National Starch acquisition and efficiency enhancement program
- Strong sales growth of 11.4 percent.
- Organic sales growth: plus 6.1 percent.
- Adjusted operating profit (EBIT): plus 7.8 percent.
- Sales in growth regions: plus 19.5 percent.
DUESSELDORF, Germany and ROCKY HILL, Conn., Aug. 6 /CNW/ -- In its second
quarter of 2008, Henkel increased sales by 11.4 percent to 3,668 million
euros. This strong rise is due to good organic sales growth and the first-time
consolidation of the newly acquired National Starch businesses. After
adjusting for foreign exchange, sales rose by a substantial 17.7 percent.
Organic sales, or those adjusted for foreign exchange and
acquisitions/divestments, increased by 6.1 percent, with all business sectors
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Operating profit (EBIT) was heavily impacted by restructuring charges
amounting to 256 million euros for the quarter under review. This corresponds
to around one third of the restructuring charges previously announced for the
year as a whole, with the total expected to be about 770 to 780 million euros.
The charges relate primarily to a global program for efficiency enhancement
and the integration of the National Starch businesses. As a consequence, EBIT
decreased to 113 million euros. Conversely, operating profit, adjusted for
restructuring charges and one-time gains and charges ("adjusted EBIT"), rose
by 7.8 percent to 372 million euros.
EBIT margin amounted to 3.1 percent, while adjusted EBIT margin decreased
from 10.5 percent to 10.1 percent. This decline is primarily attributable to
the heavy impact of raw material price increases on the Laundry & Home Care
and the Adhesive Technologies business sectors. Investment result, mainly
attributable to Henkel's participation in Ecolab, remained constant at 24
million euros, despite the weaker US dollar. Net interest expense increased by
47 million euros, from -37 million to -84 million euros, due primarily to the
higher net debt arising from payment of the purchase price for the National
Starch businesses but also to higher interest rates. There was a corresponding
increase in the negative financial result from -13 million euros to -60
million euros. The tax rate fell from 26.7 percent to 20.8 percent.
Due to lower EBIT and the increase in the negative financial result, net
earnings for the quarter decreased to 42 million euros. After minority
interests totaling 4 million euros, net earnings for the quarter were 38
million euros. At 227 million euros, adjusted quarterly net earnings after
minority interests were 4.6 percent below the prior-year level. Earnings per
preferred share decreased to 0.09 euros. The adjusted figure declined by 5.5
percent to 0.52 euros.
"We achieved highly encouraging second quarter organic sales growth,
despite a difficult economic environment still characterized by significantly
increasing raw material costs and a weak US dollar," said Henkel CEO Kasper
Rorsted. "Our organic growth was supported by all our business sectors. The
improvements were primarily from our growth regions, while development in
Western Europe was restrained. We were able to further increase adjusted
operating profit. The integration of the National Starch businesses, which
brought us a significant boost in sales, and the implementation of our
efficiency enhancement program aligned to achieving a sustainable improvement
in our competitiveness, continue on track with good progress being achieved.
Despite the challenging environment, we are confident regarding the
development in the further course of the year."
Business Sector Performance
Organic sales for the Laundry & Home Care business sector increased by a
good 3.9 percent. At 1,012 million euros, sales overall were 1.1 percent below
the previous year. Foreign exchange had a negative impact of 4.7 percent.
Operating profit decreased from 111 million euros to 96 million euros,
reflecting in particular the ongoing increase in raw material prices that lead
to a substantial rise in input costs. Despite the price increases implemented
by Henkel and measures taken to reduce costs and improve efficiency, the
company was not yet able to completely offset these additional expenses.
Organic growth in the Laundry segment was primarily due to results in Eastern
Europe. Here, both the company's heavy-duty detergents and its fabric
softeners posted a positive sales performance. The good sales growth in North
America was due to the high level of market acceptance of the change-over to
ultra concentrates, and to the successful launch of Purex Natural Elements.
This innovation with mainly natural ingredients is in line with consumers'
growing environmental awareness. Organic sales of the Home Care segment
underwent a substantial increase with the greatest impetus again coming from
Eastern Europe. The main contributors to this sales improvement were Henkel's
dishwashing detergents and WC cleaning and hygiene products. There was also an
increase in air freshener sales in North America, once again contributing to
an overall positive performance.
With strong organic sales growth of 5.9 percent, the Cosmetics/Toiletries
business sector was able to maintain the highly positive trend of the last few
quarters, with all regions contributing. In addition to an extremely positive
development in North America, the businesses in Eastern Europe and Latin
America also generated particularly strong growth. Compared to the prior-year
quarter, nominal sales rose by 1.2 percent to 779 million euros, with growth
after adjusting for foreign exchange rising to 5.8 percent. Despite rising
material costs, operating profit increased by 8.3 percent after adjusting for
foreign exchange, outstripping the rise in sales. Hence, the EBIT margin also
improved to 12.8 percent. The Hair Cosmetics segment continued to post strong
growth, further extending its market positions in all its categories --
Colorants, Care and Styling. Major contributions to this improvement came from
the international relaunch of the Schauma brand, the debut of the Taft Power
Gels Waterproof series and the rollout of Diadem Care Gloss. The Body Care
segment also continued to perform well. Developments in the deodorants
business were particularly encouraging with the launch of the Fa Rice Dry
innovation, the first Fa deodorant with natural rice extract. The Skin Care
segment was able to further expand its market position thanks to the high
level of performance turned in by its most important international brand,
Diadermine, with the focus this time on the launch of an innovative line of
antioxidant treatments. The Oral Care segment was also able to make further
market share gains thanks in particular to the launch of Theramed Titan Fresh
and Pro Natur. The Hair Salon segment continued to post very good organic
growth. The innovative strength of this business was again apparent with the
launch of the new OSiS Design Mix line and of Igora Royal Absolutes, the first
anti-aging coloration series.
