Cosmetics growth ‘solid’ for Henkel as raw material costs and Eurozone crisis lead to uncertainty

By Andrew McDougall

- Last updated on GMT

Related tags Organic sales growth Economics Henkel

Cosmetics growth ‘solid’ for Henkel as raw material costs and Eurozone crisis lead to uncertainty
Henkel, the German maker of Schwarzkopf hair products and Right Guard antiperspirant reported third quarter profit that fell short of expectations as raw-material costs rose; however the Cosmetics/ Toiletries business continued its upward curve.

Net income fell to €307m from €337m a year earlier, the Dusseldorf, Germany-based company said, as adjusted earnings before interest and tax rose to €541m.

The consumer goods group said it is stepping up cost cuts to battle an expected global slowdown and protect profit margins as its highly profitable adhesives division took the biggest hit, prompting concerns that its 2012 financial targets are too ambitious given expected difficult economic conditions, overshadowing an increased 2011 outlook for sales growth.

Economy remains challenging

"The economic environment remains challenging. In addition to intense competition and high raw material prices, the debt crisis in the eurozone is bringing additional uncertainty into the markets,”​ said CEO Kasper Rorsted.

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

The third quarter saw the Cosmetics/Toiletries business sector continue its upward growth curve. Organic sales growth was reported at 5.6 per cent.

Despite the difficult and competitive market environment, the business sector was able to further expand its market shares, thanks to lower prices, driving volume increases. Sales totaled €860m, 1.9 per cent above the figure for the prior year quarter.

Region by region

The strongest rises in the sector and another double-digit growth rate were registered in the growth markets of Eastern Europe, Africa/Middle East, Latin America and Asia (excluding Japan).

Henkel stated that development in China was particularly dynamic with a strong core business and numerous new product launches.

The mature market also held their own. There were sales increases in Western Europe, as well as positive developments in North America, thanks to an expansion of the business in the region.

‘Solid’ on all fronts

"Henkel continued its solid performance in the third quarter. Despite the challenging market environment, we outperformed once again our relevant markets in terms of organic sales growth,"​ added Rorsted.

"Despite higher raw material prices, we managed to improve profitability in all our business sectors."

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