Henkel May Shed as Many as 200 Brands to Focus on Top Labels, CEO Says
Henkel AG, the German maker of industrial adhesives, Dial soap and Soft Scrub cleaners, plans to sell or terminate as many as 200 brands as it focuses on its top labels, Chief Executive Officer Kasper Rorsted said.
“We’ve shed 600 brands in the last three years,” Rorsted, 49, said in a Bloomberg TV interview in Hong Kong yesterday. “We probably have another 100 or 200 to go.”
The maker of Loctite glues and Persil detergent derives 90 percent of sales in the fast-moving consumer goods segment from its top 10 brands, Rorsted said. Henkel, which makes about half its revenue from industrial adhesives, is expanding in China, where it invested 50 million euros ($72 million) to build what the company said is the world’s biggest glue factory.
Henkel, based in Dusseldorf, Germany, will meet its target of making 45 percent of sales in emerging markets by 2012, said Rorsted, who estimated the current share at 42 percent to 43 percent. About 54 percent of the company’s employees are in emerging markets, and that proportion will rise to 55 percent by the end of the year, the CEO also said.
Henkel gained 0.3 percent to close at 33.55 euros yesterday. The stock has lost 13 percent this year, compared with an 18 percent decline for the benchmark DAX Index.
The company founded by Fritz Henkel in 1876 has invested a total of about 600 million euros in China over about two decades. This year’s investment will be as much as 60 million euros, including the spending on the adhesives factory, Rorsted said.
Henkel is growing between 20 percent and 30 percent annually in China, he said, declining to provide a detailed sales breakdown per country.
The executive said he doesn’t see any slowdown in the Asian country’s growth. “Whether it grows 9, 10 or 8 percent, it’s still very strong growth, so we’re quite confident future growth will also continue in China.”
The economy of the world’s most populous country will probably expand 9.3 percent this year, according to the median estimate of nine economists surveyed by Bloomberg.
Henkel’s worldwide sales are increasing at an annual pace of 5 percent or more, “predominantly driven by very strong adhesives growth,” Rorsted said, adding that he’s “not worried” about a slowing global economy.
“What I see right now is more a political crisis than a fundamental crisis in the economy,” he said. “I don’t believe there has been substantial change in the fundamental health of the Fortune 500 companies in the past three months.”
Henkel, which started as a maker of bleaching soda, is selling more industrial adhesives in emerging markets in Asia, eastern Europe and the Middle East as manufacturers expand. The company on Aug. 10 raised its target for full-year sales growth at existing operations to 5 percent, the top of an earlier forecast range.
The company’s sales in Japan have recovered since the magnitude-9 earthquake and ensuing tsunami on March 11 caused Japan’s worst disaster since World War II.
“We’re seeing a very, very strong and much quicker recovery than we would have anticipated 3 months ago,” Rorsted said. “When it happened we expected to lose 10 percent of our revenue in Japan this year. At this stage we think we’ll end up at the same point as last year.”
Henkel sells glues, sealants and surface treatments mainly to industrial users in a market it estimates was worth 47 billion euros in 2009. The company supplies glues for Airbus SAS’s A380 superjumbo plane and delivered adhesives for the gluing of 90,000 square meters of parquet flooring in Dubai’s Burj Khalifa, the world’s tallest building.
China will probably be Henkel’s second-biggest market by 2015, Rorsted said. The company made 37 percent of last year’s 15 billion euros revenue in Western Europe, with 18 percent derived from North America and 15 percent from the Asia-Pacific region, according to data compiled by Bloomberg.
Henkel has no “strategic intent or requirement” to make acquisitions in the next 12-24 months, the CEO said, repeating comments he made earlier this month. The German company has no interest in acquiring Clorox Co. and doesn’t believe it needs the U.S. company to improve its business, he said at the time.
Henkel will keep hold of its cash, though will make a purchase if “the right assets are available,” Rorsted said.
To contact the reporter on this story: Robyn Meredith in Hong Kong at email@example.com