Henkel KGaA - Information on Business Performance January through June 2000
14 August 2000
Henkel KGaA - Information on Business Performance January through June 2000
- Sound performance continues
- Strong growth in sales and profits
- Improvements in every business sector
- Market shares expanded in important segments
DUSSELDORF, Germany - From January through June 2000 the Henkel Group
realised sales of EUR 6.2 billion. This represents an 11.4 percent increase
over the same period last year. Established business grew by 6.8 percent
(organic growth), foreign exchange factors contributed 4.5 percentage points to
sales growth, acquisitions/divestments constituted a positive influence of
percentage points. Sales of the companies in Germany rose by 5.3 percent while
the companies abroad achieved an increase in sales of 13.6 percent. Sales in
North America grew by 14.2 percent, and in Latin America by 20.4 percent. An
increase in sales of 36.6 percent was achieved in Asia/Australia.
Operating profit (EBIT) stood at EUR 462 million, 13.3 percent up on the
EUR 408 million of the same period last year. The business sectors Adhesives,
Industrial and Institutional Hygiene/Surface Technologies and Cognis all
registered double-digit growth rates. The return on investment improved to
13.5 percent (previous year: 12.4 percent). With an increase of 5.9 percent
to EUR 595 million, the cash flow of the Henkel Group showed very good
progress during the first six months of 2000. The increase is particularly
due to a higher operating profit. Earnings before tax for the half year
amounted to EUR 245 million. This represents an increase of 36.9 percent.
Major Events
In May 2000 Henkel and the Algerian ENAD Group established a detergents
joint venture, Henkel ENAD Algerie (HEA), in which Henkel owns 60 percent and
ENAD 40 percent. HEA has the ownership of the ISIS brand and of the two ENAD
factories, one in Ain Temouchent, the other in Algiers. The joint venture is
expected to achieve annual sales of around EUR 120 million. Its formation
represents a strategic step toward expansion of the detergents business beyond
Algeria to the entire North African region.
At the end of June, the Henkel US subsidiary Loctite Corporation signed a
contract with Dexter Corporation, Windsor Locks, Connecticut, USA, for the
purchase of a significant share of Dexter's specialty polymers business. The
deal is currently awaiting the requisite regulatory antitrust clearances. The
business portfolio comprises adhesives for the electronics manufacturing
sector, the automotive and the aerospace industries. In 1999 this business
recorded sales of EUR 220 million.
This takeover places Loctite at the forefront as a leading supplier to the
rapidly growing electronics segment and consolidates its business links to the
world's major manufacturers of computers and telecommunications equipment.
Dexter's epoxy technologies will also provide Henkel with a launch pad for
expanding business with the aerospace industry.
On July 15, 2000 the well-known European fertiliser and plant care brand
Substral was sold to The Scotts Company, Columbus, Ohio, USA, in a deal
scheduled to take effect at year-end. In 1999 the Substral business recorded
sales of about EUR 22.5 million. This step enables Henkel to concentrate even
more fully on the core activities of the Detergents/Household Cleaners
business sector.
Henkel and the Lion Corporation of Japan have agreed on the formation of a
joint venture for the hair colorants business in Japan. To this end, Lion has
acquired from Henkel a 48.5 percent interest in the Japanese colorants
manufacturer Yamahatsu. Henkel and Lion will jointly operate their hair
colorants businesses via Yamahatsu.
Development of Business Sectors
The Adhesives business sector increased sales by 14.4 percent to EUR
1.4 billion. Operating profit grew by 12 percent to EUR 130 million. All
three divisions -- Consumer and Craftsmen Adhesives, Industrial and Packaging
Adhesives, and Engineering Adhesives -- contributed to this positive
development. Performance in Europe, North and South America and
Asia/Australia was particularly encouraging.
Consumer and Craftsmen Adhesives succeeded in further expanding their
share in a number of major markets. The increase in sales world-wide amounted
to 10 per cent. Growth was particularly boosted by developments in the do-it-
yourself sector and through the launch of new bonding and correction products.
The ongoing globalisation of business through the introduction of selected
brand products in important world markets also contributed to the positive
sales performance. A 21 percent sales growth was achieved in North America
while the improvement in Asia/Australia amounted to 37 percent.
