Henkel Earnings: In-Line Results With Moderate Growth Expected in 2024

Narrow-moat Henkel reported 2023 adjusted operating profit of EUR 2.6 billion, in line with our expectations, guidance, and Vara consensus. This represents year-over-year growth of around 10% and translated into an operating margin improvement of 150 basis points to 11.9%. Positive pricing developments combined with measures to reduce costs in the adhesive technologies and consumer brands divisions were the primary drivers of this performance. As expected, the integration of the beauty care and the laundry and homecare businesses into one consumer brands unit already achieved EUR 200 million of savings in 2023 out of the total of EUR 250 million expected by the end of 2024. However, the macroeconomic picture for 2024 remains challenging, with management anticipating modest growth in industrial demand and consumer spending. The company expects organic sales growth of 2%-4% alongside an adjusted operating margin of 12%-13.5%. Our 2024 forecast is toward the lower end of both these ranges, assuming revenue growth of 2.4% and an adjusted EBIT margin of 12.4%. We don’t expect to make any material changes to our estimates at this time and confirm our EUR 82 fair value estimate. Shares remain undervalued.