DJ Henkel maintains high pace of innovation
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Düsseldorf, May 7, 2008
Henkel maintains high pace of innovation
Good start for Henkel in a challenging environment
. Robust organic sales growth of 3.3 percent
. Operating profit (EBIT) adjusted for foreign exchange: plus 2.5 percent
. Earnings per preferred share (EPS): plus 6.3 percent
. Growth regions: 16.2 percent organic sales growth
"We made a good start to the fiscal year within a challenging economic
environment. Our robust organic sales growth, achieved despite a sluggish US
market and a strong prior-year quarter, is encouraging. All our business
sectors have contributed to this," said Kasper Rorsted, Chief Executive Officer
of Henkel. "Development in our growth regions was again dynamic. I am very
confident that we will meet the targets we have set ourselves for fiscal 2008.
We expect the acquisition and integration of the National Starch businesses to
further boost growth. In addition, the implementation of our 'Global
Excellence' efficiency enhancement program is proceeding on schedule."
In the first quarter of 2008, Henkel increased sales adjusted for foreign
exchange by 1.7 percent. Organic sales, i.e. adjusted for foreign exchange and
acquisitions/ divestments, increased by 3.3 percent and was within the 3 to 4
percentage range of Henkel's guidance given at the beginning of the year. All
business sectors contributed to this performance. Overall, sales fell slightly
to 3,162 million euros in the first quarter of 2008, mainly as a result of
unfavorable movements in foreign exchange.
At 320 million euros, operating profit (EBIT) was roughly at the high level of
the previous year (-0.9 percent). After adjusting for foreign exchange, EBIT
growth amounted to 2.5 percent. The substantial increase in raw material costs,
which Henkel was unable to completely offset, had a particularly negative
influence.
Return on sales (EBIT) amounted to 10.1 percent, 0.1 percentage points above
the level of the prior-year quarter. Income from participations remained
constant at 19 million euros. The net interest result improved by 11 million
euros from -49 million euros to -38 million euros, due to lower net debt. The
overall financial result therefore improved by 11 million euros to -19 million
euros. The tax rate decreased from 28.3 percent to 25.9 percent.
Due to the improved financial result and lower taxes, net earnings for the
quarter increased by 6.2 percent to 223 million euros. After minority interests
amounting to 4 million euros, net earnings for the quarter were 219 million
euros (+6.8 percent). Earnings per preferred share increased by 6.3 percent to
0.51 euros.
Business Sector Performance
The Laundry & Home Care business sector achieved organic growth of 2.8 percent
despite the exceptionally high growth rate of 11.9 percent achieved in the
prior-year quarter thanks to the Persil brand centennial. At 1,031 million
euros, total sales were 3.5 percent below the prior-year figure, reflecting the
6.3 percent negative impact of foreign exchange and divestments. Operating
profit decreased from 117 million euros to 104 million euros. This was mainly
due to the substantial increase in raw material costs, which even
countermeasures were unable to offset. The Laundry segment experienced further
organic expansion despite the strong prior-year base. This was due particularly
to an increase in fabric softener sales following the successful launch of a
range of new fragrances. Universal detergents continued to perform well in
Eastern Europe. The Home Care segment posted significant growth with its
European dishwashing detergents undergoing significant expansion. Air
fresheners also proved to be a growth driver in North America, with sales
benefiting from a successful product innovation featuring automatically
alternating fragrances.
The Cosmetics/Toiletries business sector continued its very positive
performance, with organic sales growth of 6.1 percent once again significantly
outperforming the relevant markets. Compared to the prior-year quarter, sales
increased nominally by 0.6 percent to 708 million euros, and by 4.4 percent
after adjusting for foreign exchange. In addition to further good development
in Eastern Europe, Latin America and Asia-Pacific, strong growth was registered
particularly in the large Western European and US markets. After adjusting for
foreign exchange, operating profit significantly increased by 13.4 percent, in
nominal terms it improved by 8.0 percent to 89 million euros. As a result, the
EBIT margin also strongly increased by 0.8 percent to 12.5 percent. The Hair
Cosmetics segment again reported strong growth. The major relaunch of the
Schauma brand and the première of the Taft Power line contributed significantly
to this development. Market positions in all three categories - Colorants, Care
and Styling - were further markedly expanded. The Body Care segment again
performed well with strong support coming from the two major brands Fa and
Dial. The Skin Care segment developed very well, supported by the Diadermine
brand with its new product lines. The Oral Care segment underwent further
growth, particularly as a result of the launch of Theramed Titan Fresh. The
Hair Salon segment also posted a very good growth rate in all regions.
