PARIS — Henkel AG plan to merge its Laundry and Home Care and Beauty Care divisions to form a new Consumer Brands business, and expects to divest or discontinue non-core brands and activities, while making acquisitions in the consumer-goods space.
The Düsseldorf, Germany-based multinational said Friday that the integration preparations begin immediately and that the new organization — designed to create more scale, capture synergies and grant more agility — should be operational by early 2023 at the latest.
The multicategory platform will combine brands such as Persil and Schwarzkopf. Henkel’s Beauty Care division includes retail brands such as Syoss, Dial and Nature Box. Its professional brands count among them Igora, BC Bonacure, Osis and Silhouette.
Synergies are expected in administration, distribution, marketing and supply chain. Henkel believes this will allow the Consumer Brands activity to free up resources for higher investments, better target those investments in strategic capabilities and strengthen the business unit’s margins. The group described leaner structures, faster decision-making and attractive opportunities.
Henkel said the platform will focus its portfolio on attractive growth and margin potential.
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“Further portfolio measures will include divestments or discontinuation of non-core brands and businesses, as well as acquisitions in categories across the consumer space,” it said. “First measures related to the Beauty Care portfolio will be already implemented in the course of 2022.”
The newly combined unit will be headed up by Wolfgang König, currently executive vice president for Henkel’s Beauty Care business. Bruno Piacenza, who leads Henkel’s Laundry and Home Care business as executive vice president, will continue steering that activity and work closely with König on the transition process. Piacenza will remain at Henkel until the end of this year, at the latest.
The company announced, as well, that it is launching a share buyback program with a total volume of up to 1 billion euros. This should begin in February and run until March 31, 2023, at the latest. Henkel’s management board can acquire treasury shares of up to 10 percent of the capital stock. The group said it intends to hold the repurchased shares initially as treasury shares and reserves the right to cancel them and reduce the capital stock.
According to preliminary figures for 2021, group sales reached 20.07 billion euros, up 7.8 percent on an organic basis. Also on an organic basis, Beauty Care registered gains of 1.4 percent to 3.68 billion euros. Laundry and Home Care sales advanced 3.9 percent on an organic basis to 6.61 billion euros, while the Adhesive Technologies activity business posted sales of 9.64 billion euros, up 13.4 percent. For the group, adjusted return on sales, or EBIT margin, was 13.4 percent.
“Despite a very challenging business environment with unprecedented disruptions in global supply chains, shortage of raw materials and significantly surging prices, we achieved an overall good performance with significant organic growth supported by all business units, a stable margin and a very strong increase in earnings per share,” said Henkel’s chief executive officer Carsten Knobel, referring to an EPS that increased 9.2 percent at constant exchange rates to 4.56 euros.
Factoring in the tense market situation for raw materials and supply chains and linked to strong increases in direct material cost, Henkel expects organic growth for the group to be in the 2 percent to 4 percent range in 2022. That same range should hold true for Laundry and Home Care, while for Beauty Care it is expected to fall between minus 5 percent and minus 3 percent.
“The decrease is mainly due to measures already decided and an implementation to improve the portfolio, including the discontinuation of activities that will not be part of the future core business, amounting to around 5 percent of the business unit’s sales in 2021,” Henkel said.
Organic revenues growth for the Adhesive Technologies branch is expected at plus 5 percent to 7 percent.
Henkel’s EBIT margin should be between 11.5 percent and 13.5 percent, while EPS is forecast to range from minus 15 percent to plus 5 percent at constant.
“As part of its new mid- to long-term financial ambition, Henkel aims for its Consumer Brands business to improve the growth and margin profile sustainability, and to achieve 3 to 4 percent organic sales growth and an adjusted EBIT margin in the mid-teens percentage,” the company said.
For the Adhesive Technologies unit, the goal is to have organic sales growth in the 3 percent to 5 percent range and an adjusted EBIT margin in the high-teens percentage.
Based on this, Henkel revised its mid- to long-term financial ambitions overall, saying it aims for organic sales growth of 3 percent to 4 percent, an adjusted EBIT margin of about 16 percent, and mid- to high-single-digit percentage growth in adjusted earnings per preferred share, at constant exchange rates, including mergers and acquisitions.
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