Sensodyne maker Haleon’s shiny forecast signals price hikes unlikely to dent demand

By Eva Mathews

(Reuters) -Haleon raised its annual organic revenue growth forecast on Wednesday, as the consumer healthcare giant bets on demand for household brands like Sensodyne toothpaste and Panadol tablets to stick despite a cost-of-living squeeze.

The world’s largest standalone consumer healthcare firm has raised prices for its products like other consumer companies to minimise damage to profits amid soaring raw material and commodity costs.

However, in contrast to quarterly reports from Unilever (NYSE:), Nestle and Reckitt Benckiser, Haleon has seen volumes continue to grow as consumers spend on its essential, over-the-counter respiratory and oral health products.

“Inflation has been passed on with no real dent to demand …,” said Adam Vettese, an analyst at eToro.

In an interview with Reuters, CEO Brian McNamara said strong pricing will continue to drive growth even in the second half of the year.

The Weybridge, England-headquartered company now expects full-year organic revenue growth of between 7% and 8%, compared with an earlier forecast of the top-end of a 4% to 6% range. This is comfortably above analysts’ expectations for growth of 6.2%, according to company-supplied estimates.

Organic revenue for the six-month period ended June 30 was up 10.4%, including a 2.9% uptick in volumes on a 7.5% increase in price mix.

That was boosted by a 22% organic revenue jump in Haleon’s respiratory health unit as consumers turned to Theraflu and Contac amid rising cases of cold and flu globally.

In key market China, Fenbid sales doubled in the first-half after lockdowns were lifted. Sales for the pain reliever were restricted after it was being used to treat symptoms of COVID-19, McNamara said.

The results also highlight the benefits of the company’s spin-off from British drugmaker GSK last year.

Last week, GSK raised its full-year profit and sales outlook, lifted by strength in its shingles vaccine Shingrix and HIV medicines, helping to revive investor confidence in CEO Emma Walmsley.

However, Haleon’s shares were trading down 1% by 0900 GMT as its adjusted operating margin declined by 40 basis points year-on-year in the first half.

The company attributed the fall to higher standalone costs and inflationary pressures.

It launched a cost-cutting programme in March, aiming at saving 300 million pounds over the next three years, saying it expected to record about 150 million pounds in restructuring costs in full year 2023 and 2024.

According to media reports, that would result in hundreds of job cuts at the firm.

Haleon forecast adjusted operating profit growth of 9% to 11% for the year.

Separately, the company announced the sale of its brand Lamisil, an antifungal agent prescribed for conditions like athlete’s foot, to Stockholm-based Karo Healthcare for 235 million pounds.

($1 = 0.7817 pounds)