Consumables

Henkel reports robust Q1 sales performance in very challenging market conditions

Wednesday 13. May 2020 - Henkels business performance in the first quarter of fiscal 2020 was impacted by the COVID-19 pandemic. Group sales decreased nominally by -0.8 percent to 4.9 billion euros. Despite the effects of the COVID-19 pandemic, sales were organically only slightly below the level of the previous year with a decrease of -0.9 percent.

“We are currently facing a very challenging situation. The COVID-19 pandemic has affected all areas of life and also hit the global economy very hard. Nevertheless, we achieved an overall robust sales performance in the first quarter. In this crisis, the health and safety of our employees, customers and business partners are of the highest priority for us. We have introduced a comprehensive range of protective measures already at an early stage. At the same time, we have done everything possible to continue our business activities, despite these difficult circumstances, and to continue serving our customers. We have also launched a global solidarity program with product donations and financial support. And finally, in the first quarter we initialized the implementation of our new strategic framework,” said Henkel CEO Carsten Knobel.
Henkel reported a robust sales performance in a challenging market environment in the first quarter. Adhesive Technologies was impacted primarily by significantly declining demand from the automotive industry. Beauty Care sales were also down year on year. The Hair Salon business suffered considerably from the salon closures enforced in numerous countries. In contrast, organic sales growth in the Branded Consumer Goods business was flat compared to the prior-year quarter. Thanks to strong demand for laundry detergents and household cleaners, Laundry & Home Care achieved very strong organic sales growth.
“As the crisis evolves, we will continue to adapt and respond quickly and flexibly to changes in our markets. I am convinced that, with our dedicated global team, our new strategic framework focusing on purposeful growth, and our strong balance sheet, we are well positioned to deal with this difficult situation and that we will emerge stronger from the crisis,” Knobel added.
Group sales performance
Group sales decreased nominally by -0.8 percent in the first quarter 2020, from 4,969 million euros in the first quarter 2019 to 4,927 million euros. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales decreased by -0.9 percent. At Group level, the decline was price-driven, with price and volume developments differing between the business units. Acquisitions and divestments accounted for an increase of 0.4 percent in sales. Foreign exchange effects reduced sales by -0.4 percent.
The emerging markets posted organic sales growth of 2.2 percent. Our sales in the mature markets decreased by -2.8 percent. Year on year, organic sales development in the Western Europe region was down -4.6 percent. By contrast, we were able to increase sales in the Eastern Europe region by 10.8 percent. In the Africa/Middle East region, we achieved organic sales growth of 6.8 percent in the first quarter of 2020.
Sales decreased organically in the North America region by -1.4 percent and in the Latin America region by -2.0 percent. Organic sales development in the Asia-Pacific region was also below the prior-year quarter by -5.7 percent.
Sales performance Adhesive Technologies
In the first quarter 2020, sales in the Adhesive Technologies business unit decreased nominally by -4.3 percent from 2,309 million euros in the prior-year quarter to 2,209 million euros. Organically (i.e. adjusted for foreign exchange and acquisitions/ divestments), sales decreased by -4.1 percent driven by volume. Performance in the first quarter was marked by a significant decrease in industrial production in the wake of the COVID-19 pandemic. Foreign exchange effects reduced sales by -0.3 percent. Acquisitions/divestments did not impact sales performance.
The organic sales development in the individual business areas was influenced to differing degrees by the COVID-19 pandemic. Sales in the Automotive & Metals business area were significantly below the prior-year level, mainly due to production shutdowns in the automotive industry. Sales decreased significantly in the Electronics & Industrials business area, likewise as a result of production shutdowns in the aviation and general industry sectors. The overall decline in the Craftsmen, Construction & Professional business area was partially offset by results from the construction sector. The Packaging & Consumer Goods business area recorded a flat organic sales performance.
The businesses in the emerging markets showed a decline in organic sales development overall. Sales in the Latin America and Africa/Middle East regions and the emerging markets of Asia (excl. Japan) were down year on year. The COVID-19 pandemic had an adverse effect on our businesses in China and India in particular. By contrast, sales in the Eastern Europe region increased significantly. The Packaging & Consumer Goods and Craftsmen, Construction & Professional business areas in Russia were the main contributors to this growth.
