Henkel Trims Profit Outlook As Foreign Exchange Rates Bite
German consumer goods firm Henkel lowered its forecast for earnings growth in 2018 on Thursday after falling emerging market currencies and higher prices for raw materials dented its second-quarter results.
Henkel's shares, which had gradually recovered since the firm reported delivery problems in North America in March, were indicated down 3.3% in pre-market trade at brokerage Lang & Schwarz.
The maker of Persil detergent and Loctite adhesives said group sales rose 3.5% to €5.143 billion, stripping out acquisitions and a hit from currencies, just above average analyst forecasts.
But earnings per share rose just 2% to €1.58, missing average analyst forecasts for €1.61, as it said headwinds increased from currencies and raw material prices.
Henkel confirmed its 2018 guidance for organic sales growth between 2 and 4%, but said it now expects adjusted EPS to rise between 3 and 6%, down from a previous 5 and 8%.
German rival Beiersdorf last week lifted its underlying sales growth forecast to 5% for 2018 as a hot summer boosted demand for its Nivea skincare range.
The hit from currencies lowered Henkel's reported sales by about €310 million, or 6.1%, Chief Executive Hans van Bylen said, adding that without the currency impact, operational EPS was up 7.7%.
“Driven by strong organic growth, Henkel delivered a good development in the second quarter despite significant negative currency effects and higher material prices," he said. "We increased quarterly sales to an all-time high, further improved our adjusted EBIT margin and achieved the highest quarterly adjusted earnings to date.
“Our Adhesive Technologies business unit delivered very strong organic growth, Laundry & Home Care reported good growth and the development of Beauty Care was also positive.”
Almost two thirds of the currency impact came from weaker currencies in emerging markets like Turkey, Mexico and Russia, Henkel said, while it suffered a lesser impact from the U.S. dollar in the second quarter than in the first.
Henkel said its North America consumer goods business was back to normal after it recovered from delivery problems.
The adhesives unit, which accounts for about half of sales and provides glue to makers of appliances, electronics and packaging, saw organic sales growth accelerate to 5.2%.
Henkel said it now expects the unit to record organic sales growth for the year of 4 to 5%, up from 2 to 4%.
Beauty care, which includes Henkel's Schwarzkopf shampoo brand, reported a 0.4% rise and laundry and home care rose 2.9%.
In April, Henkel paid its 'highest-ever' dividend to shareholders.