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Henkel: Annual Report 2008

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Henkel: Annual Report 2008
Annual Report 2008
Driving Change
Unternehmen
The Company
Performance at a Glance
Highlights
Key Financials
in million euros
2007
2008
+/–
13,074
14,131
8.1 %
1,344
779
–42.0 %
10.3
5.5
–4.8 pp
Net earnings
941
1,233
31.0 %
growth regions:
Earnings after minority interests
921
1,221
32.6 %
+3 percentage points to 37 percent
in euros
2.14
2.83
32.2 %
in %
15.4
6.9
–8.5 pp
Sales
Operating profit (EBIT)
Return on sales (EBIT)
in %
Earnings per preferred share
Return on capital employed (ROCE)
Capital expenditures on property,
plant and equipment
470
473
0.6 %
Research and development expenses
350
4291)
22.6 %
Employees (annual average)
number
52,303
55,513
6.1 %
Dividend per ordinary share
in euros
0.51
0.512)
0.0 %
Dividend per preferred share
in euros
0.53
0.532)
0.0 %
Includes restructuring charges of 52 million euros
2)
Proposed
3)
Adjusted for one-time charges/gains and restructuring charges
» Organic sales growth:
+3.0 percent
» Share of sales attributable to
» Adjusted3) operating profit (EBIT):
+6.6 percent to 1,460 million euros
» Adjusted3) operating profit (EBIT)
before amortization after purchase
price allocation: +9.1 percent to
1,495 million euros
» Adjusted3) earnings per preferred
share (EPS) before amortization
pp = percentage points
1)
after purchase price allocation:
+3.2 percent to 2.26 euros
Sales by Region1)
EBIT by Region2)
Europe/Africa/
Middle East 63 %
Corporate 2 %
Europe/Africa/
Middle East 65 %
Asia-Pacific 10 %
Asia-Pacific 11 %
Latin America 5 %
Latin America 5 %
North America 20 %
North America 19 %
1)
Including Corporate; for reconciliation with Henkel Group:
Corporate = sales and services not assignable to the individual business sectors
2007
2008
+/–
in mill. euros
2007
2008
+/–
0.6 %
Sales
2,972
3,016
1.5 %
Sales
5,711
6,700
17.3 %
–2 pp
Share of
Group sales
23 %
21 %
–2 pp
Share of
Group sales
43 %
47 %
4 pp
0.9 %
Operating profit (EBIT)
621
658
6.0 %
43 %
45 %
2 pp
10.9 %
9.8 %
–1.1 pp
2007
2008
+/–
Sales
4,148
4,172
Share of
Group sales
32 %
30 %
459
439
–4.2 %
31 %
30 %
–1 pp
11.1 %
10.5 %
–0.6 pp
Excluding Corporate
pp = percentage points
1)
Key Financials
in mill. euros
in mill. euros
Return on sales (EBIT)
Adhesive Technologies
Key Financials
Key Financials
Share of
Group EBIT1)
Excluding Corporate
Cosmetics/Toiletries
Laundry & Home Care
Operating profit (EBIT)
2)
Operating profit (EBIT)
Share of
Group EBIT1)
Return on sales (EBIT)
372
26 %
25 %
–1 pp
Share of
Group EBIT1)
12.5 %
12.5 %
0 pp
Return on sales (EBIT)
Excluding Corporate
pp = percentage points
1)
376
Excluding Corporate
pp = percentage points
1)
The Company
Henkel at a Glance
» Global supplier of brands and technologies
» 132 years of brand success
» Competence in the three business sectors:
» Laundry & Home Care
» Cosmetics/Toiletries
» Adhesive Technologies
» Globally structured
» More than 125 countries
» Over 55,000 employees
Laundry & Home Care
Cosmetics/Toiletries
Adhesive Technologies
Leading market positions worldwide
Leading market positions worldwide
Leading our markets worldwide
Achieving profitable growth
through innovation, strong brands
and a heightened focus on our
customer relationships
Achieving profitable growth with
attractive innovations under our
strong brands, aligned to exacting
customer demands
Achieving profitable growth
through innovations under our
strong brands, efficient processes
and a firm focus on our customers
Further expanding our stronge
market position in Europe and our
presence in both North America
and the growth regions
Expanding our strong market posi­
tions in Europe and North America
and selectively increasing our pres­
ence in the growth regions
Developing new applications and
growth potential in all regions of
the world
Henkel is a leader with brands and technologies that make
people’s lives easier, better and more beautiful
Laundry & Home Care
Cosmetics/Toiletries
Adhesive Technologies
Major Brands
Major Brands
Major Brands
Heavy-duty detergents; fabric soften-
Hair shampoos and conditioners; hair
Adhesive and sealant systems; surface
ers; laundry conditioning products;
colorants; hair styling and permanent
treatment products for industrial appli-
dishwashing products; all-purpose
wave products; toilet soaps; shower
cations in the automotive, packaging,
cleaners; scouring agents; floor and
gels, body wash and bath products;
aircraft, electronics, durable consumer
carpet care products; bath and WC
deodorants; skin creams; skin care
goods and metal sectors, and for mainte-
cleaners; glass cleaners; kitchen clea-
products; dental care and oral hygiene
nance, repair and overhaul applications;
ners; specialty cleaning products; air
products; hair salon products.
