Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
37
Annual Report 2009
Group management report » Value-based management and control system
Weighted average cost of capital (WACC)
2009 from 2010
Risk-free interest rate 4.8 % 4.3 %
Market risk premium 4.5 % 4.5 %
Beta factor 1.00 0.80
Cost of equity after tax 9.4
% 8.0
%
Cost of debt capital before tax 5.3 % 5.0 %
Tax shield (30 %) –1.6 % –1.5 %
Cost of debt capital after tax 3.7
% 3.5
%
Share of equity
1) (target structure) 75 % 75 %
Share of debt capital
1) (target structure) 25 % 25 %
WACC after tax
2) 8.0
% 7.0
%
Tax rate 30 % 30 %
WACC before tax
2) 11.5
% 10.0
%
1) At market values
2) Rounded
WACC before tax by business sector
2009 from 2010
Laundry & Home Care 10.5 % 10.0 %
Cosmetics/Toiletries 10.5 % 10.0 %
Adhesive Technologies 12.5 % 11.5 %
EVA® and ROCE
EVA® serves to promote value-added decisions and profitable
growth in all our business sectors. Operations exhibiting neg-
ative value contributions with no prospect of positive EVA®
in the future are divested or otherwise discontinued.
At Henkel, EVA® is calculated as follows:
EVA® = EBIT
2) – (Capital Employed x WACC).
In order to be better able to compare business units of vary-
ing size, we additionally apply return on capital employed,
calculated as follows:
ROCE = EBIT
2) / Capital Employed.
ROCE represents the return on average capital employed. We
create value where this metric exceeds the cost of capital.
In fiscal 2009, the Henkel Group generated a negative
economic value added (EVA®) of –201 million euros. This
represents an improvement of 265 million euros compared
to the previous year. The business sectors Laundry & Home
Care and Cosmetics/Toiletries each generated a positive
EVA®. At 164 million euros, the contribution made by Cos-
metics/Toiletries was some 10 percent above the prior-year
level; and with 232 million euros, Laundry & Home Care
was able to significantly outstrip the figure of 166 million
Value-based management and control system
To make achievement of our growth targets measurable, we
have adopted a modern system of metrics with which we
calculate value-added and return ratios in line with capital
market practice.
We use economic value added (EVA®)
1)
to assess growth to
date and to appraise future plans. EVA® is a measure of the
additional financial value created by a company in a given
reporting period. A company creates economic value added
if its operating profit exceeds its cost of capital, the latter
being defined as the return on capital employed expected
by the capital market.
Operational business performance is measured on the
basis of operating profit (EBIT adjusted for any goodwill
impairment losses). The capital employed figure is calculated
from the assets side of the balance sheet. A reconciliation
of the year-end figures in the balance sheet to the average
values used in determining capital employed can be found
on page 123.
The cost of capital employed is calculated as a weighted
average of the cost of capital (WACC) comprising both equity
and debt. In fiscal 2009, we applied a WACC after tax of
8.0 percent. Before tax, the figure was 11.5 percent. We regu-
larly review our cost of capital in order to reflect changing
market conditions. Starting fiscal 2010, therefore, we have
adopted a WACC of 10.0 percent before tax and 7.0 percent
after tax.
We further apply different WACC rates depending on the
business sector involved. This is based on sector-specific beta
factors taken from a peer group benchmark. In fiscal 2009,
this resulted in a WACC before tax of 10.5 percent (7.5 per-
cent after tax) for both Laundry & Home Care and Cosmetics/
Toiletries, and of 12.5 percent before tax (8.5 percent after
tax) for Adhesive Technologies. In 2010 we are applying a
WACC of 10.0 percent before tax (7.0 percent after tax) for
the business sectors Laundry & Home Care and Cosmetics/
Toiletries, and 11.5 percent before tax (8.0 percent after tax)
for Adhesive Technologies.
1) EVA® is a registered trademark of Stern Stewart & Co. 2) Before goodwill impairment
38 Annual Report 2009
Group management report » Value-based management and control system
ties and other plant and equipment are likewise governed by
framework rules and regulations – including those relating
to the decontamination of soil.
Product-specific regulations of relevance to us relate in
particular to ingredients and input materials, safety of man-
ufacture, the handling of products and their constituents,
and the packaging and marketing of these items. The control
mechanisms include statutory material-related regulations,
usage prohibitions or restrictions, procedural requirements
(test and inspection, identification marking, provision of
warning labels, etc.), and product liability law.
Our internal standards are geared to ensuring compli-
ance with statutory regulations and the safety of our manu-
facturing facilities and products. The associated require-
ments have been incorporated within and implemented
through our management systems, and are subject to a
regular audit and review regime. This includes monitoring
and evaluating relevant statutory and regulatory require-
ments and changes.
One example of a material change in the statutory en-
vironment is the European regulation on the registration,
evaluation, authorization and restriction of chemicals –
Regulation (EC) No. 1907/2006, abbreviation: REACH. This
regulation primarily affects Henkel as a user of chemical
materials; however, it also affects us as an importer and
manufacturer. In order to ensure the efficient implementa-
tion of the associated requirements, we have established a
central REACH management team for handling and control-
ling the main REACH processes.
euros for the previous year, thanks to its strong operat-
ing profit. By contrast, the EVA® of Adhesive Technologies
came in at –543 million euros. This is primarily due to the
operating profit decrease emanating from the economic
crisis; however, this figure also reflects substantial one-
time and restructuring charges. We achieved a significant
improvement in the Corporate segment with –77 million
euros compared to –692 million euros for the previous year.
This substantial increase resulted from the absence of the
burden on operating profit from the previous year arising
from the restructuring charges pertaining to the “Global
Excellence” program and the integration of the National
Starch businesses.
ROCE increased from 6.9 percent to 9.8 percent. This is
again essentially due to the upturn in operating profit ema-
nating from the absence of the high restructuring charges
from the previous year.
Statutory and regulatory situation
Our business is governed by national rules and regulations
and – within the European Union (EU) – increasingly by
harmonized pan-European laws. In addition, some of our
operations are subject to rules and regulations derived from
approvals, licenses, certificates or permits.
Our product manufacturing operations are bound by
rules and regulations with respect to the usage, storage,
transportation and handling of certain substances and also
in relation to emissions, wastewater, effluent and other
waste. The construction and operation of production facili-
EVA® and ROCE1)
in million euros Laundry &
Home Care
Cosmetics/
Toiletries
Adhesive
Technologies
Corporate Henkel
EBIT 501 387 336
5) – 98
1,126
5)
Capital employed 2,562 2,125 7,035 –181
11,541
WACC2) 269 223 879 – 21 1,327
3)
EVA
®
2009 232 164 – 543 – 77 – 2013)
EVA® 2008 166 150 –132 – 692
– 466
4)
ROCE 2009 19.6 % 18.2 % 4.8 % – 9.8 %
ROCE 2008
16.9 % 17.5 % 10.0 % –
6.9
%
1) Calculated on the basis of units of 1,000 euros
2) Calculated on the basis of the different sector-specific WACC rates applied
3) Calculated on the basis of the WACC rate of 11.5 percent for the Henkel Group
4) Calculated on the basis of the WACC rate of 11.0 percent for the Henkel Group
5) EBIT plus 46 million euros in goodwill impairment losses
39
Annual Report 2009
Group management report » Business performance
The growth countries – with exceptions such as Mexico and
Russia – began to stabilize earlier than the mature markets,
with Asia, and particularly China, leading the way.
Raw material prices
The cost of raw materials such as crude oil, ethylene, pro-
pylene, palm kernel oil, metals and paper increased signifi-
cantly with the first signs of stabilization and then recovery
of the world economy as of the beginning of the second
quarter. This is particularly evident in the price of crude
oil which rose from 45 US dollars per barrel in the first
quarter to 79 US dollars per barrel in the fourth quarter.
However, average raw material prices remained below the
level of the previous year.
Currencies
In the first quarter of 2009, the foreign exchange markets
very much reflected the repercussions of the financial cri-
sis. While the US dollar was regarded as a safe haven and
appreciated substantially, the currencies of the growth
regions in particular lost value. As 2009 developed, the dol-
lar experienced a steady decline versus the euro. And while
the Eastern European currencies of particular importance
for Henkel recovered from their March low points, the ex-
change rates remained below the average levels prevailing
in 2008.
