Ladies and gentlemen, thank you for standing by, and welcome to the RB Q1 trading update conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. I must also advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Head of Investor Relations, Mr. Jonathan Dawson. Please go ahead.
Thank you, Sabina. Good morning, everyone. Welcome to RB's Q1 trading update. With me here today are Laxman, our CEO, and Jeff, our CFO. As a reminder, as the operator already said, this call will be recorded and available for replay later on today. As usual, we'll go through our normal prepared remarks and then go straight to questions and answers. With that, let me pass you over to Laxman for his opening remarks.
Thank you, Jon. Good morning, everybody, and welcome to our Q1 trading update conference call. We hope all of you are safe and healthy. We meet at an unprecedented time. It would be fair to say that none of us have ever lived through such extraordinary circumstances. Our thoughts and gratitude are with the doctors, nurses, and healthcare workers, and the innumerable others around the world who are fighting at the front line to make a difference. We are grateful to our customers, suppliers, and partners who are doing everything feasible to serve consumers and the communities. I am grateful for the extraordinary work being done by my colleagues across RB Worldwide while respecting everything that is needed to stay safe and well. It is indeed a privilege to lead them. I hope you all had a chance to review our Q1 statement.
I have three messages for you this morning. First, we have made an encouraging start on our journey to rejuvenate sustainable growth at RB. Second, we are managing the unprecedented environment presented by COVID-19 as well as possible, with a strong focus on the welfare of our teams and working closely with our partners and customers. Finally, while we have started the year well, we face an uncertain outlook. At this early stage of the year, we expect to perform better than our early expectations, but would caution against being too positive as there are many uncertainties ahead. Let me first start with where I left off over two months ago in our full year results for 2019. In February, we set out our plans to rejuvenate sustainable growth at RB.
Our objective is to rebuild a strong growth and earnings model and outperform with mid-single digit organic revenue growth, mid-20s margins, and 7%-9% EPS growth. At that time, we outlined in detail how we would achieve this with a temporary margin reduction and an enhanced multi-year productivity program. Taken together, these allow us to invest around GBP 2 billion in principally growth-led initiatives in three phases that will initially establish consistent performance, then build revenue momentum, and finally achieve sustained outperformance. From a strategic point of view, we have started our journey well, with a strong focus on executing our plan during this transformational period, one that lays the foundations for our success in the future. As we laid out in February, we are a good house in a great neighborhood.
There are four trends that are shaping our business, which are brought into even greater focus with what is happening around us today. First, urbanization and global warming continue to drive hygiene as the foundation of health. Pressures on state-funded healthcare are driving demand for self-care to release pressure on health systems. Sexual health and wellbeing are big societal issues that are driving demand for effective protection and related products. An aging and growing population is driving demand for infant and adult nutrition. At the same time, technology and e-commerce are changing the way consumers know what and how to buy and where to look for information and for advice. With this as background, we articulated our purpose. Why we at RB exist is to protect, heal, and nurture in the relentless pursuit of a cleaner and healthier world.
We recognized we would organize the business into three global business units: Hygiene, Health, and Nutrition, while China and our e-commerce business and digital RB each with specific playbooks and focus. I am pleased with the progress during this transformational period, investing in our people, brands, and operations, improving delivery performance, and increasing productivity. While there may be changes to the pace and sequence of some of our investments as we focus on doing what is right to serve the market's needs at this time, our destination is clear. We are showing encouraging progress towards becoming a great house in a great neighborhood. We remain on track to have our new organization largely in place by the 1st of July, and to deliver the expected benefits of our strategy in the medium term, sustained mid-single digit organic revenue growth, and mid-20s margins by 2025.
Moving on to COVID-19, our newly announced compass, purpose, and fight have never been more relevant in these unprecedented times. Our response to COVID-19 is guided by our purpose to protect, heal, and nurture in our relentless pursuit of a cleaner and healthier world, a purpose that has been embraced by the organization at all levels. Despite the significant pressures presented by COVID-19, our global teams have worked around the clock to ensure continuity of supply while prioritizing the safety of our employees, partners, customers, and the communities where we live and work. This is a uniquely challenging and uncertain time. The exceptional demand has resulted in some customers and consumers facing shortages of some of our products.
RB has responded with a typical can-do attitude, ramping up production, in a few cases, to multiples of what we produced last year around the world, streamlining our SKUs, and working with customers and suppliers to overcome significant barriers while incurring additional cost and investing with agility in the supply chain. Grateful to all our employees and also to our partners and customers for their patience as we work tirelessly to protect the front line, increasing supply to meet the unprecedented demand. Our strong brand portfolio provides RB with a unique position to help build healthier communities with a portfolio that includes not only leading brands such as Dettol and Lysol, which break the chain of infection, but also Mucinex, Lemsip, Durex, Nurofen, and Strepsils, as well as our nutrition and our vitamins, minerals, and supplements portfolio.
