Henkel Warns of Slower Sales Growth This Year — Update

By Mauro Orru

Henkel is forecasting slower organic sales growth this year as prices for materials to make its products are expected to remain flat, while the translation of sales in foreign currencies should also weigh on growth.

The German chemical and consumer-goods company on Monday reported sales of 21.51 billion euros ($23.32 billion) for 2023, down 3.9% in reported terms due to foreign exchange moves and the divestment of its Russian business, but up 4.2% organically.

Henkel's adhesive technologies unit contributed EUR10.79 billion to sales, up 3.2% organically thanks to its mobility and electronics, craftsmen and construction and professional businesses. The consumer brands unit recorded 6.1% organic sales growth to EUR10.57 billion, driven by the laundry and home care and hair businesses.

"We have increased sales organically and significantly improved earnings in a generally volatile industrial environment," said Chief Executive Carsten Knobel.

However, the group is forecasting organic sales growth of 2% to 4% this year, below the 4.2% recorded in 2023.

Henkel said prices for direct materials--those used in the making of a product that in the end become part of it--are expected to remain flat compared with the 2023 annual average. The company also expects the translation of sales in foreign currencies to have a negative impact in the mid-single-digit percentage range.

Knobel said 2023 was marked by what he called a persistently challenging market environment. The group estimates foreign exchange effects harmed sales by 4.3%, while acquisitions and divestments also weighed on its top-line.

The company's adjusted return on sales increased to 11.9% last year from 10.4% in 2022. Adjusted earnings per preferred share--a closely watched profitability metric--grew 20% at constant exchange rates to EUR4.35.

Henkel said it would propose a 2023 dividend of EUR1.85 per preferred share and EUR1.83 per ordinary share to its annual general meeting on April 22, the same it paid for the previous year.

The group was expected to post annual sales of EUR21.50 billion, an adjusted return on sales of 12% and adjusted earnings per preferred share of EUR4.35, according to a Vara Research consensus based on estimates from 18 analysts.

Henkel had forecast organic sales growth of 3.5% to 4.5% for 2023, with an adjusted return on sales between 11.5% and 12.5% and adjusted earnings per preferred share up 15% to 25% at constant exchange rates.

This year, the group is forecasting an adjusted return on sales between 12% and 13.5% and adjusted earnings per preferred share up 5% to 20% at constant exchange rates.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

March 04, 2024 02:45 ET (07:45 GMT)

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