Henkel AG & Co. KGaA

Henkel Informs On Business Performance January Through March 2000

    Düsseldorf (ots) -     Very Good Start In The New Year     Sales And Profits Show Strong Growth     All Business Sectors Performed Successfully     Market Share Gains From Innovative Products

    Sales, Profits and Cash Flow     From January through March 2000, the Henkel Group realized sales of 3.0 billion euro. This represents a 12.9 percent increase over the same period last year. Organic growth amounted to 8.4 percent. Foreign exchange influences contributed 5.0 percentage points to sales growth, while divestments accounted for a negative influence of 0.5 percentage points.

    Sales of the German companies rose by 3.3 percent. The foreign Group companies achieved an increase in sales of 16.5 percent. In North America, sales rose by 18.6 percent, while in Latin America the increase was 28.9 percent. In the Asia Pacific region, sales growth amounted to 36.6 percent.

    Operating profit (EBIT) was at 207 million euro and thus 17.3 percent up on the level of 176 million euro for the previous year. All business sectors except Cosmetics/Toiletries achieved double digit growth. Return on investment improved to 12.5 percent (previous year: 10.9 percent).

    With 275 million euro, the cash flow of the Henkel Group was slightly below the level of the previous year. The 31 million euro increase in EBIT was offset by higher corporate income taxes which rose by 38 million euro.

    Net earnings for the quarter increased by 61.8 percent to 110 million euro. In the first quarter of 1999, net earnings were impacted by 16 million euro of restructuring charges from Clorox due to the acquisition of First Brands.

    Henkel Group Cash Flow Statement

    January-March 1999                      January-March, 2000
    Euro million                                Euro million

    Operating profit (EBIT)              176                                      207
    Income taxes paid                        -39                                      -77
    Depreciation/Write-ups of
    fixed assets
    (excl. financial assets)            142                                      149
    Net gains from disposals of
    fixed assets
    (excl. financial assets)              -2                                        -4
    Cash Flow                                    277                                      275
    Change in working capital          -24                                        14
    Net cash flow from
    operating activities                  253                                      289
    Net cash flow from
    investing activities                  -99                                    -233
    Net cash flow from
    financing activities                 -165                                      -35
    Effect of exchange rate changes
    on cash and cash equivalents      -11                                        20
    Change in liquid funds and
    marketable securities                    0                                        41
    Liquid funds and marketable
    securities at March 31, 2000      127                                      182

    Major Events

    In January, Multicore Industries located in Great Britain was acquired for 43 million GBP. With this takeover, the Adhesives business sector has further expanded its position as world market leader for engineering adhesives in the rapidly growing electronic components sector.

    A joint research center has been established with the Kinki University in Osaka, Japan. A research partnership was founded with the Technical University of Darmstadt, Germany, as a new, progressive approach of combining research activities and competencies in the field of science and business. The objective is to convert research results more quickly into economically viable products and processes.

    In view of the ongoing trend towards internationalization in the detergents business, Henkel and The Dial Corporation (USA) have jointly  acquired a majority (80 percent of the shares) in the Mexican detergents company Fabrica de Jabon Mariano Salgado S.A. de C.V.

    To create a sustainable incentive for the management of the Henkel Group, Henkel has introduced a new Stock Incentive Program. In order to finance this program, the buy-back of up to max. 10 percent of the subscribed capital was approved by the Annual General Meeting. A procurement marketplace on the internet will be founded for the industrial businesses jointly with SAP, Degussa-Hüls and BASF. A similar project is being pursued with Danone, Nestlé and SAP for the consumer goods businesses.

    Development of Business Sectors

    The Adhesives business sector increased sales by 16.6 percent to 695 million euro. Operating profit increased by 28.7 percent to 68 million euro. This is attributable to the very positive business development in Germany, North America and Asia.

    Consumer and Craftsmen Adhesives started the year 2000 successfully, achieving a sales growth of 12 percent. In particular, home improvement and decoration products registered an outstanding first quarter in the specialist trade sector. Developments in the do-it-yourself business were also very encouraging. The introduction of Metylan Tabs and the further international roll-out of the "No More Nails" concept showed good results. Innovative roller products for adhesive-bonding and correction likewise contributed to the growth of the European business. In the USA, business activities involving adhesive tape continued to develop positively.

    Industrial and Packaging Adhesives increased sales by 16 percent. In North America, market positions were expanded, particularly in relation to labeling and bookbinding adhesives and wood glues. The market leadership in Liofol laminating adhesives was strengthened.

    Engineering Adhesives (Loctite) achieved a sales increase of 25 percent. The positive development was essentially the result of business growth in North America and Asia Pacific. Business in the highly profitable reactive adhesives segment developed particularly well.