As our company embraced our purpose, we took up our commitment around our fight, our fight for access. We launched our RB Fight for Access Fund in March. Through this, we will invest the equivalent of 1% per annum of our adjusted operating profit in a wide range of initiatives, working with partner organizations to help frontline health workers promote behavior change and help communities. Our fund has already been mobilized to meet the urgent needs, including a £6 million investment to the frontline health workers and new mothers in Wuhan, China. A $2 million commitment in the U.S.A. to support the CDC Foundation. The donation of Dettol, Lysol, and Harpic products in India, and a partnership in Africa to distribute products to 22 countries, and with UNAIDS to distribute products to HIV positive patients.
On behavior change, the Dettol India handwash challenge with TikTok has reached nearly 88 billion views to date, and the COVID-19 myth-busting website has reached over 1 million views. These complement the many local initiatives that have led to significant community involvement and support for health services around the world, like the National Health Service in the U.K. We have made an additional commitment of over GBP 8 million of COVID-19 cost savings to the RB Fight for Access Fund in support of local initiatives and communities. Turning briefly to our performance in the Q1 . Clearly, we have started the year strongly with like-for-like growth up 13% and consistent growth from both hygiene and health.
We have also seen improving market share trends and delivered strong growth in e-commerce, where we have benefited from our technology platforms and stronger customer relationships, as well as our focus on execution and customer service improvements. Looking at our performance in more detail, the impact of COVID-19 has been different in each market, reflecting our product mix and the timing of government actions, particularly around movement restrictions. The brands most positively affected by COVID-19 are Dettol and Lysol, where higher penetration and frequency of use has led to exceptional and sustained growth. Given their exposure, this has mainly benefited North America, parts of Europe, and some of our developing markets, including China, where Dettol has a strong presence, and India. Higher penetration has also benefited several of our vitamins, minerals, and supplements products, where we have seen exceptional growth across North America.
We have also seen strong growth from our OTC portfolio as customer service has improved, although the proportion that is pantry loading is probably higher, and we'd expect that to unwind over time. Several brands, including Durex, saw overall demand fall. Although for Durex, we saw a strong shift to e-commerce as a result of purchasing behavior and demand changes under lockdown conditions. Overall, as expected, our IFCN business declined 2% on a like-for-like basis in the quarter. As expected, developing market revenue declined, particularly in March, as the business lapped a stronger Q1 in 2019, when the business progressively improved product availability after the manufacturing disruption in H2 2018. As we are going through a planned super-premium product transition in China.
Trade through Hong Kong was also weaker than a year ago, reflecting the ongoing unrest together with significant COVID-19 effects on cross-border traffic. In China, the restocking in 2019 made for a tough comparator. Adjusting for this, IFCN would have delivered encouraging growth in the mainland, consistent with positive consumer uptake. North American growth was led by a particularly strong March as consumers dealt with the impact of COVID-19, including some pantry loading, and in Lysol, some penetration increase. In IFCN, growth was strong for both Enfamil and Nutramigen, although we do expect some pantry unloading in this category. Finally, looking at e-commerce, we saw exceptional growth with our direct sales to consumers and platforms up over 50%, and our total growth e-commerce sales now over 10% for the first time in Q1. Turning to our outlook for the balance of the year.
We have seen strong consumer demand, particularly in March and April, but the split between defensive buying and higher levels of underlying consumption is unclear. At this stage, it is uncertain how quickly this will change in the months ahead. Improved penetration and usage, particularly for products like Dettol and Lysol, may well sustain, although we will likely see some unwinding of pantry load as we work our way through the crisis. The near-term operational challenges to meet additional demand and handle lockdown conditions with the associated costs are also likely to continue for some time. As a result, after an encouraging start, we now expect our performance to be better than originally expected. However, the outlook for the balance of 2020 remains uncertain, with significant COVID-19 challenges across our markets.
We expect to incur higher operating costs, particularly in our supply chain, as we keep our people safe, mitigate disruptions, and serve the needs of consumers. We continue to make progress on the implementation of our new strategy. We're investing in capacity to meet growing demand. We're also investing to capitalize on new growth opportunities as they emerge. We will need to adapt and rephase some of our initiatives into the H2, and we'll be in a better position at mid-year to refine expectations and update our transformation plans. Looking to the medium term, our outlook for sustained mid-single-digit organic revenue growth and mid-20s margin by 2025 remains unchanged. Thank you for your attention. We remain committed to serving our consumers and communities as well as we possibly can during these unprecedented times.
