Annual Report 2013

Economic report

Financing and capital management

Financing of the Group is centrally managed by Henkel AG & Co. KGaAKGaA
Abbreviation for “Kommanditgesellschaft auf Aktien.” A KGaA is a company with a legal identity (legal entity) in which at least one partner has unlimited liability with respect to the company’s creditors (personally liable partner), while the liability for such debts of the other partners participating in the share-based capital stock is limited to their share capital (limited shareholders).
. Funds are, as a general rule, acquired centrally and distributed within the Group. We pursue a conservative and flexible investment and borrowings policy with a balanced investment and financing portfolio. The primary goals of our financial management are to secure the liquidity and creditworthiness of the Group, together with ensuring access at all times to the capital market, and to generate a sustainable increase in shareholder value. Measures deployed in order to achieve these aims include optimization of our capital structure, adoption of an appropriate dividend policy, equity management, acquisitions, divestments, and debt reduction. Our capital needs and capital procurement activities are coordinated to ensure that requirements with respect to earnings, liquidity, security and independence are taken into account and properly balanced.

In the year under review, Henkel paid a higher dividend for both ordinary and preferred shares compared to the previous year. Cash flowsCash flows
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
not required for capital expenditures, dividends and interest payments are used for improving our net financial position, allocations to pension funds, and financing acquisitions. We cover our short-term financing requirement primarily through commercial paperscommercial papers
Short-term bearer bonds with a promise to pay, issued for the purpose of generating short-term debt capital.
and bank loans. Our multi-currency commercial paper program is additionally secured by a syndicated credit facilitycredit facility
Aggregate of all loan services available on call from one or several banks as cover for an immediate credit requirement.
. The outstanding bonds serve to cover long-term financing requirements.

Our financial management is based on the financial ratios defined in our financial strategy (see page Key financial ratios). Due to the international orientation of our businesses, a variety of regional statutory and regulatory provisions must be adhered to. The current status and amendments to these provisions are centrally monitored and any changes are taken into account in our capital management.

Our creditworthiness is regularly monitored by the two ratingrating
Assessment of the creditworthiness of a company as published by rating agencies.
agencies, Standard & Poor’s and Moody’s. As in the previous year, we are rated “A flat”/“A–1” (Standard & Poor’s) and “A2”/“P1” (Moody’s). Hence, both Standard & Poor’s and Moody’s continue to rate Henkel as investment grade, which is the best possible category.

Credit ratings
Standard & Poor’s Moody’s
Long-term A flat A2
Outlook Stable Stable
Short-term A–1 P1

Download Excel table
Add Excel table to Download Center

As of December 31, 2013, our non-current borrowings amounted to 1,386 million euros. Included in this figure is the hybrid bondhybrid bond
Equity-like corporate bond, usually with no specified date of maturity, or with a very long maturity, characterized by its subordination in the event of the issuer becoming insolvent.
issued in November 2005 with a nominal value of 1.3 billion euros. Our current borrowings – i.e. those with maturities of less than twelve months – amounted to 1,230 million euros. They are comprised of the fixed-interest bond issued in March 2009 with a nominal value of 1 billion euros, and interest-bearing bank loans and credits.

We partly used the cash flowcash flow
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
from operating activities to repay our senior bond that was due in June 2013. Overall, we have further improved our net financial position by a significant amount. The hybrid bondhybrid bond
Equity-like corporate bond, usually with no specified date of maturity, or with a very long maturity, characterized by its subordination in the event of the issuer becoming insolvent.
is treated as 50 percent equity by Standard & Poor's and – following a change in its valuation method – also by Moody's. This treatment benefits the ratingrating
Assessment of the creditworthiness of a company as published by rating agencies.
-specific debt ratios of the Group (see table of key financial ratios).

Henkel's financial risk management activities are explained in the risks and opportunities report. Further detailed information on our financial instruments can be found in the financial instruments report here.