Adhesives provider Henkel recently announced a significant increase in earnings for the first half of 2023, despite a persistently challenging economic environment. In response to the positive results, the company has raised its sales and earnings guidance for the fiscal year 2023.
“We achieved very strong growth in both business units. At the same time, we succeeded in significantly improving our earnings despite the continuing headwinds from high material and logistic prices. Following the strong performance in the first half of the year, we are confident for the remainder of the year and have significantly raised our full-year guidance for sales and earnings,” said Henkel CEO Carsten Knobel.
“We also made good progress in implementing our strategic growth agenda in the first six months of the year. In the Consumer Brands business unit, we are advancing the integration faster than planned. At the same time, we are consistently sharpening our portfolio towards high-margin and high-growth brands and products. This is also reflected in the earnings of the business unit. In the Adhesive Technologies business unit, we have aligned the organizational structure even more closely to our customers to expand our leading global position and further increase growth momentum. In addition, we are driving forward important initiatives in the areas of sustainability and digitalization to further enhance our competitive position,” explained Knobel.
At €10,926 million, group sales in the first half of 2023 were 0.1% above the prior-year level (Q2: €5,316 million, -5.8%). This corresponds to a very strong organic sales growth of 4.9% (Q2: 3.2%). Foreign exchange effects had a negative impact on sales development of -2.5% (Q2: -5.8%). Acquisitions and divestments reduced sales by -2.2% (Q2: -3.2%).
Sales growth in the first half year was driven by both business units. Adhesive Technologies recorded very strong organic sales growth of 4.7%, driven by the Mobility & Electronics and Craftsmen, Construction & Professional business areas. Consumer Brands achieved very strong organic sales growth of 5.7%, driven by the Laundry & Home Care and Hair business areas.
In the first half of the year, organic sales growth in the Europe region reached 2.4% (Q2: 0.8%). In the IMEA region, sales increased organically by 25.7% (Q2: 23.6%). North America posted organic sales growth of 3.8% (Q2: 0.9%). The Latin America region recorded organic sales growth of 13.2% (Q2: 9.4%). By contrast, the Asia-Pacific region recorded a negative organic sales development of -2.7% (Q2: -0.6%), mainly due to the persistently challenging market environment in China.
On April 20, 2023, Henkel had announced the signing of an agreement to sell its business activities in Russia to a consortium of local financial investors. The company had announced the exit of its Russian operations following the Russian attack on Ukraine last year. The transaction has been closed, and the sale price amounts to 54 billion rubles (around €600 million).
Sales in the Adhesive Technologies business unit recorded a stable nominal development of 0.1% to €5,475 million in the first half of 2023 (Q2: €2,683 million, -5.4%). Organically, sales increased by 4.7% (Q2: 2.7%). This development was achieved through double-digit price increases, while volumes remained below the prior-year level due to muted demand in some relevant end markets. The Mobility & Electronics business area achieved double-digit organic sales growth of 10.9% (Q2: 9.2%). In the Packaging & Consumer Goods business area, organic sales development was -1.5% (Q2: -3.7%). In the Craftsmen, Construction & Professional business area, sales increased organically by 4.9% (Q2: 2.9%). Adjusted operating profit increased by 3.0% to €766 million in the first half of 2023, compared to €743 million in the prior-year period. Adjusted return on sales increased to 14.0% compared to 13.6% in the prior-year period. Here, price increases in particular had a positive impact.
The Consumer Brands business unit generated sales of €5,365 million in the first six months of 2023 (Q2: €2,594 million). This corresponds to a nominal development of 0.6% (Q2: -5.7%). Organically, sales increased by 5.7%, driven by pricing (Q2: 4.5%). By contrast, volumes declined, partly also due to the ongoing portfolio optimization measures.
Because of the positive results for the first half of the year, the company has raised its outlook for the entire year. At group level, Henkel now expects organic sales growth of 2.5 to 4.5% in fiscal 2023 (previously: 1.0 to 3.0%). For the Adhesive Technologies business unit, growth is expected to be in the range of 2.0 to 4.0% (previously: 1.0 to 3.0%), and for the Consumer Brands business unit, between 3.0 to 5.0% (previously: 1.0 to 3.0%).
Additional information about Henkel is available at www.henkel.com.