Download Henkel delivers record results in 2010

Press Release
February 24, 2011
2012 financial targets reconfirmed – despite cost pressure in 2011
Henkel delivers record results in 2010

Sales increase by 11.2 percent to 15,092 million euros

Organic sales growth of 7.0 percent

Share of sales of emerging markets: plus 3 percentage points to 41 percent

Adjusted* operating profit: plus 36.5 percent to 1,862 million euros

Adjusted* EBIT margin: plus 2.3 percentage points to 12.3 percent

Adjusted* earnings per preferred share (EPS): plus 47.6 percent to 2.82 euros

Significantly higher dividends proposed: plus 35.8 percent to 0.72 euros
Düsseldorf – “2010 was an excellent year for Henkel. For the first time, we
closed a financial year with an adjusted EBIT margin above 12 percent,” said
Henkel CEO Kasper Rorsted. “We have improved the market positions of all
our business sectors and have further strengthened our top brands. We have
also been able to further expand our positions in the emerging markets. With
these strong results, we are well on track to achieving our 2012 financial
targets.”
Looking forward to fiscal 2011, Rorsted said: “The economic conditions remain
challenging, especially in view of the highly competitive environment in which
we operate, and rising raw material costs. We will continue to respond quickly
and decisively to changes in our markets and continue the transformation
process in our company. We are confident that we will once again outperform
* Adjusted for one-time charges/gains and restructuring charges
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our markets in 2011 and expect to achieve organic growth of between 3 and 5
percent. We anticipate realizing an increase in our adjusted EBIT margin to
around 13 percent and a rise in adjusted earnings per preferred share of
around 10 percent.”
Henkel’s sales in fiscal 2010 were 15,092 million euros, an increase of 11.2 percent
versus the prior-year figure. After adjusting for foreign exchange, sales improved by
6.4 percent. In organic terms, i.e. adjusted for both foreign exchange and
acquisitions/divestments, sales grew by 7.0 – a relatively strong growth after 2009
which was impacted by the financial crisis. This strong performance was supported
by all Henkel business sectors. Adhesive Technologies performed exceptionally well,
reporting an increase in sales of 11.8 percent. The Cosmetics/Toiletries business
sector continued its encouraging growth trend, registering growth of 4.8 percent and
thus substantially outperforming the stagnating market. Laundry & Home Care
achieved organic sales growth of 1.5 percent in a slightly declining market.
Operating profit (EBIT) increased by 59.5 percent, from 1,080 million euros to 1,723
million euros. After allowing for one time gains (59 million euros), one-time charges
(14 million euros) and restructuring charges (184 million euros), adjusted operating
profit improved by 36.5 percent, from 1,364 million euros to 1,862 million euros. All
three business sectors contributed to the increasing profitability in 2010.
Return on sales (EBIT margin) grew significantly, from 8.0 percent to 11.4 percent.
Adjusted return on sales rose from 10.0 percent to 12.3 percent.
The company’s financial result improved from –195 million euros to –171 million
euros. The rise in returns on pension plan assets had a particularly beneficial effect
on the net interest result, as did the further decrease in net debt from 2.8 to 2.3
billion euros, which helped to reduce interest expenses. The tax rate was 26.4
percent (previous year: 29.0 percent).
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Net income improved by 82.0 percent, from 628 to 1,143 million euros. After
deducting non-controlling interests of 25 million euros, net income attributable to
shareholders of Henkel AG & Co. KGaA was 1,118 million euros (previous year: 602
million euros). Adjusted net income after deducting non-controlling interests
increased by 47.9 percent to 1,217 million euros. Earnings per preferred share
(EPS) rose from 1.40 euros to 2.59 euros. The adjusted figure was 2.82 euros
compared to 1.91 euros in the previous year.
The Management Board, Supervisory Board and Shareholders’ Committee will be
proposing to Henkel’s Annual General Meeting to approve significantly higher
dividends of 0.72 euros per preferred share and 0.70 euros per ordinary share.
Once again, good progress was also made in the management of net working
capital. Compared to the prior-year period, the ratio of net working capital to sales
improved by a further 0.9 percentage points to 6.9 percent. After coming in at 1,462
million euros in the previous year, the level of free cash flow was again very strong
at 1,508 million euros.
Business sector performance
The Laundry & Home Care business sector increased sales by 4.6 percent to 4,319
million euros. Organically, sales rose by 1.5 percent, with strong volume growth of
5.7 percent. Price and promotional competition in all relevant markets led to a decline
in prices of 4.2 percent compared to the previous year. However, Henkel was able to
more than compensate for this development through high volume growth.
From a regional perspective, the main sales growth was achieved in Europe and
Africa/Middle East, the latter posting double-digit increases. Significant sales
increases were also achieved in Western Europe, in particular in Germany, France
and Spain. Growth was also generated in Eastern Europe, however, due to
substantial price reductions this region was unable to achieve the expansion rates of
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previous years. In North America, the combination of aggressive pricing and
consumer reluctance resulted in a decline in sales.
Operating profit rose by 8.2 percent to a record 542 million euros. Reflected in this