The mature markets likewise exhibited negative organic sales development. While positive growth was achieved in the mature markets of the Asia-Pacific region, sales in the North America and Western Europe regions were below the level of the prior-year quarter. This was primarily due to declining developments in the Automotive & Metals and Electronics & Industrials business areas. Within North America the decrease was partially compensated by strong growth in the Packaging & Consumer Goods business area and very strong growth in the Craftsmen, Construction & Professional business area.
Sales performance Beauty Care
The Beauty Care business unit achieved sales of 935 million euros in the first quarter 2020, equivalent to a nominal decrease of -2.6 percent compared to the prior-year quarter (first quarter 2019: 960 million euros). Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales decreased by -3.9 percent. This decline was mainly driven by volume. Foreign exchange effects reduced sales by -0.9 percent. Acquisitions/divestments contributed 2.3 percent to sales development.
Sales in the Branded Consumer Goods business area were flat year on year, with particularly good performance in the Body Care category, and especially by the Dial brand. In the Hair Cosmetics category, where sales declined slightly overall, we achieved good organic growth with our Hair Colorants business. Hair Care and Hair Styling, by contrast, were down year on year.
The impact of the COVID-19 pandemic on our Hair Salon business was strongly negative. Over the course of the first quarter, hair salon closures enforced by governments in numerous countries resulted in sales decreasing by a double-digit percentage.
The downturn arising from the spread of the COVID-19 pandemic was also reflected in the regions. Performance in the emerging markets was slightly negative. The Asia (excluding Japan), Latin America and Africa/Middle East regions were all down year on year. By contrast, the Eastern Europe region achieved strong organic sales growth thanks to the very strong performance of our Branded Consumer Goods business.
Sales decreased overall in the mature markets. The Western Europe and North America regions were down year on year. The Branded Consumer Goods business in North America posted very strong growth in the Body Care category; however, this did not fully offset the decline experienced by the Hair Salon business in the region. Sales performance was slightly below prior year in the mature markets of the Asia-Pacific region.
Sales performance Laundry & Home Care
Sales in the Laundry & Home Care business unit increased nominally by 5.3 percent in the first quarter 2020, from 1,667 million euros in the prior-year quarter to 1,755 million euros. The very strong organic sales growth of 5.5 percent was volume-driven. Foreign exchange effects reduced sales by -0.2 percent. Acquisitions/divestments had a neutral effect overall on sales performance.
Organic sales growth in the Laundry Care business area was strong – mainly thanks to the performance of our core brand Persil, which achieved a double-digit percentage increase in sales due among other things to our innovation offensive. Our largest North American brand all also posted a very strong performance. Organic growth in the Home Care business area was in the double-digit percentage range, driven mainly by double-digit increases in the Pril, Bref and Somat brand families.
With organic sales increases in the double-digit percentage range, the emerging markets were the main drivers of the very strong organic sales growth in this business unit. Henkel achieved sales increases in the double-digit percentage range in the Africa/Middle East, Asia (excluding Japan) and Eastern Europe regions. Sales growth in Latin America was very strong.
Organic sales performance in the mature markets was positive. While sales were slightly negative in the Western Europe region, the North America region recorded positive sales growth. Sales performance was strong particularly in the US, an important market for Henkel. Growth in the mature markets of the Asia-Pacific region was in the double-digit range.
Net assets and financial position of the Group
No substantial changes to the net assets and financial position of the Group occurred in the period under review compared to December 31, 2019.
Outlook
On April 7, 2020, the Management Board of Henkel AG & Co. KGaA decided that the forecast for fiscal 2020 published in the Annual Report 2019 can no longer be upheld. As the dynamic development of the COVID-19 pandemic impacts the global economy, a reliable and realistic evaluation of the future business performance of Henkel is currently not possible.
As soon as it is possible to make a sufficiently reliable evaluation of future business performance in 2020, Henkel will publish a corresponding forecast.