Organic sales increase driven by adhesive technologies and consumer brands
Carsten Knobel, CEO, Henkel
Henkel recorded Group sales of around €5.4 billion euros and achieved organic sales growth of 2.8 per cent in the third quarter of 2023. This growth was driven by continued strong pricing in view of significantly higher raw material prices compared to the prior year.
Volume development was negative but showed a noticeable improvement compared to the second quarter. Nominally, sales were -9.0 percent below the prior-year quarter, mainly due to the exit from the business activities in Russia in the second quarter and to negative foreign exchange effects.
“Despite a persistently challenging market environment, we successfully sustained our growth momentum in the third quarter, with both business units contributing. Based on this performance, we have today raised our outlook for the current fiscal year. Particularly for adjusted earnings per preferred share, we now expect a significant increase in the range of 15 to 25 percent at constant exchange rates“, said Henkel CEO Carsten Knobel.
“We have also strengthened our Adhesive Technologies portfolio with an attractive acquisition – which also reflects our more pronounced focus on growth through M&A. And we are clearly ahead of plan when it comes to the integration of our Consumer Brands business, which represents the biggest transformation of our company of the past decades.”
Despite demand remaining subdued in some end markets relevant to Henkel, the Adhesive Technologies business unit recorded positive organic sales growth in the third quarter, driven by the Mobility & Electronics and the Craftsmen, Construction & Professional business areas. The very strong organic sales growth in the Consumer Brands business unit, which has been operating in the new set-up since the beginning of the year, was driven by the global business areas Laundry & Home Care and Hair.
“In both business units, volume development clearly improved in the third quarter compared to the previous quarter – which confirms our expectation as stated when publishing our results for the first half year. And for the quarter ahead, we expect a further sequential improvement,” Knobel added.
In addition, Henkel continued to make good progress in the third quarter with the implementation of its strategic growth agenda. By acquiring Critica Infrastructure, Henkel has added an attractive adjacent business to the portfolio of its Adhesive Technologies business unit with the aim of creating a platform for further growth: Critica is a specialized supplier for innovative composite repair and reinforcement solutions used in a wide range of industrial applications. In the Consumer Brands business unit, the integration of the consumer businesses is progressing ahead of plan. More than 80 percent of the net savings of around 250 million euros targeted in a first step by the end of 2024 are already expected to be realized by the end of 2023. Beyond that, the company has been stringently focusing its Consumer Brands portfolio on brands and products with strong margin and growth profiles.
“We have continued to consistently drive our strategic priorities in both business units in the third quarter. Thus, we remain on track to generate further growth and to expand our globally leading market positions,” said Knobel.
Based on the business performance in the first nine months of 2023 and assumptions in regard to the remainder of the year, the Management Board of Henkel AG & Co. KGaA has decided to raise the guidance for fiscal 2023.
For the Henkel Group, organic sales growth in fiscal 2023 is now expected to be in the range of 3.5 to 4.5 percent (previously: 2.5 to 4.5 percent). Organic sales growth in the Adhesive Technologies business unit is now anticipated to be in the range of 2.5 to 3.5 percent (previously: 2.0 to 4.0 percent) and in the Consumer Brands business unit in the range of 5.0 to 6.0 percent (previously: 3.0 to 5.0 percent).
For the Henkel Group, adjusted return on sales (EBIT margin) is now expected to be in the range of 11.5 to 12.5 percent (previously: 11.0 to 12.5 percent). For the Adhesive Technologies business unit, adjusted return on sales is now expected to be in the range of 14.0 to 15.0 percent (previously: 13.5 to 15.0 percent) and for the Consumer Brands business unit in the range of 10.0 to 11.0 percent (previously: 9.5 to 11.0 percent).
The expected guidance range for adjusted earnings per preferred share (EPS) at constant exchange rates has now been raised to 15.0 to 25.0 percent (previously: 5.0 to 20.0 percent).
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