earnings improvement are positive volume effects and successful measures
introduced to reduce cost and enhance efficiency. Adjusted operating profit increased
by 6.2 percent to 562 million euros. Adjusted return on sales increased by 0.2
percentage points to a new record of 13.0 percent.
In the Laundry business segment, the strongest growth momentum was generated
by heavy-duty detergents and fabric softeners. In Western Europe, Henkel increased
its market share with respect to heavy-duty detergents despite the difficult trading
conditions and intense competition prevailing in the region. The primary contributor to
this expansion was the Persil brand, and especially the liquid detergents. Also
successful were the brands Spee and Weisser Riese, both of which generated
above-average growth as a result of new powder and gel variants. In Western
Europe, Eastern Europe and Israel, the positive development of Henkel’s fabric
softener brands Vernel, Silan and Soad was supported by the introduction of new
products with innovative freshness pearls.
Organic sales growth in the Home Care business segment continued to be generated
primarily by dishwashing and WC products. In the machine-dishwashing segment,
the products Somat 9 and Somat Perfect Gel made an especially strong contribution.
Henkel's hand-dishwashing products also registered strong growth rates. In the WC
products category, the introduction of the first rim block with four active pearls made
a particularly noticeable contribution to sales growth.
Increasing sales by 8.6 percent to 3,269 million euros, the Cosmetics/Toiletries
business sector successfully continued its growth trend of recent years. Organic
sales grew by 4.8 percent. The business sector thus again outperformed its relevant
markets, significantly further expanding its market positions.
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From a regional perspective, good growth was achieved especially in Western
Europe, with a strong increase in sales particularly in Germany. Sales in the
emerging markets also expanded, with double-digit growth rates being achieved in
Africa/Middle East, Latin America and Eastern Europe. By contrast, sales in North
America declined.
Operating profit rose by 6.1 percent to 411 million euros, and by 12.4 percent after
adjusting for one-time gains and restructuring charges, to a new record of 436 million
euros. Adjusted return on sales increased to more than 13 percent for the first time,
reaching a record high of 13.3 percent.
The Hair Cosmetics business achieved particularly strong growth. Due to the launch
of a series of successful innovations market shares in the hair care, colorants and
hair styling segments were significantly expanded to new record highs. In addition to
the global expansion of the Syoss brand in new markets and categories, particularly
the innovation Perfect Mousse drove growth in the colorants segment. The Body
Care business was characterized by innovations and further product launches under
its core brands. The Fa brand saw the launch of the Active Pearls series. In North
America, one of the region’s most successful body care innovations of 2010 was
launched in the form of the Dial NutriSkin series. In order to further develop the
global market for men’s products, Henkel also launched its US brand Right Guard in
Germany and Eastern Europe.
In the Skin Care business, the focus remained on the development of innovative antiaging products. The introduction of the new sub-line Novagen under the Diadermine
umbrella brand contributed to the enhancement of the brand’s position in the antiaging segment. In the Oral Care business, good results were achieved with the new
Theramed variants. The Hair Salon business likewise contributed to the growth
dynamics of the business sector and further extended its position as the global
number three in a persistently difficult market environment. Following the successful
relaunch of the ammonia-free colorant, the Essensity brand saw the introduction of a
completely new line of hair care and styling products. With innovative products, such
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as the styling powder launched under the top styling brand Osis, the Hair Salon
segment was able to both attract new customers and strengthen business with
existing clients.
With the market environment recovering, the Adhesive Technologies business
sector saw sales increase by a substantial 17.4 percent to 7,306 million euros.
Organic growth reached a new record high of 11.8 percent.
In the mature markets of Western Europe and North America, Henkel generated
growth in the high single-digit range after negative growth in the previous year. The
emerging markets registered double-digit percentage increases, with the highest
growth rates in the Asia-Pacific region.
Operating profit tripled compared to the prior year, reaching a new record high of
878 million euros. Adjusted operating profit almost doubled to 938 million euros.
Compared to the previous year, adjusted return on sales rose by 4.7 percentage
points to 12.8 percent.
The Adhesives for Consumers, Craftsmen and Building business performed well.
Both, the business with consumers and craftsmen, as well as the construction
industry contributed to growth. Following the adverse effects of the global economic
and financial crisis, the Transport and Metal business performed particularly well in
2010. Sales in the General Industry segment also increased substantially driven by
the business with products for industrial maintenance, repair and overhaul under the
Loctite brand. Sales of Packaging, Consumer Goods and Construction Adhesives
also further increased. The Electronics business benefited from the recovery of the
semiconductor industry. This segment generated the highest sales increase of all our
