“Fiscal 2024 was once again marked by major challenges and many economic uncertainties. Nevertheless, we have consistently advanced Henkel over the past year and reached or even exceeded important milestones. Above all, the very good business results for 2024 demonstrate the successful implementation of our purposeful growth agenda,” said Henkel CEO Carsten Knobel. “In 2024, we achieved good organic sales growth and very significantly improved our profitability – with an outstanding margin increase of 2.4 percentage points, supported by an excellent gross margin development, and with an extraordinary increase in earnings per preferred share of 25 percent. The targeted enhancement of our products' value for customers and consumers was a key driver of our earnings improvement. Additionally, savings from the Consumer Brands integration, as well as the announced portfolio optimization measures contributed to these strong results.”
“At the same time, it was very important that we continue to maintain a strong focus on investing in our businesses and future growth – for example, through increased marketing activities in the consumer business and successful innovations in both business units. We want our shareholders to participate in the Company’s successful development. Therefore, we will propose a double-digit percentage increase in the dividend at the Annual General Meeting. We have also decided on a new share buyback program with a volume of up to 1 billion euros,” Carsten Knobel continued.
“The results of the past year are a clear evidence that Henkel’s transformation is progressing successfully and that, with our strategic agenda for purposeful growth, we are on the right path to best position the Company for the future,” summarized Carsten Knobel. “This is also reflected in the outlook for fiscal 2025, in which we expect further sales and earnings growth despite a business environment that remains challenging. I would like to thank all Henkel employees for their outstanding performance. Through their teamwork and extraordinary commitment, we have once again successfully navigated our company through a challenging year.”
Outlook 2025
Following moderate growth momentum in 2024, the global economic output is again anticipated to be moderate in 2025. This assumes a moderate increase in both industrial demand and consumer demand in key areas of the consumer goods business for Henkel. Furthermore, based on current estimates, global inflation is expected to continue to abate in fiscal 2025 compared to previous years, with interest rates also expected to fall.
With regard to the prices for direct materials, Henkel expects an increase in the low to mid-single-digit percentage range compared to the annual average of 2024. The translation of sales in foreign currencies is expected to have a neutral to negative effect in the low single-digit percentage range.
Furthermore, the volatility and uncertainty in regards to the overall macroeconomic and geopolitical environment is expected to remain high throughout the year.
Considering these assumptions, Henkel expects to generate organic sales growth of between 1.5 and 3.5 percent in fiscal 2025. Organic growth of between 2.0 and 4.0 percent is expected for the Adhesive Technologies business unit and between 1.0 and 3.0 percent for Consumer Brands. Adjusted return on sales (adjusted EBIT margin) is expected in the range of 14.0 to 15.5 percent. For Adhesive Technologies adjusted return on sales is expected to be between 16.0 and 17.5 percent and for Consumer Brands between 13.5 and 15.0 percent. For adjusted earnings per preferred share (EPS) at constant exchange rates, an increase in the low to high single-digit percentage range is expected.
Thereby, a slower start to the year is expected. However, it is also expected that organic sales growth will accelerate in the course of the year, leading to a stronger second half of fiscal 2025 versus the first half. This holds true for both business units. The reasons are a currently challenging industrial environment and subdued market growth and consumer sentiment in some of our markets, especially in North America.
In Consumer Brands, high prior-year organic sales growth comparables particularly due to strong innovation product launches in the first half of 2024 need to be considered. In 2025, innovation launches will be more skewed towards the second half of 2025. In addition, non-recurring operational topics in our supply chain in connection with the finalization of the 1-1-1 approach as well as promotional phasing will also contribute to Q1 organic sales growth and volumes coming in below prior year. For Q1 organic sales growth is expected to be between -2 and -4 percent, while pricing is expected to be positive. For full year 2025, overall positive organic sales growth is expected, driven by both volume and price.
For the full year 2025, a further margin and thus profitability improvement versus the prior year is expected for both business units and thus the Group. The development in the first two months of fiscal 2025 shows that Henkel and both business units are well underway.
