Henkel AG & Co. KGaA

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annual report/annual result/Company Information/Henkel

Düsseldorf (euro adhoc) - February 24, 2011

2012 financial targets reconfirmed - despite cost pressure in 2011

Henkel delivers record results in 2010

• Sales increase by 11.2 percent to 15,092 million euros • Organic sales growth of 7.0 percent • Share of sales of emerging markets: plus 3 percentage points to 41 percent • Adjusted* operating profit: plus 36.5 percent to 1,862 million euros • Adjusted* EBIT margin: plus 2.3 percentage points to 12.3 percent • Adjusted* earnings per preferred share (EPS): plus 47.6 percent to 2.82 euros • Significantly higher dividends proposed: plus 35.8 percent to 0.72 euros

Düsseldorf - "2010 was an excellent year for Henkel. For the first time, we closed a financial year with an adjusted EBIT margin above 12 percent," said Henkel CEO Kasper Rorsted. "We have improved the market positions of all our business sectors and have further strengthened our top brands. We have also been able to further expand our positions in the emerging markets. With these strong results, we are well on track to achieving our 2012 financial targets."

Looking forward to fiscal 2011, Rorsted said: "The economic conditions remain challenging, especially in view of the highly competitive environment in which we operate, and rising raw material costs. We will continue to respond quickly and decisively to changes in our markets and continue the transformation process in our company. We are confident that we will once again outperform our markets in 2011 and expect to achieve organic growth of between 3 and 5 percent. We anticipate realizing an increase in our adjusted EBIT margin to around 13 percent and a rise in adjusted earnings per preferred share of around 10 percent."

Henkel´s sales in fiscal 2010 were 15,092 million euros, an increase of 11.2 percent versus the prior-year figure. After adjusting for foreign exchange, sales improved by 6.4 percent. In organic terms, i.e. adjusted for both foreign exchange and acquisitions/divestments, sales grew by 7.0 - a relatively strong growth after 2009 which was impacted by the financial crisis. This strong performance was supported by all Henkel business sectors. Adhesive Technologies performed exceptionally well, reporting an increase in sales of 11.8 percent. The Cosmetics/Toiletries business sector continued its encouraging growth trend, registering growth of 4.8 percent and thus substantially outperforming the stagnating market. Laundry & Home Care achieved organic sales growth of 1.5 percent in a slightly declining market.

Operating profit (EBIT) increased by 59.5 percent, from 1,080 million euros to 1,723 million euros. After allowing for one time gains (59 million euros), one- time charges (14 million euros) and restructuring charges (184 million euros), adjusted operating profit improved by 36.5 percent, from 1,364 million euros to 1,862 million euros. All three business sectors contributed to the increasing profitability in 2010.

Return on sales (EBIT margin) grew significantly, from 8.0 percent to 11.4 percent. Adjusted return on sales rose from 10.0 percent to 12.3 percent.

The company´s financial result improved from -195 million euros to -171 million euros. The rise in returns on pension plan assets had a particularly beneficial effect on the net interest result, as did the further decrease in net debt from 2.8 to 2.3 billion euros, which helped to reduce interest expenses. The tax rate was 26.4 percent (previous year: 29.0 percent).

Net income improved by 82.0 percent, from 628  to  1,143  million  euros.  After
deducting  non-controlling  interests  of   25   million   euros,   net   income
attributable to shareholders of Henkel AG & Co. KGaA  was  1,118  million  euros
(previous year: 602 million euros). Adjusted net  income  after  deducting  non-
controlling  interests  increased  by  47.9  percent  to  1,217  million  euros.
Earnings per preferred share (EPS) rose from  1.40  euros  to  2.59  euros.  The 

adjusted figure was 2.82 euros compared to 1.91 euros in the previous year.

The Management Board, Supervisory Board and Shareholders´ Committee will be proposing to Henkel´s Annual General Meeting to approve significantly higher dividends of 0.72 euros per preferred share and 0.70 euros per ordinary share.

Once again, good progress was also made in the management of net working capital. Compared to the prior-year period, the ratio of net working capital to sales improved by a further 0.9 percentage points to 6.9 percent. After coming in at 1,462 million euros in the previous year, the level of free cash flow was again very strong at 1,508 million euros.

Business sector performance

The Laundry & Home Care business sector increased sales by 4.6 percent to 4,319 million euros. Organically, sales rose by 1.5 percent, with strong volume growth of 5.7 percent. Price and promotional competition in all relevant markets led to a decline in prices of 4.2 percent compared to the previous year. However, Henkel was able to more than compensate for this development through high volume growth.

From a regional perspective, the main sales growth was achieved in Europe and Africa/Middle East, the latter posting double-digit increases. Significant sales increases were also achieved in Western Europe, in particular in Germany, France and Spain. Growth was also generated in Eastern Europe, however, due to substantial price reductions this region was unable to achieve the expansion rates of previous years. In North America, the combination of aggressive pricing and consumer reluctance resulted in a decline in sales.

