Henkel: Information for Its Shareholders on Business Performance January Through September 1999

Duesseldorf, Germany (PROTEXT) - Sound growth in sales and profits - Adhesives sector shows strong performance - Cosmetics successful in Europe - Substantial increase in net earnings for the full year expected The following press release was issued today by Henkel KGaA (Frankfurt Stock Exchange: HNKG.F): Sales, Profits and Cash Flow Henkel Group sales from January through September 1999 amounted to Euro 8.4 billion. This is 2.3 percent up on the same period last year. The sales increase is mainly due to acquisitions. The influence of exchange rate fluctuations can be regarded as negligible. Sales realized by the German Henkel companies fell by 2.9 percent, while sales of the foreign companies increased by 4.4 percent. Due to the economic and currency crisis in Latin America, sales there fell by 10.5 percent. Sales in North America rose by 4.9 percent, with the increase in Asia Pacific amounting to 32.4 percent. Operating profit amounted to Euro 632 million. This is 4.2 percent up on the equivalent value of Euro 607 million for the preceding year. With an increase of 21 percent to Euro 880 million, cash flow at the Henkel Group developed well during the first nine months of 1999. The increase was particularly due to lower expenditures for corporate taxes and higher depreciation. Earnings before tax amounted to Euro 531 million and was thus up by Euro 63 million on the comparable period of last year, representing a 13.5 percent increase. Net earnings before restructuring costs from Clorox in the first nine months of 1999 increased by 16.4 percent to Euro 312 million compared with the previous year. Major Events In October 1999 Henkel sold its European paper auxiliaries business, which accounted for Euro 50 million in sales. The divestment of the North American automotive aftermarket business of Loctite and the sale of two local cosmetic brands, in Britain (Adorn) and in Finland (Mirame), to local operators were successfully concluded. The joint venture with Dial Corporation was further strengthened with the acquisition of the American trademark and technology rights for "Custom Cleaner", a chemical home dry cleaning system. In the Surface Technologies sector a joint venture with a local partner (Makhawi Dubai) was established in the United Arab Emirates to expand Henkel's water treatment business in the region. Henkel Group January - September 1999 Sales breakdown by product sector Jan.- Sales Share Jan.- Sales Share Change Sept. Jan. Sept. Jan.- 1998 -Sept. 1999 Sept. 1998 1999 EUR million in % EUR million in % in percent Chemical Products 1923 24% 1900 22% -1.2 Surface Technologies 651 8% 649 8% -0.4 Adhesives 1805 22% 1871 22% 3.7 Cosmetics Toiletries 1267 15% 1348 16% 6.4 Detergents Household Cleansers 1884 23% 1940 23% 3.0 Industrial and Institutional Hygiene 611 7% 645 8% 5.7 Other 92 1% 70 1% -23.9 Total 8233 100% 8423 100% 2.3 Sales Breakdown Jan. Sales Share Jan. Sales Share Change by region -Sept. -Sept. 1998 1998 1999 1999 Mio. EUR in % EUR million in % in percent Germany 2343 29% 2274 27% -2.9 Europe ex. Germany 3572 43% 3679 44% 3.0 North America 1323 16% 1388 16% 4.9 Latin America 358 4% 321 4% -10.5 Africa 140 2% 104 1% -25.7 Asia, Australia 497 6% 657 8% 32.4 Total 8233 100% 8423 100% 2.3 Henkel Group segment information by business sector Segment reporting January through September 1999 (in EUR million) Chemical Surface Adhesives Brand Hygiene Other Henkel Products Techno- -name Products Group (Cognis) logies Sales Jan. -Sept. 1999 1900 649 1871 3288 645 70 8423 Sales Jan. -Sept. 1998 1923 651 1805 3151 611 92 8233 Change in percent -1.2 -0.4 3.7 4.4 5.7 - 23.9 2.3 EBIT Jan. -Sept. 1999 104 50 185 241 57 -5 632 EBIT Jan. -Sept. 1998 139 48 170 207 51 -8 607 Change in percent -25.4 4.4 8.4 16.9 11.4 4.2 Return on Sales Jan.-Sept. 1999 (in %) 5.5 7.6 9.9 7.4 8.8 7.5 Return on Sales Jan.-Sept. 1998 (in %) 7.3 7.3 9.4 6.6 8.3 7.4 Return on Investment Jan.-Sept. 1999 (in %) 8.8 14.6 11.1 18.7 24.0 13.0 Return on Investment Jan.