Dax group feels inflation: Henkel predicts higher sales

Following robust growth in the first half of the year, the consumer goods group Henkel has increased its sales forecast for the current year.

However, increased raw material and logistics costs are weighing on results, so the company continues to expect falling profits in 2022.

Meanwhile, the planned merger of the consumer goods businesses is making progress.

The stock was very volatile until early Monday afternoon.

The paper listed in the Dax initially fell by more than two percent and then swung into the plus and minus.

Most recently, the course turned positive again and was listed a good one percent higher.

Analysts praised the numbers, which beat market expectations.

All divisions performed better than expected, according to Barclays expert Iain Simpson, who mentioned sales in the adhesives business and the margin in the cosmetics division as highlights.

JP Morgan's Celine Pannuti noted that it may disappoint investors that Henkel did not upgrade earnings guidance despite the wide range.

Grow on your own

Henkel now expects organic growth of 4.5 to 6.5 percent for the current year.

That is one percentage point more than previously promised.

This excludes currency effects and purchases and sales.

In the first half of the year, sales rose by almost 10 percent to 10.9 billion euros, as the company announced in Düsseldorf.

Organic growth was 8.9 percent, which was better than analysts' expectations.

The development accelerated in the second quarter.

Henkel also benefited from positive currency effects and price increases, while sales volumes changed little.

From the second quarter, the announced cessation of activities in Russia and Belarus also had a negative impact.

The group continues to examine all options here, from the cessation to the sale of activities.

Henkel is showing great interest in the business, said CEO Carsten Knobel in a conference call.

Expressions of interest are currently being examined.

The process should be completed by the end of the year.

According to CFO Marco Swoboda, Henkel wrote off almost 200 million euros on the business.

Henkel's adhesives business in particular proved robust in the first half of the year, posting double-digit growth rates.

However, Knobel justified the unchanged sales forecast for the area with an expected weakening of industrial demand and the high basis of comparison in the previous year.

In the consumer goods business, the detergents and cleaning agents business continued to develop more strongly than the cosmetics area.

For example, the Persil brand has achieved double-digit growth and further gains in market share, Henkel said.

The cosmetics area, on the other hand, grew slightly thanks to good hairdressing shops.

For both areas, Henkel was more optimistic about the sales development in the current year.

Knobel also sees a "clear potential" for the margin targets to be reached in the upper half of the ranges.

Billion merger possible

According to Henkel, the merger of the two consumer businesses is progressing.

As already known, the company also put brands and businesses with a total turnover of up to one billion up for sale.

In the first six months, Henkel said it had already divested itself of some non-core businesses in the cosmetics sector.

Earnings fell significantly due to higher costs.

Adjusted operating profit fell by 18.5 percent to just under 1.2 billion euros in the first half of the year, with the corresponding margin falling from 14.4 to 10.7 percent.

Henkel performed slightly better than analysts had expected.

Net profit fell by more than half to 447 million euros, with write-downs on the Russian activities and on cosmetics shops available for disposal also having a negative impact.

For 2022, Henkel continues to expect an adjusted return on sales of nine to eleven percent.

Adjusted earnings per preferred share at constant exchange rates are expected to decrease by 15 to 35 percent.

So far, after six months, there has been a decline of a good fifth.

The forecast does not include possible effects of gas bottlenecks in Europe.

However, Henkel is not a very energy-intensive company, said Knobel.

In addition, one produces locally, which reduces the dependence on European gas bottlenecks.

Henkel is in the process of replacing gas with other energy sources.

However, if suppliers had problems due to possible cuts, then this would also affect Henkel, according to Knobel.