Henkel continues strong performance in Q3 2016

“Henkel continued to deliver strong business performance in the third quarter. Sales, adjusted EBIT and adjusted earnings per preferred share reached new highs. The successful development and the high quality of earnings was driven by all three business units and the strong commitment of our global team,” said Henkel CEO Hans Van Bylen. “In the third quarter, we were also able to successfully close the acquisition of Sun Products and secure its financing at favorable conditions. We expect the overall challenging and uncertain market environment to persist in 2016. We will continue to focus on leveraging our successful brands, leading market positions and strong innovation capabilities to achieve our ambitious targets.” Henkel confirmed the outlook for the current fiscal year: “For the full fiscal year 2016, we expect organic sales growth of 2 to 4 percent. We expect our adjusted EBIT margin to rise to more than 16.5 percent and adjusted earnings per preferred share to grow between 8 and 11 percent,” said Hans Van Bylen.

In the third quarter of 2016, Henkel’s sales reached a new high. Sales rose by 3.4 percent to 4,748 million euros. The sales performance was driven by the solid organic development as well as acquisitions. Organic sales growth – i.e. adjusted for foreign exchange and acquisitions/divestments – was at 2.8 percent. Adjusted for negative foreign exchange impact of 3.3 percent, sales increased by 6.7 percent.

The Laundry & Home Care business unit recorded organic sales growth of 4.0 percent. The Beauty Care business unit posted an improvement in organic sales of 2.6 percent. The Adhesive Technologies business unit reported an increase in organic sales of 2.5 percent.

After allowing for one-time charges and gains and restructuring charges, adjusted operating profit (EBIT) rose by 7.6 percent from 778 million euros to 837 million euros. Reported operating profit grew by 16.4 percent from 666 million euros to 775 million euros.

Adjusted return on sales (EBIT margin) showed an increase of 0.7 percentage points to 17.6 percent. Reported return on sales rose from 14.5 percent to 16.3 percent. Henkel’s financial result was at -15 million euros and, due to acquisitions, below the level of the prior-year quarter. The reported tax rate was at 23.2 percent; in the prior year quarter it was at 24.6 percent.

Adjusted net income for the quarter after deducting non-controlling interests grew by 9.2 percent from 564 million euros to 616 million euros. Reported net income for the quarter increased by 18.2 percent from 494 million euros to 584 million euros.

After deducting 8 million euros attributable to non-controlling interests, quarterly net income amounted to 576 million euros (prior-year quarter: 484 million euros). Adjusted earnings per preferred share (EPS) rose by 9.2 percent from 1.30 euros to 1.42 euros. Reported EPS increased from 1.12 euros to 1.33 euros. Net working capital related to sales improved year on year by 0.8 percentage points to 5.2 percent.

The third quarter of 2016 saw the Laundry & Home Care business unit successfully continue its profitable growth path by increasing both sales and EBIT. Sales grew organically by 4.0 percent year on year. Nominally, sales increased by 12.6 percent to 1,479 million euros, also driven by the acquisition of Sun Products. In Africa/Middle East, the business unit achieved double-digit growth.

The Beauty Care business unit also successfully extended its long-established path of profitable growth in the third quarter of 2016. Organically, sales rose by 2.6 percent. Nominally, sales increased by 0.4 percent to 968 million euros. Sales in Africa/Middle East showed very strong growth.

The Adhesive Technologies business unit generated solid organic sales growth of 2.5 percent in the third quarter. Nominally, sales amounted to 2,272 million euros, after 2,279 million euros in the prior-year quarter. Sales in Africa/Middle East were below the level of the prior-year quarter.

Growth in the Africa/Middle East region continued to be impacted by the geopolitical unrest prevailing in some countries. Nevertheless, a strong organic sales growth of 6.9 percent was achieved. Nominal sales increased by 9.0 percent to 348 million euros.

Outlook

Henkel expects 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 anticipates a slight decrease compared to the prior-year level due to foreign exchange effects. For adjusted return on sales (EBIT), Henkel 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 expects an increase in adjusted earnings per preferred share of between 8 and 11 percent.