Henkel delivers very strong performance in the first half year – double-digit growth in organic sales and earnings
Mumbai – Following a strong start to the fiscal year 2021, Henkel has once again accelerated growth during the first half and has already exceeded the pre-crisis level of 2019 after having adjusted for currency effects. Despite the impacts of the global coronavirus crisis that continue to adversely affect the social and economic environment in numerous markets around the world, Henkel, achieved significant sales and earnings growth in the first half of the year. Organic sales growth reached 11.3 percent in the first six months of 2021. Group sales amounted to around 10 billion euros, an increase of 4.7 percent in nominal terms.
Adjusted operating profit grew by 20.1 percent to 1,430 million euros and the adjusted EBIT margin recorded an increase of 1.9 percentage points and reached 14.4 percent, an increase of 1.9 percentage points compared to the prior-year period. At constant exchange rates, adjusted earnings per preferred share increased by 30.1 percent. The effects of higher raw material costs in the first half of the year were offset by very strong volume growth as well as price increases and by strict cost management and efficiency improvements.
Speaking on the results Henkel CEO Carsten Knobel said, “In the first half of 2021, Henkel continued to be affected by the COVID-19 pandemic. Nevertheless, we achieved double-digit growth in sales and earnings. Mainly thanks to the outstanding team spirit and commitment of our employees around the world, as well as our balanced and robust portfolio of successful brands and innovative technologies in the consumer and industrial businesses. We continued to make good progress in implementing our strategic growth agenda in the first half of the year. As part of our active portfolio management, further brands and businesses were divested or discontinued as planned. At the same time, we made targeted acquisitions, to expand our sustainable brands portfolio. Our special focus for this year is on further strengthening our competitiveness in the areas of innovation, sustainability, and digitalization, and on further developing our company culture. We progressed very well in these areas in the first half of the year and believe we are well on track in implementing our purposeful growth agenda.”
Group sales and earnings performance in the first half of 2021
At 9,926 million euros, Henkel Group sales in the first half of 2021 were +4,7 percent above the prior-year period (Q2: 4,958 million euros, +8.8 percent). Organic sales, which exclude the impact of currency effects and acquisitions/divestments, showed double-digit growth of
+11.3 percent (Q2: +15.2 percent). The contribution from acquisitions and divestments amounted to +0.4 percent (Q2: +0.1 percent). Currency effects had a negative impact of
-7.0 percent on sales (Q2: -6.5 percent).
Emerging markets showed an organic sales growth of +21.5 percent (Q2: +24.7 percent). Business in the mature markets showed a very strong organic sales development of
+4.5 percent (Q2: +8.8 percent).
Adjusted operating profit (adjusted EBIT) increased by +20.1 percent from 1,191 million euros in the first half of the previous year to 1,430 million euros.
Adjusted return on sales (adjusted EBIT) increased by 1.9 percentage points from
12.6 percent to 14.4 percent.
Adjusted earnings per preferred share grew by +22.4 percent from 1,96 euros in the first half of 2020 to 2.40 euros. At constant exchange rates, adjusted earnings per preferred share increased by +30.1 percent.
Net working capital was further improved. At 3.6 percent of sales, it was 80 basis points below the level of the prior-year period (4.4 percent).
Free cash flow of 471 million euros was below the figure for the first half of 2020 (940 million euros), in particular due to lower cash flow from operating activities. With higher operating profit, the decrease resulted from the significant increase in net working capital compared to the end of fiscal 2020, which was partly due to the significant expansion in sales volumes.
The net financial position amounted to -1,035 million euros as of June 30, 2021 (December 31, 2020: -888 million euros).
Outlook for fiscal year 2021 updated: higher sales growth with unchanged guidance for earnings per share
Looking ahead to the rest of fiscal 2021, Knobel said: “Overall, we are seeing a normalization in demand in most of our businesses. And after the recovery in industrial demand began in many regions in the second half of 2020, growth rates are likely to be significantly lower in the second half of fiscal 2021 despite a continued economic recovery. At the same time, there is still great uncertainty about how the pandemic will develop and how consumption and industrial output will be impacted. In particular, the exceptionally sharp rise in raw material prices and strained supply chains will weigh heavily on the economy in the further course of the year. We are working hard and with extensive measures to limit the impact on our business and profitability. At the same, we will continue to respond flexibly and quickly to changes in our markets and we are consistently driving the implementation of our growth agenda. Taking into account the described environment and based on the very strong performance in the first half, we have updated our full-year guidance today. We have raised our sales forecast and kept our expectations for earnings per share unchanged – despite increasing headwinds from raw material cost inflation.”
Henkel now anticipates organic sales growth of +6.0 to +8.0 percent and adjusted return on sales (EBIT margin) in the range of 13.5 to 14.5 percent. For adjusted earnings per preferred share (EPS) at constant exchanges rates, Henkel continues to expect an increase in the high-single digit to mid-teens percentage range.