adhesives and sealants for craftsmen and
fresheners and insecticides for hou-
consumers and for applications in the
sehold applications.
home, school and office.
Major Innovations
Major Innovations
Major Innovations
Purex Natural Elements Outstanding
Taft Power with Cashmere Touch
Loctite Flex Gel Instant Adhesive The
performance and ready biodegradabi-
for supple “power hold”: An innova-
flexible instant adhesive for super-strong,
lity with wash-active substances based
tive styling line offering extra-strong
fast bonding inside and out.
exclusively on renewable raw materials
hold combined with cashmere-like
Macromelt OM 648 The first polyami-
with natural fragrance essences.
suppleness.
de hotmelt adhesive with integrated UV
Persil Gold Plus The “gold standard”
Dial Yogurt The first body wash in
protection extensively based on renew-
among laundry detergents for opti-
the USA with yogurt proteins – retains
able raw materials.
mum stain-free results without the
moisture and cares for the skin.
TecTalis An innovative technology for the
need for an additional stain remover.
Blond Me The all-inclusive blonding
environmentally sound corrosion pro-
Terra Activ Combining power and
line for every requirement – the first
tection of metals in the automotive and
nature for high-performance quality
integrated concept for the profession-
durable consumer goods industries.
without the compromise: 85 percent
al hair salon with blonde products
of the ingredients are based on renew-
for highlighting, coloration, care and
able raw materials and the exclusive
styling.
use of palm kernel oil certificates to
promote rainforest protection.
At a Glance
The Company
The Company
Seeing change as an opportunity.
Everything changes:
requirement profiles, customer
needs, consumer behavior, markets and much more. Henkel has
both the strength and the courage
to respond quickly to change.
We are determined to be the
best for our markets and our
customers, and are dedicated to
achieving – together with them
– ever better results. With our
55,000-plus employees and with
our brands and products, we are
driving change.
1 The Company
2 Interview with Albrecht Woeste
and Kasper Rorsted
7 Report of the Supervisory Board
10 Management Board
12 Driving Change
14 Shares and Bonds
17 Group Management Report
17 Group Management Report
Subindex
18 Corporate Governance
30 Operational Activities
30 Strategy and Financial Targets
for 2012
32 Value-based Management and
Control
34 Business Performance
41 Assets and Financial Analysis
45 Employees
47 Procurement
48 Production
49 Research and Development
50 Marketing and Distribution
52 Sustainability/
Corporate Social Responsibility
54 Business Sector Performance
67 Risk Report
71 Outlook for the Henkel Group
72 Subsequent Events
73 Consolidated Financial Statements
73 Consolidated Financial
Statements Subindex
74 Consolidated Statement of
Income
75 Consolidated Balance Sheet
76 Consolidated Cash Flow
Statement
77 Consolidated Statement of
Recognized Income and Expense
77 Notes to the Consolidated
Financial Statements
130 Statement by the Personally
Liable Partner
131 Auditors’ Report
132 Corporate Management of
Henkel AG & Co. KGaA
138 Further Information
140
141
142
143
144
Responsibility Statement
Quarterly Breakdown of Key Financials
Five-Year Summary
Vision and Values
Credits
Calendar
Annual Report 2008
1
The Company » Interview
“We’re driving change”
Albrecht Woeste, Chairman of the Shareholders’ Committee and of
the Supervisory Board, and Kasper Rorsted, Chairman of the Management
Board, talk about events in 2008 and the outlook for 2009
Dipl.-Ing. Albrecht Woeste (left) and Kasper Rorsted
2
Mr. Woeste, 2008 was an unusual year for Henkel in
Mr. Rorsted, what in your view were the major chal-
many respects. Are you happy with the way things have
lenges that Henkel faced?
gone?
