DUESSELDORF, Germany (Thomson Financial) - Henkel AG & Co. KGaA said
first-quarter EBIT edged lower to 320 million euros, on surging feedstock prices
and dollar weakness, but the shares jumped on a consensus-beating net profit and
as some investors had expected weaker operating results.
The EBIT figure, down from 323 million euros last year, fell short of the
average forecast of 328 million euros in a Thomson Financial News survey of nine
analysts.
The German maker of shampoos, detergents and adhesives said quarterly sales
slid to 3.162 billion euros from 3.237 billion last year, also less than the
3.212 billion euros expected by analysts.
Year-earlier revenues were boosted by an advertising campaign celebrating
the 100th anniversary of its Persil laundry detergent.
Quarterly net profit, meanwhile, rose to 219 million euros from 205 million,
above the consensus of 216 million euros, on lower borrowing costs and taxes.
At 12:42 p.m. the shares surged 1.65 euros, or 5.86 percent, to 29.80 euros,
jumping to the top of the benchmark DAX, which advanced 0.86 percent.
There was some scepticism in the market that was not fully reflected in the
consensus on operating earnings, DZ Bank analyst Heinz Mueller said.
"Overall, the performance was modest, but probably better than many investors
feared," another analyst said.
Henkel in April completed the purchase of the National Starch businesses
from Akzo Nobel NV., which handed them on to Henkel as part of its takeover of
Imperial Chemical Industries. Separately, the company this year started a
restructuring programme that will result in about 3,000 jobs being cut.
In its first guidance to include the acquisition, Henkel said it expects
revenues to grow 3 percent to 4 percent in 2008, excluding currency swings and
potential future acquisitions and divestments.
The company also said it aims for an increase in operating profit in the
"mid-teen" percentage range, up from 1.370 billion euros in 2007, when adjusted
for restructuring charges and one-time effects but including cost savings from
the ongoing overhaul.
Earnings per preferred share, adjusted for restructuring charges and
one-time effects, are set to advance by a "mid single-digit" percentage, up from
2.19 euros in 2007, it added.
Raw material markets remain "strained", Henkel said, adding that it is
cutting costs and trying to pass higher prices along to customers in response.
Chief financial officer Lothar Steinebach, however, declined to predict to
what extent price increases will be achieved.
Looking into its divisions, Henkel said the adhesives unit -- the company's
largest -- posted a 3 percent decline in sales, hurt by foreign exchange
effects.
However, EBIT at the unit rose 2.3 percent as it brought new products to
market and the industrial glues business performed well in all regions of the
world except North America.
The unit is set to post a "significant increase" in operating profit, as it
integrates the National Starch businesses, according to the quarterly report.
The first-quarter performance of the construction adhesives business was
somewhat understated because demand in the year-earlier quarter was boosted by
mild weather, according to analysts including UniCredit's Christian Weiz.
Sales and earnings at the household product unit -- the second largest
business -- were subdued by currency effects and high raw material prices.
The cosmetics and toiletries unit saw both sales and earnings increase, as
it brought new products to market and amid particularly strong growth in Western
Europe and North America.
Henkel also said its stake in Ecolab Inc., slated to be sold to finance the
recent acquisition, remains unchanged at 29.4 percent, and the holding was worth
about 2 billion euros at the end of March, down from around 2.5 billion euros at
the end of 2007.
Henkel, which is controlled by fifth-generation descendants of founder Fritz
Henkel, in February announced plans to sell its stake in U.S. cleaning
contractor Ecolab in part or in whole, to finance the 2.7 billion-pound (3.4
billion-euro) purchase of the National Starch businesses.
Henkel's cost-cutting programme is proceeding "on schedule", chief executive
Kasper Rorsted said.
About 65 percent of the charges related to the initiative will be incurred
in Europe, the Middle East and Africa, 30 percent in North America and 5 percent
in Asia, he said.
No conclusions should be drawn from this on how the total figure of 3,000
job cuts -- initially announced in February -- will be distributed, the CEO
said.
ludwig.burger@thomsonreuters.com
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