Henkel reports sales growth but costs hit profits

By Simon Pitman

- Last updated on GMT

Related tags Organic sales growth United states dollar Organic growth

Germany-based personal care and household goods player Henkel has reported healthy organic sales growth for its second quarter but says redundancies and material costs hit the bottom line.

In its second quarter the company said that sales grew by 11.4 per cent to reach €3.66m, thanks mainly to organic growth and the addition of the recently acquired National Starch business to the portfolio.

This figure was even higher when taking into accout currency exchange, which translated as a rise of 17.7 per cent, against organic sales growth of 6.1 per cent, which was attributable to all of its business divisions.

“We achieved highly encouraging second quarter organic sales growth, despite a difficult economic environment still characterized by significantly increasing raw material costs and a weak US dollar,”​ said Henkel CEO Kasper Rorsted.

Challenging economic climate

A challenging ecnomic climate did impact the bottom line, however, with net profits falling by 84 per cent to reach €38m, after minority interests totalling €4m were also deducted from this figure.

Operating profits were hit by significant restructuring charges durng the quarter, mainly relating to job losses and the integration of the new National Starch business into the portfolio.

Likewise rising material costs also hit the bottom line, but the company underlined that hardest hit was the Laundery and Home Care and Adhesive Technologies businesses.

On course with objectives

However, despite the challenging economic and business conditions, Rorsted stated that he was confident the company could fulfill its development objectives for the full financial year, a sentiment that seemed to be shared by the financial world as shares edged up over 4 per cent on the Frankfurt stock exchange.

In the cosmetics and toiletries division nominal sales for the quarter rose by 1.2 per cent, a figure that was positively impacted by currency exchange, giving an adjusted figure of 5.8 per cent. Organic sales growth was even stronger, coming in at 5.9 per cent.

For the full year, the company says it expects to see organic sales growth of between 3 and 5 per cent, while net earnings should be up around 3 to 4 per cent.

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