Henkel Delivers on 2013 Financial Targets

Henkel enjoyed strong performance in a challenging environment in 2013, posting solid organic sales growth of 3.5%, with sales of €16,355 million. Adjusted operating profit was up 7.8% to €2,516 million.

“2013 was a very successful year for Henkel. Despite a challenging and highly competitive market environment, we achieved our financial targets and made significant progress in implementing our strategy 2016,” said Henkel CEO Kasper Rorsted. “We achieved profitable growth and increased market share in all our business units. All regions contributed to the solid organic sales growth. As in previous years, emerging markets showed a very strong development. In these countries, however, foreign exchange effects had a stronger impact on reported sales.”

Looking at the fiscal year 2014, Rorsted said, “The economic environment remains challenging and we expect persisting foreign exchange effects, particularly in the first half of the year. Thus, we will continue to further simplify and improve our processes and structures, making us more flexible and more efficient. We are focused on implementing our strategy in order to deliver on our ambitious financial targets for 2016.

“For the full fiscal year 2014 we expect organic sales growth to be between 3% and 5%. We expect our adjusted EBIT margin to increase to around 15.5% and adjusted earnings per preferred share to increase in the high single digits,” Rorsted said, summarizing the financial targets for 2014.

At €16,355 million, sales in fiscal year 2013 remained slightly below the prior-year level. Organic sales growth, which excludes the impact of foreign exchange and acquisitions/divestments, reached a solid 3.5%. This growth was driven by both price and volume, with the rate of increase accelerating in the course of the year. Organic growth in the first half year amounted to 3.2%, rising to 3.8% in the second half.

In all business units, sales rose organically and market shares increased further in relevant markets. The Laundry & Home Care business unit showed very strong organic sales growth of 5.7%. Solid organic sales growth of 3.0% was achieved by the Beauty Care business unit. At 2.7%, the Adhesive Technologies business unit likewise showed a solid increase in organic sales.

After allowing for one-time charges, one-time gains and restructuring charges, adjusted operating profit (EBIT) rose by 7.8%, from €2,335 million to €2,516 million, with all three business units contributing. Reported operating profit (EBIT) amounted to €2,285 million compared to €2,199 million in the previous year. Adjusted return on sales (EBIT margin) rose by 1.3 percentage points, from 14.1% to 15.4%. Reported return on sales amounted to 14.0%, compared to 13.3% in the previous year.

The Management Board, Supervisory Board and Shareholders’ Committee propose that the Annual General Meeting approves a 28.4% higher dividend per preferred share of €1.22 (previous year: €0.95) and a 29.0% increased dividend per ordinary share of €1.20 (previous year: €0.93). The payout ratio would then amount to 30.0%.

In the fiscal year 2013, the Laundry & Home Care business unit continued its profitable growth trend of the previous years. With a strong organic sales plus of 5.7%, growth was significantly above that of its relevant markets, which were slightly negative overall. Nominally, sales rose by 0.5% to €4,580 million. The strong organic growth was generated exclusively in emerging markets, where sales improved double-digit overall. Eastern Europe showed a very strong sales increase, mainly driven by double-digit growth in Turkey. Double-digit growth rates were achieved once again in the Africa/Middle East region, despite persistent political and social unrest. Strong sales expansion was recorded in Latin America, mainly due to very strong growth in Mexico. Sales in Asia-Pacific increased double-digit.

The Beauty Care business unit posted solid organic sales growth of 3.0% in the fiscal year 2013, thus continuing to build on the profitable growth of the previous years. Organic growth was again considerably higher than the negative development of the relevant markets. Nominal sales amounted to €3,510 million, compared to €3,542 million in the previous year.

Business development in the emerging markets was particularly successful, with Asia (excluding Japan) standing out through double-digit growth thanks to substantial business expansion in China. Continuing the successful trend of the recent years, the Africa/Middle East region likewise posted double-digit growth rates, despite political instability. Sales growth in Latin America and Eastern Europe was also solid.

Organic sales in mature markets showed an overall increase. The solid sales growth in North America is particularly noteworthy. Positive sales growth was achieved in Western Europe despite weak economic development – particularly in Southern Europe – and in the face of a declining market. By contrast, sales in the mature markets of the Asia-Pacific region fell short of the previous year’s level.

The Adhesive Technologies business unit continued its profitable growth trend in the fiscal year 2013. At 2.7%, organic growth was slightly above overall market expansion. Nominally, sales amounted to €8,117 million, following €8,256 million in the previous year. The increase in organic sales was due primarily to the business unit’s strong performance in emerging markets. Performance in Latin America was particularly dynamic with double-digit sales growth. The Eastern Europe region likewise recorded a strong sales increase. The Asia-Pacific region (excluding Japan) posted a solid performance, while the Africa/Middle East region showed a positive development.

Organic sales in mature markets were above the level of the previous year. North America posted a positive performance. Sales were stable in Western Europe despite the difficult economic conditions. However, sales in the mature markets of Asia fell short of the previous year’s level.

By 2016, Henkel aims to generate total sales of €20 billion – €10 billion in emerging markets and €10 billion euros in mature markets. Emerging markets will continue to drive global economic growth, although they are characterized by high volatility and intense competition.