1H results (HLN, PRGO)
Haleon reported organic revenue growth of 11.6% comprised of 3.7% price and 7.9% volume/mix in the 1H. In North America, organic revenue grew 10.4% with 2.1% price and 8.3% volume/mix. In Europe, revenue growth was up HSD% with broad-based growth except in Germany. The company noted particular strength in Panadol, Theraflu, Otrivin, Advil, and Centrum. Two-thirds of Haleon’s businesses gained or maintained share in the 1H.
- Oral Health grew 5.1% organically, but Q2 decelerated to +2% from +8% in Q1.
- Vitamins, Minerals & Supplements grew by 11.9%. In the U.S., the business grew at three times the market’s growth rate.
- OTC & Pain Relief grew 11.7%, with Panadol being a standout performer growing in the mid-20% range while Advil grew in the low-20% range.
- Respiratory Health grew 46.7% due to a strong cold and flu season which added 4% to the organic growth rate. The cold and flu season was well ahead of 2021 with the U.S. and Europe 20% above an average season.
- Digestive Health & Other grew 3.5% due to weak market conditions for Nexium.
Overall operating margins expanded 90bps in constant currencies while in North America operating margins expanded 350bps in constant currencies.
Management reaffirmed sales and operating margin guidance for the year. Organic revenue growth is expected to be +6-8% and operating margins are expected to contract slightly. Management said that positive momentum in the 1H has continued into Q3 with an expected deceleration. For 2022 management expects inflation to be up mid-teens% for commodities and materials and up HSD% for freight. The company also has contracts or hedges fixing materials costs for the 2H. Management quantified energy costs at 1% of COGS.
Perrigo reported the June Q results over a month ago, so the read-throughs are hindsight comparisons. Perrigo’s Q2 upper respiratory revenue grew 44%, similar to Haleon’s 47%. Perrigo’s pricing has lagged behind the branded products which are boosting Haleon’s margin expansion.
Haleon is one of the companies in our upcoming Idea Hunt which will now be presented on Friday, September 23 at 12:30 PM ET. To update your Outlook Calendar Click Here.
The U.S. CO2 shortage (TAP)
Supplies of CO2 have been hit by natural gas contamination in an extinct volcano’s underground reservoir in Mississippi. The reservoir in Mississippi is the only large underground deposit east of the Mississippi River. 70% of the CO2 produced in the U.S. is used in the production of beer, soft drinks, and food processing. The gas is widely used in the food and beverage industry as a refrigerant, to improve shelf life, and to carbonate drinks. In some areas, the price of CO2 has increased fourfold.
CO2 shortages have been an issue in Europe as well. The larger companies are better able to diversify their suppliers or install equipment to address the shortage. Molson Coors recently said equipment installed to recapture CO2 for green processes at the breweries has helped mitigate some of the shortages.
Return to the office (KR, ACI)
Office occupancy levels increased 410bps to 47.5% in the week ended September 14 according to Kastle. Occupancy levels are now at the highest level since the pandemic began. New York City saw the largest increase, rising by 8.7% to 46.6%. New York City EZ Pass traffic for the week was flat to up slightly vs. a comparable pre-pandemic day. Ridership on the commuting Long Island Railroad and Metro-North Railroad was ~70% of pre-pandemic levels for Tuesday through Thursday while Monday and Friday's ridership was ~60%. New York City subway ridership last week averaged slightly above 60% of a comparable pre-pandemic day. Hybrid schedules are becoming more common which means a YOY boost in food away from home occasions, but still well below pre-pandemic levels.