I would like to thank once again our people, our customers, our suppliers, and our partners who are working tirelessly to make that happen. Thank all those at the front line who are keeping us safe and confident of a successful future. With that, I'll hand you back to Jon and to open the call up for any questions. Thank you.
Thanks, Laxman. We've got some people in the queue already. I know the operator will reiterate her instructions to press star one if you wish to ask a question. For the time being, why don't we go to Celine Pannuti for the first question? Over to you, Celine.
Morning, Celine. Celine, I can't hear you. Maybe it's me, I don't know.
I think I managed to interrupt Celine's question. Apologies, Celine. Why don't we go to Richard Taylor, and Celine, if you wish to re-lodge, we'll get you back in the queue. Richard, would you like to ask a question?
The growth number, obviously 13.3% is a fantastic start to the year. I just want to understand how we should think about it. If we assume a kind of normalized growth number for Reckitt is around four, that means that we've got 9% extra growth, I suppose. How should we think about that in terms of stockpiling, but more interestingly, increased usage? I'm particularly interested in your thoughts on new customers, new retail customers, where you're gaining distribution and also on new consumer engagement, because I think that's going to be pretty key for the go-forward momentum for the business. That's the first question. The second one, I want to also ask about guidance. I totally understand you want to keep expectations in check at this stage, and there are lots and lots of uncertainties.
If we start the year off with a 13 and then assume sort of zero in Q2 and four in the H2 on easy comps, that easily makes a five for the full year. Of course on margins, I know we've got the 350 basis points reset, but clearly there's a big input cost tailwind. A&P's tough to spend right now. There might also be some operating leverage. I suppose it'd be really helpful if you could call out some of the offsets on the margins as well, please.
Well, thank you, Richard. Let me first start with the I'll just take you on a tour of the business if I could. I go to the hygiene categories, and I go to brands like Dettol and Lysol, what you see there is you do see increased penetration and increased usage. That's happening at home, but it's also happening on the go. You go to a category like infant formula, we did see a tick-up in sales, particularly in North America, and that is clearly pantry loading. You go to the OTC part of the business, where we have seen strong growth, we expect that is also impacted by pantry loading, and we expect a lot of that to unwind as we go through the next set of months or periods.
If you go to the vitamins, minerals, and supplements space, it's a bit of a big story. We actually have some where you do see increased penetration and usage, and some where, in fact, you will see it unwind over time. Pretty much across the board, what you see is different dynamics play out. I think it's a little hard to predict exactly how much of the penetration and frequency increases, particularly in the hygiene categories, will sustain. What is clear is that what we are seeing from consumers and what we are seeing from customers is a greater desire to engage on this because they too are feeling that over time, we will see a step up in both penetration and frequency in the case of hygiene. On your question about customers.
We have really prioritized customers and engagement with customers in a very substantial way over the last eight months or so. We're in constant interaction with them. What you are seeing is systematically, we are seeing progress in terms of what we are doing with regard to customer service fill rates and our relationships with them. We've had to be incredibly agile to respond to the changes in the outside world. It has meant cutting SKUs. It has meant partnering with them to ensure that the assortments we have reflect what they believe demand could be. It is about more tight integration of these customers into our supply chains, which is beginning to happen and has happened quite well in several of our markets.
If you just looked at just the performance with our customers until February, even before all this really took off in the way that it did, what you see is steady improvement in week-over-week, month-over-month steady improvement. In terms of engagement, we are seeing engagement with regard to new spaces and new places. I think you saw our announcement last week with the Hilton hotels chain, which was really around the brand Lysol and the idea that Lysol would in fact be a partner with Hilton in defining clean spaces inside hotels. We are seeing new engagement as well that is coming. Back to your question about the overall numbers, though. It is really hard to predict what will happen. If you have lockdowns in some markets, you have a shutdown in supply in the case of others.
Just a few weeks can change the picture quite a bit, which is why all we can say at this point in terms of top line is we can say that we're certainly going to perform better than what we said in February, which is we'll grow more than we did last year. We think that's going to be more positive than that. It's hard for us to give you a real firm guidance at this point in time. To your question on margins. Let me first talk about some of the tailwinds. There's no question that you see commodity cost tailwinds in certain parts of our business. You also see volume leverage. In the case of brand equity investments, we have actually invested the brand equity investments that we plan to make. Some of it is really about the messaging also.
What we have done is we have shifted some of the messaging to drive behavior change. I think I mentioned this TikTok campaign, which is at 88 billion views. We're now scaling this across various markets. We've partnered with various health authorities to drive public service messaging around behavior change. On the A&P side or the BEI side, as we call it, plus digital, where we have actually spent more, and I think it reflects a bit in the kind of growth rates you see on e-commerce, where we have had over 50% growth in e-commerce. BEI, I believe that we will continue to spend the way we had planned to spend. We do see operating leverage, as you said. I think it's a little bit of there are pluses and there are minuses. The thing about the minuses are the costs.
