Reckitt Benckiser Group plc

Welcome to Rekits Q1 Trading Update. I'm Nick Ashworth, Head of Investor Relations here at Rekits, and I am here with our CEO, Chris Licht, and our CFO, Shannon Eisenhardt, who will take you through some prepared remarks before we then take your questions. Before we start, I would like to draw your attention to the usual disclaimer in respect to forward-looking statements contained on page 7 of our R&S published this morning. I'll now hand over to Chris.

Thank you, Nick. Good morning, everyone, and thank you for joining us. core record delivered 1.3% like-for-like net revenue growth in Q1. This was impacted by the end of a very weak season, a competitive environment in Europe, and particularly in the auto dish category, as well as geopolitical disruptions. Excluding the seasonal business, core record delivered 3.1% like-for-like growth. This was led by high single-digit growth in emerging markets, with China and India both delivering double-digit growth, and Dettol continuing to perform strongly in both countries, driven by innovation. Our North American non-seasonal business was strong, with Lysol up double digits in the quarter ahead of the spring cleaning season, and continued strong performance with Lysol air sanitizer and Lysol laundry sanitizer. In Europe, Autodish remains a very competitive category, but the actions we've been taking to improve our market share performance have led to Finnish regaining leadership across our largest seven markets. But we have clearly seen headwinds in Q1. We've just closed on one of the weakest seasons on record. As an example, incidence levels across our categories in North America were down around 10% versus the prior season. we have seen similar dynamics across all our regions impacting seasonal performance. Europe category growth continued to decelerate and a major focus for us is on improving our competitiveness as we move through the year. Innovation will also continue to be a key driver here. And even while delivering high single digit growth in emerging markets in line with our medium term expectation, This includes the impact of geopolitical headwinds. Notably, changes to the international sanctions regime has impacted our Russia household care and germ protection business. And we've also been impacted by the war in the Middle East, where a positive start to the U.S. trading has been eroded and the disruption has led to flat net revenue performance in our Middle East business in Q1. As you'd expect, we continue to monitor the evolving situation very closely. Impacts have been largely confined to our Middle East business, and we've yet to see any significant spillover to trading in countries outside of the region. Beyond Q2, we cannot predict the course of developments in the region, but we are working on scenarios around higher input costs through the year and how we will mitigate these. shannon will provide more details winning in a tough competitive environment requires a great innovation pipeline and in q1 we've continued to launch new products across each of our categories which will help us to continue driving growth through 2026 and beyond we've launched formula upgrades across finish and vanish and we're now bringing the very successful debtor active botany range into global markets outside of china We continue to roll out extensions to the Durex intensity range. And in China, we've launched Intima foam wash and high strength mega red formulations aligned to local consumer preferences. Turning then to our outlook for 2026. Macro uncertainty persists, and it remains unclear what the impact of the war in the Middle East will be on our categories as we look to the second half of the year. However, from what we know today, there are a number of reasons why we expect to deliver good growth this year and why core record can achieve 4% to 5% like-to-like net revenue growth. First, we're now out of the very weak cold and flu season, and the baseline has reset for the remainder of the year. Second, as I said, we're very excited about our innovation pipeline for the year and beyond. This includes the launch of Mucinex 12-hour cold and fever, which we will start shipping later in Q2. Other innovation platforms, particularly as I think about Detol, Durex, and Gaviscon, all have very strong activation plans through the year. Third, we have strong sustained momentum in our three largest markets. In China, this will continue to be driven by Detol, VMS, and Intima, and the strong innovation pipeline we are delivering. In India, our expanded distribution reach will continue to drive growth for our market-leading power brands. And in North America, our non-seasonal business has strong momentum and is benefiting from our execution with partners in the fastest growing channels. And finally, in Europe, we expect performance to improve in Q2 as the season resets, and we're focused on continuing to improve our execution as we move into the second half of the year. Let me now pass you to Shannon to take you through our group and segmental performance in Q1 and the drivers behind that.