Industrial and Packaging Adhesives continued their very good growth from
the first quarter, increasing sales by 16 percent over the same period last
year. This positive trend was encouraged by the increasingly benign economic
situation of customers world-wide. The market positions enjoyed by the
labelling, bookbinding and wood adhesives were strengthened. Liofol
laminating adhesives also expanded their leading market position. The
pronounced globalisation of these businesses resulted in over proportionate
growth rates overseas. While a 13 percent increase was achieved in Europe, in
North and South America the improvement amounted to 20 and 21 percent
respectively, while Asia/Australia recorded a plus of 31 percent.
Engineering Adhesives (Loctite) likewise continued their excellent
performance through the second quarter of this year. Sales for the six months
were 21 percent up on last time. The "Multicore" unit of Kelsey Industries
plc (UK), acquired in February, has been incorporated retrospectively with
effect from January 1, 2000. Multicore specializes in soldering materials for
PCB assembly applications, and the takeover thus reinforces Loctite's position
in the electronics segment. Even without this acquisition, Engineering
Adhesives recorded a commendable organic growth rate of 16 percent. Against
the background of an increasingly positive economic environment, there was an
appreciable revival in business activity among the customer industries in
Europe. Sales there rose 8 percent. Organic growth in North and South
America was likewise encouraging. All the countries of Asia/Australia
registered double-digit growth rates. Overall, sales in this region rose by
43 percent over the first half of last year.
The Cosmetics/Toiletries business sector increased sales by 9.7 percent to
EUR 979 million. Businesses in Germany, Russia, North America and
Asia/Australia developed positively. Following the acquisition of Yamahatsu,
the Cosmetics/Toiletries business sector is now also well represented in the
colorants segment of the Japanese cosmetics market, the second largest in the
world. In China a package of measures has been introduced to improve
profitability. Operating profit increased by 3.1 percent to EUR 64 million.
There was a significant increase in marketing activity compared to the
previous year aimed at strengthening the brands and their market positions.
Hair Cosmetics increased sales by 7 percent during the first half year and
further consolidated the number-two position in Europe due to significant
market share gains. In the colorants segment, the brands Country Colours,
Diadem/Soyance, Vital Colors and Live all underwent a thorough review. The
colorant lines Live and Brillance were introduced onto the Italian, Spanish,
British and Tunisian markets. The Hair Care business also performed well
backed by the relaunches of Poly Kur and Gliss Kur, and the introduction of a
new foam variant, Color Shine. Sales in the styling products segment profited
from the launch of the Taft line in France and also the good performance of
the two brands L.A. Looks and Dep in the USA.
The Bodycare business increased sales by 12 percent. Activities here
focused on the international relaunch of Fa. Although competition is tough in
the oral care market, the business was able to maintain its market share in
Europe. The Skincare segment performed well due to numerous innovations and
the launch of Diadermine in Germany. The Diadermine line is also scheduled
for introduction in other European countries.
The Hair Salon business also realised positive sales growth, with an
increase for the first half of 2000 of 24 percent to EUR 161 million. This
further improvement was founded on the outstanding market reception given to
the colorant series Igora Royal and Igora Personality, and the successful
relaunch of Natural Styling.
The Detergents/Household Cleaners business sector increased sales by
6.5 percent to EUR 1.4 billion. Operating profit improved 0.4 percent to EUR
96 million. Heavy-duty detergents recorded sales growth of 9 percent.
Throughout Europe, Henkel succeeded in reducing the gap to the market leader.
In the concentrates segment, Henkel succeeded in gaining market leadership.
The sustained upturn in business performance that has occurred outside Europe,
particularly in Egypt, Lebanon, Russia, India, Israel and Tunisia, was
especially favourable. Due to heavy competition in the USA, sales in Purex
Advanced at the Dial Henkel joint venture were below plan. Business in China
showed an improvement in the second quarter of 2000, but remained negative.
Special detergents also developed positively (sales increase: 9 percent).
This improvement was due in particular to innovative product concepts such as
Vernel Soft & Easy, the launch of SVIT in Central and Northern Europe, and the
popularity of Futura bleach products in Spain and Portugal. A leading
position in the new "easy ironing" market segment was attained with the
successful pan-European rollout of Vernel Soft & Easy.
