German consumer goods company Henkel reported a disappointing first quarter of earnings and sales on Tuesday as falling industrial production hit its adhesives business and its beauty unit underperformed in western Europe and China.
The maker of Schwarzkopf shampoo and Persil detergent saw sales rise by an organic 0.7% to €4.97 billion, while earnings per share dropped 6% to €1.34, both shy of average analyst forecasts.
"This is a disappointing start to the year in our eyes and we continue to think that the board and management need to address Henkel's challenges more radically," said Jefferies analyst Martin Deboo.
Brand Investment
Henkel has underperformed rivals such as Procter & Gamble Co (P&G) and Unilever in recent years. It warned in January that earnings would fall in 2019 as it hikes investment in brands and digital technology to try to revive growth.
Sales at the adhesives unit -- which account for almost half of total sales - fell an underlying 0.8% due to a slowdown in the electronics and automotive sectors, although Chief Executive Hans van Bylen said he expected the industries to pick up again in the second half of the year.
Van Bylen told analysts that he also expected pressure from high raw materials prices to ease in the second half.
Sales of beauty care brands like Schwarzkopf shampoo and Dial soap fell an organic 2.2%, hurt by a weak performance in western Europe and China, while it saw strong growth in North America and its professional haircare business.
Van Bylen said Henkel was taking targeted measures to boost growth in the beauty care business.
Competitor Performance
In contrast, France's L'Oreal last month reported that sales rose a forecast-beating like-for-like 7.7%, while German rival Beiersdorf saw organic sales rise 6%.
Henkel's laundry and home care unit saw sales rise an organic 4.7%, boosted by new products and innovations such as Persil four-chamber laundry discs and Somat all-in-one dishwasher gel.
Henkel confirmed its outlook for organic sales growth of between 2% and 4% in 2019 and for adjusted EPS to fall by a mid-single digit percentage.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
