Creating Sustainable Value Annual Report 2016 Contents Our Business Units
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Henkel Annual Report 2016 Creating sustainable value sustainable Creating Annual Report Annual Report 2016 Contents Our business units The Company Adhesive Technologies 2 Foreword 6 Report of the Supervisory Board Our top brands 12 Henkel 2020+ 14 Management Board Sales Combined management report 28 Management report subindex + 2.8 % 29 Corporate governance 52 Shares and bonds organic 57 Fundamental principles of the Group sales growth 63 Economic report 88 Business units 100 Henkel AG & Co. KGaA (condensed version according to the German Commercial Code [HGB]) 104 Risks and opportunities report 112 Forecast Beauty Care Our top brands Consolidated financial statements 114 Consolidated financial statements Sales subindex 116 Consolidated statement of financial position 118 Consolidated statement of income + 2.1 % 118 Consolidated statement of comprehensive income organic 119 Consolidated statement of changes sales growth in equity 120 Consolidated statement of cash flows 121 Notes to the consolidated financial statements 179 Subsequent events 180 Independent Auditor’s Report Laundry & Home Care 183 Responsibility statement by the Personally Liable Partner Our top brands 184 Corporate management bodies of Henkel AG & Co. KGaA Sales Further information 188 Quarterly breakdown of key financials 189 Multi-year summary + 4.7 % 190 Index of tables and graphs 192 Glossary organic 194 Credits sales growth 195 Contacts Financial calendar Key financials Adhesive Technologies 4 Sales Adhesive Technologies 5 in million euros in million euros 2015 2016 +/– 2012 8,256 Sales 8,992 8,961 – 0.3 % 2013 8,117 Operating profit (EBIT) 1,462 1,561 6.8 % Adjusted 1 operating profit (EBIT) 1,534 1,629 6.2 % 2014 8,127 Return on sales (EBIT) 16.3 % 17.4 % 1.1 pp 2015 8,992 Adjusted 1 return on sales (EBIT) 17.1 % 18.2 % 1.1 pp 2016 8,961 pp = percentage points 1 Adjusted for one-time charges/gains and restructuring expenses. 0 2,000 4,000 6,000 8,000 10,000 Key financials Beauty Care 6 Sales Beauty Care 7 in million euros in million euros 2015 2016 +/– 2012 3,542 Sales 3,833 3,838 0.1 % 2013 3,510 Operating profit (EBIT) 561 526 – 6.2 % Adjusted 1 operating profit (EBIT) 610 647 6.1 % 2014 3,547 Return on sales (EBIT) 14.6 % 13.7 % – 0.9 pp 2015 3,833 Adjusted 1 return on sales (EBIT) 15.9 % 16.9 % 1.0 pp 2016 3,838 pp = percentage points 1 Adjusted for one-time charges/gains and restructuring expenses. 0 2,000 4,000 6,000 8,000 10,000 Key financials Laundry & Home Care 8 Sales Laundry & Home Care 9 in million euros in million euros 2015 2016 +/– 2012 4,556 Sales 5,137 5,795 12.8 % 2013 4,580 Operating profit (EBIT) 786 803 2.2 % Adjusted 1 operating profit (EBIT) 879 1,000 13.7 % 2014 4,626 Return on sales (EBIT) 15.3 % 13.9 % – 1.4 pp 2015 5,137 Adjusted 1 return on sales (EBIT) 17.1 % 17.3 % 0.2 pp 2016 5,795 pp = percentage points 1 Adjusted for one-time charges/gains and restructuring expenses. 0 2,000 4,000 6,000 8,000 10,000 Highlights 2016 Sales EBIT EPS Dividend + 3.1 % 16.9 % 5.36 euros 1.62 euros organic adjusted 1 return on sales (EBIT): adjusted 1 earnings per preferred dividend per sales growth up 0.7 percentage points share (EPS): up 9.8 percent preferred share 2 Key financials 1 2012 2013 2014 2015 2016 +/– in million euros 2015 – 2016 Sales 16,510 16,355 16,428 18,089 18,714 3.5 % Operating profit (EBIT) 2,199 2,285 2,244 2,645 2,775 4.9 % Adjusted 1 operating profit (EBIT) 2,335 2,516 2,588 2,923 3,172 8.5 % Return on sales (EBIT) in % 13.3 14.0 13.7 14.6 14.8 0.2 pp Adjusted 1 return on sales (EBIT) in % 14.1 15.4 15.8 16.2 16.9 0.7 pp Net income 1,526 1,625 1,662 1,968 2,093 6.4 % Attributable to non-controlling interests 46 36 34 47 40 – 14.9 % Attributable to shareholders of Henkel AG & Co. KGaA 1,480 1,589 1,628 1,921 2,053 6.9 % Earnings per preferred share in euros 3.42 3.67 3.76 4.44 4.74 6.8 % Adjusted 1 earnings per preferred share in euros 3.63 4.07 4.38 4.88 5.36 9.8 % Adjusted 1 earnings per preferred share in euros (2012 before IAS 19 revised) 3.70 4.07 4.38 4.88 5.36 9.8 % Return on capital employed (ROCE) in % 18.7 20.5 19.0 18.2 17.5 – 0.7 pp Dividend per ordinary share in euros 0.93 1.20 1.29 1.45 1.60 2 10.3 % Dividend per preferred share in euros 0.95 1.22 1.31 1.47 1.62 2 10.2 % pp = percentage points 1 Adjusted for one-time charges/gains and restructuring expenses. 