Thank you, Chris, and good morning. In Q1, we've reported like-for-like net revenue growth of 0.6% across the group, driven by 1.3% growth in core record. Excluding our seasonal OTC business, core record delivered 3.1% like-for-like growth. Looking at the areas in more detail and starting with emerging markets, growth of 7.6% included 0.5% from volume and 7.1% from price mix. Volume growth was lower than recent quarters, impacted by the declines in Russia, as well as flat performance in direct China. China delivered its 11th consecutive quarter of double-digit growth, led by strong performances in Dettol, Intima, and VMS, given the innovation launches Chris touched on. This strong performance came despite Durex being broadly flat in the quarter, following the VAT increase on condoms at the start of the year and heightened promotional levels from competitors in Q1. India also delivered double-digit growth with broad-based strength across all categories, including a very strong performance in Dettol, with Durex also up double digits. LATAM was flat, with Brazil and Mexico showing marginal declines, and with double-digit growth in Colombia. Our MENARP region saw a double-digit like-for-like net revenue decline. This included the impact from changes to international sanctions around our Russia household care and germ protection business, with Russia declining double digits in the quarter, a 200 basis point headwind to area growth. To add some context to this impact, Russia accounts for around 2% of core record net revenues, with the impacted categories being less than half of that business. The changes to the EU sanctions came in towards the end of 2025, and our local teams have been working to mitigate the financial impact. These changes impact our ability to both supply these products and use global brands where the underlying product is restricted under EU sanctions. Importantly, we now believe the impact we're seeing will persist through 2026. Consistent with what we have said previously, the process to transfer ownership of our Russian operations remains ongoing. In the Middle East, we had delivered a strong start to the year, but have seen a deceleration through the quarter due to the ongoing war resulting in flat like for like net revenues in Q1. Overall, despite these headwinds, our emerging markets business delivered in line with our medium term guidance of high single digit like for like net revenue growth in the quarter. Turning to Europe, the end of a week season coupled with the weak consumer backdrop saw a 4.2% decline in Q1 like-for-like net revenue with a volume decline of 4.5% and price mix growth of 0.3%. Within that, mix was up 1.5% as we continue to drive our premiumization strategy, particularly in Finnish. More than a third of the area like-for-like decline came from our seasonal brands, and we therefore expect to see improvement in that part of the portfolio as we progress into Q2. Gaviscon delivered a strong performance in Q1, up high single digit, driven by the strong activation and expansion of the double action range. As we shared in Q4, Autodish remains competitive, with Finnish declining mid-single digits in the quarter. However, as Chris said, our team's actions have delivered encouraging market share momentum in the quarter for Finnish. Moving to North America performance was good, while the area delivered like for like net revenue decline of 0.9% in the quarter. The expected D stocking at the end of a week cold and flu season was the driver behind this we delivered mid single digit growth in our non seasonal business. with growth led by Lysol up low double digits with continued strong performance from air and laundry sanitizer and strong sell-in ahead of the spring cleaning season. In household care, finish was up low single digit. Volume growth of 1.5% was driven by strong performance of our non-seasonal portfolio. offset by price mix decline of 2.4% from a weaker seasonal OTC performance, with like for like down double digits in the quarter. From an execution standpoint, we drove strong performance across Walmart and e-commerce in particular, as we continue to focus on the fastest growing channels. Now moving on to our global categories. Self-care was broadly flat in the quarter, with a double-digit decline in seasonal OTC brands, largely offset by strong double-digit growth in emerging markets. This was led by our VMS portfolio, in particular MuFree in China, as well as high single-digit growth in Gaviscon, which performed strongly in both Europe and across emerging markets. Germ protection was our strongest category in the quarter, growing 9.5%, driven by double-digit growth in Dettol and Lysol, both benefiting from their innovation platforms. Household care declined by 7.6%, with finish down mid-single digit, driven by category softness and competitive challenges in Europe, and the impact of sanctions in Russia, more than offsetting growth in North America. Vanish was down high single digits driven by weakness in Brazil and Russia. Finally, Intimate Wellness grew 0.3% with double-digit growth in Intima alongside a muted performance in Durex, which was flat in China following the VAT increase in January with double-digit growth in India, South Africa, and a number of ASEAN markets. Turning to our non-core business, Mead Johnson Nutrition. As expected, like for like net revenue declined 2.7% as it cycled inventory rebuilding in Q1 of 2025 following the Mount Vernon tornado. We expect a return to growth from Q2 and for the business to deliver low single digit growth for the year. We're continuing to progress our billion pound share buyback program. And as of last Thursday, we bought back 669 million pounds of shares since this current program commenced in July of 2025. Now looking to guidance and specifically Q2. In North America, we expect to benefit from the initial shipments of our new Mucinex 12-hour cold and fever launch in June and lapping the Mucinex sinus PE reformulation in Q2 of 2025. In Europe, we expect a continued sequential improvement in like-for-like net revenue performance as the cold and flu season resets. In emerging markets, we expect Q2 performance to be broadly in line with Q1 2026, given the ongoing headwind to our Russia business, as well as our expectation that the impacts we've seen in our Middle East business in March will continue until the end of Q2. As Chris said, we're maintaining our core record like for like net revenue guidance for the full year at four to 5%. We also maintain our expectations around group-adjusted operating profit margins for the full year. When thinking about the shape of margin delivery through the year, as expected, this will be back half-weighted. In the first half, we see the group's AOP margin to be around 200 basis points lower than the 24.6% we delivered in 2025. This is due to the half one impact from stranded costs, the impact of lower seasonal incidents on our high margin seasonal OTC business in Q1, and some incremental costs from higher commodity prices. In the second half, group AOP margin will be much stronger than 2025. This will be driven by a greater level of stranded cost mitigation from our fuel for growth program, the reset of the cold and flu season, more favorable mix across our categories and our areas, continued activation of our innovation pipeline, and actions to offset commodity price inflation. Bringing this together and consistent with what we said in March, we expect our full year group AOP margin to be up on the 24.9% we delivered in 2025. but not all the way to the 25.6% baseline when excluding essential home. This is reflective of our expectation to largely offset the stranded costs with our fuel for growth program. Now looking at input costs. Our cog space is around 40% of net revenues and split broadly two thirds raw materials with the balance in manufacturing and freight costs. While crude oil is not a direct input cost to us, around 40% of our raw materials are correlated to oil prices. To provide some context, modeling a scenario of $110 per barrel for the rest of the year, recognizing this is above where prices are today, indicates around 130 to 150 million pound gross impact on our input cost base in 2026. This is equivalent to around 3% of our COGS. We therefore see this as a manageable level to offset through flexibility and productivity in our supply chain, hedging activities, pricing, and our strong gross margin profile. We have a strong track record over many years of gross margin delivery and a proven ability to offset and mitigate external costs. And we will use that experience as we continue to navigate the ongoing war and impacts from it. With that, let me hand it back to Chris to wrap up.