Kasper Rorsted: Well, the main problem was the raw ma-
Albrecht Woeste: I am more than happy. It was, after
terial prices. They reached their peak around the middle
all, not an easy year. The substantial distortions on the
of the year, and have since declined significantly. Looking
financial markets have carried over to the economy as a
at the year as a whole, however, our raw material costs
whole, impacting our markets. But we were able to defend
have risen appreciably. We were also confronted with
our positions very well in this difficult environment, as
substantial currency fluctuations, and the US dollar
our figures show. On behalf of everyone, I would like
was particularly volatile. And then, toward the end of
to thank all our employees for the outstanding team
the year, we too of course began to feel the onset of the
performance that they have delivered.
economic crisis.
Annual Report 2008
The Company » Interview
Within the uncertainties of the present economic en-
And we made a number of major changes and strategic
vironment, you have developed and announced a long-
decisions in 2008 to set us on our way toward achieving
term strategy and financial targets for 2012. What is
these objectives.
the reasoning behind this?
Kasper Rorsted: We are convinced that, particularly in
How did the individual regions and markets perform
times of uncertainty, it is important to set out clear objec-
last year?
tives for the longer term. To this end we have identified
Kasper Rorsted: Generally, business was more difficult
three strategic priorities:
in North America and Western Europe than in previ-
» First, we want to achieve our full business potential. By
ous years. On the other hand, our businesses in East-
streamlining our portfolio, assigning more resources to
ern Europe, the Middle East, Africa, Latin America and
strengthening our top brands, and further developing
Asia continued to post strong growth in both sales and
our innovative strengths, we will be able to grow more
profits. Of course, recently here too there has been a
quickly and profitably in the coming years.
degree of deceleration in the previously rapid pace of
» Second, we intend to focus even more on our customers:
development.
We want to grow with them. And that will only be possible if we are able to offer them the right solutions to
Albrecht Woeste: So it is all the more gratifying that we
their problems and consistently satisfy their needs.
have once again succeeded with our three business sec-
» And third, we want to strengthen our global team: We
tors in growing faster than our respective markets.
aim to further extend the internationality, the diversity and the knowledge base of our employees. After
Fiscal 2008 was a highly successful year for our Cosmetics/
all, our employees have been driving our success for
Toiletries division. The Laundry & Home Care business
the last 132 years, and it is upon them that our future
sector was able to consolidate and in some cases even
performance relies.
expand its market shares, although its profitability was
heavily impacted by raw material increases. And Adhe-
And what are the medium-term financial targets that
sive Technologies has been strategically strengthened,
Henkel intends to reach by following these strategic
extending its leading positions in the world.
priorities?
Kasper Rorsted: We have set ourselves an ambitious set
What are the specifics of your development over 2008?
of targets: We aim to achieve an organic sales growth
Kasper Rorsted: We increased sales by 8.1 percent to
rate averaging 3 to 5 percent per year between now and
14.1 billion euros, with organic sales growth coming in at
2012. We want to increase adjusted return on sales to
3 percent. Adjusted1) operating profit rose by 9.1 percent
14 percent. Plus, the average rate of growth in adjusted
to 1.5 billion euros, and adjusted1) earnings per preferred
earnings per preferred share is to exceed 10 percent per
share increased by 3.2 percent to 2.26 euros. So we deliv-
year.
ered on our guidance.
1)
Editorial note: Adjusted for one-time gains/charges and restructuring charges
and before amortization of intangible assets arising from the acquisition of the
National Starch businesses
Annual Report 2008
3
The Company » Interview
Albrecht Woeste: With this as our basis, we intend to
37 percent of our total sales. These regions will also be the
propose to the Annual General Meeting that it approve
growth drivers for Henkel in the future. However, we like-
an unchanged dividend of 0.53 euros per preferred share
wise strengthened our position in the mature markets.
and 0.51 euros per ordinary share.
