02/21/2006, Düsseldorf


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Name Ernst Primosch
  Corporate Communications
Phone 0049-211-797-3533
Fax 0049-211-798-2484
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Name Lars Witteck
  Corporate Communications, Business / Finance
Phone 0049-211-797-2606
Fax 0049-211-798-9208
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Henkel builds on success

The Henkel Group generated sales and profits in fiscal 2005 markedly above the levels of the previous year. Sales rose by 13.0 percent and operating profit (EBIT) by 16.7 percent. All the Group's business sectors and regions contributed to this positive development. The proposal to the Annual General Meeting will be for an increase in dividends of 6 eurocents per share.

"Our innovations were once again an important factor in our success, providing us with a number of competitive advantages and contributing to encouraging organic sales growth," said Ulrich Lehner, Chairman of the Management Board of Henkel KGaA. "Our new products also enabled us to expand our market positions and generate further profitable growth. Now we want to concentrate even more on the development of new and creative ideas in all our corporate areas. We have therefore declared 2006 our Year of Innovation."

The Henkel Group has published its Annual Report for fiscal 2005. The key financials are as follows:
Sales rose 13.0 percent to 11,974 million euros.
Organic sales, i.e. sales after adjusting for foreign exchange, acquisitions and divestments, grew 3.5 percent.
Operating profit (EBIT) increased 16.7 percent to 1,162 million euros.
Return on capital employed (ROCE) improved 0.3 percentage points to 13.3 percent.
Earnings per preferred share increased to 5.31 euros versus 5.24 euros in the previous year.

The Management Board, the Supervisory Board and the Shareholders' Committee propose to the Annual General Meeting an increase in dividends per preferred share from 1.30 euros to 1.36 euros, and per ordinary share from 1.24 euros to 1.30 euros.

Free cash flow improved to 684 million euros due to a reduction in net working capital.

Expenditures on research and development in fiscal 2005 were 324 million euros, 19.1 percent above the 272 million euros of the previous year. This corresponds to a 2.7 percent share of sales.

Investments in property, plant and equipment in 2005 totaled 393 million euros, an increase of 14.2 percent compared with the 344 million euros for 2004.

Business Sector Performance

Laundry & Home Care sales rose by 13.0 percent above the previous year, to 4,088 million euros. Both the first-time full-year consolidation of Dial and the businesses taken over from Clorox contributed to this rise. Organic growth was a gratifying 3.0 percent. Aside from Eastern Europe, sales also substantially increased in Turkey, China, India and Mexico. Despite declining markets, sales in Western Europe were also slightly higher. In North America, the insecticide and household cleaner businesses taken over from Clorox performed well. Within the laundry segment, growth was achieved in the heavy-duty detergents business due to both Dial and increased promotional activities. In the case of special detergents, the highest growth rates were achieved in Eastern Europe and Latin America. The innovation-driven household cleaning products of the home care segment once again performed very well. Encouraging growth was achieved with innovations such as Pril Power Spray, the WC cleaner in the "Alessi" design and further product extensions of the Bref Power household cleaner.

Cosmetics/Toiletries sales rose 6.2 percent to 2,629 million euros. Organic sales increased 1.3 percent. In Western Europe, the business sector benefited from growth in the German branded consumer goods business. Eastern Europe continued its strong growth with double-digit rates of increase. The Middle East and Latin America also registered higher sales. By contrast, developments in Asia-Pacific were more sluggish. The sales performance in North America was primarily attributable to the expansion of the Dial business. Several new colorant products were introduced in the hair cosmetics segment. The European rollout of the styling brand got2b continued and a care line was added to the range. The comprehensive revamp of the body care brand Fa and the launch of the Fa Yogurt line produced highly promising results. The skin care business was characterized by numerous product launches under the international Diadermine brand. The oral care segment showed a slight improvement. The salon business produced growth well above the market average.

Consumer and Craftsmen Adhesives sales rose 20.5 percent to 1,742 million euros. The rise is due to the acquisitions, the first-time consolidation of Sovereign and organic growth of 5.0 percent, which was above the market average. Business in Europe was slow due to prevailing market conditions. Performance in all the other regions exhibited much more dynamism, turning in double-digit percentage growth rates. One of the main activities undertaken in the adhesive tapes for home, school and office segment was the international launch of a range of innovative adhesive tape products such as the Easy Start line. In the adhesives and sealants for construction, DIY and craftsmen segment, the company considerably strengthened its position with respect to assembly adhesives. Tiling adhesives also once again performed well, with much of the momentum coming from Eastern Europe. The waterproofing products group was strengthened through the acquisition of Polybit.

Henkel Technologies sales increased 17.0 percent to 3,266 million euros, due to both the Sovereign and Orbseal acquisitions and strong organic growth of 5.5 percent. There were double-digit percentage increases in sales in all regions apart from Western Europe. Business with the aerospace industry experienced further growth due to increasing demand for composite adhesives. With the acquisition of Orbseal and various new applications in the vehicle acoustic sector, strong growth was achieved in the automotive industry. Business both with the electronics industry and the steel industry was again further expanded. As a result of innovations in air and water filtration technology, the company significantly increased its market shares with respect to consumer durables. Business with the consumer goods industry developed well, especially in the packaging industry, and the business performance in the field of industrial maintenance, repair and overhaul also improved.

Regional Performance

In the regional breakdown, Europe/Africa/Middle East exhibited significant growth of 5.7 percent to 7,490 million euros, with Germany registering an encouraging increase. Due primarily to the successful integration of the acquisitions mentioned, sales in North America rose by 36.6 percent to 2,733 million euros. All the business sectors benefited with double-digit growth rates. The share of sales of this region rose accordingly, from 19 to 23 percent. Supported by good organic growth, the Latin America region registered a 21.1 percent increase in sales to 571 million euros, with all business sectors posting double-digit growth rates. Business in Asia-Pacific was similarly encouraging with sales growing by 20.2 percent to 931 million euros. The insecticides business taken over from Clorox in South Korea strengthened the Laundry & Home Care business sector. The Consumer and Craftsmen Adhesives and Henkel Technologies business sectors enjoyed strong growth momentum.

Major Participation

Ecolab Inc. , St. Paul/Minnesota, USA, in which Henkel has a 28.6 percent interest, generated sales of 4,535 million US dollars in fiscal 2005, representing a rise of 8 percent above previous year. Net earnings for the year increased by 13 percent to 320 million US dollars. The market value of this participation on December 31, 2005 was 2,637 million US dollars (previous year: 2,544 million US dollars).


The Henkel Group expects a slight improvement in the underlying economic conditions and intends again to grow faster than its relevant markets in 2006.

The Henkel Group expects to achieve organic sales growth (i.e. after adjusting for foreign exchange and acquisitions/divestments) of 3 to 4 percent in 2006.

Henkel expects operating profit (EBIT) to grow by around 10 percent after adjusting for foreign exchange.

Henkel likewise expects an increase of around 10 percent in earnings per preferred share (EPS).