Inflation
There were noticeable reductions in inflation rates world-
wide. Many countries in the developed regions registered
stable or even falling prices.
Unemployment
Unemployment increased with the recession but generally
remained lower than had been expected in view of the depth
of the economic crisis.
Private consumption and developments by sector
While the consumer climate clouded in 2009 compared to
the longer view, consumers only restricted their spend to a
small extent worldwide. This at least cushioned the effects
of the crisis. In the course of the year, the consumer climate
began to brighten again with the gradual end to the general
crisis of confidence.
Business performance
World economy
Overview
The world economy was hit in 2009 by the heaviest reces-
sion of the post-war period. According to current estimates,
economic activity measured on the basis of gross domestic
product worldwide fell by around 2 percent. The extent of
the crisis can be explained by a coincidence of numerous
negative factors which, to some extent, also resulted in a
degree of mutual reinforcement: the financial and real
estate market crisis, the general crisis in confidence among
corporates and consumers, the slump in world trade and the
significant decline in industrial demand and production.
Developments in 2009
Nevertheless, the patterns exhibited in the individual quar-
ters differed quite considerably. The year began with a sharp
decline, followed in many regions by a still relatively weak
second quarter. In the following quarters, there was a degree
of recovery. Compared to the respective prior-year quarters,
however, the decrease in gross domestic product continued,
albeit at a slower pace.
Industry and consumption
The industrial sectors were considerably more heavily im-
pacted by the recession than private consumption. In most
regions, industrial production contracted substantially.
Some sectors, particularly export-dependent capital goods
industries, underwent double-digit declines compared to the
previous year. Nevertheless, a relatively stable level of private
consumption served to ease the decline in total economic
output in many countries, including Germany.
Regions
The crisis was substantially more noticeable in the developed
regions of North America and Western Europe than in the
growth regions. Asia (excluding Japan) proved to be the
most robust region. Eastern Europe was heavily hit, while
Latin America – with the exception of Mexico – managed
the crisis relatively well. The effects of the crisis were like-
wise noticeable in Africa and the Middle East. Instead of the
strong growth of the previous years, we saw gross domestic
product in these regions only slightly increase.
40 Annual Report 2009
Group management report » Business performance
decreased appreciably. Only China and India were able to
achieve expansion in 2009.
Further details on developments with respect to specific
segments and regions can be found in the individual busi-
ness sector reports starting on page 58.
Management Board review of business performance
Henkel’s business performance was characterized by the
above-described significant deterioration in the underlying
economic conditions compared to fiscal 2008. With the slump
in market growth at the beginning of the year, particularly in
the segments served by the Adhesive Technologies business
sector, the ensuing pattern was one of successive signs of
recovery. Our organic sales growth in the second half of the
year again experienced an improvement compared to the first
six months. Organic sales development at the Henkel Group
for the year as a whole underwent a decline of 3.5 percent.
The tense situation on the procurement markets that
characterized the trading environment of 2008 dissipated
in fiscal 2009. In the second and third quarters particularly,
we experienced a significant boost to our gross margin as
a result of declining raw material prices.
The process of stabilization in our markets toward the
end of the year and successful savings arising from our
structural and cost realignment programs were also re-
flected in the results achieved. We generated an adjusted1)
operating profit of 1,364 million euros. The implementation
of our “Global Excellence” program, introduced in order to
strengthen the profitability and competitiveness of Henkel
over the long term, turned in better results during the year
under review than was originally planned, as did the inte-
gration of the National Starch businesses.
The Adhesive Technologies business sector aligned its
activities more strictly to the needs of its customers, reor-
ganizing its internal structures to this end.
A further major event in 2009 was the successful sale of
our consumer adhesives brands Duck, Painter’s Mate Green
and Easy Liner in the USA and Canada. This divestment con-
tributed to the further consolidation of our portfolio.
Thanks to strong cash flows from our operating activi-
ties, we were able to substantially reduce our net debt. The
senior bond issued in March 2009 in the amount of 1.0 bil-
lion euros served to significantly strengthen the long-term
financing of the Henkel Group.
In the developed regions, consumption fell slightly com-
pared to 2008. In the growth regions, average consumption
stagnated. Developments in Eastern Europe were substan-
tially less favorable, with consumers significantly limiting
their expenditure following several boom years.
The retail trade performed poorly in 2009, although the
decline in activity was minor compared to that suffered by
the industrial sector.
Fiscal 2009 was a year characterized by a major industrial
downturn that exceeded the decline in total economic out-
put. Around the world, industrial production fell by almost a
tenth. And many sectors such as the transport industry had
to cope with production decreases in the high teens.
All the developed countries were affected by the heavy
industrial decline. Among the growth regions, Latin America
– with the exception of Mexico – was able to keep the minus
rates within limits. Developments in Asia were mixed: while
Japan’s industrial production declined by more than a fifth,
China was able in the crisis year of 2009 to almost repeat
the double-digit plus rates of previous years.
The region of Eastern Europe was more heavily hit by
the crisis. In most countries here, the decline in output
in the manufacturing industries was in the double-digit
percentage range.
The automotive industry began 2009 with substantial
falls in production and demand. It suffered from a reluc-
tance both among private households to buy and among
companies to invest. In the course of the year came a degree
of recovery from a low base, due primarily to state stimulus
measures such as the “scrappage premium” in Germany.
Compared to the previous year, the contraction in produc-
tion was considerable.
The electronics industry also belonged to the sectors par-
ticularly hard hit by the crisis. Here too there was a degree
of recovery during the second half of the year. Equivalent
in its magnitude was the crisis in the metals industry. Only
toward the end of the year did this sector see a gradual
revival in activity. A more substantial decline in produc-
tion was avoided in the packaging industry thanks to the
consumer-related food and semi-luxuries segment remain-
ing relatively robust.
The crisis in the building industry accelerated in 2009
with home-building being especially impacted. Most re-
gions, headed by the USA, recorded significant declines in
building output. In Eastern Europe too, building volumes
1) Adjusted for one-time charges/gains and restructuring charges
41
Annual Report 2009
Group management report » Business performance
In the regional breakdown too, the worsening economic
environment predominantly led to sales declines:
At 8,335 million euros, sales of the Europe/Africa/Middle
East region decreased organically by 1.9 percent compared
to prior year. While the consumer businesses achieved a
gratifying increase in organic sales, Adhesive Technologies
posted a decline in the double-digit percentage range. Sales
in Western Europe decreased, while in Eastern Europe we
achieved a single-digit increase in organic sales, and the
Africa/Middle East subregion once again posted a double-
digit growth rate. Overall, the share of sales of the region
fell from 63 percent to 61 percent.
Sales in the North America region decreased organically
by 8.6 percent to 2,546 million euros. All our business sec-
tors suffered considerably from the underlying economic
conditions, particularly during the first half of the year. The
share of sales accounted for by the North America region
remained constant at 19 percent.
The Latin America region continued to perform very
encouragingly, posting an organic sales growth of 5.0 per-
cent to 825 million euros, with all our business sectors con-
tributing. The share of sales attributable to Latin America
increased from 5 to 6 percent.
Like Europe and North America, the Asia-Pacific region
felt the effects of the economic crisis, with sales declin-
ing organically by 5.8 percent. Reported sales amounted to
1,657 million euros. An increase in sales posted by Cosmetics/
Toiletries was offset by a decline in Laundry & Home Care
which resulted from the discontinuation of operations in
China at the end of 2008. The organic sales performance of
the Adhesive Technologies business sector likewise under-
Sales and profits
Henkel Group sales in 2009 amounted to 13,573 million
euros, a fall of 3.9 percent compared to prior year. After
adjusting for foreign exchange, the decline in sales was
1.5 percent. Due to the difficult market environment in
2009, organic sales development (i.e. sales adjusted for for-
eign exchange and acquisitions/divestments) declined by
3.5 percent. Positive pricing was more than offset by vol-
ume decreases, particularly in the Adhesive Technologies
business sector.
