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Henkel Eyes Cuts After Q4 Slump

March 8, 2012

Cites higher raw material costs and challenging market conditions.

In an effort to boost profit margins, Henkel says it will embark on a campaign to cut costs and boost its profit margins after fourth-quarter results came in below expectations.
"Henkel intends to further adapt its structures to the constantly changing market conditions while maintaining its strict cost discipline," it said, citing a challenging economic environment and high raw material costs.
The group, whose brands include Persil detergent in most of Europe and Schwarzkopf hair products, confirmed its 2012 targets for adjusted EBIT margin of 14% and sales growth of between 3-5%.
The 2011 margin was 13.2%.
However, analysts are skeptical that Henkel will reach the 2012 margin target given the expected slowdown in the global economy, with the average forecast at 13.5%, according to Thomson Reuters I/B/E/S. Rival Unilever said 2012 will be a difficult year, while Procter & Gamble has announced thousands of job cuts in a bid to trim costs.
Henkel reported fourth-quarter sales of 3.8 billion euros ($49.9 billion) and adjusted earnings before interest and tax (EBIT) of 502 million, compared with expectations for sales of 3.9 billion euros and adjusted earnings of 516 million euros, in a Reuters poll.
It is due to give a longer-term strategy update at the end of this year, when it will reveal targets for the period beyond 2012.

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