Henkel Strategy Kasper Rorsted Carsten Knobel London Nov 16, - - PowerPoint PPT Presentation

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Henkel Strategy Kasper Rorsted Carsten Knobel London Nov 16, - - PowerPoint PPT Presentation

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Henkel Strategy Kasper Rorsted Carsten Knobel London Nov 16, 2012 1 November 16, 2012 Henkel Strategy Disclaimer This information contains forward-looking statements which are based on current estimates and assumptions made by the

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1 Henkel Strategy November 16, 2012

Henkel Strategy

London Nov 16, 2012 Kasper Rorsted Carsten Knobel

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2 Henkel Strategy November 16, 2012

Disclaimer

This information contains forward-looking statements which are based on current estimates and assumptions made by the corporate management of Henkel AG & Co. KGaA. Statements with respect to the future are characterized by the use of words such as “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, and similar terms. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and results actually achieved by Henkel AG &

  • Co. KGaA and its affiliated companies depend on a number of risks and uncertainties and

may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel's control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the

  • marketplace. Henkel neither plans nor undertakes to update any forward-looking statements.
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3 Henkel Strategy November 16, 2012

Agenda

Henkel Strategy 2 3 Financial Targets 2016 Summary 4 Achievements 2008 - 2012 1

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4 Henkel Strategy November 16, 2012

We set a clear strategic direction with 3 priorities…

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5 Henkel Strategy November 16, 2012

…and ambitious financial targets for 2012

3-5% 14% > 10%

  • Org. Sales Growth (average)

EBIT Margin (2012)* EPS-Growth (CAGR)*

* adjusted

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6 Henkel Strategy November 16, 2012

All strategic priorities were pursued consistently

Strong financial performance Efficiency gains Strengthened global footprint Focus on brands & innovations Customer focus Leadership in

sustainability

Performance culture Improved diversity

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7 Henkel Strategy November 16, 2012

Assumptions Reality GDP Growth 3-4% CAGR 1.8% CAGR (-2.1% – +4.1%) EUR/USD 1.40 – 1.55 1.19 – 1.51 Crude Oil 100 – 120 USD 37 – 127 USD

Volatility

We faced severe headwinds and volatility

  • Financial crisis
  • Political turmoils
  • Material price increases
  • Euro crisis

Headwinds

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8 Henkel Strategy November 16, 2012

Despite all odds, we are underway to reach our targets

3-5% 14% >10%

  • Org. Sales Growth ()
  • Adj. EBIT Margin
  • Adj. EPS-Growth (CAGR)*

* per preferred share ** Arithmetic mean 2009 through 2011 *** 2008 through 2011

Targets 2012 Actuals 1-9 2012 +3.1%** 13.0% +12.8%*** Achievement until 2011 +3.7% 14.3% +19.4% 45% Sales Share EM 42% 43%

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9 Henkel Strategy November 16, 2012

Our progress is built on various drivers…

2008 Shift to Emerging Markets / Strong Mature Markets Shift to Emerging Markets / Strong Mature Markets 2012 Shared Services Shared Services Optimization of Manufacturing Footprint Optimization of Manufacturing Footprint Strengthening of Top Brands / Reduction of Brands Strengthening of Top Brands / Reduction of Brands New Vision & Values New Vision & Values New Sustainability Strategy New Sustainability Strategy Talent Management / Development Round Table Talent Management / Development Round Table Targets beyond 2012 Targets beyond 2012

…and will continue

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10 Henkel Strategy November 16, 2012

Agenda

Henkel Strategy 2 3 Financial Targets 2016 Summary 4 Achievements 2008 - 2012 1

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11 Henkel Strategy November 16, 2012

Core questions of our strategic review

Which megatrends will shape our markets in the years to come? How well is our portfolio positioned against these trends? What actions are necessary to capitalize

  • n these trends?

