Price hikes prevail as Cosmetics up and Henkel boosts profits

By Andrew McDougall

- Last updated on GMT

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German manufacturer Henkel saw a boost in its Q2 profits thanks to an increase in raw material prices to combat rising input costs, with growth in the emerging markets in the double-digits for the cosmetics business.

“With intense competition continuing, an increase in raw material prices and growing uncertainties in the markets, the economic environment will remain challenging,”​ commented Henkel CEO Kasper Rorsted.

“Against this background, we will further adapt our structures in order to respond more quickly and flexibly to changes in our markets and maintain strict cost control.”

Cosmetics contribution

The maker of the Schwarzkopf hair brand posted sales of €3.95bn in the second quarter, up 1.6 per cent on last year, whilst profits were up 8 per cent.

Henkel commented that all three business sectors contributed to the positive development, with Cosmetics/Toiletries clearly outperforming a very strong prior year quarter.

Sales came in at €881m for the quarter and profits rising 11 per cent thanks to the increase in raw material and packaging prices, as well as cost reductions and efficiency enhancements.

What’s happening where?

Geographically, Henkel saw growth in both its emerging and developed markets, which helped boost the segment figures.

In the emerging regions of Eastern Europe, Africa/Middle East, Latin America and Asia, Henkel were able to expand sales with double digit increases.

However, unlike P&G who posted a slowdown in figures in the US last week, Henkel achieved sales growth in this market.

The manufacturer generated a significant improvement in sales which it puts down to a number of new product launches. Business performance in the mature markets of Asia-Pacific was similarly good.

However, there was no such success in Western Europe which, although it saw an increase in the business as a whole, saw a decline in the Cosmetics business sector.

Strong performance raises expectations

Thanks to a strong performance in the second quarter, continuing from the first, Henkel has slightly raised its growth expectations for the second half of the year.

“We are confident that we will again grow faster than our relevant markets in 2011 and now expect an organic sales growth of around five per cent,”​ added Rorsted.

“In line with our previous guidance we expect our adjusted EBIT margin to increase to around 13 per cent and adjusted earnings per preferred share by about 10 per cent.”

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