Operating profit rose by 8.2 percent to a record 542 million euros. Reflected in this earnings improvement are positive volume effects and successful measures introduced to reduce cost and enhance efficiency. Adjusted operating profit increased by 6.2 percent to 562 million euros. Adjusted return on sales increased by 0.2 percentage points to a new record of 13.0 percent.

In the Laundry business segment, the strongest growth momentum was generated by heavy-duty detergents and fabric softeners. In Western Europe, Henkel increased its market share with respect to heavy-duty detergents despite the difficult trading conditions and intense competition prevailing in the region. The primary contributor to this expansion was the Persil brand, and especially the liquid detergents. Also successful were the brands Spee and Weisser Riese, both of which generated above-average growth as a result of new powder and gel variants. In Western Europe, Eastern Europe and Israel, the positive development of Henkel´s fabric softener brands Vernel, Silan and Soad was supported by the introduction of new products with innovative freshness pearls.

Organic sales growth in the Home Care business segment continued to be generated primarily by dishwashing and WC products. In the machine-dishwashing

segment, the products Somat 9 and Somat Perfect Gel made  an  especially  strong
contribution. Henkel's hand-dishwashing products also registered  strong  growth
rates. In the WC products category, the introduction  of  the  first  rim  block
with four active pearls made a particularly  noticeable  contribution  to  sales

Increasing   sales   by   8.6   percent   to   3,269    million    euros,    the 

Cosmetics/Toiletries business sector successfully continued its growth trend of recent years. Organic sales grew by 4.8 percent. The business sector thus again outperformed its relevant markets, significantly further expanding its market positions.

From a regional perspective, good growth was achieved especially in Western Europe, with a strong increase in sales particularly in Germany. Sales in the emerging markets also expanded, with double-digit growth rates being achieved in Africa/Middle East, Latin America and Eastern Europe. By contrast, sales in North America declined.

Operating profit rose by 6.1 percent to 411 million euros, and by 12.4 percent after adjusting for one-time gains and restructuring charges, to a new record of 436 million euros. Adjusted return on sales increased to more than 13 percent for the first time, reaching a record high of 13.3 percent.

The Hair Cosmetics business achieved particularly strong growth. Due to the launch of a series of successful innovations market shares in the hair care, colorants and hair styling segments were significantly expanded to new record highs. In addition to the global expansion of the Syoss brand in new markets and categories, particularly the innovation Perfect Mousse drove growth in the colorants segment. The Body Care business was characterized by innovations and further product launches under its core brands. The Fa brand saw the launch of the Active Pearls series. In North America, one of the region´s most successful body care innovations of 2010 was launched in the form of the Dial NutriSkin series. In order to further develop the global market for men´s products, Henkel also launched its US brand Right Guard in Germany and Eastern Europe.

In the Skin Care business, the focus remained on the development of innovative anti-aging products. The introduction of the new sub-line Novagen under the Diadermine umbrella brand contributed to the enhancement of the brand´s position in the anti-aging segment. In the Oral Care business, good results were achieved with the new Theramed variants. The Hair Salon business likewise contributed to the growth dynamics of the business sector and further extended its position as the global number three in a persistently difficult market environment. Following the successful relaunch of the ammonia-free colorant, the Essensity brand saw the introduction of a completely new line of hair care and styling products. With innovative products, such as the styling powder launched under the top styling brand Osis, the Hair Salon segment was able to both attract new customers and strengthen business with existing clients.

With the market environment recovering, the Adhesive Technologies business sector saw sales increase by a substantial 17.4 percent to 7,306 million euros. Organic growth reached a new record high of 11.8 percent.

In the mature markets of Western Europe and North America, Henkel generated growth in the high single-digit range after negative growth in the previous year. The emerging markets registered double-digit percentage increases, with the highest growth rates in the Asia-Pacific region.

Operating profit tripled compared to the prior year, reaching a new record high of 878 million euros. Adjusted operating profit almost doubled to 938 million euros. Compared to the previous year, adjusted return on sales rose by 4.7 percentage points to 12.8 percent.

The Adhesives for Consumers, Craftsmen and Building business performed well. Both, the business with consumers and craftsmen, as well as the construction industry contributed to growth. Following the adverse effects of the global economic and financial crisis, the Transport and Metal business performed particularly well in 2010. Sales in the General Industry segment also increased substantially driven by the business with products for industrial maintenance, repair and overhaul under the Loctite brand. Sales of Packaging, Consumer Goods and Construction Adhesives also further increased. The Electronics business benefited from the recovery of the semiconductor industry. This segment generated the highest sales increase of all our strategic business units.