    The Cosmetics/Toiletries business sector succeeded in increasing sales by 10.2 percent to 456 million euro, with the Hair Salon business making a particularly large contribution. As a result of increased advertising spending supporting the further international roll-out of new products, operating profit rose by 2 percent to 26 million euro.

    Sales of Hair Cosmetics rose by 7 percent during the first quarter. In Germany, the market leadership in hair colorants was extended. Market shares were significantly increased in France, Italy and Benelux. Schauma and Taft consolidated their market leadership in hair care and styling products in Germany.

    Business with bodycare products increased by 10 percent. The Fa Classic line was extended through the introduction of two new fragrances (Green Tea and Spring Flower). The introduction of the Fa Men series in Germany and Eastern Europe brought market share gains. In the case of skincare products, the anti-aging line Diadermine Force Retinol registered market share increases in Spain and France. The Diadermine line was introduced in Germany and exceptionally well received by the trade.

    The Hair Salon business performed very successfully, increasing sales by 28 percent.

    The Detergents/Household Cleaners business sector increased sales by 6.3 percent to 677 million euro. Operating profit increased by 14.3 percent to 53 million euro.

    The 8 percent increase in sales in Heavy-Duty Detergents was very satisfactory.

    Specialty Detergents also performed very well with an increase in sales of 13 percent. Innovative product concepts, introduced at the end of 1999 and the beginning of 2000, mainly contributed to this growth. Noteworthy are "Svit", launched in the new market for dry cleaning in the tumble dryer, and also "Vernel Soft & Easy", which facilitates ironing.

    Sales in Household Cleaners were slightly up on the level of the same period last year. Market leadership in Germany was regained with the machine dishwashing detergent "Somat 2 in 1". This innovative product is also currently being launched in other European countries.

    The Industrial and Institutional Hygiene/Surface Technologies business sector achieved an increase in sales of 13.5 percent to 455 million euro. Operating profit improved by 34.2 percent to 34 million euro due to the strong performance of Surface Technologies and favorable exchange rate effects.

    In the Industrial and Institutional Hygiene business, sales rose by 9 percent to 213 million euro. The Hospital Hygiene unit achieved a sales increase of 8 percent. Sales of the Institutional Hygiene business likewise increased by 8 percent. Benefitting from successful product introductions, sales of the Textile Hygiene and the Food & Beverage/P3 business rose by 7 percent.

    The sustained upswing in business development at Surface Technologies resulted in a sales increase of 18 percent to 242 million euro. All regions contributed to this encouraging development. The automotive and the industrial businesses succeeded in expanding their leading positions worldwide. The continuing expansion of activities involving new technologies and innovative products was successful; examples are Terocore (polymer foam for car body reinforcement) and Granocoat (organic coating of sheet steel components).

    During the first quarter, the Chemical Products business sector, now a legally independent company operating under the name Cognis, achieved an increase in sales of 18.3 percent to 707 million euro. Operating profit rose by 62.4 percent to 51 million euro compared to a relatively weak first quarter 1999.

    The revival at the Oleochemicals division, which already began towards the end of 1999, accelerated through the first quarter of 2000. The increase in sales of 18 percent was mainly attributable to the performance of oleochemical base materials, especially fatty acids, and to Nutrition & Health.

    Care Chemicals continued its positive sales development with an increase of 14 percent. The businesses in Europe and Asia Pacific contributed strongly to this development.

    In spite of the sale of the paper auxiliaries business, sales of Organic Specialty Chemicals rose by 14 percent. Sales in paints and coatings increased significantly thanks to the introduction of new products offering improved customer benefits and ecologically compatible solutions. Business in textile auxiliary products and synthetic lubricants developed very positively.

    Henkel Group Sales January - March 2000

    Sales by          Jan.-March 1999      Jan.-March 2000          Change
    product sector
    EUR million         EUR million    in percent

    Adhesives                        596                  695                         16.6
    Cosmetics/Toiletries      414                  456                         10.2
    Detergents/
    Household Cleaners         637                  677                          6.3
    Industrial and
    Institutional Hygiene/
    Surface Technologies      401                  455                         13.5
    Chemical Products
    (Cognis)                         598                  707                         18.3
    Other                                24                    23                            -
    Total                          2,670                3,013                         12.9

    Sales by region
    Germany                          740                  764                          3.3
    Europe
    (without Germany)        1,184                1,316                         11.1
    North America                 430                  510                         18.6
    Latin America                  97                  124                         28.9
    Africa                              28                    38                         33.4
    Asia/Pacific                  191                  261                         36.6
    Total                          2,670                3,013                         12.9

    Major Participations

    Ecolab Inc., St. Paul, Minnesota, USA, in which Henkel holds a 25 percent interest, achieved a sales increase of 8 percent to 526 million US$ in the first quarter of 2000. The introduction of new products in the USA particularly contributed to this development. Net earnings for the period rose by 22 percent to 43 million US$.