Sales of household cleaners rose by 2 percent; adjusted for the divestment
of the SC Johnson business, organic growth amounted to 6 percent. One of the
best selling products is Somat 2in1. The Household Cleaner business recorded
exceptional increases in both sales and market share in Italy. The Industrial
and Institutional Hygiene/Surface Technologies business sector achieved an
increase in sales of 11.9 percent to EUR 951 million. Operating profit
increased by 15.9 percent to EUR 80 million.
The Henkel-Ecolab joint venture increased sales by 8 percent to EUR
452 million. Growth in the Professional Hygiene business amounted to
6 percent. This increase was borne in particular by strong growth in the
German Hospital Hygiene business and in the markets of Eastern Europe, and
also by the successful marketing of system-supported cleaning products to
national building cleaning companies. With a sales plus of 7 percent, the
Food & Beverage /P3 Hygiene division also continued to show good growth. The
Textile Hygiene business increased sales by 8 percent. The European rollouts
of purDOS, a patented dosing system for small laundries, and H.E.R.O., a
system for wastewater treatment in large laundries, were successful. Sales of
Institutional Hygiene also rose 8 percent. Especially the Italian business
performed exceptionally well due to several product launches.
Surface Technologies profited from the continuing strong business
environment World-wide, with further growth ensuing during the second quarter.
Sales during the first half year rose by 16 percent to EUR 499 million.
Significant sales growth and further market share gains were achieved in all
regions. Both divisions -- Automotive and Industry -- equally shared in this
positive development. The businesses in Latin America, South Africa and
Turkey have recovered well from the recession of the previous year. The
project initiatives geared to expanding our leading world-wide positions on
the basis of new technologies and innovations (including Terocore and
Granocoat) were increasingly successful in Europe, the Americas and
Asia/Australia. The emerging business activities in Korea (Hong Seong) and
Chile, and the new joint ventures in China (Wuhan and Changchun) achieved
overproportionate growth. The co-operation with Cemedine in Japan showed
first successes at Honda. The results of the Adhesives and Sealants division
were negatively influenced by uncertainty in the British automotive industry,
price problems with manufacturers in France and increasing competitive
pressures in the USA. However, the good overall performance of the business
remained largely unaffected.
During the first half year of 2000, the Chemical Products business sector,
now an independent company operating under the name Cognis, achieved an
increase in sales of 14.6 percent to EUR 1.4 billion. Operating profit rose
by 69.2 percent to EUR 112 million.
The Oleochemicals business continued to perform well. The sales increase
of 18 percent was particularly due to results achieved with oleochemical base
materials, fatty acids and fatty alcohols, and products for the Nutrition &
Health sector. The favorable development in oleochemical base materials is
attributable to higher prices for fatty acids and glycerine, lower raw
material costs and the achievement of higher sales volumes. Sales of Care
Chemicals were up 9 percent. Good sales growth was achieved with active
ingredients for the cosmetics industry. Higher raw material and manufacturing
costs of base surfactants for laundry and dishwashing detergents and household
cleaners could not be passed on in full to the market.
At Organic Specialty Chemicals sales rose 10 percent. Sales to the
plastics processing and also the paints and coatings industries have shown a
significant upturn, particularly in Europe, Asia/Australia and Latin America.
This is due inter alia to the realignment of the portfolio toward high value-
added products. Market leadership was achieved with fiber finishes for
polyacrylics. The decision by DaimlerChrysler to use Henkel transmission oils
throughout Europe constitutes a significant milestone.
Research /Technology
Major changes in the industrial and technological environment require new
structures for the Research /Technology corporate sector. The development of
new business activities, the creation of strategic response options and new
methods of securing innovative developments now take priority.
Research /Technology is thus pursuing the following strategic goals:
-- Expansion of core competencies
-- New forms of co-operation with universities
-- Entry into new technologies through venture capital funds and direct
participation in start-ups
As a commitment to the attainment of these objectives, Henkel intends to
invest between EUR 100 million and EUR 150 million in such projects over the
next few years. An example of this strategy is the venture capital
participation in Vermicon AG, Munich. This two-year-old company is
responsible for the development of the so-called FISH technology with which
micro-organisms can be identified more quickly and accurately than with
previously applied methods. The principal viability of the FISH technology
was confirmed in cooperation with the Institute for Microbiology at the
Technical University of Munich. With this identification system, new effects
of cosmetic and detergent ingredients on skin micro-flora can be determined
and investigated in detail.