If I take a look at some of the logistics costs that we have incurred, let me give you a couple of examples that actually give you a sense of what has happened. If you look at social distancing, and how we've had to implement them in some factories where we provide transportation to workers, it has meant we've had to double or even triple the buses that we use in order to bring people into factories. We have, in a very quick cycle fashion, built cafeterias inside some factories that help us also ensure that people are able to eat, but do that within the rules of social distancing.
Our Wuhan factory is a great example of this as well, where if you look at raw material availability, if a factory in China that provides raw materials to the factory in Wuhan shut down because of a lockdown, we've actually scoured the world to figure out whether there's any raw material available elsewhere. Where it has been, we have bought it and we have air freighted it to China. We do see increases of that nature. We have invested in the supply chain. We have bought equipment and advanced that in order for us to increase capacity. We're going to make even more capital investments as required in order to increase the capacity to deliver on the demand that exists. It is a bit of a pluses and minuses.
On the margin side, I feel good about where we are and where we are going. We do get some leverage, no question, but we also get some increase in cost. I think what we will do is we will update you at the half year on our margin progression.
Thanks, Laxman, and congratulations on a great start.
Thank you.
Thank you, Richard. Let's take the next question from Iain Simpson. Iain, what's your question?
Thank you very much. Firstly, just digging more into that supply chain. Even before COVID-19, you said you needed to put more CapEx in. Since then, you've seen demand step up. Presumably, COVID-19 makes it a bit more challenging to actually spend that CapEx, given the need for social distancing during the construction phase. How concerned should we be about risks to supply chain as we go through this year, and how are you thinking about that and managing that? I noticed that you've pushed back some investment into the H2, and is that related to that? Secondly, just digging a little bit into China infant formula. I think there's been a freeze on new products that regulators have introduced there. You were talking about transitioning your China infant formula business to a super-premium business. How is that new product freeze impacting that, please?
Thank you very much.
Sure. Thank you, Iain. First on supply. Although we spoke in February, we have been working on this from September. Our planning systems are in much better shape than they were in September. I think what you're seeing is a tighter linkage to demand than supply. Our supply team has done some very heroic things in order to really meet the demand. Just to give you a couple of statistics, if I could. In May, we will produce the hand sanitizer quantity that we produced in all of last year. By June, we should be at 20 times the number. If you look at some of the other product areas, some of the ones that are highly popular, we have cut down SKUs. In some cases, in China, for example, that's all. We cut 80% of SKUs.
What we did, was you had a massive increase in volume because of run lengths that we had. Now, by the way, that's back up already to, we only have a 20% SKU reduction in China, and the volumes are back and we're growing. We have a bunch of partners we're working with to ensure that we can ramp up supply rapidly. We have made investments. Examples would be molds or some of the things that we need in order to ensure we have the raw materials in place. We have made those investments. We have bought lines and we are bringing them into our factory. My sense is that we are doing everything we can to further ramp up supply, and I feel very good about the progress the team has made in order to ensure that we can get there.
It doesn't solve the longer-term questions that I think we've had and we are working through to further strengthen our supply chain and the investments that we are making. We are making good progress on productivity. We are at or above our plan for productivity in the Q1 . The team has done a great job in that, by the way. We have the plans in place, in order to further ramp up capacity that we've looked at, and that we will approve them as appropriate. Your point is absolutely correct, that the execution of some of those plans will depend a bit on our ability to pull that off in this kind of environment where there's issues around physical movement and the like. I know one thing for sure.
Working with our partners, we will be able to ramp up supply in order to meet it. We may not ramp it all the way up to meet all of it, and we're working with our customers in order to ensure that this is there. Clearly, it all depends on how long this goes and what behavior change we see over time. But we are preparing very aggressively in this area. This is an area of great focus for the entire team, and I compliment our supply chain team, our IT team. The teams in the markets were working incredibly hard to ensure that they stay safe. They put the investments in place to keep our people safe, but at the same time respond to this unprecedented demand. On China, on the question of IFCN.
First of all, in the Q1 , we were lapping a pipeline fill in the Q1 of 2019 that came from the manufacturing challenges that we had in 2018. There's clearly a lap there. The other negative is Hong Kong. We've had disruptions there, which I think are very public. The border closure and the visitor market has essentially been completely closed since early February. Clearly two negatives. The positives. We've been working through this premiumization that we have talked about. In fact, if you look at it, our super high-premium brand, Enfinitas, was 30% of our mix in Q1 of 2019. These are Nielsen numbers. It's now about 46% of our Q1 in 2020. The super premiumization for us continues to grow.