strategic business units.
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Regional performance
In Western Europe, sales grew by 4.3 percent to 5,470 million euros; the organic
growth was 4.0 percent. This performance was supported by all the business sectors,
particularly Adhesive Technologies which recorded an organic growth rate in the high
single-digit percentage range. Sales in Eastern Europe increased substantially, by
13.7 percent to 2,649 million euros. Organic growth was 7.2 percent, supported
particularly by the Cosmetics/Toiletries and Adhesive Technologies business sectors
both of which posted double-digit percentage increases. Sales of the Laundry &
Home Care business sector remained at the level of the previous year. Africa/Middle
East continued to develop positively, with sales growing by 18.7 percent to 901
million euros. Organic sales rose by 12.8 percent, to which all three business sectors
contributed with double-digit growth rates.
Sales in North America rose by 7.0 percent to 2,724 million euros. Organic sales
growth amounted to 3.5 percent thanks to the results achieved by Adhesive
Technologies, with sales of the Laundry & Home Care and Cosmetics/Toiletries
business sectors declining compared to previous year. The region of Latin America
continued to perform very well, recording sales growth of 19.1 percent to 982 million
euros.
Organic
sales
growth
of
9.8
percent
was
supported
by
the
Cosmetics/Toiletries and Adhesive Technologies business sectors. The upward trend
was most pronounced in the Asia-Pacific region: sales increased by 30.8 percent to
2,168 million euros, with organic growth at 17.8 percent. The Cosmetics/Toiletries
and Adhesive Technologies business sectors performed particularly well with doubledigit growth rates. In the emerging markets of Eastern Europe, Africa/Middle East,
Latin America and Asia (excluding Japan), sales rose by 19.9 percent to 6,132 million
euros. Organic growth amounted to 11.8 percent, keeping it in the double-digit
percentage range. The increase was supported in particular by higher sales
generated by Adhesive Technologies and Cosmetics/Toiletries. The share of sales
attributable to the growth regions increased from 38 to 41 percent.
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Fourth quarter 2010
In the fourth quarter of 2010, Henkel increased sales compared to the prior-year
period by 11.5 percent to 3,729 million euros. After adjusting for foreign exchange,
sales rose by 5.7 percent. Organic sales growth came in at 5.8 percent. Operating
profit increased by 29.0 percent, from 293 million euros to 379 million euros. After
allowing for one-time gains (16 million euros), one-time charges (5 million euros) and
restructuring charges (80 million euros), adjusted operating profit improved by 8.2
percent, from 414 million euros to 448 million euros. Return on sales (EBIT margin)
increased from 8.8 percent to 10.2 percent. Adjusted return on sales amounted to
12.0 percent after 12.4 percent in the fourth quarter of 2009. Quarterly net income
improved from 177 million euros to 254 million euros. After deducting non-controlling
interests of 5 million euros, net income for the period totaled 249 million euros
(previous year: 170 million euros). Earnings per preferred share (EPS) increased
from 0.39 euros to 0.58 euros, while the adjusted figure rose from 0.64 euros to 0.69
euros.
Sales and profits forecast 2011
In view of the economic forecasts for the current year, Henkel anticipates that the
global gross domestic product will increase by around 3 percent. Henkel is confident
to once again outperform its relevant markets in terms of organic sales, expecting an
increase within the range of 3 to 5 percent. This forecast is based on the company’s
strong competitive position, which has been consolidated and further strengthened in
recent years. Henkel has introduced a number of measures which have had a
positive impact on its cost structure. In 2011 the company intends to further adapt its
structures to the constantly changing market conditions as continuation of our
commitment to strict cost discipline. All these factors, together with the expected
increase in sales, will positively influence earnings development. Taking the 2010
results as its basis, Henkel anticipates achieving an increase to around 13 percent
(2010: 12.3 percent) in adjusted return on sales (EBIT) and an increase in adjusted
earnings per preferred share of around 10 percent (2010: 2.82 euros).
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This document contains forward-looking statements which are based on the current estimates and assumptions made by the
corporate management of Henkel AG & Co. KGaA. Forward-looking statements are characterized by the use of words such as
expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be
understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results
actually achieved by Henkel AG & Co. KGaA and its affiliated companies depend on a number of risks and uncertainties and
may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel’s control and
cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others
involved in the marketplace. Henkel neither plans nor undertakes to update forward-looking statements.
Contact
Lars Witteck
Tel. +49 211 797 - 2606
Fax +49 211 798 - 4040
Wulf Klüppelholz
Tel. +49 211 797 - 1875
Fax +49 211 798 - 4040
Henkel AG & Co. KGaA
The 2010 Annual Report and further information and download material relating to fiscal 2010 can be
found together with the link to the live webcast of the press conference for fiscal 2010 can be found in
the press folder at our website address: http://www.henkel.com/press.
[email protected]
Henkel AG & Co. KGaA, Corporate Communications
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