Henkel continues solid performance in Q2

• Sales increase of 1.6 percent to 3,953 million euros (organic: + 6.3%)
  Adjusted* operating profit: plus 8.0 percent to 514 million euros
  Adjusted* EBIT margin: plus 0.8 percentage points to 13.0 percent
  Adjusted* earnings per preferred share (EPS): plus 8.2 percent to 0.79 euros
  Growth regions post another double-digit increase (organic: + 11.6%)
  Market environment characterized by rise in raw material prices and intense competition

“Henkel continued its solid performance in the second quarter, despite the challenging market environment. We achieved high organic sales growth and outperformed once again our relevant markets,” said CEO Kasper Rorsted. “All our business sectors contributed to this growth, and with double-digit increases in our growth regions we improved the share of total sales in these markets to 42 percent. Despite higher raw material prices, we improved our profitability in all business sectors. This was driven by increased selling prices across all our business sectors, by our strong brands and innovations, as well as by measures to further enhance our efficiency.”

For the fiscal year 2011, Rorsted provided the following guidance: “With intense competition continuing, an increase in raw material prices and growing uncertainties in the markets, the economic environment will remain challenging. Against this background, we will further adapt our structures in order to respond more quickly and flexibly to changes in our markets and maintain strict cost control.” Henkel also slightly raised its expectations for organic sales growth in 2011: “We are confident that we will again grow faster than our relevant markets in 2011 and now expect an organic sales growth of around 5 percent. In line with our previous guidance we expect our adjusted EBIT margin to increase to around 13 percent and adjusted earnings per preferred share by about 10 percent,” Rorsted added.

Henkel’s sales in the second quarter of 2011 increased to 3,953 million euros, a rise of 1.6 percent compared to the figure for the prior-year quarter. After adjusting for foreign exchange, sales improved by 6.0 percent. At 6.3 percent, organic sales, which exclude the impact of foreign exchange and acquisitions/divestments, again showed a strong increase. All three business sectors contributed to this positive development. Laundry & Home Care registered organic sales growth of 3.7 percent. With organic sales growth of 5.4 percent, the Cosmetics/Toiletries business sector clearly outperformed a very strong prior-year quarter. Adhesive Technologies significantly surpassed an already successful prior-year quarter with organic growth of 8.9 percent both price and volume driven. Henkel was thus able to further expand global market share in all three business sectors, with the consumer businesses achieving historic highs.

After allowing for one-time gains, one-time charges and restructuring charges, adjusted operating profit improved by 8.0 percent, from 476 million euros to 514 million euros, with all three business sectors contributing. Operating profit (EBIT) increased by 27.5 percent, from 421 million euros to 537 million euros, positively impacted by the one-time gain of 48 million euros arising from the sale of the branded consumer goods business in India. Despite the influence of higher prices for raw materials and packaging, adjusted return on sales (EBIT margin) rose by 0.8 percentage points, from 12.2 percent to 13.0 percent. Return on sales rose to 13.6 percent, following 10.8 percent in the comparative prior-year period.

Business performance January through June 2011

In the first six months of fiscal 2011, Henkel increased sales versus the prior-year period by a substantial 5.1 percent to 7,776 million euros. After adjusting for foreign exchange, sales improved by 6.4 percent. At 6.7 percent, organic sales growth was also clearly above the level of the prior-year period. Adjusted operating profit increased by 9.9 percent, from 897 million euros to 987 million euros. This positive development was driven in particular by the Cosmetics/Toiletries and Adhesive Technologies business sectors. Operating profit (EBIT) increased by 14.7 percent, from 843 million euros to 967 million euros. Adjusted return on sales (EBIT margin) improved from 12.1 percent to 12.7 percent. In nominal terms, return on sales rose from 11.4 percent to 12.4 percent.

Business sector performance in the second quarter 2011

The Laundry & Home Care business sector increased organic sales by 3.7 percent. This significant rise, achieved despite the further contraction of the relevant markets, was due to continuing strong volume growth of 2.9 percent and a price effect of 0.8 percent compared to the prior-year quarter, positive for the first time since the third quarter of 2009. In nominal terms, sales came in at 1,076 million euros compared to 1,086 million in the prior-year quarter. Adjusted operating profit increased by 2.8 percent to 140 million euros. Adjusted return on sales improved by 0.5 percentage points to 13.0 percent. Both these key financials were therefore well above the level of the prior-year quarter, although the significant increase in raw material prices during this quarter exerted a particularly negative effect. Operating profit rose by 14.8 percent to 157 million euros. Included in this figure is a gain arising from the disposal of Henkel’s branded consumer goods business in India.