1 2 3

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12 Henkel Strategy November 16, 2012

  • Consolidation of

suppliers, manufacturers and buyers

  • Shift of market growth to

Emerging Markets

  • Rapidly changing markets &

faster transfer of information

Overview of megatrends and their implications

Trend Description Trend Implication

  • Increasing importance of

competitive size

  • Increasing importance of

Emerging Market presence

  • Increasing importance of
  • perational excellence in

processes and structures

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13 Henkel Strategy November 16, 2012

Overview of megatrends and their implications

  • Increasing importance of

competitive size

  • Increasing importance of

Emerging Market presence

  • Increasing importance of
  • perational excellence in

processes and structures

EM sales Total sales EPS growth

Performance Dimensions 2016 Trend Implication

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14 Henkel Strategy November 16, 2012

Long-term market assessment

  • Active in markets of significant size
  • Markets are attractive in terms of profitability and
  • ffer long-term growth potential
  • Strong potential to expand our businesses

Strong ability to win in attractive markets

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15 Henkel Strategy November 16, 2012

Leverage full potential in all businesses

Consumer Business

Laundry & Home Care Beauty Care Adhesive Technologies

Industrial Business

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16 Henkel Strategy November 16, 2012

Our strategy is based on our vision & values

Customers People Financials Sustainability Family

A global leader in brands and technologies

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17 Henkel Strategy November 16, 2012

  • Leading position
  • Global footprint
  • Leading processes
  • Strong & diverse team
  • Leading financial performance

Key success factors to achieve our vision

  • #1 choice for customers & consumers
  • Innovation leader
  • Powerful brands
  • Balanced portfolio

A global leader in brands and technologies

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18 Henkel Strategy November 16, 2012

  • utperform

globalized simplified inspired

We will as a with and a highly

  • ur competition

company

  • perations

team!

Henkel strategy

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19 Henkel Strategy November 16, 2012

Henkel strategy

Outperform Globalize Simplify Inspire

A global leader in brands and technologies

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20 Henkel Strategy November 16, 2012

20

Sales [bn €]*

Henkel’s financial targets 2016

* incl. continuous portfolio optimization (without major acquisitions & divestments) ** based on consensus

~20

14.1

20

~3.5 bn € ~2.5 bn €

2016 2012** 2008

[bn €]

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21 Henkel Strategy November 16, 2012

10

EM sales [bn €]*

Henkel’s financial targets 2016

~10

5.2

~3 bn € ~2 bn €

10

2016 2012** 2008

* incl. continuous portfolio optimization (without major acquisitions & divestments) ** based on consensus; sales share EM as of 1-9 2012

[bn €]

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22 Henkel Strategy November 16, 2012

10

EPS CAGR [%]*

2.19

[€]

>10% 10%

2016 2012** 2008

* incl. continuous portfolio optimization (without major acquisitions & divestments); adjusted per preferred share ** based on consensus

Henkel’s financial targets 2016

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23 Henkel Strategy November 16, 2012

20

Sales [bn €]*

10

EM sales [bn €]*

10

EPS CAGR [%]*

* incl. continuous portfolio optimization (without major acquisitions & divestments); EPS: adjusted per preferred share

Henkel’s financial targets 2016

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24 Henkel Strategy November 16, 2012

  • Active portfolio mgmt
  • Leverage top brands
  • Powerful innovations
  • Focus on customers

Globalize Simplify Inspire Outperform Outperform

Henkel strategy

A global leader in brands and technologies

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25 Henkel Strategy November 16, 2012

Outperform – Leverage potential in categories

Core Categories

  • Continuous investment in

top positions

  • Investments in category and

new segment expansion

Value Categories Active Portfolio Management Growth Categories

  • Leverage profit potential

with adequate investment

  • Divest/exit businesses

(~500 m€)

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26 Henkel Strategy November 16, 2012

Outperform – Build on strong base

  • Consistent innovation

process

  • Trend-based innovations
  • Customer relationship

management

  • Consumer proximity
  • Focused & balanced brand

portfolio

  • Strong growth of top brands
  • Brand consolidation

Brands Customers Innovations

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27 Henkel Strategy November 16, 2012

