November 14, 2017 / 8:40 AM / 5 days ago

UPDATE 2-Weak consumer market hits Henkel despite higher forecast

* Sees ‘17 adj. EPS around 9 pct, vs 7-9 pct previously

* Confirms ‘17 sales goal, but sees beauty below range

* Q3 sales, adj EBIT below analysts’ expectations

* Shares down 3 percent (Adds comments from company, analysts; updates bullet points)

By Martinne Geller and Emma Thomasson

LONDON/BERLIN, Nov 14 (Reuters) - Weakness in its global laundry and beauty business pushed Henkel’s third-quarter results below forecasts, sending its shares down 3 percent on Tuesday.

The maker of Persil detergent, Schwarzkopf beauty products and Loctite adhesives has been grappling with a decline in the overall laundry market in Western Europe and competition in its beauty business.

For the third quarter, Henkel’s earnings before interest and taxes (EBIT) adjusted for one-offs rose 7 percent to 897 million euros ($1.05 billion), below the 907 million forecast by analysts.

Sales of 4.98 billion euros showed organic growth of 3 percent, missing the 5.1 billion forecast by analysts.

Berenberg analyst James Targett said the stock decline was driven by concerns that Henkel’s margin improvement was coming from reduced selling and marketing expenses, which may harm sales over time, as well as questions over the impact of rising raw material costs.

“It doesn’t help that organic growth isn’t particularly high in laundry and beauty but that is broadly in line with expectations,” Targett said. “I think the concerns are overdone.”

He pointed out that Henkel discussed its savings as being driven by sustainable cost efficiencies rather than advertising cuts, and that the company was comfortable in its ability to pass on the rising costs.

ADHESIVES AHEAD

Henkel raised its full-year forecast for earnings per preferred share to around 9 percent from 7-9 percent while keeping its forecast for 2-4 percent underlying sales growth.

By business unit, it said adhesives would grow 4 to 5 percent, laundry and home care around 2 percent and beauty care zero to 1 percent.

It also warned that difficult conditions in the consumer goods market were likely to persist and said “currency effects will have an increasingly negative impact”.

Henkel shares were down 3.5 percent at 1008 GMT.

The consumer goods industry is having to adapt to growing demand for healthier products and niche names, along with the rise of online shopping and subscription services. Rival Unilever also reported a weak third quarter.

Henkel reported 0.5 percent sales growth in its beauty business, with home care sales up 1.8 percent and adhesives up 4.9 percent, an improvement on a 3.4 percent rise in the second quarter.

Henkel last month bought Zotos International from Japan’s Shiseido for $485 million to expand in the U.S. professional hair care sector. (Reporting by Emma Thomasson; editing by Ludwig Burger/Jason Neely/Alexander Smith)

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