Henkel AG, the German maker of Loctite glues and Persil detergent, reported second-quarter profit that beat analysts’ estimates as demand increased in emerging markets, offsetting weakness in western Europe.
Adjusted earnings before interest and taxes rose to 609 million euros ($749 million) from 514 million euros a year earlier, the Dusseldorf-based company said in a statement today. Profit exceeded the 592.2 million-euro average estimate of 11 analysts compiled by Bloomberg.
German companies are tapping growth in emerging markets as the sovereign-debt crisis curbs demand in the euro area, where economic confidence is at a three-year low. Henkel plans to boost the proportion of revenue from developing markets to 45 percent this year from 43 percent currently. The company reiterated today that it’s targeting Ebit, adjusted for one-time items and reorganization costs, at 14 percent of sales in 2012.
“Other regions can partly compensate for a slowdown in Europe,” Andreas Riemann, an analyst at Commerzbank AG in Frankfurt, said by phone. “It’s a negative, but we expected it. I think the company can reach its Ebit margin target.”
Henkel preferred shares rose 1.5 percent to 59.40 euros as of 11:34 a.m. in Frankfurt, reversing a drop of as much as 1.8 percent earlier today. Henkel stock has gained 33 percent this year, the best performance on Germany’s benchmark DAX Index and beating gains of 7.6 percent for London- and Rotterdam-based Unilever and 22 percent at Hamburg-based Beiersdorf AG.
Sales rose 6.4 percent from a year earlier to 4.21 billion euros, boosted by a 9.3 percent increase in eastern Europe, the Middle East, Africa, Latin America and Asia. On a so-called organic basis, which excludes the effects of acquisitions, disposals or currency shifts, revenue increased 4 percent, propelled by an 8.1 percent jump in emerging markets.
Organic sales rose 4.5 percent in the Asia-Pacific region and 3.8 percent in North America. Revenue on that basis fell 0.1 percent in western Europe, the only region posting a decline.
“We expect that the very volatile environment with uncertainties in our markets will persist,” Chief Executive Officer Kasper Rorsted said in the statement. “The effects of the debt and financial crises in a number of countries will continue to be a challenge.”
The company doesn’t expect a recovery in the second half in western Europe, Rorsted said in a Bloomberg Television interview. The CEO said he’s not concerned about slowing economic growth in China.
Net income jumped 9.6 percent to 401 million euros, Henkel said. That beat the 388.6 million-euro average of five estimates. Adjusted Ebit as a proportion of sales increased to 14.5 percent from 13 percent. Net debt was cut to 1.27 billion euros as of June 30 from 1.96 billion euros a year earlier.
Adhesives-division revenue gained 3.6 percent on an organic basis to 2.1 billion euros, led by growth in emerging markets, Henkel said. Organic sales rose 5.1 percent at the laundry and home-care unit and 2.8 percent in cosmetics and toiletries.
The company is targeting an increase in the full-year adjusted Ebit margin from 13 percent in 2011, and forecasting that revenue at continuing operations will rise 3 percent to 5 percent. The company now expects an increase in adjusted earnings per preferred share of 15 percent.