Reckitt Benckiser Group plc

Good morning and welcome to Reckitt's Q3 Trading Update. I'm Nick Ashworth, Head of Investor Relations at Reckitt, and I'm 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 8 of our R&S published this morning. So with that said, we'll start the presentation. I'll hand over to Chris.

Thank you, Nick, and good morning, everyone. We delivered 3.3% like for like net revenue growth across core bracket in the third quarter and 3.9% excluding Russia hygiene. We are driving good underlying performance with increasingly broad based growth across our markets, supported by a good combination of both volume and mix. And excluding Russia hygiene, all our categories were in growth. As I said earlier in the year, our innovations are landing well and generating growth. Despite the continued weak consumer backdrop in Europe, as well as a weakening consumer in North America, where we are seeing retailers under some pressure, our strategy is delivering as we continue to execute our clear priorities. We are encouraged by the breadth of growth across the business and the momentum we're seeing as we move into Q4 and 2027. Turning to each of our areas, Emerging markets delivered another strong quarter with broad-based growth across its regions. We returned Europe to growth with many of our power brands performing strongly. However, our performance in North America was below expectations. We experienced a temporary manufacturing constraint at one of our sites, limiting our ability to meet strong consumer demand for Lysol. We have consistently said that a key priority is to increase investment in our North America supply chain to strengthen its resilience. In September, we announced plans to invest up to $600 million, of which $400 million is to build our new self-care factory in North Carolina, and much of the further $200 million is to upgrade our two hygiene plants. With that work well underway, the upgrades to a small number of our lines at our hygiene factory in St. Peter's caused production downtime that was greater than expected during the quarter. This constrained our ability to supply Lysol, but it is important to highlight that this was not a demand issue. Lysol's sellout grew low single digit and we continue to gain market share here today. Our manufacturing network simply could not keep pace with that demand for a period of time. We do expect North America and Lysol to rebound in Q4 and more broadly see the investments we're making to address known constraints and build greater resilience across our US network. Turning to emerging markets, we grew 8% in Q3, 9.8% excluding Russia hygiene, with broad-based growth across every region. South Asia and India, ASEAN and Africa all grew double digits with Latin America and China growing mid single digit. Our power brands are performing strongly. All our self-care and germ protection power brands were up double digits in the area with finish also up double digits when adjusting for Russia. We are delivering against the ambitions set out at our Emerging Markets Focus On event last December and doing what we said we would do, accelerating growth across categories and into new markets to complement the strength of our businesses in China and India. In China, despite lapping a challenging comparator and some category-specific headwinds, particularly in VMS, We delivered mid single-digit growth after a strong run of consecutive quarters of double-digit growth. Dettol continued to deliver strong innovation-led growth, particularly behind active botany. Durex continued to improve across the fastest growing social e-commerce channels, returning to overall growth. And we're seeing good consumer reaction to our new VMS content focusing on the production of move free in the US with growth accelerating in Q4. The drivers of growth in China remain firmly in place and we continue to see significant opportunity to grow the business from here. In Europe, we returned to growth in Q3 demonstrating the benefits of the actions we have taken. Gaviscon grew double digit supported by the rollout of double action Durex grew mid single digit with Durex intensity continuing to perform well and our improved execution in a highly promotional auto dish category is driving the turnaround in Finnish back to growth in Europe in the quarter. This is clear evidence that our strategy in Europe is working and underpins our confidence for the remainder of this year and into 2027. The other important factor as we move into Q4 is seasonal self-care. As you know, cold and flu incidence has been low through much of the year, including in Q3. And that has been a drag on our performance in both Europe and North America. Now, as we enter Q4, incidences are running ahead of last year in several important markets, including North America. And we are well positioned. Mucinex 12-hour cold and fever is now on shelf. with very strong initial consumer feedback, including 85% repurchase intent. And we have secured incremental shelf space across our seasonal OTC portfolio. With incidences moving higher, sellout has been showing positive trends and we have been gaining share. You will have seen this morning that we have adjusted our full year 2026 net revenue guidance, taking into account the Q3 Lysol manufacturing disruption and the slowdown in the China VMS category. Together with the positive demand for our cold and flu products at the start of the season, we now expect like for like that revenue growth of plus 3.5 to plus 4.5%. Overall, we continue to execute our plan and make progress against our strategy. The consumer backdrop is weak and it has weakened through Q3 in North America especially. but our power brands are performing, growth is broadening across our markets and we're continuing to invest behind our brands and our capabilities to support future growth. You will hear more about this at our record focus on event in North America next month. So as we exit 2026, I feel good about the momentum we have and where we're headed as a business. Let me now pass you to Shannon to take you through our group and segment performance in Q3 and the drivers behind it.

