the right side, so what gives you the confidence then that in these jury cases, science is all the determinant versus other factors? Why do you think science will be more useful to you than it has been to other companies? The second thing is there was a question previously about corporate strategy. And you sort of avoided it and started talking about the NEC litigation, but I really think it, coming back to corporate strategy, seems important because I feel like the Reckitt history is almost like a living proof that there is limited or no synergies between selling condoms and dishwasher tablets in the same business. And your business are probably worth more to other operators who might have a bigger cost synergies. I think also effective governance has been a challenge for your Board as well. So, given all that kind of history and evidence, why is rethink, a radical rethink of corporate strategy not your top priority? Thank you.

Kris Licht

Okay. So, on NEC, look, I mean obviously the role of science is incredibly important because, while the Watson case didn’t bear this out today, the scientific evidence is really important to arrive at the ultimate verdicts and the conclusion of this. It’s not just science. It’s also the medical consensus which is really important. And as you see with the statements coming now from other parts of the stakeholders here, the NEC Society as an example, there is a public health interest that is very real in these matters. I can’t comment on other companies’ litigation, but I can say that, because of the confluence of strong scientific basis for our viewpoint, and unequivocal scientific basis really, a very strong consensus in the medical community and a – the very real public health issues that are at stake here, I do think that these matters will be very consequential in how this litigation is ultimately resolved and how it ends. Now, the question on corporate strategy, look, there is no question that assessing our strategy is an important exercise, and it’s something that we have been doing. I think you made reference maybe there to some of the past assessments and discussions we have had, including the debate about RB 2.0 which we studied extensively and resolved. And anyway, I can tell you that we are hearing a lot of alignment to our current plan from our large shareholders. And our Board is aligned. And so I think that’s what I can say about that. I will provide further updates on our strategy and our direction at the half.

Bruno Monteyne

Thank you.

Richard Joyce

Thanks a lot. That’s all we have time for. Thanks for dialing in and have a good day. Bye.