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Henkel Group Annual Report 2007 A World of Customers Regional and global Consumer insights Trust Brands portfolio Regional and global Reliability Solutions Regional and Global Quality Advice Wealth of brands Brands Premium brand products Performance Innovations Success Quality Reliability Individual advice Internationality Customized sollutions Quality Wealth of brands Innovative strength Service Strong sales team Sustainability Solutions Added value Wide product range Service Solutions Added value Regional and global Quality from Henkel Group KEY FINANCIALS HIGHLIGHTS in million euros 2006 2007 +/– Sales 12,740 13,074 2.6 % » Organic sales growth: Operating profit (EBIT) 1,298 1,344 3.5 % +5.8 percent Return on sales (EBIT) in % 10.2 10.3 0.1 pp » Gross margin: +1.1 percentage Net earnings 871 941 8.0 % points to 46.4 percent Earnings after minority interests 855 921 7.7 % » Return on sales (EBIT) adjusted for 1) Earnings per preferred share in euros 1.99 2.14 7.5 % exceptional gains and restructuring Return on capital employed (ROCE) in % 14.5 15.4 0.9 pp charges: +0.6 percentage points to Capital expenditures on property, 10.5 percent plant and equipment 431 470 9.0 % » EPS adjusted for exceptional gains Research and development expenses 340 350 2.9 % Employees (annual average) number 51,716 52,303 1.1 % and restructuring charges: +14.5 Dividend per ordinary share1) in euros 0.48 0.512) 6.3 % percent 3) Dividend per preferred share1) in euros 0.50 0.532) 6.0 % » Net working capital as a percent- 1) basis: share split (1:3) of June 18, 2007 pp = percentage points age of sales: –1.8 percentage points 2) proposed 3) inventories + trade accounts receivable – trade accounts payable to 11.5 percent SALES BY BUSINESS SECTOR1) EBIT BY BUSINESS SECTOR2) Laundry & Adhesives Laundry & Corporate 2 % Home Care 32 % Technologies 43 % Home Care 31 % Adhesives Technologies 43 % Cosmetics/Toiletries 23 % Cosmetics/Toiletries 26 % SALES BY REGION1) EBIT BY REGION2) Europe/Africa/ Europe/Africa/ Corporate 2 % Middle East 65 % Asia-Pacific 6 % Middle East 69 % Asia-Pacific 8 % Latin America 4 % Latin America 5 % North America 21 % North America 20 % 2) 1) including Corporate; for reconciliation with Henkel Group: excluding Corporate Corporate = sales and services not assignable to the individual business sectors Business Sectors at a Glance Laundry & Home Care Cosmetics/Toiletries Adhesives Technologies Leading positions worldwide Leading positions worldwide Leading our markets worldwide Driving growth through innovation Achieving profitable growth with at- Driving growth through innova- and strong brand equities tractive product innovations aligned tions and acquisitions to exacting consumer demands Expanding our world market posi- Developing new applications and tion from a strong European and Expanding our strong positions growth potential in all regions of North American base in Europe and North America and the world selectively extending our presence in the growth regions KEY FINANCIALS KEY FINANCIALS KEY FINANCIALS in million euros 2006 2007 +/- in million euros 2006 2007 +/- in million euros 2006 2007 +/- Sales 4,117 4,148 0.8 % Sales 2,864 2,972 3.7 % Sales 5,510 5,711 3.6 % Operating profit Operating profit Operating profit (EBIT) 449 459 2.1 % (EBIT) 359 372 3.8 % (EBIT) 579 621 7.3 % Return on sales Return on sales Return on sales (EBIT) in % 10.9 11.1 0.2 pp1) (EBIT) in % 12.5 12.5 0.0 pp1) (EBIT) in % 10.5 10.9 0.4 pp1) Return on Return on Return on capital employed capital employed capital employed (ROCE) in % 15.2 16.7 1.5 pp1) (ROCE) in % 15.4 16.7 1.3 pp1) (ROCE) in % 15.9 16.9 1.0 pp1) 1) percentage points New Products in 2007 New Products in 2007 New Products in 2007 » Bref Jumbo » Activ Dr. Hoting » Adhesin FiberPlus » Bref Power Universal Cleaner » BLONDME » Bonderite 2718 » Coordinated European relaunch » Bonacure Styling Treat » Dorus FD 150/6 LS of the premium detergent brands » Diadermine Lift+ Sun Effect » Granocoat X Persil, Le Chat, Dixan and Wipp » Diadermine Wrinkle Expert 3D » Hysol QMI 708 Express with revamped formu- » Diadermine Age ExCellium » Hysol QMI 5100/5200 lations, packaging and design » Dial Yogurt Hand Wash » Loctite 435/438 aesthetics » Fa Natural & Pure, Natural & Soft » Loctite Cure Jet LED » Mir designer version » Fa Foam Soap » Metylan Power Granulate plus » “Persil 100 Years” Centennial » Gliss Kur Oil Nutritive » MiraFoil Edition » got2b styl-tini » P3 Disperse » Perwoll Black Contrast » Natural & Easy Grey Expert » Pattex PL600 » Perwoll Total Care » RGX Body Spray » Sista Universal Seal and Repair » Purex Soft Sensitive Skin » Schauma Kiwi » Sista Easy Silicone » Purex Natural Elements » Schwarzkopf Men Perfect » Tangit FP Fire Protect System » Somat 7 » Taft Volume Power » Thomsit DS 40 » Vernel One Rinse Only » Taft Sensitive » Vernel Glamour Edition » WC Frisch Complete + 5.5 % + 5.8 % + 6.5 % organic sales growth organic sales growth organic sales growth Major Events in 2007 Henkel Group Laundry & Cosmetics/ Adhesives Home Care