Research and product development activities have led to innovations for
mild laundry detergents and machine dishwashing detergents that further
optimise the performance and in-service behaviour of these products. A new
process has been established for the manufacture of defoamers offering
improved performance. In the search for new technologies, investigations are
currently being conducted into the use of magnetic nano-particles in
environmental protection applications. Advanced test systems have been
devised for the development of new adhesives that enable the fast and
efficient identification of high-performance products.
Major Participations
Ecolab Inc., St. Paul, Minnesota, USA, in which Henkel holds a 25 percent
interest, achieved a sales increase of 9 percent to 1.1 billion US$ in the
first half of 2000. Ecolab benefited from the positive development in the USA
and the excellent business in Latin America. Net earnings for the period rose
by 16 percent to 91 million US$.
The Clorox Company, Oakland, California, USA, in which Henkel holds a
26.8 percent interest, achieved an increase in sales of 2 percent to
4.1 billion US$ in its 1999/2000 fiscal year. Net earnings reached a new
record high at 394 million US$, an increase of 60.2 percent. The successful
introduction of new products, strong international growth especially in Latin
America, as well as 90 million US$ of synergies realised following the
integration of First Brands were decisive in the excellent performance.
Capital Expenditures
Additions to fixed assets during the first half of 2000 amounted to EUR
191 million. These were essentially attributable to projects in the Brand-
Name Products, Adhesives and Chemical Products sectors.
Employees
As of June 30, 2000 the number of employees at the Henkel Group was
57,635. The proportion of Henkel personnel working outside Germany was
73 percent.
Outlook
With all the business sectors continuing to perform well through the first
half of 2000, Henkel is confident to achieve its targets for the year 2000.
Sales of EUR 12.5 billion and a double-digit increase in earnings per share
are expected. Particular emphasis has been placed this year on achieving good
organic growth in our core businesses. With the introduction of new products
and the development of new markets, Henkel's operations thrived in the first
half of 2000. Through research, further innovations and strategically
important acquisitions, Henkel will continue to create a sound basis for
sustaining this organic growth beyond 2000.
Henkel KGaA
The Management Board
Henkel Group Sales January - June 2000
Sales breakdown by product sector
Jan-June Sales Share Jan-June Sales Share Change
1999 Jan-June 2000 Jan-June (%)
(MEUR) 1999 (%) (MEUR) 2000 (%)
Adhesives 1,229 22 1,405 23 14.4
Cosmetics 893 16 979 16 9.7
Detergents
/Cleaners
1,278 23 1,361 22 6.5
Hygiene/
Surface
Technologies
850 15 951 15 11.9
Cognis 1,259 23 1,442 23 14.6
Other 43 1 46 1 --
Total 5,552 100 6,184 100 11.4
Sales breakdown by regions
Jan-June Sales Share Jan-June Sales Share Change
1999 Jan-June 2000 Jan-June (%)
(MEUR) 1999 (%) (MEUR) 2000 (%)
Germany 1,491 27 1,570 25 5.3
Rest of
Europe 2,441 44 2,651 44 8.6
North America 920 16 1,051 17 14.2
Latin America 211 4 254 4 20.4
Africa 65 1 79 1 21.5
Asia/Australia 424 8 579 9 36.6
Total 5,552 100 6,184 100 11.4
Henkel Group Segment Information by Business Sectors
January through June 2000 (in EUR million)
Adhesives Cosmetics/ Detergents/ Hygiene/ Cognis Other Henkel
Toiletries Household Surface Group
Cleaners Technologies
Sales
Jan
-June
2000 1,405 979 1,361 951 1,442 46 6,184
Sales
Jan
-June
1999 1,229 893 1,278 850 1,259 43 5,552
Change
in
percent* 14.4 9.7 6.5 11.9 14.6 4.1 11.4
EBIT
Jan
-June
2000 130 64 96 80 112 -20 462
EBIT
Jan
-June
1999 116 62 96 69 66 -1 408
Change
in
percent* 12.0 3.1 0.4 15.9 69.2 -- 13.3
Return
on
Sales
Jan
-June
2000
(%) 9.2 6.5 7.1 8.4 7.8 -- 7.5
Return
on
Sales
Jan
-June
1999
(%) 9.4 7.0 7.5 8.1 5.3 -- 7.3
Return
on
Investment
Jan
-June
2000
(%) 11.1 12.3 27.3 20.4 12.2 -- 13.5
Return
on
Investment
Jan
-June
1999
(%) 10.3 12.3 26.1 17.7 8.4 -- 12.4
* changes from previous year on the basis of figures in thousand euro.
