Reckitt warns of £150m cost hit as oil surge threatens demand

Reckitt Benckiser has warned it could face a cost hit of up to £150 million if oil prices remain elevated due to the conflict in Iran, and cautioned that consumer demand is also likely to come under pressure.

The maker of brands ranging from Dettol to Durex said sustained oil prices of around $110 a barrel through 2026 would increase costs by between £130 million and £150 million, although it described this as a “manageable level” that could be offset through pricing and supply chain adjustments.

However, the group warned that persistently high commodity costs would squeeze household budgets and weigh on spending.

“While challenging to forecast, if commodity prices remain at significantly elevated levels throughout the year, we would anticipate an impact on consumer demand,” the company said.

Shares in the FTSE 100 firm fell more than 5% in early trading as investors reacted to the warning.

Reckitt reported like-for-like revenue growth of 0.6% in the first quarter, with price increases helping to offset a 2% decline in sales volumes.

Growth in its core business slowed sharply to 1.3%, down from 5.9% in the previous quarter, as it was hit by a weak global cold-and-flu season, tougher trading conditions in Europe, and disruption linked to the Middle East conflict.

European sales fell 4.2% in the quarter, reflecting weaker consumer demand across the region.

Despite the near-term pressures, the company said it remained on track to deliver full-year like-for-like net sales growth of between 4% and 5%.

It also warned that profit margins would come under pressure in the first half of the year, partly due to rising costs linked to the conflict in Iran, before improving in the second half.

Chief executive Kris Licht said the group remained confident in its longer-term outlook, pointing to expected growth from its core brands and continued expansion in key markets including China, India and North America.

The update highlights growing concern among major consumer goods companies that geopolitical tensions and rising energy costs could increasingly weigh on both profitability and consumer demand in the months ahead.