Henkel Shares Decline on ‘Cautious’ Outlook For 2014Alex Webb
Henkel AG, the German maker of Schwarzkopf hair spray and Fa deodorant, dropped the most in 15 months after giving a forecast for 2014 that disappointed some analysts.
Adjusted earnings before interest and taxes as a proportion of sales will increase to about 15.5 percent this year, compared with 15.4 percent in 2013, the Dusseldorf, Germany-based company said in a statement today. Adjusted earnings per preferred share will increase by a “high single-digit’ percentage.
The outlook is ‘‘cautious,’’ said Frankfurt-based DZ Bank analyst Herbert Sturm. Exane BNP Paribas analysts including Eamonn Ferry said the EPS forecast was less than the ‘‘usual’’ 10 percent increase. The shares fell as much as 5.9 percent in Frankfurt trading.
Henkel had risen 37 percent in 2013, boosted by growth in emerging markets, where the company plans to have 60 percent of workers and 50 percent of revenue by 2016. Chief Executive Officer Kasper Rorsted said in November the company sees improvements in the U.S. for 2014, while an adhesives factory opened in China in September is intended to capitalize on local demand.
‘‘While we remain admirers of the management and the business model, we think that Henkel’s prospects over the next 12-18 months are now reflected in a share price which has outperformed the other staples companies,’’ London-based Canaccord Genuity analyst Eddy Hargreaves said in a note to clients as he cut his recommendation to hold from buy.
Ebit, excluding one-time items and restructuring costs, climbed 7.4 percent to 584 million euros ($804 million) in the fourth quarter. The average estimate of 12 analysts surveyed by Bloomberg was 572.7 million euros.
The stock was 5.4 percent lower at 80.26 euros as of 12:09 p.m. in Frankfurt, pushing the shares to a 4.8 percent decline this year and valuing Henkel at 33.4 billion euros.
The company, which was founded in 1876 as a detergent maker in Aachen, Germany, has driven efficiency by merging administrative functions across units, while centralizing purchasing operations into eight global hubs. Rorsted intends to further improve shared logistics processes, the company said today.
‘‘The economic environment remains challenging and we expect persisting foreign exchange effects, particularly in the first half,’’ the CEO said. ‘‘We will continue to further simplify and improve our processes and structures.’’
Headcount reduction in western Europe and North America of about 250 positions, or 1.3 percent of the total in those regions, was offset by increases elsewhere.
Laundry and home-care sales increased 3.3 percent in the fourth quarter, excluding acquisitions, disposals and currency shifts. Adhesives revenue rose 4 percent on the same basis. The unit, accounting for about half of Henkel’s sales, makes glues that are used from iPhones to airplanes.
Organic sales at the cosmetics and toiletries division, which sells Schwarzkopf hair dye and Diadermine skin cream, rose 2.2 percent. Revenue at all units declined when not adjusted for currency effects.
‘‘We saw solid organic sales growth, but at the lower part of our range and clearly not where we wanted to be,’’ Rorsted said in a conference call with analysts. ‘‘We are very focused on sustainable savings from ongoing efficiency measures.’’
Sales will again grow between 3 percent and 5 percent on an organic basis this year, Henkel said.
The company has a target of increasing revenue to 20 billion euros in 2016 from 16.5 billion euros last year, with half of sales coming from markets such as Latin America or the Asia-Pacific region. Henkel in November forecast Ebit representing 15 percent of sales for 2013, while forecasting organic sales growth of 3 percent to 5 percent. The final numbers were 15.4 percent and 3.5 percent respectively.
Henkel increased its dividend payout by 28 percent to 1.22 euros per share. Analysts in a Bloomberg survey had on average predicted 1.07 euros. The company intends to pay dividends in the range of 25 percent to 35 percent of profit.
The higher payouts won’t affect Henkel’s ability to make acquisitions, Chief Financial Officer Carsten Knobel said in a press conference at the company’s Dusseldorf headquarters. It will target small to medium-size deals with its budget of as much as 4.5 billion euros, he said.