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

Duesseldorf, Germany (PROTEXT) - Sound growth in sales andprofits - Adhesives sector shows strong performance - Cosmetics successful in Europe - Substantial increase in net earnings for the full yearexpected 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 1999amounted to Euro 8.4 billion. This is 2.3 percent up on the sameperiod last year. The sales increase is mainly due toacquisitions. The influence of exchange rate fluctuations can beregarded as negligible. Sales realized by the German Henkel companies fell by 2.9percent, while sales of the foreign companies increased by 4.4percent. Due to the economic and currency crisis in LatinAmerica, sales there fell by 10.5 percent. Sales in North Americarose by 4.9 percent, with the increase in Asia Pacific amountingto 32.4 percent. Operating profit amounted to Euro 632 million. This is 4.2percent up on the equivalent value of Euro 607 million for thepreceding year. With an increase of 21 percent to Euro 880 million, cash flowat the Henkel Group developed well during the first nine monthsof 1999. The increase was particularly due to lower expendituresfor corporate taxes and higher depreciation. Earnings before tax amounted to Euro 531 million and was thusup 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 thefirst nine months of 1999 increased by 16.4 percent to Euro 312million compared with the previous year. Major Events In October 1999 Henkel sold its European paper auxiliariesbusiness, which accounted for Euro 50 million in sales. The divestment of the North American automotive aftermarketbusiness of Loctite and the sale of two local cosmetic brands, inBritain (Adorn) and in Finland (Mirame), to local operators weresuccessfully concluded. The joint venture with Dial Corporation was furtherstrengthened with the acquisition of the American trademark andtechnology rights for "Custom Cleaner", a chemical home drycleaning system. In the Surface Technologies sector a joint venture with alocal partner (Makhawi Dubai) was established in the United ArabEmirates to expand Henkel's water treatment business in theregion. 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 OtherHenkel