2 Proposal to shareholders for the Annual General Meeting on April 6, 2017. Sales by business unit 2 Sales by region 3 Japan / Australia / Beauty Care 20 % Corporate 1 % New Zealand 3 % Corporate 1 % North America 22 % 2016 2016 Laundry & Adhesive Emerging Home Care 31 % Technologies 48 % Western Europe 32 % markets 1 42 % Corporate = sales and services not assignable 1 Eastern Europe, Africa / Middle East, Latin America, to the individual business units. Asia (excluding Japan). Our purpose Creating sustainable value Our vision Our values Leading with our innovations, We put our customers and brands and technologies. consumers at the center of what we do. Our mission Serving our customers and We value, challenge and reward consumers worldwide as the our people. most trusted partner with leading positions in all relevant We drive excellent sustainable markets and categories – as a financial performance. passionate team united by shared values. We are committed to leadership in sustainability. We shape our future with a strong entrepreneurial spirit based on our family business tradition. 2 Henkel Annual Report 2016 “ Our ambition is to generate more profitable growth Hans Van Bylen Chairman of the and to become more customer-focused, innovative, Management Board agile and digital.” Henkel Annual Report 2016 3 2016 was a very special year for Henkel. We celebrated our 140th birthday, agreed and closed the second-largest acquisition in our company’s history, achieved new record levels of sales and earnings, met our financial targets for the year – and at the end of 2016, we announced our ambitions and strategic priorities for 2020 and beyond. We are committed to continue our successful development and create sustainable value based on a strong foundation: We hold top positions with our different businesses in key markets, categories and industry segments around the world and a well-diversified portfolio with strong brands and leading technologies. We have an excellent track record of financial performance and a strong reputation in the financial markets. As a recognized leader in sustainability, we drive progress along the entire value chain – from our suppliers to our customers and consumers. All of this is only possible thanks to a highly engaged and passionate global team, united by a common purpose and strong values. Strong performance in 2016 In fiscal 2016, we achieved new record levels for sales and earnings and met our financial targets for the year in a challenging and volatile market environment. Our shares again out- performed the DAX. Henkel Group sales grew to 18,714 million euros compared to 18,089 million euros in the previous year. Organic sales growth was 3.1 percent. Adjusted ¹ earnings before interest and taxes (EBIT) + 3.1 % grew by 8.5 percent to 3,172 million euros compared to 2,923 million euros. Adjusted return on organic sales growth. sales improved to 16.9 percent compared to 16.2 percent. Adjusted earnings per preferred share grew to 5.36 euros, an increase of 9.8 percent compared to 4.88 euros in the previous year. 16.9 % All three business units again delivered solid organic growth and further improved their results adjusted 1 return in 2016. Emerging markets generated total sales of 7,814 million euros and strong organic on sales. growth of 6.8 percent. We also achieved positive organic sales growth in our mature markets. At our Annual General Meeting on April 6, 2017, we will propose to our shareholders a dividend + 9.8 % payment of 1.62 euros per preferred share. This represents an increase of 10.2 percent compared adjusted 1 earnings to the 1.47 euros paid out in 2016. per preferred share. In summary, 2016 was a very important and successful year for Henkel: We delivered a strong business performance, strengthened our company and laid the foundation to continue our successful development in the future. 2016 was also a special year for me, personally. In January, the Shareholders’ Committee decided to name me as new Chairman of the Management Board of Henkel. After more than 30 years with the company and more than 10 years on the Management Board, I was honored by the trust expressed through this appointment. On May 1, 2016, I took on my new role, committed to continue the successful development of our company in the future together with our strong global team. At this point, I would also like to thank Kasper Rorsted, Chairman of the Management Board of Henkel from 2008 until 2016, for his significant contribution to Henkel’s successful evolution during this period.