Henkel CEO Predicts Four More Difficult Years for Europe

Henkel AG Chief Executive Officer Kasper Rorsted said Europe’s economic struggles may last another four years, downplaying the prospect of any imminent recovery.

“We don’t expect a lot of growth, if any at all in western Europe” by 2017, Rorsted said in an interview with Bloomberg TV at the company’s headquarters in Dusseldorf, Germany. “Europe overall in the next four years will have quite a challenging position.”

The maker of Dial soap and Loctite adhesives gets about a third of revenue from western Europe, where its sales have barely risen in the past two years, leaving Henkel to rely on growth in North America and emerging markets. The euro area came out of a record-long recession in the second quarter amid the first sustained period of financial-market calm since the start of the sovereign-debt crisis, yet recovery remains fragile, with record unemployment and declining industrial production.

Henkel fell as much as 0.7 percent to 74.37 euros and was trading down 0.5 percent at 74.53 euros as of 9:33 a.m. in Frankfurt. The stock has gained 20 percent this year, outpacing a 13 percent increase in Germany’s benchmark DAX Index.

Rorsted said he’s more optimistic about the U.S., where he foresees growth accelerating after modest gains this year.

“The U.S. has made a lot of long-term decisions in the last four years,” the CEO said. Falling unemployment, lower energy costs than in Europe and a growing population mean the “underlying assumptions” are “quite attractive,” he said.

Market Strategy

Henkel is shifting resources toward emerging markets, where it plans to have 60 percent of its employees and 50 percent of revenue by 2016.

Unilever, the world’s second-largest consumer-goods maker, said Sept. 30 that sales growth weakened in the third quarter amid a further slowdown in emerging markets because of declining currencies in some developing countries.

Henkel anticipates having to contend with continued “volatility in the market,” Rorsted said.

A “solid balance sheet” means Henkel will buy assets over time, the CEO said. Rorsted said he doesn’t plan to change the dividend policy of Henkel, whose free cash flow doubled to a record 2.02 billion euros ($2.7 billion) last year.

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