Group sales and earnings performance in fiscal 2024
Henkel Group sales reached 21,586 million euros in fiscal 2024, a nominal increase of 0.3 percent compared to the prior year. Foreign exchange effects had a negative impact of -1.8 percent on sales. Adjusted for these foreign exchange effects, sales growth was 2.1 percent. Acquisitions/divestments had a slightly negative impact of -0.4 percent on sales, which was mainly due to the disposal of our business activities in Russia in 2023. Organic sales growth, i.e. adjusted for foreign exchange effects and acquisitions/divestments, showed a good development at 2.6 percent. This was driven by both good price and positive volume development.
The Adhesive Technologies business unit generated good organic sales growth of 2.4 percent, driven in particular by the Mobility & Electronics business area. The Consumer Brands business unit achieved strong organic sales growth of 3.0 percent, mainly driven by the Hair business area.
Adjusted operating profit (adjusted EBIT) increased significantly by 20.9 percent to 3,089 million euros (previous year: 2,556 million euros).
Adjusted return on sales (adjusted EBIT margin) in fiscal 2024 was also significantly higher year on year at 14.3 percent (2023: 11.9 percent).
Adjusted earnings per preferred share increased significantly by 23.2 percent to 5.36 euros (previous year: 4.35 euros). At constant exchange rates, adjusted earnings per preferred share increased by 25.1 percent.
Net working capital as a percentage of sales amounted to 3.0 percent, which was slightly up year on year (2023: 2.6 percent).
Free cash flow totaled 2,362 million euros, representing a decrease compared to the prior-year figure (2023: 2,603 million euros), the latter having been positively impacted by a normalization of the net working capital.
At -93 million euros, the net financial position was slightly below the prior-year level, due in particular to payments made for acquisitions (December 31, 2023: 12 million euros).
The Management Board, Supervisory Board and Shareholders’ Committee will propose to the Annual General Meeting on April 28, 2025, a dividend increase of 10.3 percent compared to the previous year, amounting to 2,04 euros per preferred share and 2.02 euros per ordinary share (+10.4 percent). This equates to a payout ratio of 37.9 percent, which is within the target bandwidth of 30 to 40 percent. The increase in dividend is possible thanks to the very good financial performance in the past fiscal year and the strong financial base of the Henkel Group.
Business unit performance in fiscal 2024
Sales in the Adhesive Technologies business unit totaled 10,970 million euros in fiscal 2024, and thus increased by 1.7 percent year on year in nominal terms. While foreign exchange rate effects had a negative impact of -1.8 percent, acquisitions/divestments increased sales by 1.1 percent. Organically, sales increased by 2.4 percent. This sales growth was particularly driven by a strong volume development in the second half of the year compared to the prior year, mainly due to increased demand in some key end markets. Prices remained flat compared to the previous year. At 1,817 million euros, the adjusted operating profit recorded a double-digit percentage increase year on year, representing a new high for the business unit. The adjusted return on sales increased significantly year on year by 190 basis points to 16.6 percent.
Sales in the Consumer Brands business unit totaled 10,467 million euros in the year under review, -0.9 percent below the prior year in nominal terms. Foreign exchange effects reduced sales by -1.8 percent. Acquisitions/divestments also had a negative impact of -2.0 percent on sales, with the disposal of our business activities in Russia in April 2023 remaining the primary cause. Organically, sales increased by 3.0 percent. This sales growth was driven by very strong price development, while volumes declined due primarily to ongoing portfolio optimization measures. The adjusted operating profit amounted to 1,419 million euros, significantly above the previous year (1,115 million euros). The adjusted return on sales reached 13.6 percent and thus increased significantly by 300 basis points compared to the previous year.
Major progress in the transformation
Over the past few years, Henkel has profoundly changed in many areas and consistently implemented its strategic agenda for purposeful growth. Key drivers of the long-term and sustainable success are the willingness and determination for continuous transformation. The aim is to achieve a sustainable improvement in results. To achieve this, the Company must constantly change and further develop. And this is happening in all areas.