We also responded quickly to the early signs of a worsenWhat were the key factors contributing to your suc-
ing market environment. In fact, we introduced a global
cess last year?
efficiency enhancement program back at the beginning
Kasper Rorsted: We successfully launched a number
of 2008 with a view to strengthening Henkel’s overall
of innovations onto the market and further improved
competitiveness.
numerous formulations. And we succeeded in partially
offsetting the higher raw material costs with price ad-
Albrecht Woeste: A year ago, the initial response of some
justments of our own.
to this initiative was somewhat skeptical. Today we are
being praised for our far-sightedness. By acting early, we
We also managed to further expand our presence in
have been able to make the jobs of our more than 55,000
the growth markets of the world. These now contribute
employees more secure.
With regard to planning for the
future, no doubt the largest acquisition in the 132 years of Henkel’s
corporate history could also be
viewed as an undertaking for the
longer term. And it was a decision,
Mr. Woeste, that not just the members of the Management Board but
also those of the Shareholders’ Committee and the Supervisory Board
had to think long and hard about,
one presumes?
Albrecht Woeste: To be sure. At the
beginning of April, Henkel acquired
the Adhesives and Electronic Materials businesses of the National
Starch & Chemical Company from
The Company » Interview
Akzo Nobel for a purchase price of 3.7 billion euros. As
Henkel also has a competitive edge in terms of its good
a result, we were able to further extend and strengthen
reputation on the sustainability front. Is that some-
our already favorable position in the adhesives, sealants
thing that a company can only really afford during the
and surface treatment market. These two former National
good times, financially and economically speaking?
Starch divisions have increased the size of our Adhesive
Albrecht Woeste: Absolutely not. Sustainability and
Technologies business sector by around one third.
corporate social responsibility count among Henkel’s
core competences. In this area we are among the most
In order to finance this acquisition, we sold our stake in
recognized companies in the world. And we want to con-
Ecolab in the USA at the end of last year.
tinue taking the lead. We are still working hard on our
sustainability initiatives – such as the “Quality and Re-
And how well has Henkel been able to digest this, your
sponsibility” campaign initiated by our Laundry & Home
largest ever acquisition?
Care business sector. The positive impact of sustainable
Kasper Rorsted: Very well. We are well on the way to real-
development is not economy-dependent. The benefits are
izing all the identified synergy potential at the rate and
there and remain tangible in both good and bad times.
level initially planned. In quickly and smoothly merging
the two operations, we have also managed to create an
even stronger team than before.
Talking of “strengthening the team”,
how do you motivate employees in turbulent times such as these?
Kasper Rorsted: Through a mix of
challenge and reward. That means giving clear and open feedback, properly
recognizing good work and drafting
individual development plans. It is an
approach that helps us ensure that we
have a skilled and motivated team to
meet the challenges of the marketplace.
And the diversity of our global team
gives us a competitive advantage that
we intend to further extend.
The Company » Interview
Kasper Rorsted: And this is why last year we announced
Albrecht Woeste: We should not finish without first
another set of ambitious sustainability targets for 2012.
discharging a debt of gratitude. We would like to take
We want to extensively reduce energy and water con-
this opportunity to express our thanks to the members
sumption, and to further cut waste and the number of
of our corporate bodies – the Supervisory Board and the
occupational accidents. We have also made it our policy
Shareholders’ Committee – for their carefully considered,
to ensure that every newly launched product makes a
constructive advice and invaluable support.
positive contribution toward sustainable development.
And we will be leveraging our sustainability credentials
We also want to thank our shareholders for their con-
to even greater effect in the future.
fidence in us and for the support they have shown for
our actions. We are likewise grateful to our customers
And no doubt you will be doing this in close coopera-
around the world for their continuing loyalty and trust
tion with your customers?
in our company, in our brands and in our technologies.
Kasper Rorsted: Of course. Our customers are at the cen-
And not least, we must express our thanks to our 55,000
ter of everything we do. Our aim is to align our collabora-
employees who again achieved remarkable results in
tion more than ever before to what they need, and to offer
2008. Together, we’re driving change worldwide.
them products and services that offer measurable value
added. We are specifically channeling our capabilities,
such as our proven competence in sustainability as just
mentioned, in order to generate enhanced benefit for
our customers. This is one of the reasons why we have
declared 2009 our “Year of the Customer”.
Talking of 2009 – what kind of year is that likely to be
for Henkel?