    The Clorox Company, Oakland, California, USA, in which Henkel has a 26.6 percent interest, achieved an increase in sales of 1 percent to 2,930 million US$ during the first three quarters of fiscal 1999/2000. In the third quarter, Household Products performed particularly well thanks to new product launches and sound international business growth. Net earnings for the period under review amounted to 269 million US$, representing an increase of 37 percent.

    Capital Expenditures

    Additions to fixed assets during the first quarter of 2000 amounted to 87 million euro. These were essentially attributable to projects in the Brand-Name Products, Adhesives and Chemical Products sectors. Employees

    As of March 31, 2000, the number of employees at the Henkel Group was 56,663. The proportion of Henkel personnel working outside Germany was 73 percent.

    Employees

    Employees
  (as of)        Dec. 31, 99  March 31, 00      Change in percent

    Germany      15,412          15,460                 0.3
    Abroad        40,984          41,203                 0.5
    Total         56,396          56,663                 0.5

    Outlook

    This year we target stronger organic growth combined with higher profitability. In view of the good business performance achieved in the first quarter, the positive worldwide economic outlook and the ongoing success coming from the introduction of innovative products and technologies, we are confident of achieving a consolidated sales figure in excess of 12 billion euro and a double-digit increase in earnings per share for fiscal 2000.

    Henkel KGaA     The Management Board

    Henkel Group Consolidated Balance Sheet

                                  December 31, 1999                  March 31, 2000
                         Euro million          %                Euro million         %

    Tangible and
    intangible assets  
                                  4,717      47.8%                 4,871            47.0%
    Financial assets        787        8.0%                    856              8.3%
    Fixed assets          5,504      55.8%                 5,727            55.3%

    Deferred tax
    Assets                        237        2.4%                    244              2.3%

    Inventories            1,505      15.3%                 1,568            15.1%
    Accounts receivable
    And miscellaneous
    Assets                    2,469      25.0%                 2,643            25.5%
    Liquid funds/
    marketable
    securities                 141        1.5%                    182              1.8%
    Current assets        4,115      41.8%                 4,393            42.4%

    Total assets          9,856    100.0%                10,364          100.0%

    Equity excluding
    minority interests 2,948      29.9%                 3,024            29.2%
    Minority interests    290        3.0%                    299              2.9%
    Equity including
    minority interests 3,238      32.9%                 3,323            32.1%

    Provisions for pensions and
    similar obligations
                                  1,871      19.0%                 1,897            18.3%
    Other provisions    1,159      11.7%                 1,220            11.8%
    Provisions              3,030      30.7%                 3,117            30.1%

    Provisions for
    deferred tax
    liabilities                184        1.9%                    189              1.8%

    Borrowings              1,915      19.4%                 2,009            19.3%
    Trade accounts
    Payable                  1,029      10.4%                 1,036            10.0%
    Other liabilities      460        4.7%                    690              6.7%
    Liabilities            3,404      34.5%                 3,735            36.0%

    Total equity
    and liabilities      9,856    100.0%                10,364          100.0%

    Henkel Group Consolidated Statement of Income

                      January-March 1999                    January-March, 2000
                      Euro million              %          Euro million              %

    Sales              2,670            100.0%                3,013            100.0%
    Cost of sales 1,451              54.3%                1,628              54.0%
    Gross profit  1,219              45.7%                1,385              46.0%
    Marketing,
    selling and
    distribution
    costs,
    administrative
    expenses incl.
    operating income
    and charges        992              37.2%                1,114              37.0%
    Amortization
    of goodwill         36                1.3%                    39                1.3%
    Restructuring
    Costs                  15                0.6%                    25                0.8%
    Operating profit
    (EBIT)                176                6.6%                  207                6.9%
    Financial items -49              -1.9%                  -21              -0.7%
    Earnings before
    Tax                    127                4.7%                  186                6.2%
    Taxes on income -59              -2.2%                  -76              -2.5%
    Net earnings        68                2.5%                  110                3.7%

    Next important dates:     Publication of Interim Report     on January through June 2000     Monday, August 14, 2000     Publication of Quarterly Report     on January through September 2000     Monday, November 13, 2000     Fall Press Conference and Analysts' Meeting     Monday, November 13, 2000     Press Conference on Fiscal 2000 and DVFA Analysts' Meeting:     Monday, March 19, 2001     Annual General Meeting of     Henkel KGaA:     Monday, April 30, 2001

Contact:
Investor Relations
Magdalena Moll                        Waltraud Müller
Tel: +49-2 11-7 97-16 31        Tel: +49-2 11-7 97-72 78
Fax: +49-2 11-7 98-28 63        Fax: +49-2 11-7 98-28 63

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