Feb 27, 2009
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Henkel keeps mid-term targets after strong Q4

Feb 27, 2009

* Confirms 2012 targets despite economic downturn

* Sees tough '09 but aims to grow faster than mkt

* Q4 underlying EBIT beats estimates on cost-cutting

* Shares gain as much as 11 percent

(Adds comments from news conference, updates shares)

By Eva Kuehnen

DUESSELDORF, Germany, Feb 25 (Reuters) - German detergents-to-glue group Henkel (HNKG_p.DE) stuck to its mid-term targets and said it aimed to grow faster than the market during a tough 2009 after unveiling forecast-beating results.

Henkel, which also selectively scaled back production and spending plans, gave encouragement to investors after Procter & Gamble (PG.N), the world's largest consumer products company, cut earnings and sales forecasts and Unilever (ULVR.L) (UNc.AS) scrapped its targets altogether.

Henkel shares jumped as much as 11 percent and were up 7.2 percent at 19.13 euros by 1252 GMT, while Germany's blue-chip DAX index .GDAXI was up 0.4 percent.

"We see it positive that the company, despite the uncertain economic environment, confirmed its targets for 2012, which should be achievable due to the restructuring programmes," said Heinz Mueller, analyst at DZ Bank.

Kasper Rorsted, who took over in April as Henkel's first non-German CEO, said 2009 is "not going to be an easy year".

"At the moment it is difficult to predict how the economy as a whole is going to develop. However, we are well equipped and confident we will emerge from this difficult economic environment with our position strengthened," he added.


The maker of Persil detergents, Loctite glues and Schwarzkopf hair products said it aimed to outperform its markets in terms of organic growth this year, and steps taken to achieve this target included adapting pack sizes to purchasing patterns that had been changed by the economic crisis.

Consumers were now more price-sensitive, tending to favour bigger packs of products in maturer markets and smaller packs in emerging ones, Henkel said, while industrial customers were reducing stock, which it would offset by trimming production capacity.

This included the temporary closure of some adhesives production plants and the possibility of shorter working hours.

"We are not an island. We have to react if recession is looming," the CEO told a news conference.

Data showed on Wednesday Germany's economy shrank by 2.1 percent in the final three months of last year, its worst quarter since reunification in 1990.

Henkel cut its 2009 capital expenditure by more than 30 percent from last year's 473 million euros and froze its acquisition budget.

"In times like this it is important to have a good balance between optimism and realism," Rorsted said.


Henkel is confident it will hit its medium-term targets for 14 percent operating margins by 2012, annual earnings growth above 10 percent and 3 to 5 percent annual organic sales growth.

Its fourth-quarter operating margin stood at 10.7 percent and earnings before interest and tax (EBIT) adjusted for one-time items and restructuring charges rose 16.6 percent to 379 million euros ($485.6 million), beating analysts' estimates.

The rise came on the back of cost savings and the integration of its National Starch acquisition.

Sales rose 11 percent to 3.54 billion euros, slightly below estimates, mainly due to a weaker performance at its adhesives unit, which accounts for about half of Henkel's annual sales.

The unit's organic sales dropped 9.2 percent in the quarter, as it felt "the first effects of slowing economic development". About 70 percent of Henkel's adhesives sales are made to industrial users such as automotive and construction companies.

The laundry and home care segment and its cosmetics and toiletries business grew 5.4 percent and 3.3 percent respectively in the last quarter of 2008.

According to StarMine, which weights analysts' forecasts by their track records, Henkel trades at about 8.8 times estimated 12-month forward earnings, a discount to P&G and Unilever mainly due to its cyclical adhesives business and ownership structure.

The Henkel family holds 52 percent of the voting rights.

(editing by John Stonestreet)

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