- The Henkel Group reported its financial results for the first half of 2024. Sales revenues increased organically by 2.9 percent in the first half of the year to around EUR 10.8 billion (-1.0 percent in nominal terms) – growth in both business sectors.
- Operating profit (EBIT) rose to EUR 1,610 million (+28.4 per cent). The EIB margin also improved significantly, reaching 14.9 per cent (+340 basis points).
- Earnings per preferred share (EPS) rose by around one third to EUR 2.78, +32.9 percent at constant exchange rates.
- The cash flow statement amounted to approximately EUR 800 million.
– We achieved very good business results in the first half of the year. This shows that our strategy is effective and our actions focused on profitable growth are bringing measurable successes, said Carsten Knobel, Chairman of the Board of Management of Henkel.
Henkel raises earnings forecast
"In the first half of the year, organic sales growth and improved earnings were driven by both business sectors. The merger of our consumer businesses was successful, and the implementation of our strategic actions and initiatives had a very positive impact on the development of sales, gross margin and earnings. Also in our adhesives business, where we have further aligned our organizational structure to customer needs, the changes made are contributing significantly to Henkel's positive development. Our cash flow statement was also strong, already exceeding the high level in the first half of 2023. All this allows us to continue to invest in our business and our future in a targeted manner: in brands, technologies and innovations. In addition, we are implementing important initiatives in the areas of sustainability and digitalization to further strengthen our competitive advantage," added Carsten Knobel.
– After the good business results in the first half of the year, we are confident that the second half of the year will also be successful, which is why we raised our earnings forecast for 2024 in mid-July. We are achieving our goals and are on track for further profitable growth. This is also reflected in the adjustment of our medium- and long-term financial ambitions: we are confident that we will achieve our sales and earnings targets by the middle of the period.
Henkel Group earnings forecast
July 17, 2024 Henkel raised its earnings forecast for fiscal year 2024 compared to the forecast issued on May 3, 2024. This is primarily due to higher earnings expectations in the Consumer Brands business sector, while increasing marketing investments to support innovation. The forecast continues to include expectations of higher direct material prices in the second half of the year. Henkel now expects the following sales and earnings development for fiscal year 2024:
At the Group level, Henkel continues to expect organic sales growth of between 2.5 and 4.5 percent in fiscal year 2024. For the Adhesive Technologies business sector (construction and consumer adhesives and industrial adhesives and technologies), organic sales growth is still expected to be between 2.0 and 4.0 percent, and for the Consumer Brands business sector (consumer brands), between 3.0 and 5.0 percent. According to the updated forecast, the Henkel Group's adjusted return on sales (EBIT margin) will be between 13.5 and 14.5 percent (previously: 13.0 to 14.0 percent). For the Adhesive Technologies business sector (construction and consumer adhesives and industrial adhesives and technologies), an adjusted return on sales is still expected to be between 16.0 and 17.0 percent. For the Consumer Brands business sector, the adjusted return on sales is currently expected to be between 13.0 and 14.0 percent (previously: 12.0 and 13.0 percent). In the case of the development of adjusted earnings per preferred share (EPS) at constant currencies, Henkel now expects growth in the range of +20.0 to +30.0 percent (previously: +15.0 to +25.0 percent).
Sales and profit development in the first half of 2024
Group sales amounted to EUR 10,813 million in the first half of 2024. In nominal terms, they fell slightly by -1.0 percent. After previously being negatively impacted by the sale of the Russian business, Henkel was able to achieve nominal sales growth again in the second quarter of 2024 (Q2: EUR 5,496 million, +3.4 percent). Exchange rate effects reduced sales by -1.9 percent (Q2: +0.2 percent). This was negatively affected by the divestment of the Russian business and positively affected by the recently completed acquisitions in both business sectors – Seal for Life and Vidal Sassoon. In organic terms – i.e. adjusted for exchange rate effects and acquisitions/divestitures – Henkel achieved a good sales growth of 2.9 percent (Q2: +2.8 percent).
