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Henkel cautious on costs, supply chains, even as sales jump

08/12/2021 | 02:46am EDT
FILE PHOTO: A logo of consumer goods group Henkel is pictured in Duesseldorf

BERLIN (Reuters) -German consumer goods group Henkel voiced concern about rising prices and over-stretched supply chains, although it raised its full-year sales outlook on Thursday after its business rebounded above pre-crisis levels in the first half.

"The exceptionally sharp rise in raw material prices and strained supply chains will weigh heavily on the economy in the further course of the year," Chief Executive Carsten Knobel said.

Henkel was trying to limit the impact on profits, he added, and also said growth rates would probably slow in the second half of 2021 versus the first half as the rebound in industrial demand began in the second half of 2020.

Henkel said it expected 2021 sales to rise an organic 6-8%, up from a previous 4-6% forecast, and confirmed it expected earnings per preferred share to rise in the high single-digit to mid-teens percentage range.

It slightly lowered its forecast for its operating earnings margin to 13.5-14.5% of sales from a previous 14-15%.

Consumer goods group Procter & Gamble Co said last month it expects higher core earnings this year, while warning of a nearly $2 billion hit from rising commodity and transportation expenses. It is relying on price increases and cost cuts to cushion the impact.

Henkel's second-quarter sales rose an organic 15% to 4.96 billion euros ($5.82 billion), just shy of average analyst consensus for 4.98 billion.

The adhesives unit, which supplies the automotive and electronics industries and accounts for almost half of sales, recorded organic growth of 28.5%, helped by global economic recovery.

The maker of Schwarzkopf hair care products said its beauty care business saw sales jump 8.2% in the second quarter as hair salons reopened after lockdowns.

Henkel, which aims to divest or discontinue brands and categories worth around 500 million euros by the end of 2021, said it had already reached around 350 million euros of the target, mainly in the consumer business.

German rival Beiersdorf last week also reported strong demand for adhesives and its dermatological brands, pushing its shares up.

($1 = 0.8516 euros)

(Reporting by Emma ThomassonEditing by Tomasz Janowski, Caroline Copley and Barbara Lewis)

© Reuters 2021
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