Reckitt shares slump as Durex owner takes £150m Iran war hit

Reckitt shares slumped after the consumer goods giant warned it could take a hit of up to £150m if the Iran war keeps oil prices high for the rest of the year.

The FTSE 100 firm – which owns Durex condoms and cleaning brands like Dettol, Vanish and Calgon – saw its stock fall by more than six per cent on Wednesday’s open, to 4,589p.

Reckitt has seen revenue dip in Europe as its Middle East operations are rocked by the Iran war, as the blockage to the Strait of Hormuz sends fuel and supply chain costs soaring.

The firm said it will take a gross hit of between £130m and £150m from the conflict if oil prices remain at $110 per barrel for the rest of the year. 

Brent crude benchmark oil prices are at around $100 and seem unlikely to rise again to $110 for the rest of the year.

£150m Iran war hit would be ‘manageable’

But the fragile state of ceasefire talks make oil prices unlikely to normalise in the coming months, meaning the real Iran war costs faced by Reckitt could reach a long way into this £150m maximum.

Reckitt said it believes this £150m hit is “manageable” because of its flexible supply chain and strong margins.

The Durex maker saw overall revenue inch up by 0.6 per cent to £3.2bn in the first quarter, though revenue at its European arm shrunk by 4.2 per cent to £873m.

The FTSE 100 giant, which owns a number of medicine brands like Mucinex and Nurofen, said it suffered from a soft flu season on the continent. 

The firm also expects the ongoing war in Iran to hit consumer demand across its markets, “as a result of pressure on household budgets”.

Reckitt’s Middle East operations were disrupted by the war, it said, as it saw no revenue growth in the region.

Condom sales shrink in China

The Durex brand took a performance hit in China after the country implemented a 13 per cent VAT on condoms. 

Despite this, Reckitt saw its eleventh consecutive quarter of revenue growth in China, boosted by growth in its germ protection brands.

While the share price slump may have been caused by Reckitt’s £150m Iran war price tag, analysts say the firm seems confident it can weather the shocks caused by the conflict.

Richard Hunter, market analyst at Interactive Investor, said: “While stocks such as Reckitt will never be seen as racy or high fashion, they are nonetheless rather more solid and dependable. 

“The group is cautiously confident that it can mitigate the effects of the conflict and subsequent impact on consumer spending by pulling the levers at its disposal.”

But Wednesday morning’s share price slump left the stock down more than 26 per cent in the year so far, wiping out two years of gains.

Chris Beauchamp, chief market analyst at IG, said: “While companies are doing their best to be guardedly optimistic, investors are deciding not to hang around.

“There are likely to be plenty more warnings to come.”