Henkel Group Consolidated Balance Sheet
December 31, 1999 June 30, 2000
MEUR (%) MEUR (%)
Tangible and intangible assets 4,717 47.8 4,859 46.0
Financial assets 787 8.0 907 8.6
Fixed assets 5,504 55.8 5,766 54.6
Deferred tax assets 237 2.4 251 2.4
Inventories 1,505 15.3 1,621 15.4
Accounts receivable and
miscellaneous assets 2,469 25.0 2,772 26.2
Liquid funds/marketable
Securities 141 1.5 145 1.4
Current assets 4,115 41.8 4,538 43.0
Total assets 9,856 100.0 10,555 100.0
Equity excl. minority interests 2,948 29.9 3,026 28.7
Minority interests 290 3.0 295 2.8
Equity incl. minority interests 3,238 32.9 3,321 31.5
Provisions for pensions and
similar obligations 1,871 19.0 1,926 18.2
Other Provisions 1,159 11.7 1,218 11.6
Provisions 3,030 30.7 3,144 29.9
Provisions for
deferred tax liabilities 184 1.9 189 1.8
Borrowings 1,915 19.4 2,269 21.5
Trade accounts payable 1,029 10.4 1,099 10.4
Other liabilities 460 4.7 533 5.0
Liabilities 3,404 34.5 3,901 36.9
Total equity and liabilities 9,856 100.0 10,555 100.0
Henkel Group Consolidated Statement of Income
Jan.-June 1999 Jan.-June 2000
MEUR (%) MEUR (%)
Sales 5,552 100.0 6,184 100.0
Cost of sales 2,996 54.0 3,354 54.2
Gross profit 2,556 46.0 2,830 45.8
Selling and distribution costs 1,584 28.5 1,740 28.1
Research and development costs 138 2.5 153 2.5
Administrative expenses 325 5.9 358 5.8
Other operating income 30 0.5 37 0.6
Other operating charges 24 0.4 38 0.6
Restructuring costs 36 0.6 37 0.6
Amortization of goodwill 71 1.3 79 1.3
Operating profit (EBIT) 408 7.3 462 7.5
Financial items -88 -1.6 -44 -0.7
Earnings before tax 320 5.7 418 6.8
Taxes on income -141 -2.5 -173 -2.8
Net earnings 179 3.2 245 4.0
Henkel Group Cash Flow Statement
Jan-June 1999 Jan-June 2000
(EUR mill.) (EUR mill.)
Operating profit (EBIT) 408 462
Income taxes paid -133 -166
Depreciation/Write-ups of fixed assets
(excl. financial assets) 293 304
Net gains from disposals of fixed assets
(excl. financial assets) -6 -5
Cash Flow 562 595
Change in inventories 59 -66
Change in receivables and
miscellaneous assets -316 -258
Change in liabilities and
short-term provisions 189 110
Net cash flow from operating activities 494 381
Capital expenditure on intangible assets -14 -6
Capital expenditure on property,
plant and equipment -184 -191
Capital expenditure on financial assets -48 -71
Acquisitions -30 -173
Proceeds from disposal of fixed assets 29 29
Net cash flow from investing activities -247 -412
Henkel KGaA dividends -119 -131
Subsidiary company dividends
(to other shareholders) -14 -11
Change in borrowings -37 314
Interest and dividends received 46 37
Interest paid -114 -111
Share buy-back 0 -40
Other financing transactions -15 -41
Net cash flow from financing activities -253 17
Change in cash and cash equivalents -6 -14
Effect of exchange rate changes
on cash and cash equivalents 13 18
Change in liquid funds and
marketable securities 7 4
Liquid funds and marketable securities
on January 01, 2000 127 141
Liquid funds and marketable securities
on June 30, 2000 134 145
Employees
(as of) Dec. 31, 1999 June 30, 2000 Change
in percent
Germany 15,412 15,570 1.0%
Abroad 40,984 42,065 2.6%
Total 56,396 57,635 2.2%