If you look at our shares, again, the Nielsen shares, are marginally better. They're certainly sequentially much better than Q4. Year-over-year, they are marginally better. Q1 of 2019 to Q1 of 2020. If you also look at the performance with the Stage 1 part of the business, our shares at Stage 1 have progressively improved and have gained steadily from August until March. If you look at our e-commerce shares, they have also steadily improved. Q1 of 2020 versus Q1 of 2019, Nielsen data plus 50 basis points of improvement. We're also seeing momentum in the lower tier cities. We are seeing it, clearly the big winners in the lower tier cities are the local competitors who have done a great job and have a great business. That's the business in China.
In terms of new product introductions in China, we do have a couple planned for the later part of the year, but not for now. They're going through right now. We've already introduced grass-fed in the latter part of the year, and that kind of migration is happening even as we speak. It's not a new product we need to introduce this month, but it's certainly something we have plans for the latter part of the year, and we will see how it plays itself out. Clean from China is still work in progress, but we're happy to see some green shoots emerge.
Thank you, Laxman. Why don't we take the next question from Celine from J.P. Morgan. Celine?
Yes. I hope you can hear me. Good morning. My first question is on hygiene. I think you mentioned there was both increased consumption and pantry loading. I just want to try to understand between categories, if you could dig a bit and tell us within hygiene, the different performance within categories and whether if you have seen from customer surveys or any insight of exactly where they are using more products. That's to try to understand a bit the hygiene performance here. My second question is on emerging markets, which was in fact slower for hygiene than the rest of the regions. I saw that India was negative. Could you give us a bit of a color of what has happened in different emerging markets? Have you also benefited from some pantry loading in Latin America, for instance, or Middle East?
What should we expect in terms of ramp up in India? Just finally, I would like to if you could clarify your outlook on the third question on margin. You talked about the positive and the negative. Am I right to understand that nonetheless, you expect the margin to be better than the guidance of -350 that you gave in February? Thank you.
Thank you, Celine. Let me go to the hygiene category that you talked about. The second is emerging markets, and your third question was on margins. To start on hygiene. Brands like Lysol, and by the way, Dettol too, are seeing increased penetration and increased usage. I think you can understand the consumer sensitivity around this, particularly because they're all anchored on this idea of protection and breaking the chain of infection. You also have consumers who are sheltering at home, and because they're sheltering at home, there are certain things they're doing, both to keep their spaces clean inside the house. They're also cooking more, as you see that from all your food companies, but also they're cleaning more, the dishes and the like.
What you see there is a brand like Finish benefiting from the fact that you have people at home who are behaving differently than they have in the past. You also have brands like Air Wick that are actually benefiting from the fact that people are at home. Physical movement, physical mobility could have an impact on those brands, but at this point in time, they're actually doing well. In the hygiene business overall, what you see is, because of the fact that you have increased penetration and frequency driven from an insight around hygiene is the foundation of health. That one is one that we expect will actually continue for as long as there's sensitivity around this. Depending upon how consumers behave and where they shop and what they do with their time, will impact some of the other categories that are inside the business.
The pantry loading effect is more pronounced in OTC, definitely pronounced in the case of the IFCN end business, where we fully expect that those will in fact evolve over time. On to your third question on margins. We will update you in the middle of the year on our view on margins. At this point in time, what I can tell you is really the pluses and minuses as I framed it. We've also said that our performance overall will be better than what we said to you at the end of February. For the specifics of that, we will update you in the middle of the year. There are a lot of uncertainties out there, Celine, it's very hard for us to really predict how Q3 or Q4 is going to look like right now.
I mean, we have all kinds of scenarios we're working with. We have teams that have obviously modeled various scenarios, and they range all over the place. It's really hard for us to give you a number and hold ourselves accountable to it. We really appreciate your understanding of this, and we will update you in the middle of the year to the best that we know.
There was a little bit in Celine's question about India and developing markets, Laxman.
Right. That's right. Sorry, that was the third one. Overall developing markets, we had mid-single digits growth in emerging markets overall. That is important, particularly given the fact that going ahead, it's 40% of our business, and so it's important that engine fly. What you're seeing here is clear demand for products like Veja in Brazil, Jik and Dettol across Africa, Dettol in India, which actually had a mid-single digits performance, as well as if you look at some of the businesses in Southeast Asia and China, where you see very strong performance of brands like Dettol. I think in the case of the hygiene business in India, we did see a single-digit decline, again, driven by some of the shutdowns and some of the physical dislocations. We are seeing that our factories are now back up and running.
Maybe not fully, they are up and running close to fully. I feel good about the trajectory of that business. Hopefully, we will see India continue to progress from a physical dislocation standpoint. What you should know is that even though we've had these sorts of declines , as you've seen in the Q1 , if you look back over time, the kind of penetration increases we've seen with our brands in the hygiene business. The kind of usage differences that we've seen over time in the hygiene business in India have been very strong. We are good about the fundamentals of the business, and we recognize we need to work through some of the physical dislocations in India that will help us get back to, I would say, stronger performance over time.
