Henkel Says Middle East War Is Bigger Risk Than Greece

Henkel AG Chief Executive Officer Kasper Rorsted said a conflict in the Middle East would pose a greater danger to the economy than the Greek debt crisis.

“The biggest risk in 2012 is not Greece, it is war in the Middle East,” Rorsted said in an interview in London. Conflict in the region is the “least manageable scenario” and would increase volatility in raw-material prices, he said.

Clashes between security forces and protesters in Cairo left one dead and hundreds injured on May 4, raising concern of increased violence before this month’s presidential election. Egypt holds Africa’s sixth-largest oil reserves.

Henkel, based in Dusseldorf, Germany, is among companies that are tapping emerging markets such as China and eastern Europe as the sovereign-debt crisis curbs demand in the euro region. German economic growth will slow to 0.6 percent this year from 3 percent in 2011, according to the Bundesbank, as fellow euro-area members drop back into recession.

It will be difficult to reach Henkel’s goal of boosting the proportion of sales from developing markets to 45 percent of revenue this year from 42 percent in 2011 because of currency fluctuations, including in Eastern Europe, the CEO said. Emerging markets accounted for 41 percent of sales in the first quarter compared with 40 percent a year earlier.

Sales in the Middle East and Africa rose 17 percent to 259 million euros ($335.5 million) in the first quarter, Henkel said yesterday. That compares with a revenue increase of 9.7 percent in the Asia-Pacific region and 0.2 percent in western Europe. Total sales rose 4.8 percent.

Henkel, the maker of Persil detergent and Loctite glue, expects raw-material prices to increase at a “mid-single digit” pace this year, Rorsted said.

The Middle East will continue to be a “huge opportunity” in the long term for Henkel, he said. “The price you pay for presence in the region is volatility.”

Europe will remain “fairly stressed” for the next three- to-five years, Rorsted said. “Almost irrespective of what will happen to Greece, the likelihood of it having a global impact is very little.” The CEO also said that there will be no “substantial” slowdown in China.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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