Henkel Reports Significant Sales Growth in Third Quarter


o Strong sales growth of 12.0 percent
o Growth regions: sales plus 24.1 percent
o Organic sales growth: 3.5 percent
o Adjusted operating profit (EBIT): plus 6.3 percent
o Adjusted earnings per preferred share: plus 3.5 percent

DUESSELDORF, Germany and ROCKY HILL, Conn., Nov. 6 - In the third quarter of 2008, Henkel increased total sales by 12.0 percent to 3,760 million euros. This considerable rise is attributable to good organic growth and the acquisition of the National Starch businesses. After adjusting for foreign exchange, sales rose by 15.8 percent. In organic terms, or adjusted for foreign exchange and acquisitions/divestments, sales increased by 3.5 percent, with all business sectors contributing. The organic improvement in sales in the growth regions was again in the double-digit percentage range while performance in the mature markets was sluggish.

Operating profit (EBIT) was primarily impacted once again in the quarter under review by restructuring charges. These totaled 181 million euros compared to 9 million euros in the same quarter of the previous year, and are particularly attributable to the global efficiency enhancement program and the integration of the National Starch businesses. As a result, EBIT declined to 191 million euros. Conversely operating profit, adjusted for restructuring costs and one-time gains and charges ("adjusted EBIT"), rose from 368 million euros to 391 million euros (+6.3 percent).

EBIT margin was 5.1 percent, while the adjusted EBIT margin decreased from 11.0 percent to 10.4 percent. This is due primarily to the heavy impact of raw material price increases on the Laundry & Home Care and Adhesive Technologies business sectors. Investment result, mainly attributable to Henkel's stake in Ecolab, rose by 2 million euros to 24 million euros while net interest expense increased by 28 million euros from -44 million euros to -72 million euros. This is largely the result of higher net debt arising from payment of the purchase price for the National Starch businesses. The financial result consequently decreased from -22 million euros to -48 million euros. The tax rate amounted to 25.2 percent.

Due to lower EBIT and the increase in the negative financial result, net earnings for the quarter decreased to 107 million euros. After minority interests totaling 6 million euros, net earnings for the quarter amounted to 101 million euros. At 251 million euros, adjusted quarterly net earnings after minority interests were 2.4 percent above the prior-year level. Earnings per preferred share decreased to 0.23 euros while the adjusted figure increased by 3.5 percent to 0.59 euros.

"Despite continuing challenging market conditions we again generated good organic sales growth in the third quarter," said Henkel CEO Kasper Rorsted. "All our business sectors contributed to this growth, each outperforming its relevant markets. Once again, it was particularly our businesses in the growth regions that supported this positive development. The integration of the National Starch businesses, which were major contributors to the substantial rise in total sales, continues on schedule." Regarding Henkel's financial targets for 2012 Rorsted emphasized: "We are committed to further accelerating profitable growth. By focusing even stronger on our strategic priorities in the future, we have set a clear course to achieving our medium-term targets."

Business Sector Performance

Organic sales generated by the Laundry & Home Care business sector increased by a good 3.4 percent. At 1,068 million euros, sales overall were 1.4 percent above the level for the previous year. The foreign exchange impact amounted to a negative 2.1 percent. Although operating profit fell from 126 million euros to 117 million euros, this was nevertheless the highest quarterly total this year. Sales generated in North America by Purex, Henkel's second largest global detergent brand, again registered an increase.

With organic sales growth of 3.4 percent versus a strong prior-year quarter, the Cosmetics/Toiletries business sector was able to maintain the positive trend of the last few quarters within a substantially more difficult market environment. In addition to another highly positive performance in North America, the businesses in Eastern Europe, Asia and Latin America also posted strong growth. At 770 million euros, nominal sales were slightly higher than in the prior-year quarter, with growth after adjusting for foreign exchange coming in at 3.3 percent. Operating profit rose to 96 million euros. After adjusting for foreign exchange it rose by 4.1 percent, despite further increases in input costs. The Body Care business continued to develop positively, particularly in the US where the innovations under the brands Dial and Dial for Men were among the most successful new products launched in 2008.