Excellent. Thank you, Laxman. We'll take the next question from Chris Pitcher. Chris, over to you.
Thank you very much. Couple of questions, please. Firstly, on the supply chain again. I imagine the Q1 as you mentioned, a lot of stresses on the supply chain. Are you comfortable that some of the old issues of the past are now resolved? You mentioned in the statement that you expect lower revenues in developed market child nutrition due to, I think, some capital projects there that look like remedial rather than proactive. Secondly, in terms of the home hygiene business, Lysol was incredibly strong in North America and probably contributed, I don't know, 40%, 45% of the category growth. Can you tell us how much Finish has grown by and whether you think you're winning, holding share in that category?
Finally, could you give us a bit of an outlook on, you mentioned at the full-year results that you would expect working capital to work against you this year. Should we expect even more of a working capital movement given extended credit term , payment terms, and so forth? Thanks.
Just before I get started, I am going to let Jeff take on the working capital question when I get done with the others. Let me just work through first. The first one on supply chain and stresses. We have been working since September in order to address some of the challenges we have seen on supply. The areas we focused on were our planning and just ensuring a much tighter link into the demand signal to ensure that we had products where we needed to have them, in order to improve our fill rates with customers. That has actually happened. If you look at the performance at the end of February, with many of our largest customers, it was actually much stronger than it ever was.
By the way, there's still more headroom, no question, and our customers have been very understanding and been working with them very closely. I've personally been very involved in this. We continue to see steady progression in terms of the way our customer service has improved. In terms of your question on some of these capital projects, these were planned. We have the migration that's happening in China on a product that's actually much more regulatory driven. We have a dryer in Latin America that was actually planned for an upgrade and is happening now. It would be great if it hadn't happened at this point in time, but it is the way it is. It is something that was needed to be done and has been in the plans for a while and is being done and actually is done.
We would expect that Q2 will be obviously a time for ramp-up for this business. You won't see it there yet, but in the back half of the year, hopefully, we will have that addressed. That's your question on stresses on the supply chain. You should also know that we have invested in capacity, and we are continuing to look at plans to further invest in capacity. Our partnership with our co-packers is very strong, and we further that up, and we really thank them for their partnership. All of that put together has led us to actually meeting the supply needs that we had. It has meant extremely agile movement.
Our supply teams, by the way, these are calls that are happening literally every single day, are working extremely hard to meet this kind of demand and to deal with the physical challenges that you have if a port shuts down or if there's a physical flow blockage somewhere or we have a challenge because of a raw material not being available in some place. It has required extremely agile working, and I really celebrate the can-do attitude of the RB team worldwide, particularly in supply, in IT, and in our sales teams, who have actually really risen to the challenge because they know how important this is. They've done it keeping in mind safety. On your question on hygiene, yes, Lysol had a terrific quarter. On Finish, the performance was strong, and I think it's driven in great part by the fact that people are showing behaviors.
When they're staying at home, they're washing more, and Finish has certainly benefited from that. On to working capital. Jeff, perhaps you want to take that question on?
Thanks a lot, Laxman. The bottom line is we're not seeing a lot of movement in our net working capital. We have seen some expansion of payables. Overall, it's not significant at this point. I wouldn't change from the guidance that we gave in February that we would expect working capital to be increased modestly in 2020. I don't see any reason to change that guidance. We remain on track to deliver strong cash flows in 2020. We don't currently see a significant swing in working capital.
Excellent. Let's take the next question from Martin Deboo.
Morning, everybody. My question is really around supply chain. They've all been answered. The one small one I'd probably add is what was your sense of where your inventories were at the end of the quarter, both your own inventories and stock in trade, and just how does that play out in Q2?
Maybe, Laxman, if I take our own inventory-
Yeah.
Then I hand it over to you to talk about the trade. Martin, overall, our inventories weren't significantly down. We clearly saw some areas, some brands, Lysol, Dettol, where inventories were down significantly. However, we're building up in terms of raw materials in significant areas. We have more raw material in the pipeline as we look to increase production. Overall, inventory was actually pretty flat versus a year ago and pretty flat versus December. No significant movement in inventory on our own balance sheet. Laxman in the trade?
In terms of the trade, I think in some of the products like Lysol and Dettol, I think it's fair to say that the consumer offtake has been strong, and it has meant that the inventory levels with the trade in some of those are not as high as they would have been last year. Having said that, what we are doing with our retail partners is we're working very collaboratively with them, not just to think about what that means, but also looking ahead. Come as well, right? We've got to worry about that too. We're working on this, and we're working with our supply chains to ensure that we are meeting the demand as appropriate for what was needed for the flu season later in the year.