Organic sales of the Adhesives Technologies business sector increased 2.4
percent. The comparable figure in the previous year was a very high 9.1
percent, arising from strong growth in the construction sector. This in turn
was due to the mild weather at the time. Negative foreign exchange effects and
the divestment of the water treatment business resulted in sales declining to
1,364 million euros, 3.0 percent below the comparable prior-year figure.
Despite the significant increase in raw material costs, operating profit rose
2.3 percent to 153 million euros. After adjusting for foreign exchange, the
increase was 6.4 percent. This development was due primarily to implemented
countermeasures and an increased focus on businesses offering higher levels of
profitability. In the Craftsmen and Consumer segment, sales in Western Europe
and North America were below the levels of the previous year due to declining
markets. The strongest growth was again achieved by the Building Adhesives
segment, with the business performing particularly well in Eastern Europe and
Middle East/North Africa. Henkel is further expanding its production capacities
in these regions in order to be able to cover the growing demand encountered
there. The Industry segment developed well overall. The one exception was the
North America business which turned in a weaker performance due to prevailing
market conditions. Particularly strong results were achieved with products for
industrial maintenance, repair and overhaul applications under the Loctite
brand. The packaging adhesives business received a boost through the innovative
hotmelt adhesives under the Technomelt Supra brand.
Regional Performance
Organic sales in the Europe/Africa/Middle East region increased by 4.2 percent,
with all the business sectors contributing. Foreign exchange and divestments
had a negative impact of 4.1 percent. Overall, sales remained roughly at the
level of the previous year with a total of 2,119 million euros. In Eastern
Europe, sales once again underwent a double-digit percentage increase, but
Western Europe including Germany was unable to maintain the good growth
momentum of the prior-year quarter. Overall, the region accounted for a 67
percent share of total sales. Sales in the North America region decreased by
3.1 percent in organic terms. Due to the prevailing market conditions,
Adhesives Technologies and Laundry & Home Care experienced only sluggish
growth. The weakness of the US dollar led to a negative foreign exchange effect
of 11.1 percent. With sales of 559 million euros, this region accounted for an
18 percent share of total sales. The Latin America region posted a sales
increase of 3.1 percent to 169 million euros, with growth after adjusting for
foreign exchange coming in at 8.8 percent. Organic sales rose by 8.9 percent,
with all business sectors contributing. The share of sales of the region
remained unchanged at 5 percent. Business in the Asia-Pacific region likewise
developed well. Sales increased by 3.8 percent to 256 million euros, and
organic growth, again supported by all the business sectors, amounted to 9.4
percent. The region's share of total sales was 8 percent.
In the growth regions of Eastern Europe, Africa, Middle East, Latin America and
Asia (excluding Japan), sales rose by 10.0 percent to 1,101 million euros. This
corresponds to a share of total sales of 35 percent. After adjusting for
foreign exchange, sales rose by 14.6 percent. Organic growth amounted to 16.2
percent, with all business sectors contributing.
Major Participation
Ecolab Inc., St. Paul, Minnesota, USA, in which Henkel has a 29.4 percent
stake, reported sales of 1,458 million US dollars in the first quarter of 2008,
an increase of 16.2 percent compared to the previous year. Net earnings for the
quarter rose by 15.0 percent to 102.9 million US dollars. The market value of
this participation as of March 31, 2008, amounted to around 2.0 billion euros.
Updated Sales and Profit Forecast 2008
(MORE TO FOLLOW) Dow Jones Newswires
May 07, 2008 01:47 ET (05:47 GMT)
© 2008 Dow Jones News