Accelerate sales growth with top brands

in % of sales

2016 2008

  • Strong growth driven by innovations & further roll-out of global brands
  • Further portfolio alignment towards umbrella brands

Top10 Other

38% 62% 46% 54% ~60% ~40%

* estimate

2012*

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28 Henkel Strategy November 16, 2012

Consistently drive trend-based innovations

Accessible Luxury Convenience & Superior Quality Performance & Sustainability

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29 Henkel Strategy November 16, 2012

New R&D sites fostering consumer proximity

Planned new site

  • Significant expansion of R&D centers in all emerging regions
  • Further leverage local competence

Johannesburg Moscow* Dubai Toluca* Sao Paulo Pune Seoul

* Significant expansion

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30 Henkel Strategy November 16, 2012

Actively deploy customer focus

Beauty Care Meet-your-Consumer Center Laundry & Home Care Shopper Marketing Adhesive Technologies Technology & Design Partnerships

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31 Henkel Strategy November 16, 2012

  • Leverage strength in

Mature Markets

  • Expand footprint in

Emerging Markets

Globalize Simplify Inspire Outperform

A global leader in brands and technologies

Henkel strategy

Globalize

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32 Henkel Strategy November 16, 2012

Globalize – Focus on regions with high potential

  • Continuation of profitable

growth with strong cost focus

  • Acceleration of growth in

existing Emerging Markets

  • Enter country white spots in

selective Emerging Markets

Mature Markets: Leverage Strengths Emerging Markets: Go Deep Emerging Markets: Enter White Spots

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33 Henkel Strategy November 16, 2012

Mature Markets – Further leverage strengths

  • Outperform our markets
  • Increase brand investments
  • Continue cost focus

2016

  • More top positions
  • Higher profit contribution
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34 Henkel Strategy November 16, 2012

Emerging Markets – Accelerate growth

2016: Balanced EM footprint with 12 EM countries in Henkel Top 20

Turkey Russia Egypt China Brazil Algeria Ukraine Poland Mexico Korea India UAE

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35 Henkel Strategy November 16, 2012

Henkel strategy

Outperform Globalize Simplify Inspire

A global leader in brands and technologies

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36 Henkel Strategy November 16, 2012

Acquisitions

In Line with Strategy Restrictive Selection Boosting Growth

Active use of strong balance sheet

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37 Henkel Strategy November 16, 2012

  • Cost efficiency
  • Best-in-class processes
  • Strong IT focus

Globalize Simplify Inspire Outperform

A global leader in brands and technologies

Henkel strategy

Simplify

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38 Henkel Strategy November 16, 2012

Simplify – Drive operational excellence

  • IT as an enabler to drive

performance

  • Simplified & standardized

global IT structure

  • Foster leading sourcing
  • Continued expansion of

shared services

IT Focus Cost Efficiency Best-in-Class Processes

  • Further improve admin costs
  • Location footprint optimization
  • Further reduce NWC
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39 Henkel Strategy November 16, 2012

Further improve manufacturing footprint From ~175 in 2012 To ~155 in 2016

Further consolidation both in Emerging & Mature Markets

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40 Henkel Strategy November 16, 2012

Foster leading sourcing

Leverage global sourcing

  • Source via global hubs, focus on Emerging Markets
  • Integrated worldwide network of suppliers

Value creation

  • Strengthen strategic relationships
  • Focus on innovation leadership

Improve efficiency & effectiveness

  • Expand e-sourcing to >10% of spend
  • Reduce number of suppliers by ~40%
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41 Henkel Strategy November 16, 2012

Expand shared services: >3,000 employees

Enhance and expand SSC capabilities

Multifunctional SSC to generate competitive advantage

Back Office

transactions-based

Middle Office

rules-based

Front Office

judgement-based

September 30, 2012: 1,300 employees in SSCs

2006 2008 2012+

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42 Henkel Strategy November 16, 2012

Shared services expansion

  • Newly established Business Process Outsourcing hub in Bangalore/India

Bratislava Mexico City Bangalore Manila

BPO: India since 09/12 Captive SSCs

  • Hubs for Arabic speaking region & Greater China/N-E Asia
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43 Henkel Strategy November 16, 2012

