Henkel AG, the German maker of Dial soap, said a new type of Persil detergent capsules and growth in emerging markets helped its laundry and home-care unit post the strongest quarterly sales growth in six years.
Revenue at the unit rose 8 percent in the first quarter, excluding foreign-exchange shifts and acquisitions or disposals, the Dusseldorf-based company said today as it reported profit for the period that exceeded analysts’ estimates. The growth was the highest since the first quarter of 2007.
Product innovation including Persil Duo-Cap liquid detergent and Vernel Aroma Therapy fabric softener provided a boost to revenue, Henkel said. Growth was strongest in emerging markets such as China and Russia, where the company generated about 43 percent of revenue last year.
“A lot of growth from laundry care is coming from eastern Europe and Middle East with very, very strong numbers,” Chief Executive Officer Kasper Rorsted said on a conference call. Rorsted said he’s “very bullish” on business in those regions.
Henkel gained as much as 5.9 percent in Frankfurt trading, the steepest intraday gain in about 21 months. The stock was up 5.8 percent at 75.88 euros as of 12:27 p.m.
The maker of Silan Royal fabric softener expects a “strong year” for its laundry and home-care business, Rorsted said, though growth will be slower than in the first quarter, when the company had a “bigger launch activity.”
Henkel said it “significantly” increased marketing expenses to support the development of new brands such as Dial coconut water body wash.
Adjusted earnings before interest and taxes at the maker of Loctite adhesives rose 8.9 percent to 600 million euros ($786 million) in the first quarter, beating the 582.1 million-euro average estimate of seven analysts compiled by Bloomberg.
Adjusted Ebit as a proportion of sales rose to 14.9 percent from 13.7 percent a year earlier amid “strong cost discipline,” Chief Financial Officer Carsten Knobel said on the conference call. The company was debt free as of March 31 after net cash investment of 114 million euros.
“The flexibility on the margin line looks sufficient for us to remain confident about earnings delivery,” Eddy Hargreaves, an analyst at Canaccord Genuity Ltd. with a buy recommendation on the stock, wrote in a report today.
Group sales rose 2.5 percent on an organic basis, missing the 3.6 percent average estimate of seven analysts compiled by Bloomberg, because of “weak” adhesives business in western Europe and North America. Adhesives-division revenue dropped 1.2 percent on that basis to 1.94 billion euros, Henkel said.
Rorsted said he’s “not concerned” by the economic outlook in the U.S., though was disappointed by the adhesives business in the region because of “weak execution” and destocking. He said he expects an improvement in the second half of the year.
The maker of Schwarzkopf shampoo reiterated its forecast for sales growth of 3 percent to 5 percent this year. The company predicts Ebit as a proportion of revenue will widen to about 14.5 percent from 14.1 percent last year, and adjusted earnings per preferred share will rise by about 10 percent.
Sales rose 7.3 percent in eastern Europe and 18.2 percent in Africa and the Middle East, while they fell 1 percent in western Europe. Sales in North America dropped 0.4 percent.
Henkel plans to increase revenue to 20 billion euros by the end of 2016 with half coming from emerging markets. It expects average annual growth of 10 percent through the end of 2016 and will increase investments to about 2 billion euros by then.
First-quarter net income rose 8.9 percent from a year earlier to 403 million euros, and was 393 million euros excluding non-controlling interests, Henkel said.