Integrative Case: Henkel AG Corporate Overview of Henkel AG
Valuation
Corporate Overview of Henkel AG
Professor David Wessels © 2010
The Wharton School of the University of Pennsylvania
3620 Locust Walk, Philadelphia, PA 19104
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Henkel AG Overview
•Henkel AG is an international consumer products firm headquartered in Düsseldorf, Germany, and its
three major segments are Adhesives, Cosmetics, and Laundry.
•After a few years of stable growth, the company suffered a severe setback in profitability for 2008 and
was only able to slightly recover in 2009. From a revenue standpoint, the company has experienced
fairly healthy growth; however, revenues dropped in 2009.
11,974
12,740
13,074
14,131
13,573
8,000
12,000
16,000
Revenues
in million euros, 2005–2009
CAGR
3.2%
1,296
779
1,080
800
1,200
1,600
Operating Profit (EBIT)
in million euros, 2005-2009
CAGR
-1.8%
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Revenue Distribution by Segment
•Laundry & Home Care include consumer
products in detergents, cleaning products, air
fresheners, and insecticides. Major brands
include Persil, Purex, Pril, Somat, and Dixan.
sealants, and surface treatment products to mostly
industrial clients. Major brands include Locitte,
Teroson, and Ceresit.
•Henkel divides its worldwide operations into three major divisions: Laundry & Home Care,
Cosmetics & Toiletries, and Adhesives.
•The three different sectors vary greatly in terms of their proportional impacts on EBIT. For example:
although Adhesives compose the largest segment of revenue, the sector currently produces the least
profit.
4,129
290
profit (EBIT)
Financial Performance by Sector
2009
Valuation: Measuring and Managing the Value of Companies 3
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Revenue Distribution by Geography
•Approximately two-thirds of the Henkel’s revenues are generated in Europe. The
company’s focus on high-growth markets, specifically Latin America and Asia-Pacific,
has tilted the proportion of revenues toward those markets. For instance, Asia-Pacific has
grown from 8.8 percent of revenues in 2005 to 12.4 percent in 2009.
Europe,
Africa,
Middle
East, 63.9%
North
America,
21.8%
Latin
America,
5.5%
Asia–
Pacific,
8.8%
Geographic Revenues
in million euros (2005)
Europe,
Africa,
Middle
East, 62.4%
North
America,
19.1%
Latin
America,
6.2%
Asia–
Pacific,
12.4%
Geographic Revenues
in million euros (2009)
Valuation: Measuring and Managing the Value of Companies 4
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Sector: Laundry and Home Care
•The Laundry and Home Care segment is globally
active in the marketing, selling, and distribution of
branded products for the laundry and home care
markets.
–The Laundry segment includes not only heavy-duty
bathroom applications together with household, glass,
and specialty cleaners.
•The company expects a slight decline in growth in
3,000
Laundry Revenues
in million euros, 2005–2009
CAGR
0.2%
Valuation: Measuring and Managing the Value of Companies 5
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Sector: Cosmetics and Toiletries
•The Cosmetics and Toiletries business sector is
active both in the branded consumer goods segments
of hair cosmetics, body care, skin care, and oral care
and in the professional hair salon business.
–The consumer goods segment is planned to be
expanded in Eastern Europe and the Middle East and to
be strengthened in Western Europe and North America.
–The hair salon segment is carrying a globalization
strategy, targeting growth particularly in Asia-Pacific,
Latin America, and the Middle East.
•Systematic cost-reduction measures, selective price
increases, and a further reduction in complexity have
led to an improvement in cost structures, and thus
record-level margins.
Latin America, Africa, and the Middle East.
2,629
2,864
2,972
3,016
3,010
0
1,000
2,000
3,000
4,000
Cosmetics Revenues
in million euros, 2005-2009
CAGR
3.4%
Valuation: Measuring and Managing the Value of Companies 6
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Sector: Adhesives
•The Adhesives segment consists of five strategic
business units: Adhesives for Craftsmen and
Packaging Consumer Goods, and Construction and
Electronics.
•Increasing consumption in high-growth areas of
China and India, as well as Latin America, are the
focus of expansion efforts in the Adhesives segment.
5,008
5,510
5,711
6,700
6,224
6,000
8,000
Adhesives Revenues
in million euros, 2005-2009
CAGR
5.6%
Integrative Case: Henkel AG Corporate Overview of Henkel AG
Market Capitalization and Capital Structure
• The company’s strategy for capital management
reducing debt.
•Liquidity risk is very low because of the use of
subsidiary group.
• “Cash and marketable securities” of 1.1 billion
euros far exceeded short-term borrowings for
2009. And the increase in short-term borrowings
(€ millions) 2008 2009
Short-term Borrowings
Other 512.0 1.0
Subtotal 1,817.0 660.0
Long-term Borrowings
(Hybrid) 5.375% (until 2015) Bond 1,331.0 1,368.0
Other 6.0 3.0
Subtotal 2,394.0 3,425.0
Debt-to-Equity
Market capitalization (year–end) 8,895.9 14,583.1
Gross enterprise value 13,106.9 18,668.1
Valuation: Measuring and Managing the Value of Companies 8