The Cosmetics/Toiletries business sector posted a substantial increase in organic sales of 5.4 percent in the second quarter, continuing the sequence of very good performances in recent periods. Once again, the rate of growth outstripped that of the relevant markets and volumes experienced a significant rise. Driven by strong innovations, the business sector succeeded in further expanding its market shares, with new record levels once again the result. Moreover, higher average selling prices were also achieved, leading to a positive price effect for the first time in four quarters. Sales came in at 881 million euros, 1.9 percent above the figure for the prior-year quarter. Adjusted operating profit rose by a substantial 11.0 percent to 124 million euros. Adjusted return on sales improved by 1.2 percentage points to a new record of 14.1 percent. Once more, cost reductions and efficiency enhancements made a substantial contribution to the increase in earnings. Again in the second quarter, the business sector succeeded in offsetting the increase in raw material and packaging prices. Operating profit rose by 24.7 percent to 140 million euros, with the one-time gain from the sale of the branded consumer goods business in India making a positive contribution.

Once again in the second quarter of 2011, the Adhesive Technologies business sector significantly outperformed its relevant markets, increasing sales to 1,963 million euros, an improvement of 3.9 percent versus an already strong prior-year quarter. Both volume improvements and selling price increases played their part in this positive development. Organic growth came in at 8.9 percent. Adjusted operating profit again improved significantly versus the prior-year quarter, by 9.0 percent to 278 million euros. Adjusted return on sales therefore also rose, by 0.7 percentage points to a new high of 14.2 percent. Although further steep rises in raw material and packaging prices exerted a distinctly negative effect, the ensuing cost increases were significantly outweighed by further efficiency enhancement measures and selling price increases. Compared to the prior-year quarter, operating profit rose by 21.1 percent to 269 million euros. Included in this figure is the one-time gain arising from the disposal of the company’s roofing membrane business operated under the Wolfin brand.

Regional performance

In the Western Europe region, sales grew by 2.4 percent to 1,425 million euros; the organic improvement was 1.5 percent. Positive growth rates posted by Adhesive Technologies and Laundry & Home Care compensated for the decline registered by the Cosmetics/Toiletries business sector. Sales in the Eastern Europe region rose by 7.3 percent to 729 million euros. Organic growth was even higher at 11.0 percent. All three business sectors contributed to this improvement, particularly Adhesive Technologies with a double-digit growth rate. Expansion in the Africa/Middle East region continued to be hampered by political unrest in some countries. Sales there totaled 231 million euros compared to 236 million euros in the comparable period of the previous year. Organically, however, sales rose by 9.5 percent, supported in particular by Adhesive Technologies and Cosmetics/Toiletries. Sales generated in the North America region decreased by 5.2 percent to 676 million euros, with foreign exchange effects exerting major negative impact. Organically, on the other hand, sales increased by 6.1 percent with support from all three business sectors. The region of Latin America recorded a sales increase of 5.0 percent to 272 million euros. Organic growth came in at 9.6 percent, with all three business sectors contributing. The Asia-Pacific region registered sales growth of 4.8 percent to 587 million euros. In organic terms, sales again saw a double-digit rise of 12.1 percent, supported in particular by Adhesive Technologies and Cosmetics/Toiletries. Developments in Japan only exerted an influence on local sales growth.

In the growth regions of Eastern Europe, Africa/Middle East, Latin America and Asia (excluding Japan), sales rose by 4.7 percent to 1,674 million euros. Organic growth amounted to 11.6 percent, keeping it in the double-digit percentage range. Particularly Adhesive Technologies and Cosmetics/Toiletries contributed to this growth. The share of sales attributable to the growth regions increased from 41 percent in the prior-year quarter to 42 percent this time.

Sales and profits forecast 2011

Following a solid first half year, Henkel is confident of again outperforming its relevant markets in terms of organic sales growth. For fiscal 2011, Henkel now expects an increase in organic sales of around 5 percent (previously: at the upper end of the 3 to 5 percent range). Henkel confirms its forecast for an adjusted return on sales (EBIT) of around 13 percent (2010: 12.3 percent) and an improvement in adjusted earnings per preferred share of about 10 percent. This guidance is based on increases in Henkel’s selling prices and the ongoing adaptation of its structures to the constantly changing market conditions. Through these activities and the maintenance of its strict cost discipline, Henkel intends to more than offset the effects of increased raw material costs on its earnings.

* 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 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 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 forward-looking statements.