Mumbai –Henkel recorded sales of 19.3 billioneuros, slightly below the prior-year level in organic terms and maintained a profitable business with an adjusted EBIT margin of 13.4 percent. Henkel also generated a very strong free cash flow in excess of 2.3 billion euros, almost at the record level of the prioryear.

“Despite the sharp decline of the global economyas a result of the COVID-19 pandemic in 2020, we delivered an overall robust performance across all business units. For the full year, our results were at the upper end of our guidance. We achieved this thanks to our balanced portfolio, successful innovations, and financial strength as well as the outstanding commitment of our employees around the world. I would like to thank all of them for their excellent contributions in this truly challenging year,” said Henkel CEO Carsten Knobel.

For the full year, the Adhesive Technologies business unit reported sales below the prior-year level, reflecting a significant decline in demand from key industries. However, thanks to the breadth of itsportfolio and successful innovative solutions the business has proven its robustnessin a global economic downturn.

The organic sales development in Beauty Care was below prior-year level, strongly impacted by the Hair Salon business due to enforced closures, while the Retail business recorded good growth. This was driven by the successful development of top brands as well as new product launches addressing key consumer trends.

The Laundry & Home Care business unit achieved very strong organic sales growth, fueled by both, the surge in demand for hygiene-related products and by successful innovations, also addressing the increased demand for more sustainable products.

After a strong negative impact on sales due to the pandemic and related shutdowns in the second quarter for Adhesive Technologies and Beauty Care, all three business units reported in the second half of 2020 good organic growth compared to the prior year. The development of the consumer goods businesses, Beauty Care and Laundry & Home Care, was also supported by increasedinvestments in brands, innovationsand digitalization.

At Group level, adjustedEBIT decreased by -19.9 percent to 2.6 billion euros. Adjustedreturn on sales (EBIT margin) was at 13.4 percent, -2.6 percentage points lower than in 2019. Adjusted earnings per preferred share were at 4.26 euros, a decline of -17.9 percent at constant exchange rates.

“The development of our earnings reflects our increased investmentswhich we stepped up as announcedin the beginning of 2020 – despite the crisis. Declining demand in key business segments during the COVID-19 crisis also negatively affected our profitability.
 

“As we are managing the current crisis, we remain fully dedicated to our ambitious growth agenda for the coming years. Looking ahead, we are more confident than ever to execute our Purposeful Growth agendawith our global team and successfully shape our future.”

Outlook 2021

Based on these assumptions, Henkel expects to generate sales and earnings growth in fiscal 2021. The company anticipates organic sales growth of 2.0 to 5.0 percent and adjusted return on sales (EBIT margin) in the range of 13.5 to 14.5 percent. For adjusted earnings per preferred share (EPS) at constant exchange rates, Henkel expects an increase in the range of 5.0 to 15.0 percent.

Group sales and earnings performance in fiscal 2020
At 19,250 million euros, Henkel Group sales in fiscal 2020 were -4.3 percent below the prior-year period. Organic sales growth, which excludes the impact of currency effects and acquisitions/divestments, was slightly negative at -0.7 percent. The contribution from acquisitions and divestments amounted to 0.3 percent. Currency effects had a negative impact of -3.9 percent on sales.

Emerging marketsshowed an organic sales growth of 3.0 percent. Mature markets showed a negative organic sales development of -3.2 percent.

In a market environment that has remained highly competitive, sales in Western Europe showed a negative organic development of -4.4 percent. Eastern Europe achieved organic growth of 7.1 percent.In Africa/Middle East, sales grew organically by 7.0 percent.

North America recorded an organic sales development of -2.2 percent. In Latin Americaorganic sales slightly decreased by 0.5 percent. In the Asia-Pacific region, sales decreased organically by -1.6 percent.

Adjusted operating profit (adjusted EBIT)reached 2,579 million euros in 2020 after 3,220 million euros in fiscal 2019 (-19.9 percent).

Adjusted return on sales (adjusted EBIT margin) reached 13.4 percent, -2.6 percentage points below the prioryear. The development was also impacted by higher investments in marketing and advertising as well as digital and IT.

Adjusted earnings per preferred share decreased by -21.5 percent from 5.43 euros in fiscal 2019 to 4.26 euros. At constant exchange rates, adjusted earnings per preferred share decreased by -17.9percent.

Net working capitalsignificantly improved to 0.7percentof sales, compared to 3.9 percentin the prior-year period.

Free cash flowremained very strong. At 2,338 million eurosit almost reached the prior-year level (2019: 2,471 million euros).

Effective December 31, 2020, Henkel’s net financial positionimproved significantly to
-888 million euros (December 31, 2019: -2,047million euros).

The Management Board, Supervisory Board and Shareholders’ Committee will propose to the Annual General Meeting on April 16, 2021 the same dividend as in the previous year, namely 1.85 euros per preferred share and 1.83 euros per ordinary share. This equals a payout ratio of 43.7 percent, which is above the target range of 30 to 40 percent, reflecting the special nature of the burdens on earnings caused by the COVID-19 pandemic. This payment is possible not least thanks to the strong financial base and low net financial debt of the Henkel Group. Going forward Henkel’s dividend policy remains unchanged.

Business unit performance in fiscal 2020
In fiscal 2020, sales in the Adhesive Technologies business unit were nominally -8.2 percent below prior-year level, reaching 8,684 million euros. Organically, sales development was -4.2 percent. The first half of the year in particular wasstrongly impacted by the COVID-19 pandemic. However, the second half of the year saw a recovery in demand across all business segments and regions.Adjusted operating profit reached 1,320 million euros (Previous year: 1,712 million euros). At 15.2 percent, adjusted return on sales was below the level of 2019. The margin decline was in particular dueto the significantly lower sales volume as a result of the pandemic.

In the Beauty Care business unit, sales in fiscal 2020 showed an organic development of -2.8 percent. Nominally, sales were -3.2 percent below prior-year level, reaching 3,752 million euros. The development is particularly due to the negative impacts of the COVID-19 pandemic on the Hair Salon business while the Retail business achieved an overall good organic sales development. Adjusted operating profit reached 377 million euros (Previous year: 519 million euros). Adjusted return on sales reached 10.0 percent,impacted by the declining sales volume in the Hair Salon business as well as higher investmentsin marketing and advertising as well as digital and IT.

The Laundry & Home Care business unit generated organic sales growth of 5.6 percent in fiscal 2020. Nominally, sales increased by 0.7 percent to 6,704 million euros. Adjusted operating profitamounted to 1,004 million euros. (Previous year: 1,096 million euros).At 15.0 percent, adjusted return on sales was below the level of 2019, especially due to the higher investments in marketing and advertising as well as digital and IT.