-Sept. 1998 (in %) 11.8 14.6 10.2 16.7 23.2 13.0 Development of Business Sectors In the first three quarters of 1999, the Chemical Products business sector, now a legally independent company operating under the name of Cognis, generated sales of Euro 1,900 million, down 1.2 percent compared to the previous year. Operating profit fell by 25.4 percent to Euro 104 million. Business with oleochemical base materials remained behind expectations. Pricing pressure on fatty acids and fatty alcohols continued unabated. Due to increasing world market prices, coconut oil was completely replaced in the third quarter by palm kernel oil. Sales at Care Chemicals rose by 8 percent. Sound growth was achieved in Europe, North America and the Asia Pacific region. Increasing competitive pressure and rising raw material costs, however, adversely affected margins, particularly in the surfactants business. With sales declining by 1 percent, operating profit at Organic Specialty Chemicals improved. While business with plastics additives fell short of last year's level, sales of paint and coatings additives showed a significant plus. The revival of the international mining industry had a positive effect on demand for our mining chemicals. Business with textile and leather auxiliaries was sluggish. Synthetic lubricants performed very well in Europe and North America. The Surface Technologies business sector recorded sales of Euro 649 million, just short (-0.4 percent) of the level for the same period last year. After adjusting for divestments, however, sales were up 3 percent on the previous year. At Euro 50 million, operating profit showed a 4.4 percent improvement on the 1998 figure. Good sales growth was achieved in North America, Mexico and Asia Pacific. Momentum came from the newly acquired business in Korea. Sales in Europe also developed well. The activities in South America suffered from the continuing recession. Sales in the automotive business rose by 10 percent. Activities involving the worldwide marketing of new products and technologies for carbody reinforcement proved particularly successful. The cooperation with Cemedine in Japan is a further step toward strengthening Henkel's world market leadership. Activities in the non-automotive industrial business benefited from increasing production levels in key industries. However, sales were 8 percent down (3 percent after adjusting for divestments) compared to last year. Sales of the Adhesives business sector increased by 3.7 percent to Euro 1,871 million. Operating profit rose by 8.4 percent to Euro 185 million. This is predominantly attributable to very encouraging results achieved in North America and Germany. Sales in adhesives for consumers and craftsmen increased by 2 percent. The craft and trade-oriented businesses in Germany were able to recover. In Europe, DIY products further expanded their market shares. The launch of innovative glue and correction rollers also contributed to the growth achieved in Europe. In the USA, the adhesive tapes business developed positively. The worldwide roll-out of adhesive tapes continues as planned. Sales in industrial and packaging adhesives rose by 4 percent. There was an increase in demand for packaging adhesives in the USA, Europe and some Asian markets. Our film and foil laminating adhesives business also achieved significant growth rates in Europe. Sales in adhesives for the wood processing and furniture industries hit a record high. Engineering adhesives (Loctite) saw sales rise by 6 percent. This growth is predominantly due to improvements in the Asia Pacific region. Good business performance in North America was assisted by a healthy level of activity in the automotive sector. In addition, earnings improvements are expected from the closedown of the former Loctite head office in Hartford, Connecticut. In the brand-name products sector -- Cosmetics/Toiletries and Detergents/Household Cleansers -- sales rose by 4.4 percent to Euro 3,288 million. Operating profit increased by 16.9 percent to Euro 241 million. The Cosmetics/Toiletries business sector increased