Kasper Rorsted: Large sections of the global economy
are in recession and any normalization in the world’s
financial markets is likely to be long in coming. However,
we are well equipped to weather the storm. Our three
business sectors are exceptionally well positioned, we can
now point to a strong presence in the growth regions,
we are focusing our innovative strengths on product
segments offering high margins, we are reducing costs
right across the board and our finances are solid.
Although 2009 is unlikely to be easy for Henkel, it will
not be a “lost” year. At the end we want to be able to say
that 2009 was an important milestone in the achievement of our strategic goals.
6
Annual Report 2008
The Company » Report of the Supervisory Board
Report of the Supervisory Board
Dear Shareholders,
members, we also discussed in detail at these meetings
the reports of the Management Board, and consulted to-
In the course of fiscal 2008, the Supervisory Board per-
gether with the Management Board on the development
formed the duties incumbent upon it according to the
of the corporation and on strategic issues.
requirements of legal statute, the corporation’s articles
of association and applicable rules of procedure.
One of the main aspects under consideration was the
acquisition of the Adhesives and Electronic Materials
One of the major changes with respect to manage-
businesses from National Starch. In addition to ques-
ment of the company involved the replacement of the
tions of finance, we also discussed in detail together
personally liable partner in 2008. Coinciding with the re-
with the Management Board the performance of the
tirement of Prof. Dr. Ulrich Lehner, Henkel Management
businesses and the measures required and implemented
AG was appointed the sole personally liable partner of the
in order to facilitate their integration. The sale of our
corporation as of the end of the Annual General Meeting
investment in Ecolab Inc. was likewise the subject of
on April 14, 2008. With the exception of Prof. Dr. Ulrich
extensive deliberations.
Lehner, all the members of the previous Management
A further major item under discussion was the
Board of Henkel KGaA were appointed members of the
“Global Excellence” efficiency enhancement program.
Management Board of Henkel Management AG.
We closely followed progress as this program was imple-
We carefully and regularly monitored the work of the
Management Board both prior and subsequent to this
mented, conferring on the the major projects as they
came up for decision.
change, advising on matters affecting the stewardship
We deliberated on the future targets and strategic
of the corporation. The basis for this was provided by
priorities of Henkel, specifically our objectives of achiev-
the detailed reports submitted in writing and in verbal
ing our full business potential, focusing even more on
form by the Management Board. These related to matters
our customers and strengthening our global employee
of material significance affecting the company, and in
teams.
particular the business situation and the development
We further conferred on the development of the
of the Group, business policy, profitability and short-
global procurement markets and the associated effects
term and long-term corporate, financial and personnel
on Henkel, as well as the planning and budgetary issues
planning as well as capital expenditures and restruc-
relating to the individual business sectors and the finan-
turings. In the course of the quarterly reports, moreover,
cial planning of the corporation as a whole.
details were provided of the sales and profits of Henkel
as a whole, with further analysis by business sector and
Committee Activities
region. Outside Supervisory Board meetings, the Chair-
In order to efficiently comply with the duties incum-
man of the Supervisory Board also remained in regular
bent upon us according to legal statute and our Articles
contact with the Chairman of the Management Board for
of Association, we established an Audit Committee in
the purpose of regularly conferring on current develop-
2008 in addition to the Nominations Committee that
ments and major business events.
was formed in 2007.
The Audit Committee is made up of three shareholder-
Major Issues Discussed in Supervisory Board
representative members and three employee representa-
Meetings
tive members. It is the task of the Audit Committee to pre-
In fiscal 2008, the Supervisory Board met five times.
pare the proceedings and resolutions of the Supervisory
Aside from the reconstitution of the Supervisory Board
Board relating to the adoption of the annual financial
required as a result of the scheduled re-election of its
statements and the consolidated financial statements,
Annual Report 2008
7
The Company » Report of the Supervisory Board
and also the auditor appointment proposal to be put
cordance with the provisions of German commercial
forward to the Annual General Meeting. It is also required
law (HGB). The consolidated financial statements and
to discuss and report back on issues of accounting, risk
the Group management report have been prepared ac-
management and compliance. In addition, the Audit
cording to International Financial Reporting Standards
Committee will also discuss the quarterly and half-year
(IFRS) as endorsed by the European Union, supplemented
financial reports with the Management Board prior to
by the provisions under commercial law applicable ac-
their publication.
