Henkel Earnings Growth Beats Estimates on Emerging Market

Henkel AG, the German maker of Loctite glue and Fa soap and deodorant, reported second-quarter profit that beat estimates, helped by revenue growth at the laundry and home-care division in emerging markets.

Earnings before interest and taxes excluding one-time gains or costs rose 8.2 percent to 660 million euros ($881 million) from 609 million euros a year earlier, the Dusseldorf-based company said in a statement today. That exceeded the 644.3 million-euro average of nine analyst estimates compiled by Bloomberg.

“The share of sales in emerging markets rose substantially, reaching 45 percent for the first time,” Chief Executive Officer Kasper Rorsted said in a conference call, reiterating a forecast that revenue excluding acquisitions, disposals and currency effects will rise 3 percent to 5 percent this year.

The shares rose as much as 3.5 percent, the biggest intraday gain since May 8, to to 64.96 euros and traded at 64.62 euros at 12:10 p.m. in Frankfurt.

Henkel, which also makes Bref all-purpose cleaner, has a target of increasing revenue to 20 billion euros in 2016 from

16.5 billion euros last year, with half of group sales coming from markets such as Latin America or the Asia-Pacific region. Henkel is working to reduce reliance on western Europe, where consumers are cutting spending in response to an economic contraction that has led to record unemployment.

Russian Ruble

Sales increased 1.9 percent to 4.29 billion euros, in line with the average of 14 analyst estimates. Adjusted Ebit as a proportion of sales widened to 15.4 percent from 14.5 percent a year earlier. Revenue gained 4 percent from a year earlier on an organic basis, Henkel said. The median estimate of nine analysts surveyed by Bloomberg was for 3.5 percent growth.

Excluding foreign exchange losses, sales climbed 4.2 percent. The negative foreign exchange effect was mainly seen from the Japanese yen, the U.S. dollar and the Russian ruble, Chief Financial Officer Carsten Knobel said on the call. Foreign exchange headwinds are expected to persist in 2013, Rorsted said.

In the laundry and home-care unit, which produces Mir wool and silk detergent and Somat dish-washing tabs, sales gained 5.8 percent on an organic basis, driven by demand in Russia and Turkey, while revenue at the cosmetics and toiletries division, which sells Schwarzkopf hair dye and Diadermine skin cream, rose

2.8 percent on the same basis. Adhesives sales climbed 3.6 percent, boosted by advances in Latin America.

Brazil Growth

“We’ve seen double-digit growth in Brazil, India and China,” Knobel said. Growth is Russia was “strong”, while Henkel had continued weakness in Southern Europe and Japan, he said.

Western Europe sales on an organic basis added 0.2 percent as recessions in southern Europe held back growth. Revenue on the same basis in Africa and the Middle East jumped 18.3 percent, despite political and social unrest in some countries in the region.

The integration of Cytec Industries Inc.’s pressure-sensitive adhesives product line, which was bought for $105 million in May 2012, is “fully on track,” Rorsted said.

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