Economic slowdown and increased investments impact performance
Henkel reports mixed business performance in 2019 and gives outlook for 2020
2019 results, impacted by slowing economic growth and increased investments in consumer businesses and digitalization across the company:
- Sales rise by 1.1% to 20,114 million euros, organic sales stable
- Adjusted* EBIT margin at 16.0% (-1.6 pp)
- Adjusted* earnings per preferred share (EPS) reach 5.43 euros, nominal -9.7%, at constant exchange rates -10.1%
- Free cash flow: 2,471 million euros (+554 million euros)
- Dividend** on prior-year level: 1.85 euro per preferred share
- Organic sales growth: 0 – 2%
- Adjusted* EBIT margin: around 15%
- Adjusted* EPS: decrease in the mid- to high single-digit percentage range at constant exchange rates
“In 2019, our business performance was overall mixed. Our Adhesive Technologies business unit was impacted by a marked slowdown in key customer segments, in particular in the automotive and electronics industry. At the same time, our consumer businesses, Laundry & Home Care and Beauty Care, faced intense competition in many markets,” said Henkel CEO.
“At the beginning of 2019, we announced our plan to increase growth investments by around 300 million euros annually from 2019 onward to strengthen our brands, technologies and innovations as well as to accelerate the digital transformation of Henkel,” Carsten Knobel further explained. In the course of the year, Henkel gradually ramped up these growth investments across the company, but the additional funding was not fully utilized. Both declining volumes and the increased growth investments impacted the earnings and the EBIT margin in 2019. “Thanks to our continued focus on cost management, higher efficiency of our processes and the adaptation of structures, we were able to partially mitigate these effects,” said Carsten Knobel. “We also continued to invest in the expansion and upgrading of manufacturing sites and innovation centers. In addition, we strengthened our different businesses through targeted acquisitions and partnerships with a total volume of almost 600 million euros.”
“However, we are not satisfied with the results that we have achieved. We had higher ambitions for Henkel and, consequently, will take decisive action to fully leverage our potential for growth and improving financial performance in the future,” Knobel summarized the business development in 2019.