Invest ~140m€ in IT until 2016

# of processes

Horizon ~800 Today ~2,200 Past >20,000

Reduce complexity & leverage one IT platform

Supply Chain Mgmt. APO SSC IT Solutions Global integration Promotion Spend Planning & management

Global Henkel IT Platform: Horizon (SAP)

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44 Henkel Strategy November 16, 2012

  • Strong leadership
  • Talent & performance focus
  • Diverse teams

Globalize Simplify Inspire Outperform

A global leader in brands and technologies

Henkel strategy

Inspire

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45 Henkel Strategy November 16, 2012

Diversity

  • Leverage diversity as key

success factor

Inspire – Strengthen our global team

Talent & Performance

  • Attract the best talents
  • Reward performance
  • Set clear expectations
  • Develop strong leaders

Leadership

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46 Henkel Strategy November 16, 2012

Executive Resource Program

  • Virtual pool of ~100 talents on top mgmt. level
  • Annual nomination by defined criteria
  • Personal development plan, high-level

training, selective initiatives, etc.

  • Successful record of promotions and job rotations
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47 Henkel Strategy November 16, 2012

Diverse teams as key success factor

Nationality/Culture Gender Age/Seniority

Foster internationality in our teams Increase female share by systematic career development Leverage experience of senior colleagues

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48 Henkel Strategy November 16, 2012

  • Coherence of success & incentive
  • Target KPIs: OSG, Adj. EBIT %, NWC
  • Linked to individual performance

Performance Potential

Short-term incentive implemented as of 2011:

  • Linked to long-term financial targets
  • Target KPI: EPS
  • Ensures sustainable success & talent retention

20 bn € Sales 10 bn € EM Sales 10 % EPS CAGR

Aligned long-term incentive as of 2013:

Highly competitive reward system

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49 Henkel Strategy November 16, 2012

Henkel strategy

Outperform Globalize Simplify Inspire

A global leader in brands and technologies

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50 Henkel Strategy November 16, 2012

Agenda

Henkel Strategy 2 3 Financial Targets 2016 Summary 4 Achievements 2008 - 2012 1

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51 Henkel Strategy November 16, 2012

Henkel’s financial targets 2016

20

Sales [bn €]*

10

EM sales [bn €]*

10

EPS CAGR [%]*

* incl. continuous portfolio optimization (without major acquisitions & divestments); EPS: adjusted per preferred share

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52 Henkel Strategy November 16, 2012

Internal

  • Ongoing adaptation of our

structures to the market

  • Continuous portfolio management,

including small & mid-sized acquisitions and divestments (divestment/exit: ~500 m€) External

  • Avg. GDP growth:
  • Global: 3.3% p.a.
  • Western Europe: 1.8% p.a.
  • USD at 1.30 USD/€
  • Material price development:

mid-single digit p.a.

Key assumptions for 2016 targets

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53 Henkel Strategy November 16, 2012

Henkel’s financial targets 2016 Step-change in scale

20

Sales [bn €]*

* incl. continuous portfolio optimization (without major acquisitions & divestments)

  • Mid-single digit CAGR until 2016
  • Outperform – Strong investments in categories
  • Globalize – Focus on regions with high potential
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54 Henkel Strategy November 16, 2012

Henkel’s financial targets 2016 Improved footprint

10

EM sales [bn €]*

* incl. continuous portfolio optimization (without major acquisitions & divestments)

  • High single-digit CAGR until 2016
  • Go deep in existing countries
  • Selectively enter country white spots
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55 Henkel Strategy November 16, 2012

Henkel’s financial targets 2016 Excellence in value creation

10

EPS CAGR [%]*

* incl. continuous portfolio optimization (without major acquisitions & divestments); adjusted per preferred share

  • Balanced value creation through top & bottom

line growth

  • Standardization & complexity reduction along

entire value chain to drive profitability

  • Continue strong cash orientation & financial

discipline to maintain “A flat/A2”-rating

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56 Henkel Strategy November 16, 2012

