Annual Report 2013

Economic report

Review of overall business performance

Henkel had a very successful 2013. With solid growth in all business units, we continued the success of the previous year.

Henkel's business performance was impacted by the aforementioned general conditions prevailing in the global economy. The economic environment was particularly characterized by the recessionary trend in Southern Europe, slowing growth momentum in the emerging markets, and the political and social unrest in the Africa/Middle East region. In addition, the US dollar depreciated significantly against the euro, as did other emerging market currencies that are relevant for Henkel.

Henkel generated sales of 16,355 million euros, which was slightly below the prior-year figure due to negative exchange rate effects. Organically, we achieved a sales increase of 3.5 percent despite the challenging market environment. The solid increase in organic sales was notably driven by very strong performance in the emerging markets. In these markets, Henkel was able to generate organic sales growthorganic sales growth
Growth in revenues after adjusting for effects arising from acquisitions, divestments and foreign exchange differences – i.e. “top line” growth generated from within.
of 8.3 percent and expanded their percentage of sales to a new high of 44 percent (2012: 43 percent). In the mature markets, organic sales remained at the level of the previous year.

With prices for direct materials (raw materials, packaging, and purchased goods and services) flat versus the previous year, we were able to increase adjusted1 gross margingross margin
Indicates the percentage by which a company’s sales exceed cost of sales, i.e. the ratio of gross profit to sales.
by 0.9 percentage points to 48.0 percent in fiscal 2013. Particular contributions were made by savings from cost-reduction measures, improvements in production and supply chainsupply chain
Encompasses purchasing, production, storage, transport, customer services, requirements planning, production scheduling and supply chain management.
efficiency, and selective price increases.

As a result of the improved gross margingross margin
Indicates the percentage by which a company’s sales exceed cost of sales, i.e. the ratio of gross profit to sales.
, the continuous adjustment of our structures to our markets and customers, and further reductions in our overheads achieved by expanding shared services and optimizing our production network, we were able to further improve our profitability compared to the prior year. In 2013, we achieved for the first time an adjusted return on sales of 15.4 percent (2012: 14.1 percent). All business units contributed to this success.

Adjusted earnings per preferred share grew to 4.07 euros, a substantial increase of 12.1 percent over the 2012 figure of 3.63 euros2.

Our successful business performance is also reflected by a further improvement in our net working capitalnet working capital
Inventories plus payments on account, receivables from suppliers and trade accounts receivable, less trade accounts payable, liabilities to customers and current sales provisions.
-to-sales ratio to 2.3 percent, as well as a strong free cash flowfree cash flow
Cash flow actually available for acquisitions, dividend payments, the reduction of borrowings and contributions to pension funds.
. This enabled us to transform our net debtnet debt
Borrowings less cash and cash equivalents and readily monetizable financial instruments classified as “available for sale” or in the “fair value option,” less positive and plus negative fair values of hedging transactions.
position into a net cash position of 959 million euros (2012: –85 million euros). This gratifying performance supports our long-term ratings of "A flat" (Standard & Poor's) and "A2" (Moody's).


Adjusted for one-time charges/gains and restructuring charges.


Adjusted in application of IAS 19 revised (see here).