Okay, thank you.
Let's take the next question from David Hayes. David, over to you.
Thank you so much for the opportunity to ask the question. Just two from me. The first one, I guess, is just to clarify maybe on the LATAM infant formula spray dryer capacity. Just to understand your comment, has that been a constraint, a bottleneck on supply, on sales levels in various geographies in the markets? Is that, you're saying, going to come off that bottleneck in the H2 and will support better growth? The second question is broader . You talk about in the release, obviously significant management change that's ongoing to the first of July, but a lot of top positions changing. Can you outline what you're expecting from those people? What they're going to bring that wasn't there before, beyond just delivering the medium-term targets? What characteristics have you got in those people that wasn't present in the people they were replacing?
Thank you so much.
Great. Well, on the LATAM dryer, this has been a planned project for seven years. There's nothing new about it. If you look at our market shares in this business in Mexico, they've actually gone up. What we are doing is it's a planned upgrade of the dryer. It will have an impact because you have to take down the line for a period of time, and then you will end up having to rebuild it, which is the way it is. We've obviously looked for ways to fill that demand from other places. There are obviously registration questions and the like that we have had to work through. To me, this is a planned upgrade. In a very similar way, I think that you would. It just so happens that this is a factory that supplies a lot of our product in Latin America.
On the management change, we have a combination of two things. We have a combination of existing RB people, who are terrific, who have been promoted, and who are occupying key roles inside the company. There'll be more of those as you'll see over time. In addition to that, we have made targeted hires of people to come in, and these people are people who are bringing in very specific expertise, experiences, and the ability to guide our organization to what we want to do, which is position this company for strong growth in the medium term with a top-line emphasis. I mean, Jeff Carr, for example, is a great example of that.
I know he's on the line here, part of the attraction of Jeff, as you know, as I mentioned in the previous call, was Jeff brings a great deal of experience, both strategic leadership, operational leadership, and the ability to build a great finance team that will help us really strengthen the business for the future. We've begun working really well together despite the fact that we are always doing this on Microsoft Teams from the sound of it. In a very similar way, we are bringing people in with very specific expertise and experiences to round out our team.
Thank you.
Let's take the next question from Alicia Forry from Investec. Alicia, over to you.
Hi. Good morning, everyone.
Morning.
I wanted to ask about the market share gains that you referenced in both your health business and in hygiene. Can you tell us whether those are versus private label, other brands, and how sustainable do you think this development is? Secondly, R&D was a key part of the strategic evolution in FY 2020 prior to this crisis. What's the outlook for R&D, new product development, et cetera, sort of near term as a result of COVID-19? Then finally, if I could just circle back on China Infant Nutrition briefly. You mentioned that growth was encouraging on an underlying basis. While that's positive, it doesn't sound especially dynamic. Can you update us in a bit more detail what's kind of going on with the portfolio and your brands on the underlying basis and growth outlook for that? Thank you.
Thank you. First, your question on market shares. I think that what you're seeing is actually solid to strong performance on market shares pretty much across the board. Part of it is driven a bit by consumers. It's actually migrating to large brands that they have trust in. In knowing that that will help them through various periods of time. On market shares, it's a broad question. There's many, many parts to our portfolio. I think what you see overall as a broad theme is, as consumers move to larger brands, we're seeing the impact on market shares. On your question on R&D, this is a big priority and a big emphasis for us.
The R&D team's working incredibly hard to ensure that we are reflecting what is happening in the world around us and translating that into ideas and innovation platforms that will stand us in good stead for the future. It's a very dynamic process right now. We already have plans for next year. As we look at what's going on, we're continuing to look at this and update this as appropriate for new products that we will bring out over the course of next year. On your third question on China IFCN. This is still work in progress, but the progress is encouraging. As I think I've given you some of the statistics on our premiumization, what we've been able to do with e-commerce, what is it that we're really doing? We are focused on offline execution in stores in China.
The team understands this, and we are really focused hard on ensuring that we actually get that piece of it right. Second is e-commerce is a big area of focus for the business, and has done well, but we can continue to make investments and make that better. Third, we have invested in the competitiveness of the business. No question that that was needed, and we've done that. Fourth is, we are innovating with new models that help us address the opportunity in tier 2 and tier 3, tier 4, tier 5 cities. We're seeing momentum. It's clearly not at the level that the local Chinese companies have, which is why they have these big share gains, but our performance relative to others is not bad. It's not enough, but it's not bad.
On the overall IFCN business, I think the team understands clearly my perspective on this is that performance is going to be important for us to deliver a consistent, sustainable performance. They are absolutely on it; they understand my view that performance is going to matter. I am all over them, if I could say that, in order to ensure that we get there.