Organic growth in the Adhesive Technologies business sector amounted to a
highly encouraging 7.9 percent. Nominal sales rose by 26.1 percent to 1,816
million euros, and by 34.6 percent after adjusting for foreign exchange, due
primarily to the acquisition of the Adhesives and Electronic Materials
businesses of National Starch. Operating profit increased by 21.1 percent to
195 million euros, and by 29.3 percent after adjusting for foreign exchange.
In the Craftsmen and Consumer segment, business was affected by the tough
conditions prevailing in North America and Western Europe. Major craftsmen
markets in Western Europe showed a decline, and the severe real estate
downturn in the USA continued unabated. By contrast, the Eastern European
region continued to develop successfully. There was again strong growth in the
Building Adhesives segment, supported in particular by very good results in
Eastern Europe and the North Africa/Middle East region. The Industry segment
benefited significantly from the acquisition of the National Starch businesses
while also performing well in organic terms. There was a further increase in
sales in Western Europe despite a difficult business environment. The products
for industrial maintenance, repair and overhaul under the Loctite brand again
generated positive results. Activities in the automotive and durable goods
segments were stepped up with the launch of TecTalis, an innovative metal
pre-treatment product. The performance of the National Starch businesses eased
slightly in the face of a slowdown in the semiconductor and electronic
Organic sales in the Europe/Africa/Middle East region increased by an
encouraging 6.2 percent, with all business sectors contributing. After
adjusting for foreign exchange, sales rose by 10.4 percent. At 2,283 million
euros, total sales were 8.2 percent above the level of the previous year.
Significant double-digit organic growth rates were achieved in Eastern Europe
and Africa/Middle East, while development in Western Europe including Germany
underwent a slight decline. Overall, the share of sales accounted for by the
region amounted to 62 percent. Organic sales for the North America region
increased by a good 3.8 percent. Here, the performance of the
Cosmetics/Toiletries business sector was encouraging as was that of Laundry &
Home Care following a relatively slow start to the year. The weakness of the
US dollar led to a negative foreign exchange impact amounting to 16.3 percent.
Sales adjusted for foreign exchange rose by 23.0 percent, with the acquired
National Starch businesses making a significant contribution. With sales of
690 million euros, this region contributed 19 percent to total sales. The
Latin America region reported an increase in organic sales of 13.3 percent,
with all business sectors contributing. After adjusting for foreign exchange,
sales growth amounted to 21.0 percent. With sales of 202 million euros, the
region's share of the total remained at 5 percent. The businesses in the
Asia-Pacific region likewise performed well. Sales increased by 44.9 percent
to 432 million euros, due primarily to the businesses acquired from National
Starch. Organic growth, also supported by all business sectors, was 6.6
percent. The share of total sales accounted for by the region grew by 3
percentage points to 12 percent.
In the growth regions of Eastern Europe, Africa, Middle East, Latin
America and Asia (excluding Japan), sales increased by 19.5 percent to 1,336
million euros, corresponding to a share of consolidated sales of 36 percent.
After adjusting for foreign exchange, sales rose by 27.0 percent while organic
growth amounted to 15.7 percent, with all business sectors contributing.
Henkel has a 29.4 percent stake in Ecolab Inc., St. Paul, Minnesota, USA.
In the second quarter of 2008, Ecolab Inc. generated sales of 1,570 million US
dollars. This corresponds to a rise of 15.2 percent. Net earnings for the
second quarter increased versus the prior year quarter by 26.0 percent to
139.0 million US dollars. The market value of this participation as of June
30, 2008, amounted to around 2.0 billion euros.
Updated Sales and Profit Forecast 2008
Given the business developments of the first half 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") at the lower end of
the mid-teens percentage range (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") at the
lower end of the mid 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. We also anticipate that the currently weak US dollar will
recover in the course of the second half of the year.
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
fiscal effects relating to a possible Ecolab transaction, the acquisition and
the restructuring charges.
Henkel in North America
Henkel markets a wide range of well-known consumer and industrial brands
in North America, including Dial(R) soap, Purex(R) laundry detergent, Right
Guard(R) antiperspirants, got2b(R) hair gels, and Loctite(R) adhesives. Visit
www.henkelna.com for more information.
This information 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, etc. 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 any forward-looking statements.
Cindy Demers (North America) Lars Witteck (International)
Phone: 480-754-4090 Phone: +49-211-797-2606
email@example.com Fax: +49-211-798-9208
For further information:
For further information: Cindy Demers (North America), +1-480-754-4090,
firstname.lastname@example.org, or Lars Witteck (International), +49-211-797-2606,
or Fax: +49-211-798-9208, or email@example.com