11/16/2012, London / Düsseldorf
Outperform – Globalize – Simplify – Inspire
Growth strategy and financial targets for 2016
Today, Henkel presented its new strategy and financial targets for the period up to 2016. At the same time, the company reconfirmed its guidance for fiscal 2012 based on its strong business performance in the first nine months of the year.
“The new strategy builds on the foundation of our corporate values and will drive Henkel's successful development in the coming years in order to achieve our long-term vision – to be a global leader in brands and technologies,” explained Henkel CEO, Kasper Rorsted. “We will outperform our competition as a globalized company with simplified operations and a highly inspired team - this is the essence of our new strategy. We will accelerate growth and increase profitability in all our three business sectors. We are focusing particularly on the development of our core and growth categories and the expansion of our businesses in emerging markets while we are continuously adapting our structures and strengthening our global team.”
The new strategy builds on the successful implementation of the strategic priorities defined in 2008 for the period up to 2012. The foundation for the strategy until 2016 was a detailed analysis of the major long-term market trends. The portfolios of Henkel’s three business sectors were reviewed against these trends to determine how they are positioned for delivering profitable growth in their respective markets.
As a result, Henkel has identified considerable potential for accelerated growth and increased profitability in each of its business sectors. The company will increase its investments and raise capital expenditures (capex) by more than 40 percent to a total of around 2 billion euros until 2016.
Financial targets 2016
By 2016, Henkel aims to grow sales to 20 billion euros, of which 10 billion euros in emerging markets. For adjusted earnings per preferred share (EPS) Henkel targets a compound annual growth rate (CAGR) of 10 percent until 2016.
These financial targets include an active portfolio optimization, i.e. small and mid-sized acquisitions as well as divestments or the discontinuation of non-strategic activities (with total sales of currently around 500 million euros). Potential major acquisitions or divestments are not accounted for in the financial targets.
Henkel will continue to focus on strong cash generation driven by reducing net working capital to around 5 percent of sales by 2016.
Strategic priorities in summary
- Outperform: Leverage potential in categories
Henkel will leverage its full potential in categories by actively managing its portfolio, strengthening top brands, launching powerful innovations and focusing on customers and consumers.
In its core categories, Henkel will continue to invest in strengthening and expanding its leading positions. In growth categories, investments will fuel overproportional growth of existing and new segments. In value categories, investments will be tailored to maximize profit potential. Henkel will focus on its strong brands: By 2016, the top 10 brands will generate approximately 60 percent of total sales (2012: around 46 percent).
To move its innovation capabilities closer to the growing consumer base in emerging markets, Henkel will open seven new R&D facilities: in Pune (India), Seoul (Korea), Dubai, Moscow (Russia), Johannesburg (South Africa), São Paulo (Brasil) and Toluca (Mexico).
- Globalize: Focus on regions with high potential
In mature markets, Henkel will leverage its strengths and generate profitable growth by increased brand investments and continued cost focus. By 2016, the company aims to gain more top positions while increasing profitability.
In emerging markets, Henkel will expand its existing category positions and accelerate growth in countries where the company has already a strong presence. In addition, Henkel will selectively enter new countries. By 2016, 12 out of Henkel’s Top 20 countries are expected to be in emerging markets.
- Simplify: Drive operational excellence
Henkel will continuously improve its operational excellence by making its processes faster, more standardized and more digital, driving cost-efficiency and reducing administration cost.
To expand the global coverage of its Shared Services Centers, Henkel will make significant investments and plans to open new hubs for the Arabic speaking region and Greater China/North East Asia in addition to its existing four Centers. The number of employees in Shared Services will grow to more than 3,000. A stronger IT focus will be critical to increase the efficiency of business processes. Henkel will leverage an integrated global IT platform supported by incremental IT investments of 140 million euros until 2016. Henkel will also increase efficiency by sourcing via global hubs, expanding e-sourcing and reducing the number of suppliers globally by around 40 percent by 2016.
As Henkel continuously adapts its structures to changing market environments, the company will optimize its global manufacturing footprint on an ongoing basis.
- Inspire: Strengthen our global team
To strengthen its global team Henkel will focus on three areas Leadership, Talents & Performance and Diversity.
As part of its focus on developing strong leaders, Henkel will expand its training and development programs, such as the Executive Resource Program at Harvard Business School. To attract and retain talents globally, Henkel will strengthen its employer brand and offer competitive compensation linked to performance. Its revised Long-Term-Incentive Plan is fully aligned with the new financial targets for 2016.
As a diverse employee base with different cultural and professional backgrounds provides a competitive advantage, Henkel promotes diversity by actively managing the dimensions nationality, age and gender. With around 30 percent women in management, Henkel has a leading position and strives to increase this ratio by 1 to 2 percentage points per year.
Long-term sustainability strategy through to 2030
At the beginning of 2012, Henkel already announced its long-term sustainability strategy with the target to triple its resource efficiency by 2030 and defined specific intermediate targets for five-year intervals.
* Including continuous portfolio optimization without major acquisitions and divestments
** Adjusted earnings per preferred share, compound annual growth rate
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, forecast 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.
Henkel AG & Co. KGaA