Regional performance

In Western Europe, sales grew by 4.3 percent to 5,470 million euros; the organic growth was 4.0 percent. This performance was supported by all the business sectors, particularly Adhesive Technologies which recorded an organic growth rate in the high single-digit percentage range. Sales in Eastern Europe increased substantially, by 13.7 percent to 2,649 million euros. Organic growth was 7.2 percent, supported particularly by the Cosmetics/Toiletries and Adhesive Technologies business sectors both of which posted double-digit percentage increases. Sales of the Laundry & Home Care business sector remained at the level of the previous year. Africa/Middle East continued to develop positively, with sales growing by 18.7 percent to 901 million euros. Organic sales rose by 12.8 percent, to which all three business sectors contributed with double-digit growth rates.

Sales in North America rose by 7.0 percent to 2,724 million euros. Organic sales growth amounted to 3.5 percent thanks to the results achieved by Adhesive Technologies, with sales of the Laundry & Home Care and Cosmetics/Toiletries business sectors declining compared to previous year. The region of Latin America continued to perform very well, recording sales growth of 19.1 percent to 982 million euros. Organic sales growth of 9.8 percent was supported by the Cosmetics/Toiletries and Adhesive Technologies business sectors. The upward trend was most pronounced in the Asia-Pacific region: sales increased by 30.8 percent to 2,168 million euros, with organic growth at 17.8 percent. The Cosmetics/Toiletries and Adhesive Technologies business sectors performed particularly well with double-digit growth rates. In the emerging markets of Eastern Europe, Africa/Middle East, Latin America and Asia (excluding Japan), sales rose by 19.9 percent to 6,132 million euros. Organic growth amounted to 11.8 percent, keeping it in the double-digit percentage range. The increase was supported in particular by higher sales generated by Adhesive Technologies and Cosmetics/Toiletries. The share of sales attributable to the growth regions increased from 38 to 41 percent.

Fourth quarter 2010

In the fourth quarter of 2010, Henkel increased sales compared to the prior- year period by 11.5 percent to 3,729 million euros. After adjusting for foreign exchange, sales rose by 5.7 percent. Organic sales growth came in at 5.8 percent. Operating profit increased by 29.0 percent, from 293 million euros to 379 million euros. After allowing for one-time gains (16 million euros), one- time charges (5 million euros) and restructuring charges (80 million euros), adjusted operating profit improved by 8.2 percent, from 414 million euros to 448 million euros. Return on sales (EBIT margin) increased from 8.8 percent to 10.2 percent. Adjusted return on sales amounted to 12.0 percent after 12.4 percent in the fourth quarter of 2009. Quarterly net income improved from 177 million euros to 254 million euros. After deducting non-controlling interests

of 5 million euros,  net  income  for  the  period  totaled  249  million  euros
(previous  year:  170  million  euros).  Earnings  per  preferred  share   (EPS)
increased from 0.39 euros to 0.58 euros, while the  adjusted  figure  rose  from
0.64 euros to 0.69 euros.

Sales and profits forecast 2011

In view of the economic forecasts for the current year, Henkel anticipates  that 

the global gross domestic product will increase by around 3 percent. Henkel is confident to once again outperform its relevant markets in terms of organic sales, expecting an increase within the range of 3 to 5 percent. This forecast is based on the company´s strong competitive position, which has been consolidated and further strengthened in recent years. Henkel has introduced a number of measures which have had a positive impact on its cost structure. In 2011 the company intends to further adapt its structures to the constantly changing market conditions as continuation of our commitment to strict cost discipline. All these factors, together with the expected increase in sales, will positively influence earnings development. Taking the 2010 results as its basis, Henkel anticipates achieving an increase to around 13 percent (2010: 12.3 percent) in adjusted return on sales (EBIT) and an increase in adjusted earnings per preferred share of around 10 percent (2010: 2.82 euros).

This document contains forward-looking statements which are based on the current estimates and assumptions made by the corporate management of Henkel AG & Co. KGaA. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by Henkel AG & Co. KGaA and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel´s control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace. Henkel neither plans nor undertakes to update forward-looking statements.

Contact Lars Witteck Wulf Klüppelholz

Tel.  +49 211 797 - 2606     Tel. +49 211 797 - 1875
Fax   +49 211 798 - 4040     Fax  +49 211 798 - 4040

Henkel AG & Co. KGaA 

The 2010 Annual Report and further information and download material relating to fiscal 2010 can be found together with the link to the live webcast of the press conference for fiscal 2010 can be found in the press folder at our website address: http://www.henkel.com/press.


end of announcement                               euro adhoc


Irene Honisch
Corporate Communications
Tel.: +49 (0)211 797-5668
E-Mail: irene.honisch@henkel.com

Branche: Consumer Goods
ISIN: DE0006048432
WKN: 604843
Index: DAX, CDAX, HDAX, Prime All Share
Börsen: Frankfurt / regulated dealing/prime standard
Hamburg / free trade
Stuttgart / free trade
Düsseldorf / free trade
Hannover / free trade
München / free trade
Berlin / regulated dealing

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