05/02/2007, Düsseldorf, Germany/Gulph Mills, Penn.

 

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Henkel reports successful start to 2007

Sales increased by 6.2 percent to 3,237 million euros / Strong organic sales growth of 9.1 percent / Operating profit (EBIT) up 9.2 percent to 323 million euros / Earnings for the quarter improved 13.5 percent to 210 million euros

In the first quarter of 2007, Henkel reported sales of 3,237 million euros, an increase of 6.2 percent compared to the prior-year quarter, with all business sectors contributing. The increase in organic sales, i.e. growth adjusted for foreign exchange and acquisitions/divestments, was even higher at 9.1 percent. The Laundry & Home Care business sector posted a very high organic growth rate of 11.9 percent, due particularly to the extensive activities undertaken in celebration of the Persil laundry detergent centennial. The Cosmetics/Toiletries business sector achieved an encouraging growth rate of 6.4 percent. The strongest performer was the Consumer and Craftsmen Adhesives business sector, posting a rise of 12.3 percent, aided by mild weather in Europe that had a positive effect on the building sector. Henkel Technologies achieved an organic growth rate of 7.5 percent.

Exceeding sales, operating profit (EBIT) rose by 9.2 percent to 323 million euros, again with all the business sectors contributing. After adjusting for foreign exchange, profit growth was even higher at 12.4 percent. 

“Our start to the new fiscal year has been very successful. We are particularly encouraged by our strong organic sales growth and the significant contributions made by all our business sectors,” said Ulrich Lehner, Chairman of the Management Board of Henkel. “We have generated further dynamic expansion in our growth regions while our businesses in Western Europe including Germany also performed well. The launch of new and innovative products again contributed to this good performance.”

In North America, Henkel markets a range of well-known consumer and industrial brands, including Dial® soap, Purex® laundry detergent, Right Guard® antiperspirants, got2b® hair gels, Duck® brand duct tape, and Loctite® adhesives.

Return on sales (EBIT) was 10.0 percent, exceeding the level of the prior-year quarter by 0.3 percentage points. Return on capital employed (ROCE) improved by 1.5 percentage points to 14.6 percent. Income from participations increased by 6 million euros to 19 million euros. The prior-year quarter was burdened by an impairment loss taken for the meanwhile divested participation in the Lion Corporation, Japan. Net interest expense decreased by 2 million euros to -49 million euros. Overall, net financial items thus improved by 4 million euros, from -34 million euros to -30 million euros. At 28.3 percent, the tax rate was slightly below the figure for the previous year, which also included the taxes payable on income from the sale of the Dial foods business.

Earnings for the quarter increased by 13.5 percent to 210 million euros. After adjusting for minority interests of 5 million euros, the figure was 205 million euros (up 13.3 percent). Earnings per preferred share rose by 12.6 percent to 1.43 euros.

Regional Performance

The regional analysis shows that Europe/Africa/Middle East posted a strong increase in sales of 10.9 percent to 2,116 euros, to which all the business sectors contributed. In Eastern Europe, sales again underwent a double-digit percentage increase with further encouraging sales improvements also being registered in Western Europe and Germany. In all, the share of sales accounted for by this region increased slightly to 65 percent. Due to foreign exchange effects, sales in the North America region fell by 4.7 percent. After adjusting for foreign exchange, sales increased by 4.1 percent to 652 million euros, accounting for 20 percent of global sales. The Latin America region posted a sales increase of 5.1 percent to 164 million euros, a rise of 15.3 percent after adjusting for foreign exchange. The Cosmetics/Toiletries and Consumer and Craftsmen Adhesives business sectors achieved double-digit percentage growth in sales in this region. The overall share of sales remained at 5 percent. Business performance in the Asia-Pacific region was likewise encouraging. Sales rose by 4.1 percent to 247 million euros. The increase after adjusting for foreign exchange was 10.2 percent. High levels of growth momentum were once again exhibited here, particularly by the Henkel Technologies and Consumer and Craftsmen Adhesives business sectors. The share of sales accounted for by the region was unchanged at 8 percent.

Major Participation

Ecolab Inc., St. Paul, Minnesota, USA, in which Henkel has a 29.0 percent stake, reported sales of 1,254 million US dollars in the first quarter of 2007, an increase of 12.0 percent compared to the previous year. Net earnings for the quarter rose by 14.9 percent to 89.5 million US dollars. The market value of this participation as of March 31, 2007, amounted to around 2.3 billion euros.

Outlook

Henkel once again intends to grow faster than its markets.

Henkel expects to achieve organic sales growth (i.e. after adjusting for foreign exchange and acquisitions/divestments) at the upper end of the 3 to 4 percent range in 2007.

Henkel expects an increase in operating profit (EBIT) – adjusted for foreign exchange – in excess of organic sales growth.

Henkel likewise expects an increase in earnings per preferred share (EPS) in excess of organic sales growth.

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This document contains forward-looking statements which are based on the current estimates and assumptions made by the corporate management of Henkel KGaA. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate, etc. 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 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 any forward-looking statements.