Bloomberg News

Henkel Drops Most in Seven Weeks as Quarterly Profit Falls

November 09, 2011

(Closes shares in second paragraph.)

Nov. 9 (Bloomberg) -- Henkel AG, the German maker of industrial adhesives and Soft Scrub cleaners, fell the most in seven weeks in Frankfurt trading after third-quarter profit missed analysts’ estimates as raw-material costs rose.

Henkel’s preferred shares dropped 4.5 percent to 41.61 euros, the steepest decline since Sept. 22. The stock has fallen 11 percent this year.

Net income fell 8.9 percent from a year earlier to 307 million euros ($424 million), the Dusseldorf, Germany-based company said today. Profit was less than the 348 million-euro average of five analyst estimates compiled by Bloomberg. Risks to business this year include a slowing economy as well as further increases in supply costs, Henkel said.

“We believe there to be a considerable risk that Henkel could fall short of the company targets for 2012” amid a slowdown in the global economy, Thomas Maul, a Frankfurt-based analyst at DZ Bank AG, wrote in a report today.

Henkel, the maker of Loctite glues and Persil detergent, said in August that it plans to sell or terminate as many as 200 brands to focus on its top labels. Henkel derives 90 percent of its fast-moving consumer-goods sales from its top 10 brands, Chief Executive Officer Kasper Rorsted said at the time.

“In addition to intense competition and high raw-material prices, the debt crisis in the euro zone is bringing additional uncertainty into the markets,” Rorsted said in a statement.

‘Very Confident’

The manufacturer said it’s “very confident” of reaching a 2012 target of earnings before interest and taxes of 14 percent of sales, adjusted for one-time items and reorganization costs. The third-quarter adjusted-Ebit margin increased 4.4 percentage points to 13.4 percent, Henkel said in its quarterly report, reiterating that it expects a full-year margin of 13 percent.

Earnings per preferred share, excluding one-time items, may rise by about 10 percent this year and by more than that rate in 2012, the company said.

Henkel raised its forecast for full-year sales growth at existing operations to a range of 5 percent to 6 percent from a previous target of about 5 percent. The gain is likely to be at the upper end of that range, Rorsted said on a conference call.

Henkel will increase prices and reduce spending to offset growth in raw-material costs and achieve this year’s targets, the company said.

Lagging Behind Estimates

Third-quarter sales rose 1.7 percent to 4.03 billion euros, missing the 4.05 billion-euro average of 17 analyst estimates. Revenue rose at the adhesive-technologies and cosmetics and toiletries units, while dropping at the laundry and home-care division. Adjusted Ebit rose 4.7 percent to 541 million euros, less than the 550.3 million-euro average of 13 estimates.

Sales in emerging markets expanded to 43 percent of total third-quarter revenue from 42 percent a year earlier. Henkel said in August that it aims for those markets to account for 45 percent of sales by 2012. Developing economies may grow by 6.1 percent next year, the International Monetary Fund said in September. That compares with IMF forecasts for advanced economies of 1.9 percent growth in 2012.

--Editors: Tom Lavell, David Risser

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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