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Henkel First-Quarter Profit Beats Estimates on China

Henkel AG, the German maker of Loctite glue and Persil washing detergent, reported first-quarter earnings that beat analyst estimates on higher demand from emerging markets such as China, Russia and Turkey. The preferred shares rose the most in nine months.

Earnings before interest and taxes, excluding one-time items and restructuring costs climbed 3.3 percent to 619 million euros ($862 million), the Dusseldorf, Germany-based company said in a statement today. Analysts had predicted 600.8 million euros, according to a Bloomberg survey.

Henkel is sticking to a full-year profitability target for adjusted Ebit to make up 15.5 percent of sales, after posting an increase to 15.8 percent in the first three months. The German company’s earnings contrast with rival Unilever, which forecast weaker profit margins in the first half and reported the slowest sales growth at its personal care unit in more than three years.

“This is not a bad set of results at all,” compared to other companies making home and personal care products, Eamonn Ferry and James Bushnell, analysts from Exane BNP Paribas wrote in a note to investors. The analysts rate Henkel neutral.

The preferred shares gained as much as 4 percent, the steepest intraday jump since August, to 82 euros, and were up 3.5 percent at 81.55 euros as of 9:50 a.m. local time. The stock has fallen 3.5 percent this year for a market value of 34 billion euros.

Strong Euro

Quarterly sales fell 2.6 percent to 3.93 billion euros, weighed down by a stronger euro. Analysts had estimated 3.96 billion euros. Excluding currency effects, revenue grew 4.3 percent, Henkel said. Net income increased 14 percent to 449 million euros in the quarter.

“We delivered a very strong performance in our emerging markets, while we also grew in our mature markets,” Chief Executive Officer Kasper Rorsted said in today’s release. “However, negative foreign exchange effects had an even stronger impact on reported sales than in the previous year.”

Henkel, founded in 1876 as a detergent maker in Aachen, Germany, has merged administrative functions across units and centralized purchasing operations into eight global hubs to cut costs. Rorsted intends to further improve shared logistics processes, the company has said.

Henkel said today it expects a slight increase in the share of sales from emerging markets this year, helping toward a goal of having 60 percent of workers and half of revenue there by 2016.

Sales will rise 3 percent to 5 percent on an organic basis this year with each business unit generating growth in that range, Henkel reiterated. Adjusted earnings per preferred share will increase in the “high single digits,” it said.

Rorsted has said he’s looking for acquisitions of any size should they fit the company’s strategy.

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