After a first quarter heavily impacted by the econom-
ic crisis, the subsequent quarters were characterized by
a gradual recovery. With a decline of 1.0 percent overall,
organic sales performance in the second half of the year
was an improvement on developments during the first six
months, which saw a 6.1 percent decrease.
Sales development
1)
in percent 2009
Change versus previous year – 3.9
Foreign exchange
– 2.4
After adjusting for foreign exchange –1.5
Acquisitions/Divestments
2.0
Organic – 3.5
1) Calculated on the basis of units of 1,000 euros
The performance of our business sectors varied consider-
ably: while the consumer businesses Laundry & Home Care
and Cosmetics/Toiletries continued to perform well during
fiscal 2009 with organic growth rates of 2.9 percent and
3.5 percent respectively, sales of the Adhesive Technolo-
gies business sector decreased organically by 10.2 percent
due to the globally difficult situation being experienced by
important customer industries.
Sales
in million euros
5,000
0
2009
2008200720062005
10,000
13,573
14,131
11,974 12,740 13,074
1) Excluding Corporate
Sales by business sector1)
in million euros
1,500
0
200920092009 200820082008
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesive
Technologies
3,000
4,500
6,000 6,224
3,010
4,129
4,172
3,016
6,700
42 Annual Report 2009
Group management report » Business performance
Adjusted EBIT
in million euros 2008 2009 %
EBIT (as reported) 779 1,080 38.6
One-time gains – 30
– 9
One-time charges 48
134
Restructuring charges 663
159
Adjusted EBIT 1,460 1,364 – 6.6
At 1,364 million euros, adjusted operating profit (“adjusted
EBIT”) fell below the prior-year figure of 1,460 million euros
due to the decline suffered by the Adhesive Technologies
business sector. However, we succeeded in avoiding a greater
decrease thanks to the savings generated from our “Global
Excellence” program and the integration of the National
Starch businesses. Adjusted return on sales fell by 0.3 per-
centage points to 10.0 percent due to the margin decline at
Adhesive Technologies from 10.1 percent to 8.1 percent. The
consumer businesses Laundry & Home Care and Cosmetics/
Toiletries were able to increase their adjusted return on
sales figures to an encouraging 12.8 percent (previous year:
10.8 percent) and 12.9 percent (previous year: 12.6 percent)
respectively.
The difficult market conditions also affected the profit
performance of our regions:
In Europe/Africa/Middle East, operating profit decreased
by 16.7 percent (–9.8 percent after adjusting for foreign ex-
change). While the consumer businesses saw their currency-
adjusted EBIT rise, there was a significant decline at Adhesive
Technologies. At 10.1 percent, the region’s return on sales
was below the prior-year level of 11.4 percent.
went a downturn, although there was already a return to
positive growth in the second half of the year. The share of
sales accounted for by Asia-Pacific increased to 12 percent
compared to 11 percent in the previous year.
Sales of our growth regions Eastern Europe, Africa/Middle
East, Latin America and Asia (excluding Japan) fell by 1.0 per-
cent to 5,114 million euros. Organic growth amounted to
3.7 percent, with continuous recovery in the course of the
year following a weak start. The consumer businesses made
a particularly important contribution to this improvement,
registering growth rates close to the double-digit percent-
age mark, while developments at Adhesive Technologies
remained slightly regressive. The share of sales of the growth
regions increased from 37 to 38 percent.
The following is a discussion of our operating perfor-
mance without one-time charges/gains and restructuring
charges:
1) Excluding Corporate
Sales by region1)
in million euros
0
2009200920092009 2008200820082008
North AmericaEurope/Africa/
Middle East
Latin America Asia-Pacific
2,000
4,000
6,000
8,000
1,657
825
2,546
8,335
2,700
8,863
780
1,545
1) Excluding Corporate. Effective 2009, we assign the centrally incurred cost of our
regional business management activities to the individual regions; the figures for
2008 have been adjusted accordingly
EBIT by region1)
in million euros
250
0
2009200920092009 2008200820082008
North AmericaEurope/Africa/
Middle East
Latin America Asia-Pacific
500
750
1,000
139
74
127
838
1,006
59
132
276
EBIT
in million euros
2009
2008200720062005
1,200
900
600
300
1,080
779
1,162
1,298 1,344
0
43
Annual Report 2009
Group management report » Business performance
shared services. The early implementation of the efficiency
enhancement measures resulted in benefits already accruing
in 2009, despite the difficult market environment.
One major aspect of the “Global Excellence” program
has been the consolidation of our liquid detergents manu-
facturing operation in Europe, initiated in 2008. However,
we avoided closure of the production facility in Genthin,
selling it instead to a third party with the majority of jobs
there being retained. Liquid detergent production has now
been transferred to Düsseldorf.
National Starch:
Integration of operational activities
Through the integration of the National Starch businesses,
we have been able to significantly improve Henkel’s product
and service portfolio for both existing and potential cus-
tomers in the global adhesives market. The integration of
customer relationships, our extended know-how in research
and development and a combination of the capabilities of
our two internationally successful organizations have cre-
ated an excellent basis for sustainable, profitable growth.
We accelerated the process of integrating the acquired
businesses in 2009. For 2011, we expect at least to achieve
the planned total synergies of 250 million euros.
Production consolidation, information technology and
revenue synergies constituted the focal areas of the 2009
integration program. By combining the product portfolios,
we have been able to expand our business with existing and
new customers, leveraging the potential available around
the world in the form of specific customer-related projects.
We have also succeeded in completing a number of major
production relocation projects. The implementation of the
measures still remaining is either running according to
schedule or has been expedited. Since the middle of 2009,
the IT systems of Henkel and those of the seller have been
operating independently. The rapid merger of the two orga-
nizations has facilitated simplification and acceleration of
the internal processes within the new organization. Looking
to the future, we intend to continue our systematic approach
in pursuing all synergy projects aligned to increasing sales
and profits.
Our integration work and focus in 2010 will be aligned
to further production relocations and revenue synergies.
The projects are due for completion in 2011, marking a
In North America, operating profit fell by 54.1 percent
(–56.2 percent after adjusting for foreign exchange). Due
to the difficult market environment, there was a substan-
tial decrease in profits at Adhesive Technologies, while the
consumer businesses Laundry & Home Care and Cosmetics/
Toiletries suffered only a slight decline. The return on sales de-
creased correspondingly, from 10.2 percent to 5.0 percent.
Operating profit in the Latin America region improved
by 25.1 percent. After adjusting for foreign exchange, profits
rose by 37.1 percent, with the encouraging results of Laundry
& Home Care and Adhesive Technologies making a major
contribution. Return on sales increased by 1.4 percentage
points to 9.0 percent.
The operating profit of the Asia-Pacific region rose by
5.6 percent (–0.9 percent after adjusting for foreign ex-
change). This is primarily due to the discontinuation of the
detergents business in China. The region’s return on sales
decreased slightly from 8.5 percent to 8.4 percent.
Further details relating to our business performance
can also be found in the reports dealing with the individual
business sectors starting on page 58.
“Global Excellence” restructuring program
In February 2008, Henkel announced the main framework
of a worldwide efficiency enhancement program under the
heading “Global Excellence.” This initiative had become nec-
essary due to changing market conditions, an increasingly
tough competitive environment and rising cost pressures.
“Global Excellence” encompasses a wide range of indi-
vidual measures in all our business sectors, regions and
functions around the world. In view of the economic crisis
of 2009, we accelerated the implementation of the program
so that, utilizing the entire volume of provisions made in
2008 in the amount of 504 million euros, we were able to
successfully complete “Global Excellence” before the end
of 2009.
While the original plan was to generate annual savings
of around 150 million euros from 2011, we now expect – as
a result of said accelerated implementation of the program
– to achieve this figure and possibly exceed it from 2010.
We introduced “Global Excellence” in order to strengthen
the long-term profitability and competitiveness of Henkel.
