Henkel reports strong performance in third quarter

Solid organic sales growth of 4.2%
Sales impacted by foreign exchange effects: 4,184 million euros (-2.6%)
Adjusted operating profit: +6.5% to 672 million euros
Adjusted EBIT margin: +1.4 percentage points to 16.1%
Adjusted EPS again with double-digit growth: +11.1%*
Very strong organic sales growth in emerging markets

“Despite an increasingly challenging market environment, Henkel continued its strong performance in the third quarter and was able to accelerate organic growth quarter by quarter in 2013. We significantly increased both earnings and profitability – with our EBIT margin exceeding 16 percent for the first time,” said Henkel CEO Kasper Rorsted. “We achieved solid organic sales growth with all our business sectors and regions contributing. The emerging markets once again showed a particularly dynamic development. However, foreign exchange effects negatively impacted reported sales.”

Looking at the remainder of the year, Rorsted stated: “The economic environment will remain difficult. Therefore we will continue to adapt our processes and structures in order to further improve our flexibility and efficiency in this volatile market environment.”

2013 guidance confirmed – higher margin expected

“As previously stated, we expect organic sales growth to be between 3 and 5 percent in the full fiscal year and adjusted earnings per preferred share (EPS) to increase by about 10 percent. For our adjusted EBIT margin, we are raising our forecast from about 14.5 percent to about 15 percent,” Kasper Rorsted said.

Sales and earnings performance in the third quarter 2013

Henkel generated sales of 4,184 million euros in the third quarter of 2013. This was below the prior-year figure due to negative foreign exchange effects amounting to 6.7 percent. Nominally, sales decreased by 2.6 percent. Organic sales growth, which excludes the impact of foreign exchange and acquisitions/divestments, reached solid 4.2 percent, with all business sectors contributing.

Laundry & Home Care recorded strong organic sales growth of 5.5 percent. Beauty Care achieved a solid organic growth rate of 3.1 percent. Adhesive Technologies also registered solid growth with organic sales rising by 4.2 percent versus the prior-year quarter.

After allowing for one-time gains, one-time charges and restructuring charges, adjusted operating profit improved by 6.5 percent, from 631 million euros to 672 million euros, with all three business sectors contributing. Reported operating profit (EBIT) was 649 million euros compared to 586 million euros in the third quarter of 2012.

Adjusted return on sales (EBIT margin) rose by 1.4 percentage points, from 14.7 to 16.1 percent. Reported return on sales amounted to 15.5 percent compared to 13.6 percent in the prior-year quarter.

Henkel’s financial result improved by 27 million euros to -25 million euros, due primarily to a stronger net financial position and an improved result from currency hedging activities. The tax rate was at 24.8 percent compared to 24.7 percent for the prior-year quarter.

Net income for the quarter rose by 16.7 percent, from 402 million euros to 469 million euros. After deducting 11 million euros attributable to non-controlling interests, quarterly net income amounted to 458 million euros (prior-year quarter: 390 million euros). Adjusted net income for the quarter after deducting non-controlling interests was 476 million euros compared to 422 million euros in the same period of 2012. Earnings per preferred share (EPS) rose from 0.90 euros to 1.06 euros. The adjusted figure was 1.10 euros compared to 0.97 euros in the prior-year quarter. Before application of IAS 19 revised, prior-year EPS was 0.99 euros. Compared to this figure, adjusted earnings per preferred share increased by 11.1 percent.

The ratio of net working capital to sales further improved year-on-year, decreasing to 4.5 percent. The net financial position as of September 30, 2013, changed from a net debt figure to a net investment of 485 million euros. As of September 30, 2012, Henkel reported a net debt of 612 million euros.

Business performance January through September 2013

At 12,503 million euros, sales in the first nine months of fiscal 2013 remained at the level of the prior-year period. Organic sales, which excludes the impact of foreign exchange and acquisitions/divestments, registered solid growth of 3.6 percent. Adjusted operating profit rose by 7.8 percent, from 1,791 million euros to 1,932 million euros, with all business sectors contributing. Adjusted return on sales (EBIT margin) increased from 14.3 to 15.5 percent.

Adjusted net income for the nine months after deducting non-controlling interests grew by 12.6 percent, from 1,203 million euros to 1,354 million euros. Adjusted earnings per preferred share (EPS) amounted to 3.13 euros, showing a significant increase of 12.6 percent compared to the 2.78 euros registered in the first nine months of 2012. Before application of IAS 19 revised, prior-year EPS was 2.83 euros. Compared to this figure, the increase in EPS was 10.6 percent.