Sales of the Adhesive Technologies business sector rose by 31.8 percent after adjusting for foreign exchange. This is primarily due to the acquisition of the Adhesives and Electronic Materials businesses of National Starch. Nominal sales growth was 26.2 percent rising to 1,860 million euros, with organic growth coming in at 3.6 percent. Operating profit rose to 169 million euros. After adjusting for foreign exchange the increase was 8.1 percent. The products for industrial maintenance, repair and operations under the Loctite brand again posted positive results.

Regional Performance

Organic sales of the North America region increased by 0.3 percent. As a result of the difficult prevailing market environment in this region, organic sales both of the Adhesive Technologies business sector and Laundry & Home Care underwent a slight decline. The Cosmetics/Toiletries business sector, on the other hand, performed well. The weakness of the US dollar produced a negative foreign exchange impact of 10.5 percent. After adjusting for foreign exchange, sales rose by 19.6 percent, with the acquired National Starch businesses making a major contribution. With sales of 727 million euros, the share of total sales accounted for by this region was 19 percent.

Major Participation

Henkel has a 29.3 percent stake in Ecolab Inc., St. Paul, Minnesota, USA. In the third quarter of 2008, Ecolab Inc. generated sales of 1,626 million US dollars. This corresponds to a rise of 15.1 percent. Net earnings for the quarter increased by 10.7 percent to 126.2 million US dollars versus the previous year. The market value of this participation as of September 30, 2008, amounted to around 2.5 billion euros.

Updated Sales and Profit Forecast 2008

Given the business developments of the first nine months of 2008 and taking into account the National Starch businesses acquired as of April 3, Henkel has specified its sales and profit forecast for full fiscal 2008 as follows:

Henkel expects to achieve organic sales growth (after adjusting for foreign exchange and acquisitions/divestments) of 3 to 5 percent.

Henkel expects to increase operating profit adjusted for restructuring charges and one-time gains and charges ("adjusted EBIT") by around 10 percent (2007 base: 1,370 million euros).

Henkel expects to increase earnings per preferred share adjusted for restructuring charges and one-time gains and charges ("adjusted EPS") in the low single-digit percentage range (2007 base: 2.19 euros).

Included in this forecast are initial savings arising from the "Global Excellence" efficiency enhancement program and the integration of the National Starch businesses.

Not included in this forecast are any influences arising from the sale in part or in whole of our stake in Ecolab, the purchase price allocation for the acquired National Starch businesses that still has to be carried out, and the tax effects relating to a possible Ecolab transaction, the acquisition and the restructuring charges.

Financial targets for 2012: Strategic priorities for profitable growth defined

Henkel's financial targets for 2012 entail a further increase in organic sales accompanied by disproportionate increases in both operating profit and earnings per share. By focusing even stronger on its strategic priorities Henkel will further accelerate its profitable growth.

Margin improvement is to be achieved primarily by an even greater focus on the company's core business. Henkel has defined a number of measures in this regard, aligned to achieving a substantially higher level of utilization of its existing business potential. Within this context, portfolio and brand management, innovations and efficiency improvements play a major role. A significant contribution is also anticipated from the integration of the National Starch businesses and the implementation of the "Global Excellence" program announced in February of this year.

Moreover, Henkel intends to further focus on its customers through establishing direct contacts and developing joint strategies. This will also involve expanding value-added services and leveraging Henkel's capabilities to satisfy customer needs.

A further major factor in Henkel's future success lies in the ongoing further development of its more than 55,000 employees around the world. Here, Henkel will be focusing on increasing its performance orientation and enhancing its approach to diversity as a strategic competitive advantage.

The 2012 financial targets are:

o Average organic sales growth: 3 - 5 percent
o Adjusted return on sales (EBIT margin): 14 percent by 2012
o Average growth in adjusted earnings per preferred share: > 10 percent

Henkel in North America

Henkel markets a wide range of well-known consumer and industrial brands in North America, including Dial® soap, Purex® laundry detergent, Right Guard® antiperspirants, got2b® hair gels, and Loctite® adhesives. Visit www.henkelna.com for more information.

Press Contacts:
Cindy Demers (North America)
Phone: 480-754-4090
cindy.demers@us.henkel.com

Lars Witteck (International)
Phone: +49-211-797-2606
Fax: +49-211-798-9208
press@henkel.com

SOURCE Henkel

Web site: www.henkelna.com /

All Topics