Henkel delivers very strong organic sales growth in the first quarter

Carsten Knobe

“We had a good start to the year – despite a continuously challenging market environment. The very strong sales increase in both business units underlines the strength of our portfolio of successful brands and innovative technologies. In the first quarter, we continued our pricing measures to further compensate for the headwinds from raw material and logistics costs,” said Henkel CEO Carsten Knobel. “Today we affirmed our guidance for 2023 and, based on the very strong organic sales development in the first quarter, we are looking at the current fiscal year with confidence.”

The very strong organic sales increase of the Adhesive Technologies business unit in the first quarter was driven by all business areas. The new business unit Consumer Brands likewise achieved very strong organic sales growth, with all business areas contributing.

“We also pushed ahead with our strategic priorities and have made important progress. For example, we are rigorously driving integration and portfolio focus in our Consumer Brands business unit, we are aligning the organizational structure of our Adhesive Technologies business unit even more closely to our customer base, and we have successfully launched relevant innovations in both businesses,” explained Carsten Knobel.

As part of its capital allocation strategy, Henkel had launched a share buyback program for the first time ever in 2022. The program was successfully completed in the first quarter of 2023: By the end of March, the company had repurchased shares with a total value of around 1 billion euros.

On April 20, 2023, Henkel announced the signing of an agreement on the sale of its business activities in Russia to a consortium of local financial investors. Henkel had announced its decision to exit its business activities in Russia last year, following the country’s attack on Ukraine. The transaction has meanwhile been completed; the sale price amounts to 54 billion rubles (around 600 million euros).

Group sales performance

Group sales increased nominally by 6.4 percent in the first quarter of 2023, from 5,271 million euros in the prior-year quarter to 5,609 million euros. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales increased by 6.6 percent. This very strong growth in sales at Group level was driven by price increases. Acquisitions/divestments reduced sales by -1.1 percent. Foreign exchange effects had a slightly positive impact of 0.9 percent on sales.

Organic sales growth in the Europe region was 4.2 percent in the first quarter. In the IMEA region, sales increased organically by 27.8 percent. We increased sales in the North America region organically by 7.1 percent. The Latin America region posted organic sales growth of 17.6 percent. Organic sales development in the Asia-Pacific region was -4.8 percent.

Sales performance Adhesive Technologies

In the first quarter of 2023, sales in the Adhesive Technologies business unit increased nominally by 6.1 percent, from 2,631 million euros in the prior-year quarter to 2,791 million euros. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), we increased sales by 6.8 percent compared to the first quarter of 2022. We achieved price increases in the double-digit percentage range, while volumes were below the prior-year quarter. Foreign exchange effects increased sales by 1.1 percent; acquisitions/divestments had a negative effect of -1.8 percent.

The very strong organic sales growth of the Adhesive Technologies business unit in the first quarter was driven by all business areas. The Mobility & Electronics business area achieved double-digit organic sales growth of 12.6 percent. This increase was driven by the Automotive and Industrial businesses, while the Electronics business posted a negative development due to a difficult market environment. The Packaging & Consumer Goods business area generated organic sales growth of 1.0 percent. Very strong sales growth in the Consumer Goods business more than offset the sales decline in the Packaging business. Sales in the Craftsmen, Construction & Professional business area grew organically by 7.0 percent compared to the prior-year quarter, with all businesses contributing.

From a regional perspective, the Adhesive Technologies business unit generated significant organic sales growth in Europe. Here, the negative development in the Packaging & Consumer Goods business area was more than offset by growth in the Mobility & Electronics business area. North America also showed significant sales growth, driven by the Mobility & Electronics business area. Both IMEA and Latin America generated double-digit organic sales increases, driven in both regions by the Mobility & Electronics business area. By contrast, sales in the Asia-Pacific region were organically below the prior-year level. This was due in particular to the development in China arising from the overall difficult market environment that continued to prevail, even after the end of the COVID-19-related restrictions there, coupled with a market-related decline in the Electronics business.

Sales performance Consumer Brands

In the Consumer Brands business unit, sales increased nominally by 7.3 percent to 2,772 million euros in the first quarter of 2023. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales were up 7.0 percent compared to the prior-year level. Year on year, the business unit recorded a double-digit increase in prices, while volumes declined, due in part to the effects from portfolio optimization measures. Foreign exchange effects had a positive impact of 0.8 percent on sales. Acquisitions/divestments decreased sales by -0.5 percent.

In the first quarter, the Laundry & Home Care business area generated very strong organic sales growth of 6.3 percent. The Laundry Care business achieved a significant organic sales increase which was predominantly driven by significant sales growth in the Fabric Cleaning category and a double-digit increase in the Fabric Care category. Good growth in the Home Care business was primarily driven by a double-digit increase in sales in the Dishwashing category. Organic sales growth in the Hair business area, which includes the Professional business, was 9.9 percent. We generated double-digit growth in the Consumer business, driven in particular by the Hair Styling category. The Professional business achieved strong organic sales growth.

All regions served by the Consumer Brands business unit achieved organic sales increases in the first quarter. The Europe region recorded positive organic sales growth in the first quarter – mainly driven by the Hair business area, while sales in the Laundry & Home Care business area were below the prior-year quarter. The North America region generated very strong organic sales growth, with all business areas contributing. The IMEA and Latin America regions each generated double-digit organic sales increases across all business areas. Sales growth in the Asia-Pacific region was very strong with all business areas contributing.

Net assets and financial position of the Group

No substantial changes to the net assets and financial position of the Group occurred in the period under review compared to the situation as at December 31, 2022.

Outlook for the Henkel Group

The guidance for fiscal 2023, which was published on March 7, 2023, has been confirmed.

For the current year, Henkel continues to expect organic sales growth of between 1.0 and 3.0 percent, with both business units anticipated to be within this bandwidth. Adjusted return on sales (adjusted EBIT margin) is still expected to be in the range of 10.0 to 12.0 percent. Adjusted return on sales is anticipated to be between 13.0 and 15.0 percent for Adhesive Technologies and between 7.5 and 9.5 percent for Consumer Brands. For adjusted earnings per preferred share (EPS), Henkel continues to expect a development in the range of -10.0 to +10.0 percent at constant exchange rates.