This initiative has enabled us to respond to changes in our
markets, improve our production network and expand our
44 Annual Report 2009
Group management report » Business performance
Other operating income and charges
The balance of other operating income and charges fell by
110 million euros. Income from the reversal of operating
provisions decreased compared to the previous year by 6 mil-
lion euros. Moreover, the income figure for the previous year
included gains from the sale of our water treatment business
amounting to 8 million euros. Reflected in the rise in other
operating charges are valuation adjustments with respect to
individual activities in the Adhesive Technologies business
sector. Planned closures or divestments of product lines led
to goodwill impairment losses of 46 million euros.
Financial result
The financial result for 2008 reflects a gain of 1,042 million
euros arising from the sale of our participating interest in
Ecolab Inc. Overall, the 2009 financial result decreased sig-
nificantly due to this one-time effect to –195 million euros.
Net interest improved by 84 million euros to –191 million
euros. Due to the rise in cash flow and the lack of major
acquisitions, we were able to substantially reduce our net
debt. Together with the lower interest rate levels prevailing,
this made a significant contribution to the improvement
in our net interest result.
Net earnings
Earnings before tax decreased by 45.6 percent to 885 million
euros due to the gain recognized in the previous year from
the sale of our Ecolab stake. Taxes on income amounted to
257 million euros. The tax rate was 29.0 percent. The lower
tax rate of 24.2 percent that applied in the previous year
was due in part to the lower rate payable on the at-equity
income from our Ecolab investment, and to the subsequent
sale of said investment.
Net earnings for the year decreased by 605 million euros
to 628 million euros. After deducting minority interests of
26 million euros, net earnings totaled 602 million euros.
Adjusted net earnings after minority interests, i.e. the figure
after allowing for one-time charges/gains and restructur-
ing charges, declined by 123 million euros to 822 million
euros.
The annual financial statements of the parent company
of Henkel AG & Co. KGaA are summarized on page 131.
further milestone as we consolidate our position as a world
leader in adhesives.
Expense items
The cost of sales for the year under review decreased by
9.5 percent, coming in at 7,411 million euros. Gross profit
increased to 6,162 million euros, which meant gross mar-
gin improved by 3.4 percentage points to 45.4 percent. It
was positively influenced by, in particular, the fall in raw
material prices, while a reduction in capacity utilization in
the Adhesive Technologies business sector compared to the
prior year had a burdening effect. Restructuring charges
arising from the efficiency enhancement measures and the
integration of the National Starch businesses were incurred
in both the year under review and in the previous year, and
these need to be taken into account in any comparison. The
allocation of the restructuring charges between the various
items of the income statement is explained on page 80.
After adjusting for restructuring charges, gross margin
amounted to 45.9 percent, 1.2 percentage points above the
adjusted prior-year figure.
The expense items discussed in the following were also
affected by the restructuring charges. It should also be noted
that the National Starch businesses acquired in the previous
year were not consolidated until April 2008.
At 3,926 million euros, marketing, selling and distribu-
tion expenses fell by 1.7 percent below the figure for the
previous year. After adjusting for restructuring charges, this
item remained roughly at the prior-year level.
Our research and development expenses totaled 396 mil-
lion euros, with the R&D ratio (i.e. research and develop-
ment expenses expressed as a proportion of sales) falling
0.1 percentage points below the prior-year figure of 3.0 per-
cent. After allowing for restructuring charges, the adjusted
R&D ratio rose compared to prior year by 0.1 percentage
points.
Administrative expenses decreased by 10.9 percent to
735 million euros. After adjusting for allocated restructur-
ing charges, administrative expenses increased slightly by
1.9 percentage points.
45
Annual Report 2009
Group management report » Business performance / Assets and financial analysis
The Stock Incentive Plan introduced in 2000 resulted in no
dilution of earnings per ordinary or preferred share as of
December 31, 2009.
Assets and financial analysis
Acquisitions and divestments
The Laundry&HomeCare business sector acquired the
remaining minority shares in a Tunisian joint venture for
a total of around 8 million euros.
As part of its ongoing portfolio streamlining operation,
the Cosmetics/Toiletries business sector disposed of a num-
ber of minor brands in the USA.
The AdhesiveTechnologies business sector increased
its shareholding in joint venture companies in Turkey and
China, expending a total of around 19 million euros. Its
major disposal in the year under review was of the North
American consumer adhesives business operated under the
Duck brand. The proceeds of the sale amounted to around
87 million euros.
Capital expenditures
Capital expenditures (excluding financial assets) amounted
to 415 million euros in the year under review. Investments
in property, plant and equipment for our continuing opera-
tions totaled 344 million euros, 129 million euros below the
level of the previous year. A major portion of these fixed asset
investments relates to the integration of the production and
IT facilities of the acquired National Starch sites (Adhesive
Technologies). A further portion of the expenditure went on
establishing and expanding production capacities and on
Dividends and distribution policy
The level of dividend distribution is primarily aligned to
earnings after deducting minority interests and exception-
al items. The payout ratio should be around 25 percent.
We intend to propose to the Annual General Meeting that
the dividends payable on both classes of share remain un-
changed. This will yield payouts of 0.53 euros per preferred
share and 0.51 euros per ordinary share, giving a payout
ratio of 27.6 percent.
Earnings per share (EPS)
Basic earnings per share are calculated by dividing earnings
after minority interests by the weighted average number of
shares outstanding during the reporting period. Earnings
per preferred share decreased from 2.83 euros to 1.40 euros
and earnings per ordinary share fell from 2.81 euros to
1.38 euros. Adjusted earnings per preferred share amounted
to 1.91 euros (previous year: 2.19 euros).
Net earnings
in million euros
0
2009
2008200720062005
250
500
750
1,000
628
1,233
770
871
941
Preferred share dividends1)
in euros
0.10
0
2009
2008200720062005
0.20
0.30
0.40
0.50
0.53
2)
0.50
0.53 0.53
0.45
1) Basis: share split (1:3) of June 18, 2007
2) Proposal
Earnings per preferred share1)
in euros
0.50
0
2009
2008200720062005
1.00
1.50
2.00
2.50
1.40
2.83
1.77
1.99 2.14
1) Basis: share split (1:3) of June 18, 2007
46 Annual Report 2009
Group management report » Assets and financial analysis
344 million euros, offset by depreciation of 377 million euros
and disposals with a book value of 63 million euros. Other
financial assets rose compared to the end of 2008 due pri-
marily to the positive fair values of interest rate derivatives
transacted in order to hedge our long-term borrowings.
Under current assets, there was a substantial decrease of
390 million euros in the combined totals of inventories and
trade accounts receivable, supported by our continuing strict
management of net working capital. Other current financial
assets fell by a total of 361 million euros, due primarily
to the cash pool settlement by the seller in respect of the
acquired National Starch businesses, and a decrease in the
fair values of financial derivatives. Conversely, liquid funds
increased by a substantial 772 million euros to 1,110 million
euros as a result of the strong cash flows generated by our
operating activities. Due to continuing uncertainties in the
financial markets, our focus in the year under review was
again on securing our liquidity. Assets held for sale decreased
substantially following the disposal of certain consumer
adhesive brands in the USA and Canada.
At 6,544 million euros, shareholders’ equity includ-
ing minority interests remained roughly at the prior-year
level. The changes are shown in detail in the statement of
changes in equity on page 83. The equity ratio increased
compared to the previous year by 1.1 percentage points to
41.4 percent.
Non-current liabilities rose overall by 914 million euros.
The increase is primarily due to the senior bond for 1.0 bil-
lion euros issued in March 2009. The funds generated were
used to repay short-term borrowings and to increase our
liquid funds.
Under current liabilities, there was a decrease in tax pro-
visions from 343 million euros to 224 million euros. This is
predominantly due to tax payments arising from the sale of
our Ecolab stake in November 2008. Short-term borrowings
decreased substantially from around 1.8 billion euros to 0.7
billion euros as a result of the financing measures indicated
above and also repayment of the remaining balance of the
bridge loan facility used to acquire the National Starch busi-
nesses. There was a countervailing rise of 207 million euros
in trade accounts payable as a further component of our
net working capital.
structural improvements such as the merger of our admin-
istrative and production sites. Among the major individual
projects of 2009 were the following:
» Expansion of capacity for construction-related prod-
ucts in Eastern Europe (Ukraine and Russia; Adhesive
Technologies).
