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Henkel Profit Tops Estimates on Emerging Markets

August 01, 2012

Henkel AG, the German maker of Loctite glues and Persil detergent, reported second-quarter profit that beat analysts’ estimates as demand increased in emerging markets, offsetting weakness in western Europe.

Adjusted earnings before interest and taxes rose to 609 million euros ($749 million) from 514 million euros a year earlier, the Dusseldorf-based company said in a statement today. Profit exceeded the 592.2 million-euro average estimate of 11 analysts compiled by Bloomberg.

“We expect that the very volatile environment with uncertainties in our markets will persist,” Chief Executive Officer Kasper Rorsted said in the statement. “The effects of the debt and financial crises in a number of countries will continue to be a challenge.”

German companies are tapping growth in emerging markets as the sovereign-debt crisis curbs demand in the euro area. A report on July 30 showed economic confidence in the region fell more than economists forecast to the lowest in almost three years in July. Henkel is seeking to boost the proportion of revenue from developing markets to 45 percent this year from 43 percent currently.

Henkel preferred shares fell as much as 1.8 percent to 57.46 euros and were trading down 1.7 percent at 9:24 a.m. in Frankfurt. Henkel stock has gained 29 percent this year, the best performance on Germany’s benchmark DAX Index (DAX) and beating gains of 6.7 percent for London- and Rotterdam-based Unilever (UNA) and 22 percent at Hamburg-based Beiersdorf AG. (BEI)

Sales Rise

Sales rose 6.4 percent from a year earlier to 4.21 billion euros, boosted by a 9.3 percent increase in eastern Europe, the Middle East, Africa, Latin America and Asia. On a so-called organic basis, which excludes the effects of acquisitions, disposals or currency shifts, revenue increased 4 percent, propelled by an 8.1 percent jump in emerging markets.

Organic sales rose 4.5 percent in the Asia-Pacific region and 3.8 percent in North America. Revenue on that basis fell 0.1 percent in western Europe, the only region posting a decline.

The company doesn’t expect a recovery in the second half in western Europe, Rorsted said in a Bloomberg Television interview. The CEO said he’s not “overall concerned” about slowing economic growth in China.

Net Income

Net income jumped 9.6 percent to 401 million euros, Henkel said. That beat the 388.6 million-euro average of five estimates. Adjusted Ebit as a proportion of sales increased to 14.5 percent from 13 percent. Net debt was cut to 1.27 billion euros as of June 30 from 1.96 billion euros a year earlier.

Adhesives-division revenue gained 3.6 percent on an organic basis to 2.1 billion euros, led by growth in emerging markets, Henkel said. Organic sales rose 5.1 percent at the laundry and home-care unit and 2.8 percent in cosmetics and toiletries.

The company reiterated that the Ebit margin in 2012, adjusted for one-time items and reorganization costs, will rise to 14 percent of sales from 13 percent last year. Henkel is forecasting revenue growth at continuing operations of 3 percent to 5 percent in 2012. The company now expects an increase in adjusted earnings per preferred share of 15 percent.

This year “should be an even better year than 2011 and we also see the potential for strong sales and, especially, margin growth beyond 2012,” Andrew Wood, an analyst at Sanford C. Bernstein in New York, said in an e-mailed statement yesterday. “We do not believe this strong potential operating performance is fully reflected in Henkel’s stock at present.”

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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