In the first quarter of 2022, Henkel announced that it increased group sales to around €5.3 billion (approximately $5.6 billion) in a challenging market environment. Group organic sales grew significantly by 7.1%, driven primarily by a strong pricing performance, with a slight simultaneous decline in volume. In nominal terms, group-wide sales increased by 6.1%.
“This very good sales performance is a testament to our growth agenda as well as the huge dedication of our employees worldwide—and we want to express our gratitude for their great commitment,” said Carsten Knobel, CEO. “However, the macroeconomic environment has continued to deteriorate dramatically since the beginning of the year. The impact of the global coronavirus crisis, accompanied by an extraordinarily tense situation in the raw material markets and global supply chains, has been drastically exacerbated by the war in Ukraine.
“Despite these exceptionally difficult circumstances, we are pushing ahead with our clear strategy for purposeful growth. Our Adhesive Technologies business is a global leader in the market, offering innovative solutions in numerous key industries—with a clear focus on future trends such as mobility, connectivity and sustainability. And by merging our consumer businesses Laundry & Home Care and Beauty Care to create Henkel Consumer Brands we are establishing a multi-category platform with around 10 billion euros [~ $10.5 billion] in sales. We aim to have our future Consumer Brands business in place by early 2023 at the latest. It will offer a broader base to drive the optimization of our portfolio more consistently and advance the business to a higher growth and margin profile.”
Sales growth in the first quarter was particularly driven by the Adhesive Technologies business unit, which generated a double-digit organic increase amounting to 10.7%, with all its business areas contributing. From a regional perspective, Henkel’s group sales performance was driven primarily by the emerging markets. However, the mature markets also posted strong organic sales growth.
“The uncertainty and volatility in our business environment have increased further in the wake of the war in Ukraine,” Knobel said. “Prices for raw materials and logistics services have once again increased significantly. Against the backdrop of developments of the war in Ukraine, we also decided in mid-April to exit our business operations in Russia. Furthermore, we have also announced to end our activities in Belarus. This affects total annual sales of around 1 billion euros [~ $1.1 billion] and more than 2,500 employees. Given these developments, we now expect a significantly higher pressure on our earnings for the rest of the year than at the beginning of the year. Therefore we updated our guidance for the year accordingly at the end of April.”
In the first quarter of 2022, sales in the Adhesive Technologies business unit increased nominally by 11.6%, to €2.6 billion (~ $2.7 billion). Organically (adjusted for foreign exchange and acquisitions/divestments), sales increased by 10.7% compared to the first quarter of 2021. Volumes remained stable while prices rose in the double-digit percentage range. Foreign exchange effects increased sales by 1.6%, whereas acquisitions/divestments had a slightly negative effect.
All Adhesive Technologies’ business areas contributed to the sales growth achieved in the first quarter. The Automotive & Metals business area generated good sales growth. The negative impact on the business from the decline in automotive production, due particularly to the ongoing global shortage of semiconductors, was more than offset by double-digit growth in the Metals business.
The Packaging & Consumer Goods business area benefited from ongoing high customer demand and generated double-digit sales growth, driven particularly by the Packaging and Lifestyle businesses. The Electronics & Industrials business area generated significant organic sales growth, due in particular to double-digit growth in Industrials complementing positive sales growth in Electronics. The Craftsmen, Construction & Professional business area posted significant organic sales growth compared to the prior-year quarter, driven mainly by double-digit increases both in Construction and in Mechanical Engineering & Maintenance.
Looking at the regional breakdown, the Adhesive Technologies business unit achieved double-digit organic sales growth in the emerging markets. Sales growth was in the double-digit range in Eastern Europe and Latin America, driven mainly by the Packaging & Consumer Goods business area. The Africa/Middle East region generated a significant increase, and the Asia (excluding Japan) region reported a very strong increase in sales.
Organic sales growth in the mature markets was significant overall, with the North America region posting a double-digit rise in sales. Western Europe saw a strong increase in sales, with the adverse effects on the business arising from declining automotive production being more than offset by the growth generated in all other business areas. The mature markets in the Asia-Pacific region registered significant growth, with all business areas contributing.
Henkel reports that the tense situation within the raw material markets and in global supply chains has been worsened by the war in Ukraine. As a result, prices for direct materials and logistics services have increased significantly and stronger than previously anticipated. In addition to the announcement in mid-April to exit the business activities in Russia, Henkel has decided to discontinue its operations in Belarus as well. This affects total annual sales of around €1 billion (~ $1.1 billion).
With regard to material prices, Henkel now anticipates an increase in the mid-twenties percentage range for the full year compared to the average for 2021. Previously, an increase in the low-teen percentage range had been anticipated.
Henkel now expects organic sales growth at the group level in 2022 of 3.5-5.5%. The overall anticipated stronger sales growth will be primarily driven by the Adhesive Technologies business unit, for which Henkel now expects organic sales growth in the range of 8-10%, mainly due to the passing on of higher raw material and logistics costs in the form of higher prices.
Additional details are available at www.henkel.com.