» Completion of the new production and administrative site
in South Korea (Adhesive Technologies).
» Consolidation and concentration of our liquid detergent
manufacturing operation in Western Europe. In Germany,
relocation of production from Genthin to Düsseldorf, and
in Spain from Malgrat to Montornès (Laundry & Home
Care).
» Launch of the new detergent generation Purex Complete
3-in-1 in the USA (Laundry & Home Care).
» New production plant for the manufacture of bar and liq-
uid soaps in West Hazleton, Pennsylvania, USA (Cosmetics/
Toiletries).
» Commissioning of a new factory for liquid detergents in
Toluca, Mexico (Laundry & Home Care).
» Completion of the new main administrative center in
Greece (Cosmetics/Toiletries, Adhesive Technologies).
Capital expenditures 2009
in million euros Continuing
operations
Acquisitions Total
Intangible assets 28 40
68
Property, plant
and equipment 344 3
347
Total 372 43 415
In regional terms, the emphasis of our capital expenditures
in 2009 lay in North America and Europe.
Net assets
At 15.8 billion euros, the balance sheet total in 2009 was
slightly below that of the previous year. On the assets side,
a decline in intangible assets resulted from currency trans-
lation effects based on a lower US dollar exchange rate,
and the remeasurement of individual assets attributable
to the Adhesive Technologies business sector. Within the
also slightly lower property, plant and equipment total are
included capital expenditures in continuing operations of
47
Annual Report 2009
Group management report » Assets and financial analysis
“A3/P2” (Moody’s). The ratings are thus one notch lower
than at the end of 2008.
Credit ratings
Standard & Poor’s Moody’s
Long-term A– A3
Outlook Stable Stable
Short-term A–2 P2
At December 31, 2009
Our financial strategy is aligned to the single-A rating cat-
egory as a means of maintaining our financial flexibility.
We are endeavoring to upgrade our long-term credit rating
by one notch to A (Standard & Poor’s) and A2 (Moody’s). Cash
flows from operating activities and from divestments are
used to reduce our net debt exposure.
Essentially, we pursue a conservative borrowing policy,
again aligned to flexibility, within a balanced financial
portfolio. This is based on a core platform of syndicated
credit facilities and a multi-currency commercial paper
program.
At December 31, 2009, our long-term borrowings
amounted to 3.4 billion euros. Included in this figure are
the hybrid bond issued in November 2005 with a nominal
value of 1.3 billion euros, and the fixed-interest bonds is-
sued in May 2003 and March 2009, each with a volume of
1.0 billion euros.
Our short-term borrowings – i.e. those with maturities
of less than 12 months – amounted to 0.7 billion euros as of
the balance sheet date. These essentially comprise interest-
bearing loans and overdrafts from banks.
We considerably reduced net debt in the course of the fi-
nancial year, finishing at 2,799 million euros, a decrease of
993 million euros compared to the level of the previous year.
We define net debt as borrowings less liquid funds and – com-
mencing with the 2009 financial year – minus any positive
or plus any negative fair values of hedging contracts covering
those borrowings, providing that the underlying borrowings
are themselves subject to mark-to-market accounting.
Financing
The finances of the Group are, to a large extent, centrally
managed by Henkel AG & Co. KGaA. Financial funds consti-
tute a global resource and are, as a rule, centrally procured
and then allocated within the Group. The primary goals
of financial management are to secure the liquidity and
creditworthiness of the Group and to achieve a sustainable
increase in shareholder value. Our capital needs and capital
procurement activities are coordinated to ensure that the
requirements with respect to yield, liquidity, security and
independence are taken into account and appropriately bal-
anced. The cash flows not required for capital expenditures,
dividends and interest payments are used to reduce our
net debt. We cover our short-term financing requirement
primarily with commercial papers and bank loans. Our
bonds outstanding serve to cover our long-term financing
requirements.
Our creditworthiness is regularly checked by indepen-
dent rating agencies. Both Standard & Poor’s and Moody’s
currently categorize Henkel in the best possible category,
the Investment Grade Segment, with “A–/A–2” (S&P) and
Property, plant and equipment/Intangible assets
Financial assets
Other non-current assets
Liquid funds/Marketable securities
Shareholders’ equity
of which in % of which in %
Pension provisions
Other non-current liabilities
Short-term borrowings
Other current liabilities
1) Including assets held for sale 2008 2009 2009 2008
Balance sheet structure
in million euros Assets Shareholders’ equity and liabilities
15,818 16,173
15,818
16,173
Current assets1)
Long-term borrowings
66
67
41 41
0
0
55
5
3
22 15
22
28
6
6
7
2
411
22 22
48 Annual Report 2009
Group management report » Assets and financial analysis / Employees
We have used the inflowing funds arising from the increase
in long-term borrowings in order to repay short-term bor-
rowings and to increase our liquid funds.
The hybrid bond is treated by Moody’s as 75 percent
equity and by Standard & Poor’s as 50 percent equity. This
reduces the rating-specific borrowing ratios of the Group
(see adjacent key financial ratios table).
For further information on our financial steward-
ship and our financial instruments, please refer to Notes
41 and 42 to the consolidated financial statements on
pages 112 to 118.
Financial position
Cashflowfromoperatingactivities in 2009 amounted
to 1,919 million euros, an increase of 754 million euros
above the level of the previous year. Income tax payments
decreased due to a fall in advance tax payments. Positive
developments in net working capital, primarily during the
second half of 2009 with improvements in inventories, trade
accounts receivable and trade accounts payable, made a
significant contribution to the substantial increase in cash
inflow. With regard to other liabilities and provisions, the
main burden derived from payments in respect of restruc-
turing measures.
Cashflowfrominvestingactivities/acquisitions was
influenced by a reduction in capital expenditures on prop-
erty, plant and equipment compared to the previous year.
Further, the previous year had been characterized by high
cash outflows arising from the acquisition of the National
Starch businesses on the one hand, and proceeds from the
sale of our Ecolab stake on the other. The cash pool settle-
ment relating to the acquisition of the National Starch busi-
ness resulted in a cash inflow of 103 million euros in the
year under review.
Our cashflowfromfinancingactivities shows lower
and thus less burdensome outflows in the form of interest
payments, together with payments to reduce short-term
borrowings and higher pension fund contributions.
Liquidfunds/marketablesecurities increased as a re-
sult of the higher cash flow from operating activities, by
772 million euros to 1,110 million euros.
At 1,462 million euros, freecashflow is 1,005 mil-
lion euros above the comparable prior-year level, having
increased primarily due to the strong inflow of cash from
the management of our net working capital, reduced in-
vestments in property, plant and equipment, and lower
interest payments.
Key financial ratios
The interest coverage ratio, i.e. EBITDA divided by our net
interest expense, improved due to the twin effects of lower
interest outgoings and higher earnings before interest, tax,
depreciation and amortization. In the previous year, this
metric was burdened by charges arising from the efficiency
enhancement and integration measures and also – follow-
ing the acquisition of the National Starch businesses – an
increase in our interest expense.
The significant reduction in our net debt in 2009 has had
a beneficial effect on the debt coverage ratio. In the previ-
ous year, this metric was additionally boosted by the gain
from the sale of our Ecolab stake. The slightly higher equity
ratio is a reflection of the strengthening of our financing
structure in the year under review.
Key financial ratios
2008
2) 2009
Interest coverage ratio
(EBITDA/Net interest expense including
interest element of pension provisions)
4.8
8.7
Debt coverage ratio
(Net earnings + Amortization and
depreciation + Interest element of pension
provisions/Net borrowings and
pension provisions)1)
45.1 %
41.8 %
Equity ratio
(Equity/Total assets)
40.3 %
41.4 %
1) Hybrid bond included on 50 percent equity basis
2) Prior-year figures adjusted on the basis of the new definition of net borrowings
Employees
The number of people employed by Henkel at the end of the
reporting period was 49,262. In the course of the year, head-
count decreased by 5,880. Per capita sales increased further
to 264,300 euros. Henkel Group payroll costs decreased by
54 million euros to 2,382 million euros. The decrease in the
number of employees is due both to the “Global Excellence”
program and the synergies arising from the integration of
the National Starch businesses, with economic develop-
ments also exerting an influence. We responded to the latter
with specific countermeasures, for example with a highly
selective hiring policy and organizational adjustments. The
reductions in personnel in 2009 affected all our regions and
hierarchical levels; and as ever, they were implemented in
a socially responsible manner.
