Henkel Reports a 3.3% Decline in Sales; Acquisitions and Divestitures Only Yield a 2.8% Growth

In the third quarter of 2024, Henkel Group sales increased to approximately 5.5 billion euros, achieving a significant organic growth of 3.3%, driven by price increases at the group level and an overall upward trend in volumes. Nominal sales increased by 1.0% compared to the same period last year.

Mr. Carsten Nobel, Chief Executive Officer of Henkel Group, said: "In the third quarter, we continued to deliver good results, driving further development of the Henkel Group. Both business units achieved organic growth. During the quarter, we achieved strong gross margins, which enabled us to continue to increase our investment in related businesses and brands. Adjusted profit margin before interest and taxes (EBIT) also achieved significant growth. This shows that we are on the right path with our growth strategy."

"We are confident that the Henkel Group will continue its success in the 2024 financial year and will achieve the sales and profitability targets we have set for the year. Therefore, we are reaffirming our financial outlook for the current fiscal year. Based on the strong results to date, we believe there is a clear opportunity for the Group to reach the high end of each earnings range, including adjusted EBIT and adjusted EPS growth."

The Henkel Group has also made significant progress in advancing its strategic growth agenda. In this context, the Henkel Group has strengthened its commitment to sustainability. As part of its commitment, the Henkel Group has developed a net-zero emissions roadmap, which includes further targets to reduce emissions throughout the value chain.

Mr Carsten Nobel further explained: "All of us must take responsibility for helping to limit global warming to 1.5°C in line with the Paris Climate Agreement. Our net Zero emissions roadmap has been certified by the Science Based Targets initiative. The roadmap Outlines our plan to achieve net zero greenhouse gas emissions by 2045. To achieve this, we will implement a number of measures along the entire value chain."

Supported by all business areas, the Adhesive Technologies Business unit achieved strong organic sales growth in the third quarter. The good organic sales growth in the Consumer Brands business unit was primarily driven by the global hair business area.

In the third quarter of 2024, Group sales increased by 1.0% in nominal terms to €5,492 million. Acquisition/divestment activity boosted sales by 1.2%. Currency factors contributed to a 3.6% decline in sales. Organic sales, which are adjusted for currency and acquisitions/divestments, rose 3.3%. This growth was driven by price increases at the group level and an overall increase in sales volume.

In the first nine months of 2024, total sales reached 16.305 billion euros. It was down 0.4% in nominal terms. Henkel Group's organic sales grew strongly by 3.0%, driven by price and volume growth.

Europe, India, Middle East and Africa, Asia Pacific and Latin America contributed to organic sales growth in the third quarter. Organic sales in North America declined in both business units.

Similarly, Henkel's strong organic sales growth in the first nine months of 2024 was driven by all regional markets except North America.

In the third quarter of 2024, the Adhesives Technology Business unit generated sales of €2.8 billion. Organic sales, adjusted for exchange rates and acquisitions/divestments, increased by 3.3% compared to the same period last year (€2.711 billion). Organic sales (that is, excluding currency and acquisition/divestment effects) grew 3.7%. This increase was driven by a significant increase in sales volumes and stable prices compared to the same period last year. However, foreign exchange movements reduced sales by 3.3%. Acquisition/divestment activity contributed 2.8% to sales growth.

In the first nine months of 2024, sales of the Adhesive Technologies business unit increased by 1.1% in nominal terms, totalling €8.275 billion. The increase in volume helped drive organic sales growth of 2.5%.

In the third quarter, organic sales in the Adhesive Technologies business unit increased significantly, driven by the combination of three business areas. The Mobile and electronics segment achieved organic sales growth of 3.9%, driven by double-digit growth in electronics and strong performance in Industrial. Despite the slowdown in market demand, the overall sales of the automotive business showed a downward trend. Organic sales in the Packaging and Consumer Products business increased 2.7%, with strong organic sales growth in the packaging business on higher demand and organic sales growth in the Consumer Products business. The Artisans, Construction and Professional business segment achieved organic sales growth of 4.5%, with particularly strong sales growth in General Manufacturing & Maintenance and Consumer and Artisans, as well as good growth in construction.