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 Productsbusiness sector, now a legally independent company operatingunder the name of Cognis, generated sales of Euro 1,900 million,down 1.2 percent compared to the previous year. Operating profitfell by 25.4 percent to Euro 104 million. Business with oleochemical base materials remained behindexpectations. Pricing pressure on fatty acids and fatty alcoholscontinued unabated. Due to increasing world market prices,coconut oil was completely replaced in the third quarter by palmkernel oil. Sales at Care Chemicals rose by 8 percent. Sound growth wasachieved in Europe, North America and the Asia Pacific region.Increasing competitive pressure and rising raw material costs,however, adversely affected margins, particularly in thesurfactants business. With sales declining by 1 percent, operating profit at OrganicSpecialty Chemicals improved. While business with plasticsadditives fell short of last year's level, sales of paint andcoatings additives showed a significant plus. The revival of theinternational mining industry had a positive effect on demand forour mining chemicals. Business with textile and leatherauxiliaries was sluggish. Synthetic lubricants performed verywell in Europe and North America. The Surface Technologies business sector recorded sales ofEuro 649 million, just short (-0.4 percent) of the level for thesame 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 1998figure. Good sales growth was achieved in North America, Mexico andAsia Pacific. Momentum came from the newly acquired business inKorea. Sales in Europe also developed well. The activities inSouth America suffered from the continuing recession. Sales in the automotive business rose by 10 percent.Activities involving the worldwide marketing of new products andtechnologies for carbody reinforcement proved particularlysuccessful. The cooperation with Cemedine in Japan is a furtherstep toward strengthening Henkel's world market leadership. Activities in the non-automotive industrial business benefitedfrom increasing production levels in key industries. However,sales were 8 percent down (3 percent after adjusting fordivestments) compared to last year. Sales of the Adhesives business sector increased by 3.7percent to Euro 1,871 million. Operating profit rose by 8.4percent to Euro 185 million. This is predominantly attributableto very encouraging results achieved in North America andGermany. Sales in adhesives for consumers and craftsmen increased by 2percent. The craft and trade-oriented businesses in Germany wereable to recover. In Europe, DIY products further expanded theirmarket shares. The launch of innovative glue and correctionrollers also contributed to the growth achieved in Europe. In theUSA, the adhesive tapes business developed positively. Theworldwide 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 theUSA, Europe and some Asian markets. Our film and foil laminatingadhesives business also achieved significant growth rates inEurope. Sales in adhesives for the wood processing and furnitureindustries hit a record high. Engineering adhesives (Loctite) saw sales rise by 6 percent.This growth is predominantly due to improvements in the AsiaPacific region. Good business performance in North America wasassisted by a healthy level of activity in the automotive sector.In addition, earnings improvements are expected from theclosedown of the former Loctite head office in Hartford,Connecticut. In the brand-name products sector -- Cosmetics/Toiletries andDetergents/Household Cleansers -- sales rose by 4.4 percent toEuro 3,288 million. Operating profit increased by 16.9 percent toEuro 241 million. The Cosmetics/Toiletries business sector increased sales by6.4 percent to Euro 1,348 million, gaining market sharethroughout Europe. Sales performance in the hair salon businesswas also good. Sales growth in Europe is mainly due to favorable developmentsin Belgium, France, Great Britain and Scandinavia. In Germany,sales fell below the level of the previous year due to increasingpricing pressure. Sales in Russia during the third quarter wereonce again satisfactory. In the United States the Fa brand wassuccessfully launched. Hair cosmetics achieved a sales increase of 12 percent,strengthening its number 2 position in the European market. Thelaunch of the new colorants Live Unlimited Colors and VitalColors 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 2position in the European bodycare/toiletries market. The Diadermine product line, which enjoys leading positions inthe Spanish and French facial care markets, achieved high saleswith new products. The hair salon products business recorded an increase in salesof 13 percent. The relaunch of the colorants brand Igora Royal inWestern Europe was successful. The international roll-outcontinued in Scandinavia and Eastern Europe. The Detergents/Household Cleansers business sector recorded asales increase of 3 percent to Euro 1,940 million. Good growth in Europe and the Middle East was offset bydeclining sales, particularly in Russia, and also in China. The major detergent brands performed very well in Europe. Theysucceeded 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 newconditioner that makes ironing easier, was launched in Septemberon a Europe-wide scale. Household cleansers recorded a sales increase of 8 percent.With the introduction of the WC Frisch toilet freshener (rimblocks), Henkel attained a leading position in the WC caresegment in Europe. Since September, fasa Textile Deodorant hasbeen launched throughout Europe. The product eliminatesunpleasant odors and offers an effective solution for difficult-to-clean textiles. The Industrial and Institutional Hygiene business sector sawsales increase by 5.7 percent to Euro 645 million. At Euro 57million, operating profit was 11.4 percent up on the previousyear. The institutional hygiene business recorded a sales increaseof 6 percent. This growth was attributable to numerous productlaunches in all countries and investments in personnel in theservice sector, thus strengthening customer orientation. Salesimprovement in the professional hygiene business was 8 percent,assisted by the ongoing revival of the German business. The 6percent sales increase in the Food & Beverage/P3 business was dueto the good summer season in the tourist countries. The TextileHygiene unit also benefited from this upturn. It recorded a salesincrease 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 a21.6 percent interest, achieved a sales increase of 11 percent toUSD 1,564 million in the first three quarters of 1999. Theintroduction of new products and aggressive promotionalactivities in the United States as well as good sales growth ofthe Henkel-Ecolab joint venture contributed to this development.Net earnings from continuing operations increased by 16 percentto USD 133 million. The Clorox Company, Oakland, California, USA, in which Henkelholds a 24.7 percent stake, reported a sales decline of 2 percentto USD 942 million in the first quarter of fiscal 2000. Lowervolumes were recorded by the company's household productssegment; inefficient promotional activities were eliminatedduring the ongoing integration of First Brands. Net earningsamounted to USD 87 million, down 13 percent compared to the sameperiod last year. Investor Relations/Capital Market The prices of Henkel preferred shares and ordinary shares fellduring the first three quarters of 1999 by 19.3 percent and 23percent respectively. Despite numerous buy recommendations fromfinancial analysts, Henkel's share prices have suffered. Profitwarnings made by certain American consumer goods companies andthe pressure on chemical stocks had a negative impact. As ofSeptember 30, 1999, Henkel's market value amounted to Euro 8billion. Capital Expenditures Additions to fixed assets during the period from Januarythrough September 1999 amounted to Euro 300 million, 13 percentless compared to the same period last year. This reduction is dueto more restrictive capital expenditures. The funds were spentmainly on projects in the Brand-Name Products, Adhesives andChemical 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 theHenkel Group was 56,769. In Germany, the payroll fell by 237employees to a total of 15,554. At the end of September 1999, theproportion of Henkel personnel working outside Germany was 73percent. Outlook Due to the good sales performance reported by all businesssectors for the third quarter, and the sustained recovery takingplace in the growth regions of Asia Pacific and Latin America,Henkel expects consolidated sales for fiscal 1999 to exceed Euro11.3 billion. Henkel is confident of achieving another significant increasein operating profit. Net earnings for the year will also showsound growth. Henkel KGaA The Management Board Henkel is a worldwide operating specialist in brand-nameproducts, adhesives and in systems businesses with affiliates inover 70 countries. Henkel is the number one producer ofAdhesives, Surface Technologies and Industrial and InstitutionalHygiene (jointly with Ecolab Inc.) on a worldwide scale. InDetergents it ranks second in Continental Europe and in CosmeticsHenkel holds the number three market position in Europe. Internet site: http://www.henkel.com ots Original TextService: Henkel KGaA Internet: http://www.newsaktuell.deContact: 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, ormagdalena.moll@henkel.de, waltraud.mueller@henkel.de, both ofHenkel KGaA

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