Henkel is one of those companies that is represented in practically every laundry room or cleaning department in this republic and yet hardly makes a fuss about itself: The group stands for brands such as Persil, Schwarzkopf or Pritt – and is still majority owned by the heirs of Fritz Henkel, who was the one Detergent factory founded in 1876.
But now the company is announcing the biggest renovation for several years. Because compared to consumer goods companies such as L’Oréal or Unilever (“Dove”, “Coral”), Henkel is lagging behind. The Düsseldorf-based company reports significantly lower profits than before the pandemic for both the past year and the outlook for the new year. Inversely: Henkel shares are worth a good 40 percent less on the stock exchange than they were five years ago.
On the one hand, the many plastic-packaged shampoos and cleaning products on the shelves of supermarkets and cosmetics chains compete with so many other mass-produced products. On the other hand, during the Corona crisis, raw material and transport costs are increasing to an “unprecedented” extent, complains CEO Carsten Knobel, who has been working for Henkel for more than 25 years.
So now the group wants to merge its detergent and cleaning agent division around Persil or Pril with the cosmetics business around Schwarzkopf or Fa. Both divisions suffered in 2021 from precisely those high raw material prices. And both face similar challenges, from e-commerce to environmental protection.
When it comes to large acquisitions, Henkel has not had a lucky hand lately
Knobel hopes for “significant synergies”, which means in German: The company wants to save double expenses for administration, sales or advertising in the future. It is vaguely said that this will also affect employees worldwide. “We will now start talks with the employee representatives in the respective countries very quickly,” says Knobel. So far, the Persil and Schwarzkopf divisions together have around 20,000 employees worldwide, 15 percent of them in Germany.
Now one can argue that other companies have restructured more vigorously than Henkel in recent years. Siemens and Bayer, for example, have outsourced several areas and listed them on the stock exchange as independent companies.
Is Henkel also about to split up soon, into detergents and cosmetics on the one hand and the adhesives business with brands like Pritt or Loctite on the other, which is more profitable and is currently growing faster? “The answer is very clear: no,” says Knobel. The new alliance around Persil and Schwarzkopf is “strong enough to remain part of Henkel”. The fact that the group is represented in different markets has always helped to get through crises. And, according to the CEO: “Of course, the combined size also gives us opportunities to finance larger acquisitions.”
As far as such large acquisitions are concerned, the Düsseldorf company has not had a lucky hand lately. For example, in 2020 they were not awarded the contract when the Coty group sold the hair care brand Wella. The group, which would have gone well with Henkel’s hairdressing business, went to financial investor KKR instead.
On Friday, Henkel temporarily lost ten percent in value on the stock exchange
The announcements on Friday were badly received on the stock exchange, Henkel temporarily lost ten percent in value. Knobel attributes this primarily to the sober outlook that his company has now also given: According to this, the profit margin this year will at best remain at the level of the crisis years 2020 and 2021, rather be even lower. Henkel refers to the demand for raw materials or transport, which in many places is met with a shortage of supply, for example in shipping containers or in air freight.
Carsten Knobel has been managing the Henkel company for two years.
(Photo: NILS HENDRIK MUELLER/Henkel/oh)
The Henkel leadership had tried to garnish the bad news with the announcement of a share buyback, the first in the company’s history. When corporations buy their own shares, it tends to make the remaining shares more valuable because the profits are distributed among fewer shareholders. But sometimes a stock buyback can give the impression that a company doesn’t know where to put its money.
Knobel, on the other hand, interprets the buyback as an expression of the fact that the group believes in the potential of its business. “We have a very strong balance sheet and are practically debt-free,” says the 53-year-old, who has been at the top of the board since the beginning of 2020. Henkel could therefore also tackle takeovers despite the share buyback.
In view of all the upheavals, Knobel tries even more to invoke the tradition of his company. “Yes,” says the CEO at the beginning of his remarks, “Persil will continue to be produced in Düsseldorf.”