The Adhesive Technologies business sector generated good organic sales growth of 2.0 percent in the first half of 2024, driven by the Mobility & Electronics and Craftsmen, Construction & Professional business areas (Q2: +2.6 percent). The Consumer Brands business sector achieved very strong organic sales growth of 4.3 percent, with all business areas contributing (Q2: +3.3 percent). The sales growth in both business areas was driven by positive price developments. At the Group level, volume development, which is still influenced by portfolio changes in Henkel Consumer Brands, showed a slightly positive trend – both compared to the first half of 2023 and a sequential improvement compared to the first quarter of 2024.
In the first half of the year, organic sales growth in the Europe region amounted to 1.8 percent (Q2: +1.2 percent). In the IMEA region, Henkel achieved significant double-digit organic sales growth of 21.0 percent (Q2: +13.7 percent). The North America region recorded an organic sales decline of -1.6 percent (Q2: -0.2 percent). The Latin America region recorded a flat sales development of 0.0 percent (Q2: +2.7 percent). The Asia/Pacific region achieved organic sales growth of 5.5 percent (Q2: +7.5 percent).
Adjusted operating profit (adjusted EBIT) rose significantly from EUR 1,254 million in the first half of 2023 by 28.4 percent to EUR 1,610 million, mainly as a result of the strong increase in the gross margin.
The Henkel Group’s adjusted return on sales (adjusted EBIT margin) rose very strongly by 340 basis points from 11.5 percent to 14.9 percent.
Earnings per preference share rose significantly to EUR 2.46 (previous year: EUR 1.35). Adjusted earnings per preference share rose by 30.5 percent to EUR 2.78 compared to EUR 2.13 in the same period of the previous year. This significant increase was mainly due to the increase in adjusted operating profit. At constant exchange rates, adjusted earnings per preference share rose by 32.9 percent.
The net working capital ratio decreased by 0.9 percentage points compared to the same period of the previous year, from 6.1 percent to 5.2 percent.
Free cash flow reached EUR 772 million, which is higher than in the first half of 2023 (EUR 749 million). This is mainly due to higher cash flow from operating activities.
As of 30 June 2024, the net financial position amounted to EUR -1,440 million (31 December 2023: EUR 12 million).
Progress in implementing the Henkel Group's strategic priorities
In the first half of 2024, Henkel continued to implement the strategic priorities of its purposeful growth agenda and achieved good progress in all areas.
The merger of the former Laundry & Home Care and Beauty Care businesses into the Consumer Brands business unit is being implemented in two steps and was successfully continued in the first half of 2024. Henkel achieved further savings in this process. Henkel is targeting savings of €525 million from both integration steps. These savings are to be fully realized by the end of 2026.
Henkel has a policy: one order, one delivery, one invoice
As part of the second integration phase, which focuses on improving the supply chain in the Consumer Brands business segment, the so-called 1-1-1 principle was introduced in almost 30 countries. It involves better integration and simplification of logistics processes according to the principle of "one face to the customer". This means: one order, one delivery, one invoice. In addition, the production and logistics network was further optimized and consolidated, for example in the USA and Eastern European countries in the Laundry & Home Care division. Overall, these measures have already led to an overall reduction in complexity of around 16 percent.
Henkel has also further focused its Consumer Brands portfolio, with recent attention focused on the Laundry & Home Care segment in North America.
To further strengthen its competitiveness, Henkel is focusing on strong innovations in attractive business areas. These again contributed to growth in both business units in the first half of 2024. In Adhesive Technologies (construction and consumer adhesives and industrial adhesives and technologies), Henkel is responding to the trend towards more integrated automotive components, which is driving the demand for innovative adhesive solutions. An example is the integration of electronic components, which brings major benefits to cars, regardless of the type of drive.
In the Consumer Brands business unit, the very strong organic sales growth of over 7 percent in the Hair segment was driven in particular by the Schwarzkopf brand – in both the consumer and professional segments. This business area has now recorded four consecutive quarters of positive volume development. At the same time, market share increased by 40 basis points in both the hair styling and coloring segments. In addition, the relaunch of the Gliss brand with new formulas for 100% stronger hair resulted in double-digit organic sales growth for this brand in the first half of the year.
– We are very satisfied with Henkel's business performance in the first half of the year and proud of the progress we have made in implementing our strategic growth plan, said Carsten Knobel. – We are delivering what we committed to and what we announced. And we are making tangible progress: in our businesses, in sales and in our results. We are transforming Henkel with bold decisions for future success. And with a clear strategy, we are on track for further profitable growth.