With the “Global Excellence” program introduced at the
beginning of 2008, Henkel responded very quickly to the ad-
vent of economic change. The resultant efficiency enhance-
ments and process optimizations already began to take effect
49
Annual Report 2009
Group management report » Employees
in this respect through the inclusion of dual studies as of
the start of the 2009 academic year. Here, students are able
to combine a course leading to a diploma granted by the
Chamber of Trade and Industry, with a bachelor degree at a
university, allowing them to obtain academic qualifications
combined with practical professional training.
One of the most important tasks undertaken by our
managers is that of developing our employees. Again in
2009, we focused specifically on the identification of high
potentials and ensuring their effective development. The
“Talent Management Process” introduced for senior man-
agement candidates in 2008 was extended in the year un-
der review to cover all managerial levels worldwide. This
involves groups of managers attending so-called “Develop-
ment Round Tables” chaired by their own line manager to
discuss the performance and potential of their employees on
the basis of global standards, and to decide on appropriate
further development measures. The managers pass on to
their employees the results of this evaluation in feedback
meetings, and together the two parties prepare individual
development plans which are then implemented on a joint
responsibility basis. An international training initiative was
carried out in order to prepare managers for these feedback
meetings.
2009 saw us significantly improve our performance-re-
lated compensation structure – i.e. the linkage between per-
sonal contribution and individual remuneration. We intend
to take this process forward in 2010 by providing regular
feedback on employee performance and target achievement,
in 2009. Regarding the integration of the National Starch
businesses, the main activities in 2009 involved the forma-
tion of a uniform and high-caliber organization exhibiting
a strong customer focus. All the employees incorporated as
a result of the acquisition have now been completely inte-
grated within our corporation and our compensation, per-
formance appraisal and personnel development systems.
In order to attract the best young talents, we maintain
a program of close collaboration with universities and fac-
ulty chairs. Our offerings in the form of workshops, case
studies and lectures are readily received and have resulted
in ever more applications from graduates with outstanding
qualifications. 2009 also saw the third of our innovation
competitions for students – the “Henkel Innovation Chal-
lenge” – successfully launched in twelve European countries.
This enabled us to gain extensive online and print media
coverage, positioning Henkel as an “employer of choice”
within the international environment.
A review of our hiring process, which has now been
extensively transferred to an online platform, led to more
internal efficiency and a more convenient application pro-
cess for candidates.
In Germany, Henkel offers apprenticeships and initial
qualifications at ten locations covering more than 20 profes-
sions. In all, we engaged 167 apprentices at Henkel’s German
sites in 2009. The number of applications rose considerably
compared to the previous year, indicating the level of attrac-
tiveness assigned to an apprenticeship and similar training
opportunities at Henkel. We extended our range of offerings
Employees by function
Marketing, selling
and distribution 32 %
Production and
engineering 49 %
Research and development 5 %
Administration 14 %
Employees by business sector
Adhesive
Technologies 49 %
Laundry & Home Care 23 %
Cosmetics/
Toiletries 15 %
Corporate 13 %
Group management report » Employees
Since 2005, an international team has been working on a Henkel-wide personnel data system. Today it already
provides the basis for standardized procedures in HR management. Each year, between 15 and 20 projects have
had to be managed concurrently on a worldwide basis. Whether in airports, the office, in a hotel or in a taxi,
telephone conferences across various time zones with local colleagues throughout the world were a permanent
feature of the everyday work of this young team from HR management and information technology.
From the left:
AndreasBender MarthaPereiras TianshuDeng FabricediFiore InaSchreckenberger JörgHeinen
Project Manager –
Europe and
North America
Change Manager and
Project Manager
Project Manager –
Europe/Africa/
Middle East
Program Manager –
Information Technology
Program Manager –
HR Management
Program Manager –
Information Technology
51
Annual Report 2009
Group management report » Employees / Procurement
were among the first signatories of their respective national
diversity charters, which constitute a public commitment
to diversity and inclusion. And our “Women in Leadership”
network has also laid the ground for a global mentoring
program at Henkel, due to be launched in 2010.
Procurement
Fiscal 2009 was again characterized by severe price volatility
in the procurement markets. Following the fall in the prices
of raw materials such as crude oil, ethylene, propylene,
palm kernel oil, metals and paper in the first quarter as a
consequence of the global economic crisis, the prices of, in
particular, petrochemical derivatives began to rise again by
the start of the second quarter. The average price level for
raw materials for the year as a whole was, however, below
that of the previous year. With a natural time lag, this also
had a beneficial effect on the costs of the raw materials and
packaging purchased by Henkel.
Our expenditures on direct materials (raw materials,
packaging, purchased goods and services) in the year under
review amounted to 5.9 billion euros, a fall of around 0.7 bil-
lion euros compared to the previous year. This is largely due
to lower production volumes coupled with the decrease in
prices for raw materials and packaging. 2009 was the first
full financial year to contain the procurement expenditures
of the National Starch businesses.
Aside from our ongoing efforts to negotiate new, com-
petitive contractual conditions, our global program aligned
to reducing overall procurement cost is a major factor in
the success of our sourcing strategy. We are permanently
engaged in reducing product complexity, optimizing our raw
material mix and promoting the further standardization of
packaging and raw materials. This gives us strong negotiat-
and by further developing the monetary reward systems in
place, taking into account aspects of differentiation and
competitiveness.
The development of our global team is a strategic priority
of Henkel and is therefore regarded as an important manage-
ment duty. Consequently, not only technical expertise but
also managerial competence are significant aspects in the
selection process applied to our managers. These undergo
regular training using our “Henkel Global Academy” re-
source with value-adding courses provided in collaboration
with international business schools. In 2009, we reviewed
the curriculum and now offer high-quality training events
covering general management requirements, together with
specific managerial and technical expertise. In developing
our managerial staff, we also make use of international as-
sessment centers that match the current competence profile
of the manager with future requirements, defining specific
measures for the further advancement of the personnel
concerned. As in the past, we endeavor to develop and pro-
mote managerial talent primarily from within. With a strict
selection process, we ensure that every candidate appointed
to a post satisfies our high quality criteria.
In 2009, the Management Board introduced a global
directive on Diversity & Inclusion, providing us with a uni-
form definition of both terms and a number of associated
implementation priorities. An international team of di-
versity ambassadors was also formed within the company.
Their task is to instigate and implement local projects and
initiatives on this theme. In 2009, activities included a Di-
versity Day in the USA and a cross-generation mentoring
program in Belgium. Our subsidiaries in Italy and Spain
Management structure
Senior executive personnel
Female 15 %
Expenditures by type
Raw materials 61 %
Contract manufacturing
and traded goods 19 %
52 Annual Report 2009
Group management report » Procurement / Production
Production
Henkel operates 203 production sites in 57 countries. Our
biggest site is located in Düsseldorf, Germany. Here we manu-
facture not only detergents and household cleaners but also
adhesives for consumers and craftsmen, and products for
our industrial customers.
Our Düsseldorf plant is also the largest production site of
the Laundry & Home Care business sector. Here we predomi-
nantly manufacture powder and liquid detergents, fabric
softeners and liquid cleaning products. To enable transfer
of production from Genthin to Düsseldorf, we substantially
expanded our capacity in the course of 2009 through the
construction of a modern liquid detergent manufacturing
facility. We reduced the number of production sites around
the world to 33 last year. Through concentrating our deter-
gent production on just a few high-performing factories, we
have been able to generate substantial cost advantages.
Our biggest plant for manufacturing products for the
Cosmetics/Toiletries business sector is located in Wasser-
trüdingen, Germany. In addition to body and hair care prod-
ucts for consumers, we also manufacture products for the
salon business here. With the sale of a production facility
in the USA and one in India, and closure of two factories
in China, the business sector is efficiently structured with
eight factories worldwide. We expect further efficiency en-
hancements through the expansion of production sites with
a more regional responsibility – our “regional hubs” – in
Columbia and Thailand.
