Dusseldorf The manufacturer Henkel made significantly less money last year with Persil detergents, Pril cleaners and Pritt glue sticks. Adjusted earnings before interest and taxes (EBIT) fell by 13.7 percent to 2.3 billion euros. The bottom line was only a net income of 1.3 billion euros – a minus of 23.1 percent. The Dax group announced this on Tuesday morning.
Like the entire consumer goods industry, Henkel suffers from high expenses for freight, raw materials and energy. In 2022, Henkel expected additional costs of two billion euros. At the same time, many consumers are buying more cautiously. Especially when it comes to everyday goods, they turn to cheaper but often equally good quality private labels. Henkel’s profit margin fell to 10.4 percent.
Meanwhile, CEO Carsten Knobel was pleased that Henkel had “reached a new high in sales”. The group grew organically by 8.8 percent and generated sales of 22.4 billion euros. However, the growth was mainly explained by the additional costs being passed on to retailers. However, the group sold fewer products.
Henkel is coming through the crisis worse than many of its competitors. Nivea manufacturer Beiersdorf grew by 10.2 percent in 2022 and was even able to increase its profit by 17 percent. The British competitor Unilever (Knorr, Dove) increased sales by nine percent and profits slightly by 0.5 percent.
Henkel is also skeptical about the current year. The Düsseldorf-based company only expects sales growth of one to three percent. Knobel is assuming “subdued industrial demand” and a “declining growth dynamic in consumer demand”.
Withdrawal from Russia weighs on business
The result is likely to be additionally burdened by the planned withdrawal from Russia. At the end of April, after much hesitation and a great deal of public pressure, Henkel discontinued its business in Russia. However, Henkel is also the only major consumer goods manufacturer that wants to withdraw from the country.
This is far from being implemented: the original goal of leaving the country by December 2022 was missed. The group is now expecting a decision in the first quarter. Because Russian President Vladimir Putin is making it increasingly difficult for foreign companies to withdraw: sales must be approved by the authorities and are only possible with losses of at least 50 percent of the company’s value.
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Henkel invested more heavily in Russia than any other Dax group. The company achieved five percent of its sales there, around one billion euros. 2500 employees work there in eleven plants. In the first half of 2022, Henkel had already written off 200 million euros because of the Russian business.
Profits with Persil and Pril collapse by 32 percent
Although Henkel earned a good eight percent more in the past year with detergents and cleaning agents such as Persil and Pril, adjusted EBIT fell by 32 percent. Henkel sold fewer products because many consumers switched to private label. Expenditures for raw materials, logistics and marketing also made themselves felt.
The manager has been head of Henkel since the beginning of 2020.
(Photo: Henkel)
CEO Knobel rebuilt the consumer business in 2022. He merged the cosmetics division (“Dial”, “Syoss”) with the detergents and cleaning agents division. This reorganization was completed at the beginning of the year. Henkel stands on two pillars: the adhesives business and the consumer goods business known as “Consumer Brands”. As a result, Henkel has cut 2,000 jobs worldwide and 300 in Germany.
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In this area, Henkel discontinued non-profitable brands worth around 200 million euros last year, for example in the areas of oral and skin care. The group sold its dental care Theramed to the confectionery manufacturer Katjes.
Knobel wants to make Henkel more powerful with the conversion. With higher-margin products, he hopes to increase revenue and invest more money in the brands. This could increase the relevance of the products and make it easier for the group to push through price increases, argues Knobel.
However, many industry experts mainly see advantages on the cost side. Henkel expects annual net savings of around 250 million euros from next year. Knobel will have to show that the conversion will also lead to increasing income in the next annual balance sheet at the latest in order to be able to refute criticism from inside and outside.
Knobel wants to optimize logistics and supply chains
In a second phase of the corporate restructuring, which is now beginning, Knobel wants to optimize the supply chain and make production more efficient. In this context, further jobs will be cut, the extent is still unclear.
Henkel manager Wolfgang König, who heads the new consumer division, addressed major inefficiencies in the fall. So far, one van from the cosmetics and one from the detergents and cleaning agents sector has been driving to the same dealers. “It’s hard to find a consumer goods company that affords such a luxury,” König said in September.
In the past year, the adhesives business was once again the growth driver for Henkel with a sales increase of 13.2 percent. It represents half of the proceeds and 65 percent of the profit. Henkel is the market leader in the field of adhesives and supplies, for example, car manufacturers, aircraft manufacturers, construction companies and packaging manufacturers.
This division has recently caused a stir. Behind the scenes there is said to have been a power struggle in the fall between CEO Knobel and Jan-Dirk Auris, then the board member responsible for adhesives, which is why Auris had to leave the company early. The Handelsblatt had first reported on it. Henkel has now filled the post with Mark Dorn, an internal candidate.
More: Dispute escalated in the Henkel Management Board – Jan-Dirk Auris has to go now.