11-Aug-2016 Düsseldorf / Germany
Henkel delivers strong second-quarter performance
- Sales at 4,654 million euros: organic +3.2% (nominal: -0.9%)
- Emerging markets sales growth: organic +6.1%
- Operating profit*: +6.6% to 819 million euros
- Earnings per preferred share* (EPS): +8.5% to 1.40 euros
- Very strong EBIT margin* improvement: +120 basis points to 17.6%
- Guidance for full year EBIT margin* raised
“Henkel delivered a strong business performance in the second quarter. We generated solid organic sales growth, supported by a strong development in the emerging markets and a positive development in the mature markets. We were also able to significantly increase both earnings and profitability. Adjusted earnings per preferred share grew by 8.5 percent to 1.40 euros and adjusted return on sales rose to 17.6 percent, representing new record levels for Henkel. The successful development of Henkel was driven by all three business units,” said Henkel CEO Hans Van Bylen. “I would like to thank our global team which contributed to the strong performance in the second quarter.”
“We are also very excited about the acquisition of The Sun Products Corporation which we agreed on in the second quarter. This will be a step-change for our position in North America, one of the most important regions for Henkel worldwide. Upon closing of this transaction, we will reach the No. 2 position in the US laundry care market.”
Commenting on the current fiscal year, Van Bylen said: “We are facing a market environment which is becoming increasingly challenging, with moderate global economic growth, slowing growth dynamics, high uncertainties in the markets and unfavorable foreign exchange developments. We are committed to reaching our ambitious targets and will focus on leveraging our innovation capabilities, our strong brands and our leading market positions.”
Guidance for full year adjusted EBIT margin raised
“For the full fiscal year 2016, we continue to expect organic sales growth of 2 to 4 percent and our adjusted earnings per preferred share to grow between 8 and 11 percent. For adjusted EBIT margin, we now anticipate an increase to more than 16.5 percent. We had previously expected this figure to reach approximately 16.5 percent,” said Hans Van Bylen.
Sales and earnings performance in the second quarter 2016
In the second quarter of 2016, Henkel generated organic sales growth – i.e. adjusted for foreign exchange and acquisitions/divestments – of 3.2 percent. Nominally, sales decreased by 0.9 percent to 4,654 million euros due to a negative foreign exchange impact of 5.3 percent.
The Laundry & Home Care business unit recorded strong organic sales growth of 5.3 percent. The Beauty Care business unit posted a solid improvement in organic sales of 2.1 percent. The Adhesive Technologies business unit likewise reported a solid increase in organic sales of 2.6 percent.
After allowing for one-time charges and gains and restructuring charges, adjusted operating profit (EBIT) rose by 6.6 percent from 768 million euros to 819 million euros. Reported operating profit grew by 5.8 percent from 715 million euros to 757 million euros.
Adjusted return on sales (EBIT margin) showed an increase of 1.2 percentage points to 17.6 percent. Reported return on sales rose from 15.2 percent to 16.3 percent.
Henkel’s financial result improved from -11 million euros in the second quarter of 2015 to -1 million euros this time. This is attributable both to the improvement in the net interest result and an improvement in the foreign exchange result. The reported tax rate was 24.3 percent; in the prior-year quarter it was 24.6 percent.
Adjusted net income for the quarter after deducting non-controlling interests grew by 8.8 percent from 558 million euros to 607 million euros. Reported net income for the quarter increased by 7.7 percent from 531 million euros to 572 million euros. After deducting 11 million euros attributable to non-controlling interests, quarterly net income amounted to 561 million euros (prior-year quarter: 521 million euros).
Adjusted earnings per preferred share (EPS) rose by 8.5 percent from 1.29 euros to 1.40 euros. Reported EPS increased from 1.20 euros to 1.30 euros.
Net working capital related to sales improved year on year by 1.3 percentage points to 5.3 percent.
Strong business performance in the first half of 2016
In the first half of 2016, Henkel generated organic sales growth – i.e. adjusted for foreign exchange and acquisitions/divestments – of 3.1 percent, with all Henkel’s business units contributing. Nominally, sales slightly decreased by 0.2 percent to 9,110 million euros due to negative foreign exchange effects.
Adjusted operating profit rose by 6.4 percent from 1,475 million euros to 1,570 million euros; adjusted return on sales improved from 16.2 percent to 17.2 percent. After deducting non-controlling interests, adjusted net income for the half year rose by 8.2 percent from 1,068 million euros to 1,156 million euros.
Adjusted earnings per preferred share (EPS) grew by 8.1 percent or 20 eurocents from 2.47 euros to 2.67 euros.
Effective June 30, 2016, Henkel’s net financial position showed a balance of -118 million euros (December 31, 2015: 335 million euros). The change compared to the end of 2015 was mainly due to dividends paid and payments for acquisitions.
Outlook for the Henkel Group in 2016
Henkel has updated its guidance for fiscal 2016. Henkel continues to expect to generate organic sales growth of 2 to 4 percent, with each business unit generating growth within this range. Regarding the share of sales from emerging markets, Henkel now anticipates a slight decrease compared to the prior-year level due to foreign exchange effects. For adjusted return on sales (EBIT), Henkel now expects an increase to more than 16.5 percent and the adjusted return on sales of each individual business unit is expected to be above the level of the previous year. Henkel continues to expect an increase in adjusted earnings per preferred share of between 8 and 11 percent.
* Adjusted for one-time charges/gains and restructuring charges.
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, forecast 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 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.