March 5, 2020 / 8:51 AM / a month ago

New Henkel CEO plans to divest or discontinue some brands

BERLIN (Reuters) - The new chief executive of Henkel (HNKG_p.DE) announced plans on Thursday to divest or discontinue brands in the consumer businesses of the German company by 2021 at the same time as looking for new acquisition opportunities.

FILE PHOTO: Carsten Knobel, chief financial officer of German consumer goods group Henkel is seen at Henkel's annual general shareholders' meeting in Duesseldorf, Germany, April 11, 2016. REUTERS/Wolfgang Rattay

Henkel said in a statement that “active portfolio management” would be a key element in the new strategy of Carsten Knobel, Henkel’s former finance chief who took over as chief executive in January after a string of poor results.

To that end, Henkel said it had identified brands and categories with a total sales volume of more than 1 billion euros (£864 million), mainly in its consumer units, of which around 50% were marked to be divested or discontinued by 2021.

Henkel also said that acquisitions would remain an integral part of its strategy, aiming to expand its technology leadership in adhesives and look for consumer brands that would strengthen its position in its top markets and categories.

Reuters has reported that Henkel is vying with Unilever and buyout funds including Advent and Cinven for some of Coty’s (COTY.N) top beauty brands in a deal worth up to $7 billion.

Analysts have suggested Henkel should consider selling or spinning off beauty products, but the founding family, which owns around 60% of the company’s voting shares, had long been seen as resistant to take such a radical step.

Henkel’s struggling beauty business, which makes Schwarzkopf shampoo and Dial soap, reported organic sales fell 2.1% in 2019.

Its adhesives unit, which accounts for half its sales, saw sales fall 1.5% in 209 as it was hurt by the declining automotive and electronics sectors.

By contrast, Henkel’s laundry and home care unit, which competes with Procter & Gamble (PG.N) brands like Tide, saw organic sales growth rise 3.7% in 2019 after it relaunched Persil detergent and offered more online-friendly products.

Henkel set a medium term ambition for organic sales growth of 2-4%, after it predicted just 0-2% for 2020, and for mid-to-high single-digit growth for its adjusted earnings per preferred share.

In a presentation, Henkel said it expected the coronavirus would significantly impact first-quarter results, but its full-year guidance was unchanged based on its current assumptions.

It noted that China was its third-largest market in terms of sales and profit and said the virus was affecting business there, and increasingly spreading globally, although all 12 of its production plans in China were in operation.

Reporting by Emma Thomasson; Editing by Michelle Martin

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