Thanks, Chris, and good morning. In Q3, Core Reckitt delivered like-for-like net revenue growth of 3.3%, taking our year-to-date performance to 2.9%. In the quarter, volumes were up 0.1%, with both price and mix each delivering growth of 1.6%. Excluding Russia Hygiene, Core Reckitt grew 3.9% in the quarter. As expected, emerging markets delivered the strongest growth with like-for-like net revenue up 8% or 9.8% excluding Russia Hygiene. This performance was broad-based with growth across all regions and was broadly balanced between volume, price, and mix. China delivered mid-single-digit growth despite a challenging comparator and category-specific headwinds in VMS. Growth was driven by continued innovation-led momentum in Dettol, particularly active botany. In Durex, we returned to growth on the back of improved execution and share progress, in particular through social e-commerce channels. However, growth in the cross-border VMS category slowed significantly when false claims from smaller local competitors impacted consumer trust. We have launched media showing our VMS brands are US manufactured and this is already delivering improved growth. India delivered another quarter of double-digit growth, broad-based across all categories. We continue to drive growth through strong execution and route to market capabilities supporting strong underlying demand. We were also lapping a favorable comparator following GST changes which we expect to be a headwind in Q4. Elsewhere in the area, ASEAN and Africa grew double digits with strong performance across several smaller high potential markets including Indonesia, Vietnam, Thailand and South Africa. LATAM grew mid single digits with Columbia delivering double digit growth. As we talked about at our focus on event last December, this growth was led by continued expansion of Gaviscon into new regions as well as Strepsil-Celin ahead of the cold and flu season. Turning to our developed markets. Europe returned to growth in Q3, delivering like-for-like net revenue up 0.8%, driven by executional improvement and innovation launches. Volumes were down, primarily from lower seasonal OTC sales, more than offset by pricing benefits, following our actions in the quarter as we look to mitigate the impact of higher commodity costs, as well as benefits from mix. We delivered strong underlying performance driven by growth in Gaviscon, Vanish, and Veet with a return to growth in Finish, Durex, and Harpic despite limited category growth and a challenging consumer environment. Promotional intensity in Autodesk continued to increase during the quarter. Despite this, our actions have returned Finish to like-for-like net revenue growth With continued volume growth and maintaining its position as the number one Autodish brand across our seven largest European markets. While we're seeing the impacts on our portfolio of consumer value seeking behavior, particularly in germ protection, this was more than offset by improved execution supported by continued innovation and premiumization programs. Examples include the ongoing rollout of Gaviscon Double Action and premiumization across the category, supporting double digit growth in Gaviscon. Vanish continued to drive growth and gain market share following the rollout of Vanish Turbo. And Intimate Wellness returned to growth, up high single digits in the quarter, driven by strong performance in directs intensity, supported by recent range extensions and ongoing rollout across Europe. Viet also benefited from a strong activation and seasonal trends. Moving to North America, where we were disappointed by like for like net revenue decline of 1.3% in the quarter. This was impacted by temporary manufacturing constraints at one of our Lysol facilities, which kept us from meeting strong consumer demand. For the region as a whole, volumes and mix were both positive, in total up 1.5%. However, this was more than offset by continued price investment given the weaker consumer backdrop. Lysol continues to deliver strong sellout in the quarter and is growing market share year to date. As you heard from Chris, we continue to invest in our North America supply chain capabilities to future proof the increasing demand for Lysol, which we expect to rebound in Q4. You'll hear more about our supply chain and wider North America business at our Focus On event next month in New Jersey. The broader consumer environment weakened across North America during the quarter, driving greater value-seeking behavior and increasing competitive intensity, particularly in autodish, where Finnish like-for-like net revenue declined mid-single digits. In addition, at the very end of the quarter, we experienced some retailer order phasing in the drug channel, which we expect to reverse in Q4. Finally, self-care declined