Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Henkel AG & Co KGaA (HELKF, Financial) reported strong organic sales growth of 3.3% at the group level, with adhesive technologies growing by 3.7% and consumer brands by 2.7%.
- The company achieved continued strong gross and EBIT margins in Q3, allowing for increased investment in brands and businesses.
- Henkel's adhesive technologies business outperformed relevant markets, driven by customer-centric innovations and sustainability-focused solutions.
- The consumer brands segment saw high single-digit organic sales growth in the hair business for the fifth consecutive quarter, supported by volume growth and market share gains.
- Henkel reiterated its full-year guidance and expressed confidence in reaching the upper half of the ranges for both adjusted EBIT margin and adjusted EPS growth.
Negative Points
- The consumer brands segment experienced a volume decline, with volumes remaining below the prior year quarter, impacted by ongoing portfolio optimization measures.
- North America showed a decline in both business units, reflecting a challenging market environment and the impact of portfolio optimization in consumer brands.
- The company faced headwinds from foreign exchange effects, which negatively impacted sales by 3.6%.
- The automotive segment within adhesive technologies showed signs of weakness, reflecting a slowdown in market demand.
- Henkel anticipates lower profitability levels in the second half of the year compared to the first half, due to increasing direct material costs and higher marketing investments.
Q & A Highlights
Q: Can you explain the volume deterioration in Q3 for your consumer brands unit and the impact of portfolio measures? Also, when do you expect to return to positive volume growth?
A: Carsten Knobel, Chairman of the Management Board, explained that the volume decline of 1.7% in Q3 was in line with expectations due to ongoing portfolio measures. The impact of these measures was 1.7%, meaning volumes were flat when adjusted. The expectation is for volumes to improve in Q4 and to be positive in 2025 as portfolio measures conclude by the end of this year.
Q: How did pricing in the consumer segment perform, and what changes in consumer behavior have you observed?
A: Carsten Knobel noted that pricing remained strong due to the valorization of the portfolio with tech-driven innovations. Consumer behavior has been more muted in North America compared to Europe, with a slight increase in promotional intensity and private label shares stabilizing.
Q: Can you provide insights into the performance of the hair business, particularly in professional versus mass market segments?
A: Carsten Knobel highlighted that the hair business has shown strong growth, with both consumer and professional segments contributing. The professional business recorded very strong growth across all regions, with North America and Europe posting strong results.
Q: What is the outlook for the adhesives business, particularly in electronics and automotive sectors?
A: Carsten Knobel stated that the electronics business has been strong with no signs of change, while the automotive sector is facing market difficulties. However, Henkel is outperforming the market by winning projects and increasing market share, especially in e-mobility.
Q: Are there any changes in the competitive landscape in North America's laundry business, and is there a risk of needing to reset pricing?
A: Carsten Knobel acknowledged high competition in North America but emphasized that Henkel's strategy focuses on portfolio valorization and tech-driven innovations, which support current pricing levels. He does not see a need for pricing adjustments due to overpricing concerns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