From a geographical perspective, Adhesive Technologies delivered good organic sales growth in Europe in the third quarter, with contributions from all three business areas. In contrast, organic sales in North America declined slightly, mainly due to the impact of the mobile and electronics and packaging and consumer goods business segments. The Adhesive Technologies business unit achieved double-digit organic sales growth, driven by all business areas in the India, Middle East and Africa region. Latin America also saw significant sales growth, driven by the mobile and electronics and artisan, construction and professional business segments. Organic sales growth in Asia Pacific was strong, with all three business areas contributing, with growth in China having a particularly positive impact.

In the third quarter of 2024, total sales of the Consumer Brands business unit reached 2.653 billion euros, a nominal decrease of 1.6% compared with the same period last year. Organic sales (that is, excluding foreign exchange and acquisitions/divestments) increased by 2.7%, driven by continued price increases. Sales volumes were negatively impacted by ongoing portfolio optimization measures. Foreign exchange movements contributed to a 3.9% decline in sales, while acquisition and divestment activity contributed to a 0.4% decline in sales.

In the first nine months of 2024, sales of the Consumer Brands business unit reached 7.919 billion euros, a nominal decrease of 1.8% compared to the same period last year. Organic sales were up 3.7%, driven by price.

In the third quarter, organic sales in the detergent and Home Care segment increased by 0.9%. Organic sales in the detergent business decreased slightly, mainly due to product mix optimization measures. In contrast, the home care business achieved significant organic sales growth, driven by double-digit sales growth in the dishwashing category and strong sales growth in the toilet cleaning category.

Organic sales in the Hair business segment grew strongly by 6.8%, with a significant increase in sales in the retail line segment, driven by double-digit growth in the styling category. The Professional line business achieved very strong organic sales growth.

In the other consumer products segment, organic sales increased by 2.0%, mainly due to significant growth in Europe.

In terms of geographical distribution, the Consumer Brands business unit achieved organic sales growth in Europe in the third quarter. Sales in the hair business segment increased significantly, while sales in the detergent and home care business segment decreased slightly. Organic sales in North America showed an overall downward trend, mainly due to product mix optimization measures in the detergent and home care business segments. However, the hair business in North America saw strong growth. Latin America also saw good organic sales growth, driven by the hair business. All business segments in the India, Middle East and Africa region achieved double-digit organic sales growth. Organic sales growth was particularly strong in Asia Pacific, with contributions from both the hair and detergent and home care business segments.

With respect to the Group's net assets and financial position, there has been no material change compared to 30 June 2024. At the group level, Henkel expects organic sales growth of 2.5 to 4.5 percent for fiscal 2024. For the Adhesive Technologies business unit, organic sales growth is expected to be 2.0% to 4.0%. For the Consumer Brands business unit, organic sales growth is expected to be 3.0% to 5.0%.

The adjusted return on sales (adjusted EBIT margin) is expected to be in the range of 13.5% to 14.5%. Adjusted return on sales for the Adhesive Technology business unit is expected to be 16.0% to 17.0%, and the Consumer Brands business unit is expected to be 13.0% to 14.0%. For adjusted preferred earnings per share (EPS) at constant exchange rates, growth is expected to range from 20.0% to 30.0%.

In addition, other expectations for 2024 are as follows: Acquisitions/divestments will have little impact on nominal sales; Translation of foreign currency sales will have a negative impact in the low to mid-single digit percentage range; Direct material prices are expected to be in line with the prior year's average; Restructuring charges are expected to be between €250 million and €300 million; Cash outflows from investments in real estate, plant and equipment and intangible assets are expected to be between €650 million and €750 million.