Excellence in value creation

Cash-Return Options Acquisitions Organic Performance

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57 Henkel Strategy November 16, 2012

Excellence in value creation

Cash-Return Options Acquisitions Organic Performance

  • Invest in our businesses
  • Enhance profitability
  • Further reduce NWC
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58 Henkel Strategy November 16, 2012

  • Increase capex spend by >40%* to ~2 bn €
  • Strong focus on IT with investment of ~140 m€
  • Structural shift to Emerging Markets
  • Strengthen top brands & innovations via higher

marketing investments

Invest in our businesses

* total 2013-2016 vs. 2009-2012

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59 Henkel Strategy November 16, 2012

Enhance profitability

  • Drive gross margin via innovation & pricing power
  • Further optimize production footprint by ~20 locations
  • Expand shared services to >3,000 employees
  • Continue focus on leaner structures

Levers

Future Levers

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60 Henkel Strategy November 16, 2012

Further reduce NWC

  • Regional cross-divisional initiatives

in % of sales

  • 1,2pp

6.6

2008

11.7

5.1 2016

~5.0

~1.6 1-9 2012

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61 Henkel Strategy November 16, 2012

Organic performance resulting in higher cash flow

Holistic value creation focus increases strategic options

NWC % sales Effective tax rate Profitability Invest Free cash flow

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62 Henkel Strategy November 16, 2012

Excellence in value creation

Cash-Return Options Acquisitions Organic Performance

  • Accelerate growth potential
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63 Henkel Strategy November 16, 2012

Acquisitions

In Line with Strategy

  • Adhesives: Technology

leadership

  • Laundry & Home Care/Beauty

Care: Regions & categories

  • Restrictive evaluation and

selection process

  • Centralized decision and

execution

  • Integrated part of our
  • verall strategy
  • Clear prioritization of

categories and regions

Restrictive Selection Boosting Growth

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64 Henkel Strategy November 16, 2012

Excellence in value creation

Cash-Return Options Acquisitions Organic Performance

  • Share buy-back
  • Dividend payout
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65 Henkel Strategy November 16, 2012

Excellence in value creation

Priority: Grow our business No change so far

Cash-Return Options Acquisitions Organic Performance

 

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66 Henkel Strategy November 16, 2012

Excellence in volatile environment

Henkel well prepared to achieve next level of targets

  • Euro crisis
  • EM growth slowdown
  • Market cyclicality
  • FX volatility
  • Competitive pressure

Excellence in value creation Volatile Environment Performance Drivers

  • Organic focus
  • Operational excellence
  • Acquisitions/divestments
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67 Henkel Strategy November 16, 2012

Agenda

Henkel Strategy 2 3 Financial Targets 2016 Summary 4 Achievements 2008 - 2012 1

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68 Henkel Strategy November 16, 2012

  • utperform

globalized simplified inspired

We will as a with and a highly

  • ur competition

company

  • perations

team!

Henkel strategy

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69 Henkel Strategy November 16, 2012

Strategy & financial targets 2016

20 bn € Sales 10 bn € EM Sales 10 % EPS CAGR

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70 Henkel Strategy November 16, 2012

  • Excellence is the result of always striving to do better
  • We transform our plans into concrete actions
  • We are passionate about achieving our targets
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71 Henkel Strategy November 16, 2012

Passionate to achieve our targets

Kasper Rorsted CEO Carsten Knobel CFO Hans Van Bylen Beauty Care Kathrin Menges Human Resources Bruno Piacenza Laundry & Home Care Jan-Dirk Auris Adhesive Technologies

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72 Henkel Strategy November 16, 2012

Henkel – Strategic framework A global leader in brands and technologies

Customers People Financials Sustainability Family

Values Vision Targets

20 bn €

SALES

10 bn €

EM SALES

10 %

EPS CAGR

Strategy

Outperform Simplify Inspire Globalize

Vision Values Strategy Targets

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73 Henkel Strategy November 16, 2012

Thank You!