- Strong Organic Sales Growth: Group sales increased organically by 2.9% in the first half of the year to approximately €10.8 billion (-1.0% nominally) with growth in both business sectors.
- Strong Operating Profit (EBIT): EBIT increased to €1,610 million (+28.4%).
- Strong EBIT Margin: EBIT margin significantly improved to 14.9% (+340 basis points).
- Strong Earnings Per Preferred Share (EPS): EPS rose by approximately one-third to €2.78, +32.9% at constant exchange rates.
- Strong Cash Flow: Free cash flow amounted to around €800 million.
- Strong Strategic Progress: Continued progress in executing the strategic growth plan.
Updated 2024 Outlook:
- Strong Organic Sales Growth: Expected to be between 2.5% and 4.5% (unchanged).
- Strong Adjusted Return on Sales: Revised upwards to 13.5% to 14.5% (previously: 13.0% to 14.0%).
- Strong Adjusted EPS Growth: Revised upwards to +20.0% to +30.0% at constant exchange rates (previously: +15.0% to +25.0%).
- Strong Mid- and Long-Term Financial Ambitions: Expected to be achieved by mid-term.
In the first half of 2024, Henkel demonstrated strong organic sales momentum and significant profit growth despite a challenging economic environment. The company continued its path of profitable growth successfully.
“We achieved excellent business results in the first half of the year, demonstrating that our strategy is effective and that our actions focused on profitable growth are delivering tangible success,” said Carsten Knobel, CEO of Henkel.
“In the first half of the year, organic sales growth and profit improvement were driven by both business sectors. The successful integration of our consumer businesses and the implementation of our strategic initiatives had a very positive impact on sales development, gross margin, and profits. Additionally, in our adhesives business, where we have further aligned our organizational structure to customer needs, these changes are significantly contributing to Henkel’s positive development. Our cash flow was also strong, exceeding the high level of the first half of 2023. This enables us to continue making targeted investments in our business and our future: in brands, technologies, and innovations. Moreover, we are advancing important initiatives in sustainability and digitalization to further strengthen our competitive advantage,” Knobel added.
“After strong business results in the first half of the year, we are confident that the second half will also be successful, which is why we raised our earnings outlook for 2024 in mid-July. We are delivering on our goals and are on track for further profitable growth. This is also reflected in the revision of our mid- and long-term financial ambitions: we are confident that we will achieve our sales and earnings targets by mid-term.”
Henkel Group Outlook
On July 17, 2024, Henkel raised its outlook for fiscal year 2024 compared to the forecast published on May 3, 2024. This revision is mainly due to higher profit expectations in the Consumer Brands business sector, alongside increased marketing investments to support innovation. The forecast continues to consider expectations of higher direct material prices in the second half of the year. Henkel now expects the following developments in sales and earnings for fiscal year 2024:
At the Group level, Henkel continues to expect organic sales growth in the range of 2.5% to 4.5% for fiscal year 2024. For the Adhesive Technologies business sector, organic sales growth is still expected to be between 2.0% and 4.0%, while for the Consumer Brands business sector, it is expected to be between 3.0% and 5.0%. According to the updated forecast, the adjusted return on sales (EBIT margin) for the Henkel Group is expected to be in the range of 13.5% to 14.5% (previously: 13.0% to 14.0%). For the Adhesive Technologies business sector, the adjusted return on sales is still expected to be between 16.0% and 17.0%. For the Consumer Brands business sector, the adjusted return on sales is now expected to be between 13.0% and 14.0% (previously: 12.0% to 13.0%). In terms of adjusted earnings per preferred share (EPS) at constant exchange rates, Henkel now expects growth in the range of +20.0% to +30.0% (previously: +15.0% to +25.0%).
Sales and Earnings Development in the First Half of 2024
In a challenging and demanding market environment, Group sales amounted to €10,813 million in the first half of 2024. Nominally, sales decreased slightly by -1.0%. Following the negative impact of the divestment of Russian operations on previous results, Henkel achieved nominal sales growth again in the second quarter of 2024 (Q2: €5,496 million, +3.4%). Currency effects reduced sales by -1.9% (Q2: +0.2%). The negative impact was due to the divestment of Russian operations, while the recently completed acquisitions in both business sectors – Seal for Life and Vidal Sassoon – had a positive impact. In organic terms – adjusted for currency and acquisition/divestment effects – Henkel achieved good sales momentum of 2.9% (Q2: +2.8%).
The Adhesive Technologies business sector generated good organic sales momentum of 2.0% in the first half of 2024, driven by the Mobility & Electronics and Craftsmen, Construction & Professional segments (Q2: +2.6%). The Consumer Brands business sector achieved very strong organic sales growth of 4.3%, with all segments contributing (Q2: +3.3%). Sales growth in both business sectors was driven by positive price development. 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 sequential improvement compared to the first quarter of 2024.
In the first half of the year, organic sales growth in Europe was 1.8% (Q2: +1.2%). In the IMEA region, Henkel achieved significant double-digit organic sales growth of 21.0% (Q2: +13.7%). North America recorded an organic sales decline of -1.6% (Q2: -0.2%). Latin America reported flat sales development at 0.0% (Q2: +2.7%). The Asia-Pacific region achieved organic sales growth of 5.5% (Q2: +7.5%).
Adjusted operating profit (adjusted EBIT) increased significantly from €1,254 million in the first half of 2023 by 28.4% to €1,610 million, mainly due to strong gross margin growth.
Adjusted return on sales (adjusted EBIT margin) for the Henkel Group saw a strong increase of 340 basis points from 11.5% to 14.9%.
Earnings per preferred share increased significantly to €2.46 (previous year: €1.35). Adjusted earnings per preferred share rose by 30.5% to €2.78 compared to €2.13 in the same period last year. This significant increase was mainly due to the rise in adjusted operating profit. At constant exchange rates, adjusted earnings per preferred share increased by 32.9%.
