Reckitt Benckiser Group plc

Good morning everyone and welcome to Rekit's Q3 trading update. Jeff, our CFO, is going to take you through a brief overview of our Q3 performance and then we will move to Q&A. But before we do that, I'll hand over to our new CEO, Nicandro Durante, who will say a few words. So, Nicandro, over to you.

Thank you, Richard, and good morning to everyone who has dialed in. Before you go through our Q3 trading update, I want to take this opportunity to introduce myself and to provide you with a few messages. I have been at the board of Racket in an unaccepted capacity for over eight years, so I already know the business very well. It has been a privilege to work closely with the board and executive team over this time to shape Racket's strategy as we deliver our purpose, which is to protect, heal, and nurture in the relentless pursuits of a cleaner, healthier world. It is a strategy that I fully endorse. Our brands can make an authentic and meaningful impact to the world whilst delivering an attractive growth analysis model. I am very happy to now step into the CEO role for a period of time as we seek a long-term successor. Since taking up my new role, I have made a conscious effort to focus my time out in the markets with our people Seeing first-hand how they execute in-store with our customers. I have visited a number of manufacturing sites and art centers and met many of our leaders. It has been a delight to see the energy and passion of our teams from around the world as they make our brands better and stronger every day. What I would say is our company is in great shape. We have strong momentum and record is well positioned to compete and win in the market and to outperform our peers. The continued execution of this strategy is therefore my priority to drive sustainable mid-single-digit growth with adjusted operating margins in the mid-20s by the mid-2020s. Our Q3 and year-to-date results are a testament to the strength and resilience of our business. and the hard work and commitment of every one of our talented people. My focus will be on furthering the good momentum that the team has already built. In particular, invest and leverage our large innovations where scale and returns are the greatest. Review where we can unlock barriers to higher growth. Drive the continuation of our productivity and efficiency programs and drive improved Thank you for joining us today. and our 2022 full years results early next year. Finally, I know that you are very interested in the seal search. All I can tell you at this point is that a thorough process is ongoing and you update us as and when appropriate. I will now hand over to Jeff to take you through our Q3 numbers in further detail. Jeff, over to you.

Well, thank you, Nicandro, and good morning, everyone. Our Q3 performance further demonstrates that our strategy is delivering broad-based growth across our portfolio of market-leading brands. We delivered a strong performance with life-for-life growth of 7.4% in the quarter, and that's 8.2% on a year-to-date basis. We also continue to see good market share momentum with 63% of our core CMUs either growing or holding share on a year-to-date basis. Given the inflationary environment, growth in the quarter was more weighted to price and mix, a combination of both which was up 12% in the quarter. Actual consumer pricing was in the high single digits in the quarter, with the balance being driven by a positive mix mainly related to IFCN and trade spend efficiencies which have been across the group. We continue to mitigate unprecedented Program, and implementing responsible pricing where appropriate. Volume was down 4.6% in the quarter. However, excluding the impact of Lysol volumes, overall volumes remained resilient across the business and were down 1% in the quarter. Overall, Q3 was another quarter of mid-single-digit like-for-like net revenue growth For the 70% of our business, which has been less impacted by COVID. And by the way, this is also true when excluding the positive impact of the competitive supply issues in our North American IFCM business. And this is the seventh consecutive quarter of mid single digit growth demonstrating the underlying resilience and strength of our business. And this has only been made possible by the exceptional contribution from our colleagues across all of our regions in these challenging times. Let me cover each of the GBUs in a quick way. In hygiene, like-for-like net revenue declined 1.2% in the quarter. Now this reflects a 3.3% growth when excluding a mid-teens decline in Lysol. So while Lysol was down in the quarter, this was driven by tough comparatives where we saw a spike in consumption in August and September of last year, due to the outbreak of the COVID Delta variant. The periodic decline in Lysol is an improvement versus the first two quarters of the year. And I'm pleased that we continue to see strong consumption around 50 to 60% above pre-pandemic levels. Driving the increase in consumption, we continue to see increased hygiene habits among our core users. and a strong contribution from our growth into adjacent categories. For example, laundry sanitizers continue to perform very well with penetration levels in the US now reaching over 10%. We expect year-on-year comparatives to continue to improve for Lysol into the fourth quarter. In the rest of hygiene, we delivered robust growth. However, we're seeing some softness in more discretionary categories such as air care. I'm particularly pleased to see double-digit growth across our Finnish franchise. This is a testament to the investment we're making in innovation, including the launch of our Finnish Quantum all-in-one range. In health, we delivered another quarter of growth and outperformance. Our OTC brands continue to lead the way. with around 20% growth in the quarter due to strong consumption and market share gains. Dental Lite for Lite net revenue remains well above pre-pandemic levels and although Q3 revenue was slightly down year-on-year, we continue to expect low single-digit growth for the full year at around 40% above pre-pandemic levels. Our intimate wellness portfolio delivered double-digit growth in the quarter, driven by strong growth in many European markets resulting from improved execution and distribution gains. China revenues were lower in the quarter due to the ongoing COVID-related lockdowns. Within nutrition, we see the trends from the first half of the year continuing. We continue to see a good turnaround in our ASEAN and LATAM businesses, with strong market share performances across both regions. In the US, we delivered revenue growth of over 40% in the quarter. This included, obviously, the temporary competitor supply, the benefit from the temporary competitor supply issues, which added approximately 20% to our total nutrition business growth in Q3 and 18% on a year-to-date business. Looking ahead to the fourth quarter, as you will likely be aware, the competitor supply issues are starting to normalize. And we therefore expect the market dynamics in the US infant formula to return to normal by the end of this year. So stepping back and looking at the current macroeconomic environment, we clearly have challenging times ahead. And with continued high inflation, we do expect some impact in more discretionary categories, as I mentioned, such as air care. It's also clear that with higher energy costs, it will be a tough winter for consumers, especially in Europe. However, it's important to remember that we operate in categories where trust and efficacy are of high importance. Consequently, elasticities have been relatively low for the majority of our portfolio of brands. And moving to the full year targets, we remain on track to deliver against expectations from the year. On net revenue, we've raised the lower end of our range, and we now expect to deliver between 6% and 8% like-for-like net revenue growth for the full year. On margins, we reiterate our target of growth in adjusted operating profit margins for the year. As I previously detailed at the half year, second half margins will reflect higher inflation, more normalized margins in our nutrition business, and higher levels of investment versus the first half of the year. So to summarize, our business remains resilient, delivering a further quarter of broad-based growth and market share momentum. We've now seen seven quarters of mid-single-digit growth, with 70% of our business less impacted by COVID. And that's also true adjusting to the temporary uplift in our US IFCM business. While market conditions are challenging, particularly in Europe in the near term, However, our performance here today gives us confidence that we'll deliver our 2022 revenue and margin targets. As Nicandro said, we remain fully focused on executing on our strategy and we remain firmly on track to deliver our medium term targets of mid single digit like for like net revenue growth and the mid 20s margins by the mid 20s. With that, we're now happy to take any questions you might have. Thank you.