Henkel achieves good organic sales growth with strong earnings, profitability and cash flow

DUBAI SILICON OASIS, UAE - Feb. 26, 2019 - PRLog -- Henkel's 2018 fiscal report highlights the company's significant organic growth with increased earning and profitability amidst rising negative currency effects and direct material prices.

"In 2018, we continued to deliver profitable growth for Henkel. We achieved good organic growth with new highs in earnings and profitability. We also significantly increased free cash flow. At the same time, we faced substantial negative currency effects as well as increasing direct material prices. The overall good business performance was once again driven by our successful brands and innovative technologies with leading positions in highly attractive markets and categories. Our profitable growth was complemented by the contributions from acquisitions in our industrial and consumer goods businesses. We maintained our strong cost discipline and continuously improved our efficiency," said Henkel CEO Hans Van Bylen.

"We made substantial progress in the execution of our strategic priorities through to 2020 and beyond. We successfully implemented key strategic initiatives and further improved our competitiveness. To capture additional growth opportunities, mainly in our consumer goods businesses, and to further accelerate the digital transformation of our company, we announced in January to step up investments by around 300 million euros annually from 2019 onwards," said Hans Van Bylen. "Our mid- to long-term financial ambition underlines our commitment to delivering sustainable profitable growth and attractive returns."

Outlook 2019

Reflecting the increased growth investments from 2019 onwards, Henkel expects an organic sales growth of between 2 to 4 percent in the current fiscal year. For the adjusted EBIT margin, Henkel expects a range of 16 to 17 percent and an adjusted EPS development in the mid-single percentage range below prior year at constant exchange rates.

Sales and earnings performance 2018

Sales in the fiscal year 2018 decreased slightly by 0.6 percent to 19,899 million euros. Currency developments had an overall negative effect of around
1.1 billion euros or -5.4 percent on sales. Adjusted for foreign exchange effects, sales grew by 4.8 percent. Acquisitions and divestments accounted for 2.4 percent of sales growth. Organic sales, excluding the impact of foreign exchange effects and acquisitions/divestments, showed a good increase of 2.4 percent.

The Adhesive Technologies business unit increased by 4.0 percent. Organically, sales in the Beauty Care business unit were 0.7 percent below last year, while Laundry & Home Care business unit increased organic sales of 1.9 percent. The emerging markets again improved in organic sales of 6.3 percent. The mature markets registered a slightly negative organic sales performance of -0.4 percent.

Sales increased organically in all regions, apart from North America. In Western Europe, sales showed a positive organic growth of 0.3 percent. In Eastern Europe, sales grew organically by 7.6 percent. Africa/Middle East posted organic sales growth of 11.3 percent. Sales in North America were organically 1.0 percent below the level of the last year. Latin America achieved organic sales growth of 9.3 percent, and in the Asia-Pacific region, sales grew organically by 0.9 percent.

Adjusted operating profit (EBIT) improved by 1.0 percent to 3,496 million euros, a new high for Henkel, while adjusted return on sales (EBIT) rose by 0.3 percentage points to 17.6 percent. The financial result amounted to -65 million euros. Adjusted net income for the year after non-controlling interests increased by 2.8 percent to 2,604 million euros. Adjusted earnings per preferred share (EPS) grew by 2.7 percent from 5.85 euros to 6.01 euros.

Net working capital as a percentage of sales reached 5.1 percent, showing good improvement in the course of the year, nearly matching the level of the prior-year period (4.8 percent).

The net financial position closed the year at -2,895 million euros.

Business unit performance

The Adhesive Technologies Business Unit generated strong organic sales growth of 4.0% in 2018. The Beauty Care business unit was slightly negative at -0.7%, while Laundry & Home Care business unit generated growth of 1.9%

Nominally, sales grew by 0.2% to 9,403 million euros for Adhesive Technologies, by 2.1 percent to 3,950 million euros for Beauty Care and reached 6,419 million euros after 6,651 million euros in the prior year for Laundry and Home Care.

For Adhesive Technologies, adjusted operating profit increased by 1.6% to 1,761 million euros and adjusted return on sales grew by 0.2 percentage points, reaching 18.7%. Beauty Care's Adjusted operating profit grew by 1.6% to 675 million euros while adjusted return on sales was slightly below the level of the prior year, reaching 17.1%. For Laundry and home Care, adjusted operating profit decreased slightly by 0.7% to 1,162 million euros. Adjusted return on sales grew strongly by 0.5 percentage points and reached 18.1 percent.

An increase in the dividend per preferred share of 3.4% to 1.85 euros will be proposed by the Management Board, Supervisory Board and Shareholders' Committee. The proposed dividend per ordinary share is 1.83 euros, 3.4% more than the previous year (1.77 euros). This would be the highest dividend payment in the company's history and equals a payout ratio of 30.9 percent.

Great progress in strategy implementation in 2018

In 2018, Henkel drove growth in its markets around the world. Regular in-depth exchange and close collaboration with customers were key success factors.

A particular focus was placed on accelerating the innovation cycles and the reduction of innovation lead times to address new market trends. Henkel also improved its innovation processes, resulting in high innovation rates and increasing first-year sales from innovations.

Henkel also progressed in the integration of acquired businesses, completing several new acquisitions. To capture new sources of growth, Henkel's Corporate Venture Capital unit invested in new technologies, materials, applications, business and service models with direct investments in start-ups and other venture funds.