Henkel Announces Sale of Cognis; Third Quarter Results

Henkel, Dusseldorf, Germany, confirmed the sale of its chemicals business, Cognis. On Sept. 12, Henkel signed an agreement to sell Cognis to the investor consortium comprising Permira (formerly Schroder Ventures Europe), GS Capital Partners and Schroder Ventures Life Sciences. Henkel granted the investors a withdrawal up to Nov. 11, due to tragic events in the U.S. and the ensuing turmoil in world financial markets. The investors have decided not to exercise this right to withdraw. The deal is now expected to close on Nov. 30. Due to current economic conditions, it was agreed to adjust the enterprise value from $2.3 billion to $2.2 billion.

“We are pleased that our confidence in the investors and in the closing of the agreement has been confirmed in a difficult economic environment,” said Dr. Ulrich Lehner, president and chief executive officer, Henkel Group. “The sale of Cognis will increase our financial flexibility to make acquisitions and ensure the long-term growth of the Henkel Group.”

As a result of the world market, the Henkel KGaA management board decided on the principles of a restructuring program at Cognis to increase competitiveness through sustainable cost-cutting in production, selling and distribution and administration in all management sectors. These measures include specialization and complete or partial shutdown of production sites. Unprofitable businesses will either be permanently closed or redeveloped, executives said.

Sales of Cognis grew 2.3% to $1.9 billion for the first three quarters. Operating profit increased by 10.9% to $163 million. The restructuring program introduced in the U.S. last spring showed significantly positive effects during the third quarter, executives noted.

The Henkel Group’s sales for the first nine months of 2001 increased 6.1% to $8.9 billion, despite a difficult market environment. Operating profit was below the record figure of the previous year’s $629 million at $607 million. Net earnings for the first three quarters were up 1.7% to $326 million.

Sales in the cosmetics and toiletries business sector increased by 4.3% to $1.4 billion in the first nine months. Operating profit increased by 8.4% to $92 million. The laundry and home care business sector’s sales increased 9.7% to $2 billion for the first nine months. Operating profits were $147 million. In Latin America, the acquisition of the Viva brand in Mexico resulted in a high sales growth. Sales also increased 6.1% to $1.3 billion at the company’s industrial and institutional hygiene/surface technologies business, primarily due to the acquisitions of Atofina and Vagnone & Boeri. Operating profit decreased 9.9% to $97.5 million due to the economic downturn in North America and the ongoing recession in Turkey, the Mercosul region, Japan and Australia, Henkel executives reported.