Achieve our full business potential
For this, we have identified the following drivers:

1. Portfolio optimization
   Within the Laundry & Home Care business sector, we aim to increase our profitability in the mass categories such as heavy-duty detergents and hand-dishwashing products, and drive growth in the profitable specialty categories such as household cleaners and fabric softeners. In the Cosmetics/Toiletries business sector, we intend to further enhance profitability by strengthening our innovation leadership and expanding the Schwarzkopf brand. Within the Adhesive Technologies business sector we want to improve our profitability in the automotive segment and consumer adhesives business, drive growth in specialty applications and utilize our economies of scale with innovations in the industrial adhesives segment.
   
   In addition, we intend to achieve disproportionate expansion in the growth regions through increased capital expenditures, and to expand the share of sales accounted for by these markets to 45 percent by 2012, while also improving our margins. We also want to further increase our market shares in the mature markets.
   
   
2. Focus on our top brands
   Our focus is on fewer but stronger brands and further expansion of our strong regional and global brands. Brand awareness is to be further enhanced through extensive marketing invest ment. Our three top brands Schwarzkopf, Loctite and Persil already account for around 23 percent of our sales. Our objective is to grow organically twice as fast with these and other top brands as Henkel overall, and therefore to significantly expand their share of total sales. At the same time, we are reducing the total number of our brands by selling off or discontinuing the smaller and less important brands.
   
   
3. Innovation and innovation rates
   With innovation rates ¹⁾ of around 40 percent in the business sectors Laundry & Home Care and Cosmetics/Toiletries, and of around 24 percent at Adhesive Technologies, we count among the strongest innovators in our fields of competence. We are helped in this respect by the proximity we have to our consumers and customers, actively incorporating both audiences in our product development activities where appropriate. We have also made it our principle only to launch a new product onto the market if it has a positive effect on gross margin and makes a contribution to sustainable development in at least one of our five focal areas.
   
   
4. Operational excellence
   In our purchasing activities, our aim is to create benefits through the further development of effective strategies. These include concentrating on strategic suppliers and on procuring materials in low-cost emerging economies. Our objectives with regard to production and supply chain management include further reducing the number of manufacturing sites, particularly in the mature markets. This will enable us to reduce the complexity of our structures and better utilize available capacities. We will also be introducing improvements with respect to our administrative, selling and distribution expenses, by pooling our standardized processes in the areas of finance, purchasing and human resources within our shared service centers in Bratislava (Slovakia) and Manila (Philippines), and by outsourcing noncore activities such as IT support. We expect such measures to yield further cost savings.
   
   

Focus more on our customers
In order to place our customers right at the center of all we do, we have prioritized expanding our dialogue with them at the highest managerial level (top-to-top contacts), coupled with the further development of our partnership structures. Our aims are to establish a joint strategic approach to our markets, to expand services offering a measurable added value for our customers, and to effectively leverage our own competences in the form of, for example, our leadership in the field of sustainability. The objective is to generate organic growth with our key accounts equivalent to 1.5 times the amount for Henkel as a whole.

Strengthen our global team
Our employees are our most important resource. With clear and unequivocal feedback, discernible rewards in recognition of individual performance, and tailored development plans, we ensure that our competent and motivated team can master the challenges with which they are confronted. We are keen to develop and promote our managers from within. At the same time, we are also aware of the need to bring in external talents, especially when their knowledge of their local markets is better than that of the established managerial staff within the company. Already today, there are people from more than 110 nations working for Henkel; and the proportion of female managers is 29 percent worldwide, with the trend clearly rising. The diversity of our global team gives us a competitive advantage, one that we intend to further extend.

Progress in fiscal 2010
We made further substantial progress in the pursuit of our three strategic priorities in fiscal 2010. The salient advancements were as follows:

Achieve our full business potential

• Record sales and profit levels in all three business sectors.
• Efficiency enhancement program “Global Excellence” and integration of the National Starch businesses implemented ahead of schedule
• Further expansion of our two shared service centers in Bratislava (Slovakia) and Manila (Philippines), together with increased usage of these facilities in the fields of finance, purchasing and human resources.

Focus more on our customers

• Further expansion of customer contacts at the highest managerial level for the purpose of identifying joint projects.
• Expansion of our position as a leading partner to our customers in the field of sustainability.

Strengthen our global team

• Introduction of the new vision – “A global leader in brands and technologies” – and tighter focus on five values.
• Development and introduction of a new system of managerial staff appraisal.

¹⁾ Percentage share of sales accounted for by new products launched onto the market in the last three years (five years for Adhesives Technologies).