cording to Clause 315a (1) of the German Commercial
In December 2008, the Audit Committee convened
Code (HGB).
its first meeting to discuss the current draft of the Ac-
The auditors appointed for 2008 by the last Annual
counting Law Reform Act and its possible effects on the
General Meeting – KPMG AG Wirtschaftsprüfungsgesell-
financial reporting activities of the corporation, our
schaft (KPMG), Berlin (formerly KPMG Deutsche Treuhand-
compliance organization, headed since the end of 2007
Gesellschaft Aktiengesellschaft Wirtschaftsprüfungs-
by a Chief Compliance Officer with global responsibility,
gesellschaft, Berlin), have examined the 2008 annual
and the organization of the Internal Audit function.
financial statements of Henkel AG & Co. KGaA and the
At its meeting on February 16, 2009, attended by the
2008 consolidated annual financial statements including
external auditor, the Audit Committee discussed the
the management reports in compliance with the gener-
annual financial statements and consolidated financial
ally accepted standards for the audit of financial state-
statements for fiscal 2008, and the risk report, thereupon
ments promulgated by the Institut der Wirtschaftsprüfer
preparing the corresponding Supervisory Board resolu-
(IDW) and – in the case of the consolidated financial
tions. It also made recommendations to the Supervisory
statements – in supplementary compliance with Inter-
Board regarding appointment of the external auditor for
national Standards on Auditing (ISA), and have issued
the subsequent financial year.
them with an unqualified opinion.
In view of the upcoming supplementary elections
KPMG reports that the annual financial statements
to the Supervisory Board due to take place at the 2009
give a true and fair view of the net assets, financial posi-
Annual General Meeting, the Nominations Committee
tion and results of operations of Henkel AG & Co. KGaA in
proposed suitable candidates for said election.
accordance with generally accepted German accounting
principles, and that the consolidated financial state-
Corporate Governance
ments give a true and fair view of the net assets, financial
In 2008, the Supervisory Board consulted on the issue of
position and results of operations of the Group and of
corporate governance, and in particular the latest edition
its cash flows for the year under review, in compliance
of the German Corporate Governance Code. We also dis-
with International Financial Reporting Standards. KPMG
cussed and approved our joint Declaration of Compliance
further confirms that the consolidated financial state-
of the Management Board, the Shareholders’ Committee
ments and Group management report for the year under
and the Supervisory Board with respect to the German
review meet the requirements of Clause 315a (1) of the
Corporate Governance Code for 2009. The full wording of
German Commercial Code (HGB).
the current and also the previous declarations of compliance can be found on the company website.
The annual financial statements and management
report, consolidated financial statements and Group
management report and the audit reports of KPMG and
8
Annual and Consolidated Financial Statements and
the recommendations by the personally liable partner
Audit Result
for the appropriation of the profit made by Henkel AG
The annual financial statements of Henkel AG & Co. KGaA
& Co. KGaA were laid before all members of the Super-
and the management report have been prepared in ac-
visory Board in good time. We examined these docu-
Annual Report 2008
The Company » Report of the Supervisory Board
ments and discussed them at our meeting of February
side and also representatives on the employees’ side were
17, 2009 attended by the auditors who reported on their
newly elected for a term of four years. This resulted in
main audit findings. We received the audit reports and
three new members on the shareholders’ side and four
voiced our acquiescence therewith. Having received the
new members on the employees’ side being appointed
final results of the examination conducted by the Audit
to the Supervisory Board; the remaining members were
Committee and concluded our own examination, we see
re-elected. In the course of the constituting meeting,
no reason for reservation or objection. At our meeting
Dipl.-Ing. Albrecht Woeste was elected Chairman and
of February 17, 2009, we approved the annual financial
Mr. Winfried Zander was elected Vice-Chairman of the
statements, the consolidated financial statements and
Supervisory Board.
the management reports as prepared by the personally
liable partner.
