Annual Report 2013

Fundamental principles of the Group

Management system and performance indicators

Henkel manages the company based on the strategy and the financial targets for 2016.

As defined and described in the section "Strategy and financial targets 2016," our financial targets are as follows: For 2016 we aim to generate net sales of 20 billion euros. We recognize the increasing importance of the emerging markets of Eastern Europe, Africa/Middle East, Latin America and Asia (excluding Japan) by targeting above-average growth in these regions. Here we intend to generate net sales of 10 billion euros in 2016. Furthermore, we aim to increase adjusted1 earnings per preferred share by an average of 10 percent per year through to 2016. The financial targets for 2016 are our most important performance indicators.

For efficient management of the Group, we have transferred the Henkel Group strategy into strategic plans for the three business units, Laundry & Home Care, Beauty Care, and Adhesive Technologies, as well as for their respective business areas. The financial targets are represented together with the businesses in both the year and the medium-term plans. A regular comparison of these plans with current developments and reporting of expected figures enables focused management of the company based on the described performance indicators.

Our management system is supplemented by additional key financials relevant to the capital market – primarily, adjusted return on sales (EBIT)return on sales (EBIT)
Operating business metric derived from the ratio of EBIT to revenues. Also known as EBIT margin.
.

Moreover, we report further key performance indicators, such as 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.
as a percentage of sales. We are committed to the principle of value creation and use economic value added (EVA®)economic value added (EVA®)
The EVA concept reflects the net wealth generated by a company over a certain period. A company achieves positive EVA when the operating result exceeds the weighted average cost of capital. The WACC corresponds to the yield on capital employed expected by the capital market. EVA is a registered trademark of Stern Stewart & Co.
to assess current and future growth. EVA® is a measure of the surplus economic value generated by a company over a certain period.

1

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