German consumer goods group Henkel, the maker of Persil detergent, said it expects profit margins to fall next year as its adhesives business comes under pressure from waning industrial demand.
The group said its adjusted earnings before interest and tax margin would decline to about 15% next year, down from an expected 16.2% in 2019 and below the 15.9% estimate according to Refinitiv data.
Last month, Henkel said its adhesives unit, which accounts for half of its sales, saw revenues fall 2.4% in the third quarter, hit by a slowdown in the car industry.
'Challenging Market Environment'
"We expect Henkel to continue to face a challenging market environment in fiscal 2020 that is difficult to predict, particularly with regard to industrial demand," outgoing CEO Hans Van Bylen said.
Frankfurt-listed shares in the group were down 6.5% after the news.
Henkel in October announced that chief financial officer Carsten Knobel would take over as CEO from Van Bylen in January after a string of poor results.
The group said it expects organic sales growth of 0-2% in 2020, while sales likely stagnated this year. Profits are expected to be hit next year by higher investments for marketing and advertising as well as for IT and digitalisation, it added.
Adjusted earnings per preferred share will fall by a mid to high single-digit percentage at constant exchange rates in 2020, down from an expected 5.45 euros in 2019, it added.
"Despite the further weakening of economic dynamics in the course of the year, our expectations for 2019 are overall in line with the expectations of the capital market as well as our guidance for fiscal 2019," Van Bylen said.
News by Reuters, edited by Checkout.