The two largest sites for Adhesive Technologies are like-
wise located in Germany: in Düsseldorf – with a portfolio of
high-quality specialty adhesives for industry and consumers
– and in Heidelberg where we manufacture a wide range of
adhesives and sealants. In the course of our “Global Excel-
lence” program and the integration of the National Starch
businesses, we have over the last two years significantly
consolidated our production network, closing 30 factories,
therefore reducing the number to 162. In 2010, we intend
to continue the optimization of our global manufacturing
capability and to undertake further production transfers
to more efficient locations.
We have improved our production network throughout
the Group as part of the efficiency enhancement programs
respect to manufacturing, logistics, quality and innovation.
We support this program with individual target agreements
involving our strategically important suppliers.
Against the background of persistently high price vola-
tility in the procurement and financial markets and the
tense economic situation, one important element of our
sourcing strategy is that of expanding our integrated and
all-encompassing risk management capability. As part of
our active price management approach, we establish strate-
gies for safeguarding prices over the longer term both on a
contractual basis and – where appropriate and possible – by
means of financial hedging instruments. We also systemati-
cally analyze the effects of currency fluctuations on procure-
ment costs and introduce corresponding countermeasures
to reduce foreign exchange risks. We constantly monitor our
vendor portfolio in order to minimize the risks of financial
failure among our suppliers. If a vendor is considered to be
in a critical state, we systematically prepare back-up plans
in order to ensure consistency of supply.
Our five most important raw material groups are surfac-
tants, raw materials for polyurethane-based adhesives, raw
materials for aqueous adhesive systems, raw materials for
use in hotmelt adhesives, and inorganic raw materials for
use e.g. in detergents and surface treatment products. These
account for around 30 percent of our total direct materials
expenditure. Our five largest suppliers account for around
11 percent of our cost of direct materials.
Our annual expenditure on indirect materials and ser-
vices, plus logistics, amounts to some 3.4 billion euros, or
around one third of total procurement expenditures at
Henkel. Here we have been able to reduce procurement
prices in all areas compared to the previous year through the
introduction of savings measures. These have been initiated
both regionally and globally in all the relevant categories
on the basis of procurement strategies extending across the
entire corporation.
Expenditures by business sector
Laundry & Home Care 32 %
Adhesive Technologies 47 %
Group management report » Production / Research and development
As an annual average, the number of employees working
in research and development at our sites around the world
was 2,743 compared to 2,942 in 2008. The main reasons
for this decline lay in the “Global Excellence” efficiency
enhancement program initiated in 2008 and the associated
dissolution of our Corporate Research division, coupled with
the integration of the National Starch businesses.
We have stepped up our drive toward open innovation
– i.e. the increased inclusion of universities, institutes, sup-
pliers and customers within our innovation process – as part
of our worldwide research and development strategy. To this
end, we have also increased the funds available for collabora-
tion with external partners. Three examples indicate the kind
of successes that can be achieved with this approach:
In cooperation with the Fraunhofer Institute for Manu-
facturing Technology and Applied Materials Research in
Bremen, Germany, and a leading automobile manufacturer,
our Adhesive Technologies business sector has developed a
new generation of energy-absorbing structural adhesives
for composite materials.
In conjunction with the launch of our automatic dish-
washing detergent Somat 9, we together with Cognis gar-
nered the 2009 Best Innovation Contributor Award for the
development of a unique surfactant for improved dishwasher
drying performance. In addition, Symrise AG has provided
a completely new fragrance technology for Somat 9 to neu-
tralize unpleasant odors.
nological platform for the relaunch of Bonacure, our biggest
salon hair care brand for professional hairdressers.
complexity within the overall value chain with respect to
both production and logistics, adding simplicity in product
manufacturing and in our vendor selection processes. As a
result, we have been able to substantially increase efficiency
and reduce cost.
Our optimization activities are also aligned to making
our manufacturing operations ever more environmentally
reducing our carbon footprint. For further details relating
to the development of our environmental parameters, please
refer to the sustainability/corporate social responsibility
section on page 56.
The current and planned measures are expected to con-
tribute equally to cost optimization and improved sustain-
ability. The main priorities are to achieve additional savings
in resources with respect to raw materials and packaging,
to introduce further improvements in the supply chain and
to make greater use and improve the technology of our IT
capability for planning and control.
Research and development
Expenditures on research and development at Henkel
amounted to 396 million euros in the year under review,
compared to 429 million euros in 2008. After adjusting for
restructuring charges, the 2009 figure was 383 million euros
compared to 377 million euros in the previous year. The R&D
share of sales was 2.9 percent (adjusted: 2.8 percent) following
3.0 percent in 2008 (adjusted: 2.7 percent). This demonstrates
that, even in this difficult economic environment, we man-
aged to maintain our expenditures on research and develop-
ment at a high level, conscious of the fact that innovations
are an important driver of profitable growth.
R&D expenditures by business sector
Laundry & Home Care 26 %
R&D expenditures
in million euros
200
300
400 3961)
4291)
324 340 350
54 Annual Report 2009
Group management report » Research and development
» Further development of TecTalis, a new high-performance
generation of pretreatment products free of heavy metals
for the automotive industry
All the new developments and products exhibit an improved
sustainability profile, particularly in the form of lower en-
ergy consumption, the increased use of renewable raw ma-
terials and/or a reduced waste footprint.
Each year we select a number of outstanding develop-
ments for our Fritz Henkel Award for Innovation. In 2009,
this accolade went to three interdisciplinary project teams
in recognition of their efforts in the realization and com-
mercialization of the following concepts:
» PurexComplete3-in-1LaundrySheets: Setting a com-
pletely new set of performance standards, Purex Complete
3-in-1 laundry sheets offer an innovative combination of a
laundry detergent – significantly more concentrated than
the market standard – with a fabric softener and an anti-
static compound to prevent the build-up of charge in the
drier. This unique product concept is a further successful
example of the strategy adopted by our Laundry & Home
Care business sector of offering consumers outstanding,
innovative product performance accompanied by high
environmental compatibility – Quality & Responsibility.
» Ammonia-freePermanentColorantsSchwarzkopfEs-
sentialColorandEssensity: With Essential Color (for
consumers) and Essensity (for the salon sector), the ex-
perts from Schwarzkopf have succeeded for the first time
in developing a permanent colorant with no ammonia
whatsoever, offering optimum hair care with a maximum
of natural-derived raw materials. Essential Color, our first
100 percent permanent hair colorant without ammonia
and with nature-based ingredients such as lychee and white
tea, offers an intensively radiant color with long-lasting
gray coverage. And, for the professional hairdresser, Es-
sensity is the first colorant without ammonia, fragrance,
silicones or preservatives capable of ensuring a permanent
effect with 100 percent gray coverage. Essensity – 100 per-
cent performance, 0 percent compromise.
» TechnomeltSupraCool130: A newly developed hotmelt
adhesive for packaging that combines the best of both
After ten years of successful research collaboration, we have
allowed our contract with Henkel Kindai Laboratories in
Japan to expire, and have instead launched a number of
special projects with Japan’s top universities.
Following the successful integration of the National
Starch businesses, the Adhesive Technologies business sector
has restructured its research portfolio with the intention to
concentrate on larger projects and thereby increase both its
innovation rate and the number of breakthrough innova-
tions available to the business sector.
Our scientists have made valuable contributions to our
corporate success in the following areas:
» Development of ammonia-free permanent hair colorants
with certain natural-based ingredients for home and salon
applications
» Joint development of “Dermo-Ident” technology with
the beauty expert Dr. Caspari for innovative anti-aging
cosmetics
» Development of Dial Anti-Ox, a new body wash with
cran berry extract and vitamin E pearls as an active anti-
oxidative complex – the USA’s most successful launch in
this category in 2009
» Development of an innovative capsule technology for the
optimum release of fragrances, particularly for laundry
detergent additives
» Development of a new surfactant with a substantially
improved drying effect for use particularly in machine
dishwasher detergents
» Development of Purex Complete 3-in-1, a product com-
prised of laundry detergent, fabric softener and an anti-
static compound
» Development of halogen-free structural adhesives for mo-
bile devices
» Development of Pattex No More Nails Invisible – a high-
performance adhesive that dries to a transparent finish
Major R&D sites
Düsseldorf, Germany
Dublin, Ireland
Shanghai, China
Hamburg, Germany
Rocky Hill, USA
Irvine, USA
Vienna, Austria
55
Annual Report 2009
Group management report » Research and development / Marketing and distribution
and technical advice in the salons. As an additional service,
we also offer specialist seminars and training courses in our
50-plus Schwarzkopf academies worldwide.