low single digit. Seasonal OTC was marginally down as we lapped the Mucinex sinus portfolio reset. Looking forward, with the launch of Mucinex 12-hour cold and fever and the incremental shelf space secured for our seasonal OTC portfolio, were well positioned heading into the start of the season where early incidence levels have been trending higher year on year and category sellout has been up double digit year on year for the past five weeks. Now moving on to our categories. Across self-care, we delivered 2.2% like for like net revenue growth in Q3. Excluding seasonal OTC, self-care grew 4.2% driven by strong double-digit growth in Gaviscon. VMS performance weakened in the quarter mainly reflecting the cross-border category challenges in China. Seasonal OTC performance was marginally lower in Q3 with strong growth in emerging markets offset by lower cold and flu incidents across Europe and North America in the quarter and the Mucinex sinus reset lap in North America. Germ protection net revenue grew 6% on a like-for-like basis. Growth was broad-based across emerging markets with continued momentum in Dettol and double-digit growth in Harpic. Consumer demand for Lysol was strong in North America, and we continue to make share gains year-to-date. Although, as I've said, temporary manufacturing challenges prevented us from fully meeting consumer demand. Household care net revenue declined 1.5% in Q3, However, excluding Russia hygiene, net revenue grew 1%. Vanish returned to growth in Europe and delivered double-digit growth across emerging markets, excluding Russia, offsetting a more challenging consumer and competitive environment in North America. Vanish also returned to growth ex-Russia, led by the successful rollout of Vanish Turbo and improving market share performance in Europe. Intimate wellness like for like net revenue grew 6.4% in the quarter with growth across all areas. Directs delivered mid single digit growth driven by continued momentum in Europe and a return to growth in China and emerging markets remained a key contributor to growth. VEET delivered double digit growth supported by strong activation and favorable seasonal trends. Now turning to Mead Johnson Nutrition, which delivered like for like net revenue growth of 2.7% in Q3. Performance reflected normalized trading conditions following the disruption caused by the Mount Vernon tornado in 2024. The international business delivered low to mid single digit growth led by Latin America. Innovation remained focused on portfolio expansion, including the rice-based product launches introduced earlier this year in Mexico and the Philippines. Turning briefly to the buyback, as we announced at half year, our 500 million pound share buyback program commenced on the 5th of August. As of October 23rd, we've completed 90 million pounds of the program. Now onto our guidance. As Chris talked about, we now expect core bracket like-for-like net revenue to be 3.5% to 4.5% growth for 2026. In Q3, we've seen constraints with Lysol supply as well as the slowdown in China VMS. However, seasonal incidences have so far been trending ahead of our initial expectations. and we've seen positive demand for our seasonal cold and flu brands in early Q4. Given these recent trends, we're now planning for an improved seasonal performance versus our prior expectation of incidence levels to be slightly higher than the prior season. We continue to expect to deliver high single digit growth in emerging markets for the full year. We continue to expect Core Racket plus MJN adjusted operating profit margin for full year 2026 to be in the range of 24.9% to 25.6%. With respect to our technical guidance, our adjusted net finance expense is now expected to be lower in 2026 in the range of 250 million pounds to 270 million pounds. This is versus 346 million pounds in 2025. This is primarily driven by the successful tender of our Mead Johnson bond in Q3, which provides a one-off benefit. Although we wouldn't normally guide on next year's net finance expense at this stage of the year, given the abnormally low level now expected for 2026, it's worth setting out some of the moving parts for 2027. absent the specific one-offs benefiting 2026 of around 75 million pounds and both the current rate environment and a higher gross borrowing level, we currently expect 2027 net finance costs in the range of 390 million pounds to 410 million pounds. We now expect our effective tax rate for 2026 to be in the range of 26 to 27%. benefiting from some one-offs with our longer-term effective tax rate remaining around 27%. And we reiterate our ambition to deliver long-term sustainable EPS growth, acknowledging in 2026 the headwind from the dilution resulting from the divestment of essential home. With that, let me hand back to Chris to wrap up.