Henkel profits up but European challenges remain
In its third quarter figures, the German firm’s sales rose significantly by 8.4% to €4,590 million, while adjusted operating profit, after one-time charges, one-time gains and restructuring charges, improved by 12.3% to €778 million.
In the Beauty Care business unit, organic sales rose by 2.1%, with company CEO Kasper Rorsted highlighting Russia as a strong performer due to the continued market demand for skin and hair care products.
The Henkel boss explains that emerging markets, such as Russia and China, continue to be very strong (both of these posted double-digit growth), although the mature markets are negative.
The exception to this is in North America where the business has seen good growth thanks to the implementation of the Schwarzkopf brand.
Schwarzkopf was also subject to a new product innovation in the men’s category with a new hair care range launched in Germany, Russia, and China, which has helped expand the brand.
‘Not concerned’
Germany, however, has been one of the markets that have seen a change in retail landscape with stiff competition, which has contributed to performance in Europe dropping slightly, with the market also seeing a high level of promotion.
“We've been able to grow our market share during that period of time, which is not reflected in the revenue numbers. But that's simply a current position of the market,” says Rorsted on a conference call.
“Long-term, I'm not so worried about [it]. Of course, it is a concern in the short-term. We are, particularly in Germany, seeing a very, very aggressive retail market competitive landscape, which is impacting all categories.”
The plan now is to look at growing the market share over a long period of time and Rorsted says the company believes this will be through innovation, such as with lines like Schwarzkopf For Men.
“We believe we can also grow the top line,” he says. “So, it is a nuisance in the short-term, but in the long-term, we're actually not so concerned about it.”
In all, Henkel expects the Beauty Care business unit to post organic sales growth of approximately 2% for the remainder of the year, with profits expected to increase, with all business units, including Laundry & Home Care and Adhesives, to contribute to this.
“The strong third quarter performance in challenging and volatile markets demonstrates our ability to adjust to the difficult economic environment,” adds Rorsted.
“Agility and flexibility remain key success factors for us, confirming our strategy of adapting and further simplifying our structures and processes in line with the changing market conditions.”