Toiletries Technologies Successful through Henkel to acquire Nati- innovations onal Starch businesses One of the focuses of 2007 Henkel has concluded an was our worldwide inno- agreement involving a vation offensive. With new back-to-back transaction instruments – such as the with Akzo Nobel allowing intranet-based “Innovation us to acquire the Adhesives 25 years of the “Fritz 100 years of Persil Lounge”, our international and Electronic Materials Henkel Award for Inno- In 2007, Henkel’s most businesses from National va tion” successful and innovative Starch in the course of 488 prize-winners, over quality brand celebrated a 2008. The agreed purchase 100 Henkel innovations – major anniversary: Persil price is 2.7 billion pounds this is the balance from 25 turned 100. Persil was sterling (close to 4 billion years of the “Fritz Henkel launched onto the mar- euros). Award for Innovation”, an ket in 1907 as the first accolade exclusively reser- self-acting detergent in Common markets, ved for Henkel innovations Germany. In 2007, Persil faster growth that have succeeded in was once again extensively April 1, 2007 saw the birth becoming established in re-invented as one of the of our new business sector their markets. world’s leading premium ideas community – we suc- Adhesives Technologies, a detergent brands. ceeded in creating nume- merger of the two previous rous innovative product business sectors Consumer concepts. Working close- and Craftsmen Adhesives ly with consumers and and Henkel Technologies. customers and using the Working together, these results of our thorough businesses will be able to trend research activities, develop their markets more Henkel share split we identified three main effectively and achieve In order to further en- fields of focus for the fu- even faster growth. Alois hance the liquidity and ture: Nature, Anti-Aging, Linder heads up the new attractiveness of Henkel New Purex concentrate and Men as a target group. business sector. Jochen shares, our Annual Ge- Its ingredients come from Our successful innova- Krautter, the former head neral Meeting resolved to nature and, as an ultra- tions in 2007 included, of Henkel Technologies, implement a share split in concentrate, Purex Natural for example, the body ca- has now retired after 34 the ratio 1:3. The quotati- Elements enables savings re series Fa Natural & Pu- years with Henkel. on switch took place on to be made in both pa- re and Fa Natural & Soft, Monday, June 18, 2007. ckaging materials and our anti-aging skin care transport weight. Just one product Diadermine Age of Henkel’s responses to ExCellium and the first growing environmental hair toning gel especially awareness in the USA. for men, Schwarzkopf Men Perfect. Contents We are customer-driven. 01 The Company 02 Preface This is the first of our ten cor- 06 Report of the Supervisory Board porate values. For more than 08 Management Board 10 Successful with our Customers 130 years, we have based our 12 Top Brands 14 Innovations success on our insights into the 16 Shares and Bonds needs of consumers. And it is 21 Group Management Report: this knowledge that generates Corporate Governance The Company our innovative power. Innova- 32 Group Management Report Subindex 33 Group Management Report tions enable us to hone our 33 Operational Activities competitive edge to the benefit 37 Business Performance 41 Assets and Financial Analysis of our customers in both the 44 Employees retail and industrial segments. 46 Procurement 46 Production Quality from Henkel – 47 Research and Development for a world of customers. 49 Marketing and Distribution 50 Sustainability/Corporate Social Responsibility 52 Business Sector Performance 65 Risk Report 69 Outlook for the Henkel Group 70 Subsequent Events 71 Consolidated Financial Statements Subindex 72 Consolidated Financial Statements 72 Consolidated Statement of Income 73 Consolidated Balance Sheet 74 Consolidated Cash Flow Statement 75 Notes to the Consolidated Financial Statements 124 Auditors’ Report 125 Corporate Management of Henkel KGaA 129 Further Information 130 Responsibility Statement 131 Quarterly Breakdown of Key Financials 132 Ten Year Summary Credits, Calendar Annual Report 2007 1 Preface Once again in fiscal 2007, our 131st year, we were able to add to the Henkel success story with a further improvement on the record results achieved in 2006. As always, this accomplish- ment derives from our ability to satisfy the needs and desires of our customers to the best possible degree with strong brands and innovative technologies. Robust organic growth in 2007 enabled us to further increase both sales and operating profit, despite an often difficult environment. Raw material prices rose once again, while an appre- ciable decline in the construction industry in North America was exacerbated by the crisis in the mortgage and real estate sector and uncertainties in the financial markets. These factors exerted an adverse effect on major customers served by our industrial business – and thus our- selves.
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