There were also changes in the Management Board
in 2008 with the departure of Prof. Dr. Ulrich Lehner ef-
We discussed the recommendation by the personally
fective April 14, 2008, and Mr. Alois Linder effective June
liable partner for appropriation of the profit of Henkel
18, 2008. Mr. Thomas Geitner joined the Management
AG & Co. KGaA, taking into account the financial and
Board effective March 1, 2008.
earnings position of the corporation, and expressed our
We thanked the members departing from the Super-
endorsement of said recommendation. At this meeting,
visory Board and Management Board for their – in some
we also ratified our proposals for resolution to be pre-
cases – many years of successful engagement in the inter-
sented before the Annual General Meeting relating to
ests of the company. We wish to express our particular
the appointment of the external auditor for the next
gratitude to Mr. Alois Linder for his 29 years of commit-
financial year, taking into account the recommendations
ted endeavor, and Professor Ulrich Lehner who, after 24
of the Audit Committee, and discussed the costs of the
highly successful years of work on behalf of the company,
audit of the financial statements.
and having reached the Henkel-internal retirement age,
handed over the office of Chairman of the Management
Risk Management
Board to Kasper Rorsted. In keeping with our traditions,
Risk management issues were examined not only in the
he is now providing us with the benefit of his extensive,
Audit Committee but also during our plenary sessions.
specialized expertise with respect to Henkel through his
We therefore received detailed reports on the risk man-
work as a member of the Shareholders’ Committee. We
agement system in place at Henkel, with quantification
also take this opportunity to thank the Management
of major individual risks. Our considered opinion is that
Board and all Henkel employees for their hard work and
there is no apparent evidence of any risks that could
commitment in 2008.
endanger the continued existence of the company as
a going concern. In the course of the year-end audit,
Düsseldorf, February 17, 2009
KPMG likewise investigated the structure and function
of the risk management system and found no cause for
reservation. In our view too, the risk management system
corresponds to the statutory requirements.
The Supervisory Board
Dipl.-Ing. Albrecht Woeste
Changes in the Supervisory Board and
(Chairman)
Management Board
Following the scheduled re-election of members of the
Supervisory Board, which took place at the Annual General Meeting of 2008, representatives on the shareholders’
Annual Report 2008
9
ZumCompany
The
Unternehmen
» Management Board
Management Board
Dr. Friedrich Stara
Thomas Geitner
Executive Vice President
Executive Vice President
Laundry & Home Care,
Adhesive Technologies,
born 1949;
born 1955;
with Henkel since 1976.
with Henkel since 2008.
Driving Change
Driving Change
“We intend to drive change
“We will be aligning our activities
with even more innovation and
even more purposefully to the
entrepreneurial effort. We are
needs of our customers, intro-
determined to get our products
ducing best practices in our in-
to market more quickly than ever
dustrial processes and generating
before and to further deepen
disproportionate growth in the
and expand our relationships
emerging markets. We also want
with our key customers.”
to further increase the efficiency
of our innovation processes.”
10
Annual Report 2008
The Company » Zum
Management
Unternehmen
Board
Kasper Rorsted
Dr. Lothar Steinebach
Hans Van Bylen
Chairman of the
Executive Vice President
Executive Vice President
Management Board,
Finance/Purchasing/IT/Law,
Cosmetics/Toiletries,
born 1962; with Henkel since 2005,
born 1948;
born 1961;
Chairman of the Management
with Henkel since 1980.
with Henkel since 1984.
Driving Change
Driving Change
Driving Change
“It is important that we chart a
“We intend to do everything in
“The key lies in successful
clear course for the longer term.
our power to keep Henkel com-
innovations based on a clearly
To this end, we have defined
petitive and attractive for inves-
structured innovation process
our strategic priorities. And we
tors. And that means improving
and a strong innovation culture.
have set ourselves an ambitious
our structures and processes
Direct customer contact is like-
set of financial and sustainability
as laid out in our ‘Operational
wise indispensable as a source
targets for 2012.”
Excellence’ program.”
of inspiration for new product
Board since April 14, 2008.
development.”
Annual Report 2008
11
The Company » Driving Change
Driving Change
We have the right strategies. And our more than 55,000 employees are already
implementing them with determined perseverance. And we are winning in our
markets. In our quest to achieve our goals, we will be concentrating on three
strategic priorities:
» Achieve our full business potential
» Focus more on our customers
» Strengthen our global team
Our ultimate purpose: To further improve our competitiveness and to permanently
establish a winning culture.
