Management system and performance indicators

Our management system and key performance indicators are derived from our ambition to generate purposeful growth. The key performance indicators are organic sales growth, adjusted return on sales, and growth in adjusted earnings per preferred share at constant exchange rates.

In the mid- to long-term, Henkel is aiming to achieve organic sales growth of 3 to 4 percent and adjusted return on sales of around 16 percent. For adjusted earnings per preferred share, Henkel is targeting growth in the midto high single-digit percentage range at constant exchange rates and including acquisitions.

The key performance indicators are represented in both our year and our medium-term plans. A regular comparison of these plans with current developments and the regular reporting of expected figures enable focused management of the company based on the described performance indicators.

Moreover, we report further key performance indicators, such as adjusted earnings per preferred share, net working capital as a percentage of sales, return on capital employed (ROCE), and free cash flow, which we are aiming to further expand, as described in our mid- to long-term financial ambition.

Cost of capital

The cost of capital is calculated as a weighted average of the cost of equity and debt capital ‏(WACC). We regularly review our cost of capital in order to reflect changing market conditions. In addition, we apply different WACC rates depending on the business unit involved. These are based on business unit-specific beta factors determined from a peer group benchmark. The following two tables indicate the WACC rates before and after tax for the Henkel Group and each business unit.