sales by 6.4 percent to Euro 1,348 million, gaining market share throughout Europe. Sales performance in the hair salon business was also good. Sales growth in Europe is mainly due to favorable developments in Belgium, France, Great Britain and Scandinavia. In Germany, sales fell below the level of the previous year due to increasing pricing pressure. Sales in Russia during the third quarter were once again satisfactory. In the United States the Fa brand was successfully launched. Hair cosmetics achieved a sales increase of 12 percent, strengthening its number 2 position in the European market. The launch of the new colorants Live Unlimited Colors and Vital Colors in Germany, Austria and Scandinavia was very successful. In France hair colorants consolidated their market share. The umbrella brand Fa likewise expanded its strong number 2 position in the European bodycare/toiletries market. The Diadermine product line, which enjoys leading positions in the Spanish and French facial care markets, achieved high sales with new products. The hair salon products business recorded an increase in sales of 13 percent. The relaunch of the colorants brand Igora Royal in Western Europe was successful. The international roll-out continued in Scandinavia and Eastern Europe. The Detergents/Household Cleansers business sector recorded a sales increase of 3 percent to Euro 1,940 million. Good growth in Europe and the Middle East was offset by declining sales, particularly in Russia, and also in China. The major detergent brands performed very well in Europe. They succeeded in expanding their market shares. Specialty detergents achieved a 4 percent sales increase. Particular instrumental in this success were Vernel softeners, featuring a range of new fragrances. Soft & Easy, a new conditioner that makes ironing easier, was launched in September on a Europe-wide scale. Household cleansers recorded a sales increase of 8 percent. With the introduction of the WC Frisch toilet freshener (rim blocks), Henkel attained a leading position in the WC care segment in Europe. Since September, fasa Textile Deodorant has been launched throughout Europe. The product eliminates unpleasant odors and offers an effective solution for difficult- to-clean textiles. The Industrial and Institutional Hygiene business sector saw sales increase by 5.7 percent to Euro 645 million. At Euro 57 million, operating profit was 11.4 percent up on the previous year. The institutional hygiene business recorded a sales increase of 6 percent. This growth was attributable to numerous product launches in all countries and investments in personnel in the service sector, thus strengthening customer orientation. Sales improvement in the professional hygiene business was 8 percent, assisted by the ongoing revival of the German business. The 6 percent sales increase in the Food & Beverage/P3 business was due to the good summer season in the tourist countries. The Textile Hygiene unit also benefited from this upturn. It recorded a sales increase of 4 percent. Henkel Group Jan.-Sept. 1998 Jan.-Sept. 1999 Consolidated Statement of Income MEUR % MEUR % Sales 8233 100% 8423 100% Cost of sales 4538 55.1% 4539 53.9% Gross profit 3695 44.9% 3884 46.1% Marketing, selling and distribution costs, administrative expenses incl. operating income and charges 2942 35.8% 3092 36.7% Amortization of goodwill 95 1.1% 108 1.3% Restructuring costs 51 0.6% 52 0.6% Operating profit (EBIT) 607 7.4% 632 7.5% Financial items -139 -1.6% -101 -1.1% Earnings before tax 468 5.8% 531 6.4% Taxes on income -200 2.5% -219 -2.7% Net earnings before restructuring 268 3.3% 312 3.7% costs from Clorox One-time charges related to Clorox 0.0% -33 -0.4% Net earnings 268 3.3% 279 3.3% Henkel Group Dec. 31, 1998 Sept. 30, 1999 Consolidated Balance Sheet MEUR % MEUR % Tangible and intangible assets 4629 50.7% 4695 48.8% Financial assets 535 5.9% 642 6.7% Fixed assets 5164 56.6% 5337 55.5% Deferred tax assets 212 2.3% 206 2.1% Inventories 1426 15.6% 1422 14.8% Accounts receivable and 2201 24.1% 2509 26.2% miscellaneous assets Liquid funds/marketable