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Henkel Drops Most in Year as Four-Year Targets Disappoint

November 16, 2012

Henkel AG fell the most in more than a year in Frankfurt trading on disappointment that the German maker of Loctite glues and Persil detergent refrained from giving a margin forecast among four-year goals outlined today.

The shares fell as much as 5.6 percent to 57.85 euros, the steepest decline since November last year. They were 4.8 percent lower as of 11:16 a.m., leading declines in the DAX index.

The 2016 targets announced by the Dusseldorf-based company were “disappointingly non-existent or vague,” Andrew Wood, an analyst at Sanford C. Bernstein, wrote in a note to clients. He said investors may be unhappy at the absence of a margin goal.

Henkel predicted that revenue will rise to 20 billion euros ($25.5 billion) in 2016 with half coming from emerging markets as it plans mid-sized acquisitions. Earnings per share will grow at an annual pace of 10 percent, the company said. Henkel is “deeply committed” to reaching the goals, Chief Executive Officer Kasper Rorsted said at a meeting with analysts.

Also today, the company reported third-quarter sales growth that missed analysts’ estimates and said it expects 125 million euros of costs for restructuring this year, higher than a previous forecast of 100 million euros.

The 2016 targets imply that Henkel will make “small and mid-sized acquisitions” as well as divest non-strategic activities with total sales of about 500 million euros, the company said today. The guidance doesn’t include any potential big acquisitions or divestments, it said.

Acquisitions Sought

Henkel, which ended last year with the lowest level of net debt since 2004, wants to boost growth through acquisitions, Chief Financial Officer Carsten Knobel said at the meeting. The German company in May purchased Cytec Industries Inc.’s pressure-sensitive adhesives product line for $105 million and in August acquired Colgate-Palmolive Co.’s (CL:US) laundry cleaning business in the Dominican Republic, its first acquisitions since 2008, according to data compiled by Bloomberg.

Share repurchases and higher dividends are also possible, Knobel said, though buybacks aren’t part of the plan at the moment and the company’s growth is the main priority, he said.

Henkel is tapping growth in developing regions as austerity measures weigh on spending in the euro area. Competitor Unilever reported third-quarter revenue growth on Oct. 25 that beat estimates led by demand for personal-care products in emerging markets, while Beiersdorf AG (BEI) had profit in the period that also exceeded estimates on strong developing markets growth.

Henkel said it will increase investment and raise capital spending by more than 40 percent to about 2 billion euros until 2016. The company will continue to focus on cash generation by reducing working capital to about 5 percent of sales by 2016.

So-called organic sales rose 2.5 percent in the third quarter, Henkel said today, trailing the 3.4 percent average estimate of nine analysts. Adjusted earnings before interest and tax rose 17 percent to 631 million euros, exceeding the 620.1 million-euro average estimate of 13 analysts.

To contact the reporter on this story: Julie Cruz in Frankfurt at

To contact the editor responsible for this story: Celeste Perri at

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