Henkel Counts on Organic Growth, Acqusitions

German consumer goods maker Henkel, Duesseldorf, Germany, said it would counter a sluggish global economy in 2003 through organic growth and acquisitions, enabling it to meet ambitious growth targets. Chief executive officer Ulrich Lehner declined to comment on reports his firm was among suitors circling German hair care group Wella AG, but Henkel made it clear that acquisitions of all sizes remained an option and hair care was a strategic priority.

“Big acquisitions would be nice but it’s not a must to survive,” said Henkel chief financial officer Jochen Krautter on the sidelines of the group’s annual press conference in Duesseldorf. “There are always interesting options but who knows what will happen,” he said, adding that the group had a theoretical war chest for any buying spree of at least $6.03 billion.

The group said it expected 2003 operating profit to rise by almost 10% with sales climbing 4% despite a difficult operating climate.

Krautter said Henkel could raise some 2.5 billion euros from cash flow and debt without risk to its credit ratings and at least a further 3 billion euros if the group were to sell off assets.

Analysts say that Henkel could raise money for a major acquisition by selling off its 28.9% stake in U.S. consumer goods company Clorox and its 28.1% interest in industrial hygiene firm Ecolab Inc.

The company made it clear that its hair care business, which includes the Schwarzkopf brand and competes directly with Wella, was a strategic focal point.

Henkel said it would also consider “appropriate regional acquisitions” at its adhesives business where it is focusing on growth in North America and the Asia Pacific. The firm said that growth at its technologies division would be principally driven through the acquisition of small to medium-sized enterprises.

Henkel also said it was sticking to its target of annual earnings per share growth of 10% by 2005 and reiterated its goal for 2003 operating profit to rise “in the high single-digit percentage range.” The company also repeated its forecast for 2003 adjusted sales growth of around 4% and said it expects net earnings to grow significantly even without any significant improvement in underlying economic conditions this year.