Our Adhesive Technologies business sector serves a wide
range of clientèle from large, internationally active corpo-
rations to small and medium-sized industrial businesses,
craftsmen, do-it-yourselfers and private home consumers,
all with specific needs and applications.
For the most part, our customers are addressed by our
own sales personnel. Our direct customers are industrial
clients and retail companies; these latter are able to meet
demand from private users and craftsmen more efficiently
than is possible through direct sales. While the grocery
retailers, DIY stores and specialist retailers are of great
importance for the private user, craftsmen purchase our
products primarily from specialist wholesalers. Due to our
unique global position, we are able to support internation-
ally active customers such as automobile manufacturers or
large retail chains effectively and comprehensively with key
account management teams. As many of our products are
characterized by their high technical complexity, our Tech-
nical Customer Services and the training of users also have
an important role to play. Our Technical Customer Services
people have detailed knowledge both of the properties of
our products and of their application, and can therefore
assist our customers in everything from the choice of the
right product and its usage to fine adjustment of their pro-
duction processes.
The close contact maintained by our employees with our
customers and users is also an important source of input
for innovation and development, enabling us to meet exist-
ing requirements even more effectively and develop new
applications for our adhesives.
For us, communication with end users is of central im-
portance. While we develop our marketing strategy at the
global or regional level, we implement the measures derived
at the national and local level. In the case of the private
consumer, we mainly use classic media advertising with
complementary promotional and support activities at the
point of sale. We serve professional craftsmen and industrial
customers primarily through our sales organization, with
technical advice, product demonstrations, training courses
and regular appearances at key industrial fairs. Aside from
the classic communication media, the internet is also be-
coming increasingly important as a platform for efficient
dialogue with our customers and users.
We currently have around 8,000 patents in place, protect-
ing our technologies around the world. We also have some
5,000 patent applications pending, and we have approxi-
mately 2,300 registered designs safeguarding our intellectual
property.
Further information on our research and development
activities can be found on our website www.henkel.com/
innovation.
Marketing and distribution
Our customers and consumers are the focus of all our thoughts
and actions. Consequently, we align our marketing and distri-
bution activities in each of our business sectors to the respec-
tive requirements of these primary target groups.
At Laundry & Home Care, our marketing activities
are controlled from headquarters and the regional com-
petence centers. Our sales and distribution activities, on
the other hand, are planned on a country-specific basis
and co ordinated at the regional level. Our direct customer
group in this business segment is the grocery retail trade
with distribution channels in the form of supermarkets,
mass merchandizers/hypermarkets and discount stores. In
Western Europe, drug stores are also extremely important,
while in the markets outside Europe and North America,
a large proportion of sales continues to be channeled via
wholesalers and distributors. As the trade’s first point of
contact, the Sales unit provides a full range of competences
in serving our customers.
In marketing, however, we focus on the requirements
of the end consumer. Our Marketing unit initiates innova-
tion processes, applying knowledge acquired from market
research and analysis activities. It also develops and imple-
ments media strategies and advertising formats aligned to
the consumer.
At the Cosmetics/Toiletries business sector, our marketing
strategies are centrally planned and globally implemented
with respect to both our branded consumer goods and our
professional hair salon business. Here too, our sales activi-
ties are controlled on a national level while being increas-
ingly internationally coordinated. We communicate with
consumers primarily through media advertising and with
information and point-of-sale campaigns in retail outlets.
Consumers purchase our products from grocery retailers,
specialist drug stores and department stores. We address our
customers in the salon business directly through the activi-
ties of our own field sales force. They support professional
hairdressers through, for example, product demonstrations
56 Annual Report 2009
Group management report » Sustainability / Corporate social responsibility
Alignment and focus
Right across the value chain, we consistently and system-
atically align our activities to the challenges of sustainable
development. These we have categorized on the basis of
five focal areas: energy and climate, water and wastewater,
materials and waste, health and safety, and social progress.
The importance of these issues is constantly increasing with
expansion in the world population, the rise in general living
standards and the accompanying growth in consumption.
Therefore, it is and will remain one of our central tasks to
contribute to sustainable consumption.
Every day, millions of customers and consumers world-
wide decide in favor of brands and technologies that offer
quality and responsibility from Henkel. It is therefore both
our duty and our desire to ensure that all new products
contribute to sustainable development in at least one of our
five focal areas. Hence we concentrate our efforts on innova-
tions that combine product performance and quality with
responsibility toward people and the environment. And we
endeavor to properly and effectively convey the importance
and the added value of these innovations to our customers
and consumers. To this end, we use a range of vehicles from
direct product communication to detailed information pro-
vided in the form of newsletters or, for example, at special
demonstration events.
The common focus of the company and our brands on
the key CSR challenges constitutes an important basis for
the credible implementation of our sustainability strat-
egy in the marketplace. And through our visible dedica-
tion, we strengthen both our brands and the reputation
of Henkel, enabling us to consolidate our market positions
worldwide.
Objectives and progress achieved
As long ago as the 1980s, we committed in our “Principles
and Objectives of Environmental Protection and Safety”
to promoting occupational health and safety, conserving
resources and reducing emissions. These principles and
objectives continue to be applied at both the corporate
and local site level, and we have been able to achieve major
improvements as a result. Taking this as our basis, at the
beginning of 2008 we defined the following four targets for
the Group leading up to 2012:
» To reduce energy consumption per ton of output by a
further 15 percent
» To reduce water consumption per ton of output by a fur-
ther 10 percent
Sustainability/
Corporate social responsibility
Henkel is dedicated to sustainability and corporate social
responsibility (CSR). We clearly state this principle as one of
the corporate values binding on all our employees around
the world. In generating our sales and profits, we conduct
all of our business in a socially responsible manner. We
are convinced that sustainable business practices – that
is to say providing the best possible product quality com-
bined with effective environmental protection and social
responsibility – are essential to our long-term entrepreneur-
ial performance. Henkel’s constant endeavors to reconcile
economic, ecological and social aims are a salient feature
of our 130-year-plus corporate history.
Similarly, many of our customers expect from us not only
best-quality products and persuasive innovations but also
proof of our commitment to sustainable development and
corporate social responsibility. In meeting these demands,
we are able to call upon decades of experience that have en-
abled us to set the pace as a leading partner for retailers, con-
sumers and industry alike. It is particularly gratifying when
our customers also recognize this. For example, Wal-Mart
honored Henkel with the Wal-Mart Sustainability Award,
identifying us as the supplier that, seen globally, has made
the biggest contribution to sustainability. With the Coop
Natura Prize, we were also recognized by the Swiss retail
group Coop in the category Best Sustainability Promoter.
Our contributions are similarly respected by our industrial
customers, as evidenced by our receipt of Kellogg’s Environ-
mental Stewardship Challenge Award.
Once again in 2009, our performance with respect to
sustainability and corporate social responsibility impressed
a range of external experts, as reflected in various global
and national sustainability ratings. For example, we are pres-
ent in the Dow Jones Sustainability World Index and in the
European Dow Jones Stoxx Sustainability Index, again being
named Sustainability Leader in the market sector Nondu-
rable Household Products. Our inclusion in the FTSE4Good
index was also confirmed. And in its Corporate Responsibil-
ity Rating, the company oekom research AG again declared
us to be the best performer in the consumer goods segment.
We also took first place in the DAX rankings ascertained by
the business magazine Wirtschaftswoche on behalf of oekom
research AG. Further, the Ethisphere Institute and Forbes
Business Magazine confirmed Henkel’s position on the list
of the World’s Most Ethical Companies.