securities 127 1.4% 139 1.4% Current assets 3754 41.1% 4070 42.4% Total assets 9130 100.0% 9613 100.0% Equity excluding minority interests 2570 28.2% 2861 29.7% Minority interests 259 2.8% 266 2.8% Equity including minority interests 2829 31.0% 3127 32.5% Provisions for pensions and similar obligations 1773 19.4% 1837 19.2% Other provisions 972 10.6% 1157 12.0% Provisions 2745 30.0% 2994 31.2% Provisions for deferred tax liabilities 162 1.8% 163 1.7% Borrowings 2163 23.7% 1847 19.2% Trade accounts payable 803 8.8% 950 9.9% Other liabilities 428 4.7% 532 5.5% Liabilities 3394 37.2% 3329 34.6% Total equity and liabilities 9130 100.0% 9613 100.0% Major Participations Ecolab Inc., St. Paul, Minnesota, USA, in which Henkel holds a 21.6 percent interest, achieved a sales increase of 11 percent to USD 1,564 million in the first three quarters of 1999. The introduction of new products and aggressive promotional activities in the United States as well as good sales growth of the Henkel-Ecolab joint venture contributed to this development. Net earnings from continuing operations increased by 16 percent to USD 133 million. The Clorox Company, Oakland, California, USA, in which Henkel holds a 24.7 percent stake, reported a sales decline of 2 percent to USD 942 million in the first quarter of fiscal 2000. Lower volumes were recorded by the company's household products segment; inefficient promotional activities were eliminated during the ongoing integration of First Brands. Net earnings amounted to USD 87 million, down 13 percent compared to the same period last year. Investor Relations/Capital Market The prices of Henkel preferred shares and ordinary shares fell during the first three quarters of 1999 by 19.3 percent and 23 percent respectively. Despite numerous buy recommendations from financial analysts, Henkel's share prices have suffered. Profit warnings made by certain American consumer goods companies and the pressure on chemical stocks had a negative impact. As of September 30, 1999, Henkel's market value amounted to Euro 8 billion. Capital Expenditures Additions to fixed assets during the period from January through September 1999 amounted to Euro 300 million, 13 percent less compared to the same period last year. This reduction is due to more restrictive capital expenditures. The funds were spent mainly on projects in the Brand-Name Products, Adhesives and Chemical Products sectors. Employees Employees Dec. 31, 98 Sept. 30, 99 Change in % Germany 15,791 15,554 -1.5 Abroad 40,828 41,215 0.9 Total 56,619 56,769 0.3 As of September 30, 1999, the number of employees at the Henkel Group was 56,769. In Germany, the payroll fell by 237 employees to a total of 15,554. At the end of September 1999, the proportion of Henkel personnel working outside Germany was 73 percent. Outlook Due to the good sales performance reported by all business sectors for the third quarter, and the sustained recovery taking place in the growth regions of Asia Pacific and Latin America, Henkel expects consolidated sales for fiscal 1999 to exceed Euro 11.3 billion. Henkel is confident of achieving another significant increase in operating profit. Net earnings for the year will also show sound growth. Henkel KGaA The Management Board Henkel is a worldwide operating specialist in brand-name products, adhesives and in systems businesses with affiliates in over 70 countries. Henkel is the number one producer of Adhesives, Surface Technologies and Industrial and Institutional Hygiene (jointly with Ecolab Inc.) on a worldwide scale. In Detergents it ranks second in Continental Europe and in Cosmetics Henkel holds the number three market position in Europe. Internet site: http://www.henkel.com ots Original Text Service: Henkel KGaA Internet: http://www.newsaktuell.de Contact: Corporate Communications +49-211-797-2710, or fax, +49- 211-798-4040, or alexandra.boy@henkel.de, or Investor Relations +49-211-797-3937, or fax, +49-211-798-2863, or magdalena.moll@henkel.de, waltraud.mueller@henkel.de, both of Henkel KGaA Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents. PROTEXT