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More Henkel Corporate Reporting 2015
We achieved strong financial performance, continued to successfully implement our strategy and laid a strong foundation for our future.
2015 was another successful year for Henkel: We grew all our businesses, increased our profitability and advanced key strategic initiatives. This enabled us to improve our competitiveness and create value for shareholders.
Led by our long-term vision to become a global leader in brands and technologies and guided by our values, we continued to implement our strategy: We want to outperform our competition as a globalized company with simplified operations and an inspired team. Our clear focus on this strategy and the dedication of our employees around the world were critical to delivering strong performance – despite a highly volatile and challenging business environment.
In 2015, the global economy grew only moderately. The growth in emerging markets continued to slow down to around 4 percent. This was mainly attributable to lower growth rates in China and recessions in a number of other emerging markets, such as Brazil. The conflict between Russia and Ukraine affected economic growth and the business environment, as did instability in the Middle East. Mature markets grew around 2 percent, mainly driven by robust economic growth and lower unemployment in the USA. While lower oil prices supported industrial and household demand in many countries, they negatively affected emerging economies that rely on income from oil exports.
In 2015, Henkel Group sales grew to 18,089 million euros, a double-digit increase compared to 16,428 million euros in the previous year. Organic sales growth was 3.0 percent. Adjusted1 earnings before interest rates and taxes (EBIT) grew by 12.9 percent to 2,923 million euros compared to 2,588 million euros. Adjusted1 return on sales improved to 16.2 percent compared to 15.8 percent. Adjusted1 earnings per preferred share (EPS) grew to 4.88 euros, an increase of 11.4 percent compared to 4.38 euros in 2014.
All three business units delivered solid organic growth and improved their profits. Our emerging markets continued to be the main growth drivers and reported strong organic growth of 5.9 percent in 2015. We also achieved positive organic sales growth in our mature markets.
Henkel increased its cash flow from operating activities to 2,384 million euros versus 1,914 million euros in 2014 and continued to invest in its businesses, brands and innovation capabilities. Capital expenditures (excluding acquisitions) rose to 625 million euros from 517 million euros in 2014. In addition, we closed a number of acquisitions across all business units with a total value of more than 300 million euros.
At our Annual General Meeting on April 11, 2016, we will propose to our shareholders a dividend payment of 1.47 euros per preferred share. This represents an increase of 12.2 percent compared to the 1.31 euros paid out in 2015.
In summary, we delivered another excellent year for Henkel in 2015: We recorded double-digit growth rates in sales, profits, earnings per share, share price and our proposed dividend.
We have identified digitalization as a key driver of our business success and made further progress in integrating it into all dimensions of our business and processes. In 2015, we continued to standardize and digitalize our business platforms. We also improved internal networking and collaboration and successfully expanded our market- and customer-facing digital activities.
Strong brands are the backbone of our business. The share of sales generated by our top 10 brands accounted for 61 percent of total sales compared to 59 percent in the previous year. Our top three brands – Persil, Schwarzkopf and Loctite – generated combined sales of 5.9 billion euros. This significant increase over the previous year was driven by continuous innovation, investment in brand equity and expansion into new markets.
Our commitment to innovation is reflected in high innovation rates across all businesses: In 2015, we generated more than 45 percent of sales in our Laundry & Home Care and Beauty Care businesses with products launched within the last three years. In our Adhesive Technologies business, the share of sales from products launched within the last five years was around 30 percent.
Strong relationships with our major retail and industrial customers are a critical success factor for our business and helped us to grow our share of sales with them in 2015.
We aim to expand our footprint in emerging markets while leveraging our strong positions in mature markets. In 2015, sales in emerging markets accounted for 43 percent of total Group sales, slightly below the share in the previous year, mainly due to declining currencies in a number of emerging markets. At the same time, adjusted for currency fluctuations as well as acquisitions and divestments, emerging markets were the main growth driver for Henkel. We will continue to grow our presence in these markets.
In mature markets, we were able to grow our business and leverage our leading market positions. A highlight in 2015 was the successful launch of two of our flagship brands, Persil and Schwarzkopf, in the US retail business. These launches helped us to return to growth and to improve our performance in our largest market.
We aim to continuously simplify our organization in order to improve our operational excellence, increase our efficiency and create competitive advantage. In 2015, we made significant progress in building a scalable business model with standardized, digitalized and accelerated business processes. We successfully established a new organization that manages global supply chain and purchasing activities for all our business units. Its rollout will continue in 2016 and beyond. By the end of 2015, the number of employees in our six shared service centers around the world had climbed to more than 3,000. Key processes for our global organization are handled in these centers. In addition, we launched a new digital networking platform for all employees globally. It complements their digital workplaces and facilitates collaboration across the entire organization.
Excellent performance is based on a clear strategy and a strong global team that drives its execution. In order to excel in a highly dynamic and complex business environment, our diverse and increasingly virtual teams require strong leaders. We aim to continuously improve our leadership team and foster a unique performance culture.
A diverse workforce that blends different cultural backgrounds and work experiences is an important success factor. We actively manage diversity and have made significant progress over the past years. In 2015, the share of employees in emerging markets was 55 percent. The share of female managers was around 33 percent.
2015 was an important milestone on our path toward our long-term sustainability goal: By 2030 we want to triple the value we create for our customers and consumers, for the communities in which we operate and for our company – compared to the environmental footprint of our operations and products.
I am proud to report that we exceeded our interim targets for the first five-year period up to 2015. We improved our overall resource efficiency by 38 percent between 2011 and 2015. This has created a strong foundation to meet our long-term goal by 2030. For the next five years, we have defined a target of 75 percent improvement compared to the base year 2010.
2016 marks another milestone in sustainability for us: We have published our 25th Sustainability Report. Since our first Environment Report in 1992, we have developed it into a detailed and extensive report.
We are committed to leadership in sustainability – this is anchored in our company values. We will continue to be ambassadors for sustainability, drive continuous improvements in all its dimensions and actively engage in dialog with stakeholders on our strategy, decisions and actions.
2015 was an excellent year for Henkel: We achieved strong financial performance, continued to successfully implement our strategy and laid a strong foundation for our future. After three years of our four-year strategy cycle, we are well on track to meet our key targets for 2016.
After 11 years on the Management Board and 8 years as CEO, I have decided to leave Henkel after the Annual General Meeting at the end of April 2016. I am deeply grateful for my time with Henkel, and I am convinced that the company is well positioned to continue to prosper and grow.
I would like to thank all Henkel employees for their dedication and contribution to our excellent business performance. I would also like to thank our supervisory bodies for their valuable advice. I would like to especially thank you, our shareholders, for your continued trust and support. And finally, I would like to thank our customers around the world for their confidence in our company, people, brands and technologies.
Everyone at Henkel is fully committed to our strategy and targets, and we will continue to implement our strategy and deliver excellent performance.
Düsseldorf, January 29, 2016
Chairman of the Management Board
1Adjusted for one-time charges/gains and restructuring charges.