Reckitt gains from rising medicine sales as Covid-19 beds in

The return of common viruses after the coronavirus pandemic and Covid-19 becoming part of everyday life has sparked a boom in sales of over-the-counter cold and flu medicines.

Strepsils-maker Reckitt Benckiser is projecting a long-term increase in sales of cold and flu products and said that sales in its health portfolio had surged close to 25 per cent in the first half of the year.

Growth was partly propelled by the return of colds and flu, which were suppressed by pandemic-induced restrictions, but also by the spread of Covid-19 through populations as it moves from a “pandemic to an endemic” phase, said chief executive Laxman Narasimhan.

Sales of Mucinex cold medicine and Nurofen painkillers helped Reckitt beat expectations with first-half like-for-like net revenue growth of 8.6 per cent.

Scientists refer to a disease becoming “endemic” when its presence is steady or predictable in a particular region, as with flu. They say Covid-19 is in the process of moving to this stage, with researchers at the Yale School of Medicine in the US saying it could be reached as soon as two years’ time.

Narasimhan said he expected a “baseline change in the business as [Covid-19] becomes endemic . . . We are seeing . . . that consumers are resorting to self-care more,” he added.

The trend also benefited rival Haleon, the consumer health group spun out from GSK last week, which reported first-half like-for-like net revenue growth of 11.6 per cent, helped by the rebound in sales of over-the-counter cold and flu medicines.

Haleon, which makes Panadol painkillers and Theraflu and Contac cold medicines, said the boost was “supported by the Covid-19 Omicron wave underpinning results across all regions”.

Revenues from Theraflu more than doubled, while those of Otrivin nasal sprays were up by almost half, it said.

Reckitt said it expected like-for-like net revenue growth — a key metric for the sector — of 5 to 8 per cent for the full year, up from previous guidance of 1 to 4 per cent, as it benefits from higher medicine sales along with a productivity programme and higher pricing.

Narasimhan said the productivity programme, which involves measures such as bringing some advertising creation in-house, was delivering results faster than expected, with £370mn of savings in the first half.

Reckitt also gained from pushing up prices for its products by 6 per cent to help pass on steep rises in commodity and transport costs, a similar rise to companies including dairy group Danone.

Reckitt’s operating profit rose 20 per cent to £1.8bn, while pre-tax profit was £1.7bn, swinging from a £1.9bn loss a year earlier.

The positive numbers prompted Narasimhan to declare victory in a bid to turn round the company, which had suffered execution problems and slow growth ahead of his appointment in 2019.

He said he had met a target of “sustainable, mid-single-digit net revenue growth” and would reach another goal of mid-20s adjusted operating margins by the mid-2020s. “Reckitt is a much stronger business today than it was in 2020,” he said.

The company has also benefited from competitor Abbott Laboratories halting production of infant formula as a result of problems at its US plant.

Shares in Reckitt closed up 2.8 per cent to £65.50, while shares in Haleon fell 1.8 per cent to 303.5p.