Thank you.
Shall we take the next question from James Edwardes Jones? James, over to you.
Thank you, June. Laxman, I understand that you're reluctant to be drawn on the outlook, but you are much better placed than most of us to anticipate what's going on. Longer term, I know it's all very uncertain, but is your best guess for, say, 2022 and beyond that this crisis fundamentally changes things, or do you expect things to revert to something like the previous normality?
I think the longer we see the behavior changes that consumers are being forced into, the more pronounced the changes will be in the long term. Just so you know, in terms of how we're organized around this, we clearly have a team that is focused on our people and on safety. We have a team that is focused on supply and doing all the heroic things in order to ensure we meet the supply requirements that we have. There's a team that is looking at demand in the near term and looking to see what we need to do in order to ensure we truly understand the demand picture and respond to it with supply, along with our people and keeping them safe. That's sort of I would call the current business.
I do have a small team working directly for me and, what we are doing is looking at the long term and what that means. There's no question that, as we look ahead, you are seeing some fundamental shifts. Take a look at our e-commerce business. E-commerce business today has grown north of 50%. It's been pretty much across the board. Every single region, every channel within e-commerce has had strong growth. We are in 43 countries. We have 40 direct-to-consumer sites that are operational across our brands. As I said on February 27th, e-commerce and technology and digital is going to be a big emphasis for us, and it's clearly proving itself out in Q1, and I don't expect that this will change.
The level of change we see, particularly digitally, is massive, and we will intend to respond to that and make the investments as appropriate for it. I do not expect that 2022 or 2023 is going to look similar to what 2019 looked. Consumers are going through massive change in behavior, and we will respond to that with the appropriate investments. We are blessed with a portfolio that makes us play in the right neighborhood across both hygiene, health, and nutrition. What we have to do is capitalize on that with the right investments, with the right execution, with the right talent and team, and the organization that has purpose and fight central to it. That's the real focus for us.
That's really interesting. Thank you.
Thank you, Laxman. We'll take our last question, if that's okay, from Jeremy Fialko. For those who don't have a chance to ask questions and who want to, please call me during the day. My numbers in the press release, and you can reach out anytime. Jeremy, over to you.
Hi. Morning, Jeremy Fialko, HSBC here. A couple of questions to finish off. Thanks for fitting me in. Firstly, could you just talk a little bit about the January, February results versus the March numbers? Clearly March was when you had the pantry loading and the biggest COVID-19 effect. Just to get a sense of what the underlying momentum was pre the big demand spike in March, and how that was comparing with your original expectations. Secondly, expanding a little bit on the e-commerce point. Clearly, as the customers are shifting more to ordering online, there’s a natural boost that everybody gets through e-commerce, i.e., people buying Tesco online versus going into the store.
If you could perhaps split out a little bit what your e-commerce performance has been like relative to the market, and where you think that you have been able to take advantage of your e-commerce capabilities to do better than how the market is doing. Thanks.
Great. Well, we were pleased with our performance in January and February. We felt that there was real underlying momentum that we were seeing initial progress on the strategy that we were implementing. For example, if you look at customer service, the improvements that we saw there. If you looked at some of the penetration increases, we were seeing increases there. If you looked at some of the ability for us to move into new channels, clearly there. Our e-commerce business was performing well. I think if you look at it from an underlying perspective, just the strength of the brands, what we were doing, we felt good about the performance in January and February. We had nothing to be alarmed about. In fact, it was positive. Of course, March came, and you saw some big shifts, particularly in North America. Also, in Europe.
I think that our teams have held up very well, but you shouldn't take away from the fact the underlying executional strength of the business was stronger in January and February than we have seen for a while. To get to your second question on e-commerce. We've grown north of 50% in e-commerce. I don't think that's a particularly bad number. If you look at our shares in some of the geographies, and I mentioned China as an example, where we have data on this, at least the data that is captured, or the element that it can be, we are seeing share increases over there. Durex, despite the fact that the category was impacted, Durex grew double digits on e-commerce.
I think that the portfolio that we have, the investments we've made in e-commerce and eRB over time, that we are rapidly and agilely scaling up. We literally have increased the headcount in that business in the last three to four weeks by 10% to capitalize on the various opportunities. That has meant that the business is in a place that is performing with a rhythm that is actually terrific, and I think more to come.
Okay, thanks very much.
Excellent. Well, look, thank you all very much for taking part. We're up to the hour. Thank you all for your attention. As I mentioned, anyone who wishes to contact the team should reach out. We'll be trying to get in and have a conversation. Thank you all for taking part.
Thank you very much. Stay safe, and we really appreciate you all joining this call.
That does conclude our conference for today. Thank you all for participating. You may now disconnect.