The net working capital ratio decreased by 0.9 percentage points compared to the same period last year, from 6.1% to 5.2%.
Free cash flow reached €772 million, higher than in the first half of 2023 (€749 million). This was mainly due to higher cash flow from operating activities.
As of June 30, 2024, net financial position stood at -€1,440 million (December 31, 2023: €12 million).
Business Sector Performance in the First Half of 2024
The Adhesive Technologies business sector generated sales of €5,475 million in the first half of 2024, nominally at the same level as in the same period last year (Q2: €2,798 million). In organic terms, sales increased by 2.0% (Q2: +2.6%). This growth was driven by a price component of +0.2% and a volume increase of 1.8%. This sector showed improvement in volume development in the second quarter.
The Mobility & Electronics business segment achieved very strong organic sales growth of 5.3% (Q2: +6.8%). This growth was supported by all business segments, particularly the electronics business, which recorded double-digit organic sales growth compared to a weak period in the previous year. The Packaging & Consumer Goods business segment recorded an organic sales decline of -0.6% (Q2: -1.0%). In Packaging, volume growth offset negative price development. Overall, the Consumer Goods business saw a slight decline compared to the strong period in the previous year. The Craftsmen, Construction & Professional business segment generated organic sales growth of 1.0% (Q2: +1.7%), driven by the Construction and Consumers & Craftsmen segments. The General Manufacturing & Maintenance business, on the other hand, saw a slight decline due to weaker demand.
Adjusted operating profit increased by 21.8% to €933 million in the first half of 2024 compared to €766 million in the same period last year
. Adjusted return on sales increased significantly by 310 basis points to 17.0%. Lower raw material costs, positive mix effects, and supply chain efficiency had a particularly positive impact on the gross margin.
The Consumer Brands business sector generated sales of €5,266 million in the first six months of 2024 (Q2: €2,662 million), nominally down -1.8% compared to the same period last year. Organic sales growth accelerated to 4.3% (Q2: +3.3%). This growth was driven by a price component of +5.1%. Primarily due to ongoing portfolio optimization activities, volumes decreased slightly by -0.9%. However, volume development showed sequential improvement in the second quarter compared to the first quarter of 2024.
The Laundry & Home Care business segment achieved strong organic sales growth of 3.1% (Q2: +1.5%). The Laundry Care business achieved positive organic sales growth, mainly driven by double-digit growth in the Fabric Care category and good sales growth in the Fabric Cleaning category. Significant growth in the Home Care business was mainly driven by double-digit sales growth in the Dishwashing and Toilet Care categories. The Hair business segment achieved significant organic sales growth of 7.3% in the first six months of the year (Q2: +7.7%). The consumer segment saw double-digit growth, mainly driven by the Hair Styling category, which also recorded double-digit organic sales growth in the same period last year. The professional business achieved strong organic sales growth. Other Consumer Brands business areas recorded good organic sales growth of 2.3% (Q2: +0.7%).
Adjusted operating profit amounted to €753 million, representing a 34.8% increase compared to the same period last year. This growth was driven by sales price development and savings resulting from the creation of the integrated Consumer Brands business sector, as well as portfolio optimization and valorization actions. Adjusted return on sales increased significantly by 390 basis points to 14.3%.
Progress in Strategic Priorities
In the first half of 2024, Henkel continued to consistently implement the strategic priorities of its purposeful growth agenda and made good progress in all areas.
The merger of the former Laundry & Home Care and Beauty Care businesses into the Consumer Brands business sector, which is being implemented in two stages, continued successfully in the first half of 2024. Henkel achieved further savings in this process. The company aims to achieve savings of €525 million from both integration stages. These savings are expected to be fully realized by the end of 2026.
As part of the second phase of integration, which focuses on optimizing the supply chain in the Consumer Brands business sector, the so-called 1-1-1 principle was introduced in nearly 30 countries. This principle involves better integration and simplification of logistics processes, according to the principle “one face to the customer.” This means: one order, one delivery, one invoice. Additionally, the production and logistics network was further optimized and consolidated, for example, in the USA and Eastern Europe in the Laundry & Home Care segment. Overall, these actions have already led to a general reduction in complexity by approximately 16%.
Henkel also further focused its Consumer Brands portfolio. Recently, attention has been directed towards 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, Henkel is responding to the trend towards more integrated automotive components, which increases demand for innovative adhesive solutions. An example is the integration of electronic components, which bring significant benefits to vehicles, regardless of the type of drive. At the same time, this is a very complex field with very specific requirements for the thermal management of the adhesives used. Henkel is one of the few players who recognized this trend early and collaborated with leading OEMs and key suppliers in creating innovative solutions. The market for these integrated components is expected to grow by over 20% in the coming years. In the Consumer Brands business unit, very strong organic sales growth of over 7% in the Hair segment was driven, in particular, by the Schwarzkopf brand – both in the consumer and professional segments. This business area has already 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 Hair Coloring segments. Furthermore, the relaunch of the Gliss brand with new formulas for 100% stronger hair resulted in double-digit organic sales growth for the brand in the first half of the year.
“We are very pleased with Henkel’s business results in the first half of the year and proud of the progress we have made in implementing our strategic development plan,” said Carsten Knobel. “We are delivering on what we have committed to and promised. And we are making tangible progress: in our businesses, in sales, and in results. We are transforming Henkel through bold decisions for future success. And with a clear strategy, we are on the right path to further profitable growth.”
Source: https://ceo.com.pl/henkel-z-silnym-wzrostem-zyskow-w-pierwszej-polowie-2024-optymistyczne-prognozy-na-caly-rok-32920