Focus more on
our customers
The Company » Driving Change
Achieve our
full business
potential
Winning
Culture
Strengthen our
global team
The Company » Shares and Bonds
Shares and Bonds
» Share price weakens in line with market
trends
» International, widely diversified shareholder
structure
» Capital market communications further
augmented
Trading volumes remained roughly at the level of the
preceding year with an average of 1.7 million preferred
shares changing hands per trading day. In the case of our
ordinary shares, the average per trading day increased to
330,000 shares (previous year: 288,200). Due to the fall
in price levels, the market capitalization of our ordinary
and preferred shares combined decreased from 15.9 bil-
The performance of Henkel shares in 2008 was signifi-
lion euros to 8.9 billion euros.
cantly affected by the global downturn on the stock mar-
Henkel shares remain an attractive investment for
kets. Due to the international financial crisis triggered by
long-term investors. Shareholders who invested 1,000
the US credit crunch and with the first signs of recession
euros when Henkel’s preferred shares were issued in
ahead, the DAX fell by 40.4 percent compared to the clos-
1985, and then re-invested the dividends received (exclud-
ing price at the end of 2007. The industry benchmark, the
ing taxes) in the stock, would have had a portfolio value
Dow Jones Euro Stoxx Consumer Goods index, declined by
of about 6,700 euros by the end of 2008. This represents
40.6 percent. Within this weak market environment, the
investment growth of 570 percent or an average yield of
price of the Henkel preferred share likewise decreased,
8.5 percent per year. Over the same period, DAX tracking
closing the year at 22.59 euros, 41.2 percent below the
would have provided an annual yield of 6.4 percent.
level of the previous year. The ordinary share ended the
year at 18.75 euros, 46.4 percent below its prior-year clos-
Henkel Shares Listed in All Major Indexes
ing price.
Henkel shares are predominantly traded on the Xetra elec-
In the first few months of 2008, the preferred share
tronic market of the Frankfurt Stock Exchange. Henkel
initially declined further, tracking the general market
is also represented on the floor of this and the other re-
downturn. Our share price then underwent a marked
gional stock exchanges in Germany. In the USA, investors
increase in response to the positive business performance
are able to acquire Henkel preferred and ordinary shares
reported for the first quarter. This was followed by a
by way of stock ownership certificates obtained through
phase of price stability that lasted until the beginning of
the Sponsored Level I ADR (American Depositary Receipt)
June. The Henkel share then again fell in value as the year
Program. The number of ADRs representing ordinary and
proceeded, eventually tracking the performance of the
preferred shares outstanding at the end of the year was
overall market. It registered its year low of 19.30 euros in
about 6.3 million (end of 2007: 9 million).
October, recovering in the ensuing period by 17 percent.
Henkel Preferred Share Performance Versus Market in 2008
INEUROS
Henkel preferred share
DAX (indexed)
DJ Euro Stoxx Consumer Goods (indexed)
40
35
22.59 euros
December 31, 2008
30
25 38.43 euros
December 31, 2007
20
15
February 27, 2008:
Publication of 2007 Annual
Report; announcement of
“Global Excellence” efficiency
enhancement program
January 2008
14
Annual Report 2008
April 3, 2008:
Closing of
National
Starch
acquisition
May 7, 2008:
Publication
of results for
Q1 2008
August 6, 2008:
Publication
of results for
Q2 2008
November 6, 2008:
Publication
of results for
Q3 2008
November 13, 2008:
Divestment of Ecolab
investment
December 2008
The Company » Shares and Bonds
Key Data on Henkel Shares 2004–2008
in euros1)
2004
2005
2006
2007
2008
Ordinary share
1.73
1.75
1.97
2.12
2.81
Preferred share
1.75
1.77
1.99
2.14
2.83
Ordinary share
20.30
26.18
32.73
34.95
18.75
Preferred share
21.33
28.33
37.16
38.43
22.59
Ordinary share
22.67
26.18
33.14
37.50
34.95
Preferred share
24.53
28.37
37.82
41.60
38.43
Ordinary share
17.50
20.32
25.66
29.96
16.68
Preferred share
18.67
21.46
28.21
33.70
19.30
Ordinary share
0.41
0.43
0.48
0.51
0.514)
Preferred share
0.43
0.45
0.50
0.53
0.534)
in bn euros
9.1
11.8
15.1
15.9
8.9
in bn euros
5.3
6.8
8.5
9.1
4.9
in bn euros
3.8
5.0
6.6
6.8
Earnings per share in accordance with IFRS2)
Share price at year-end3)
High for the year3)
Low for the year3)
Dividends
Market capitalization3)
Ordinary share
Preferred share
1)
Comparable based on share split (1:3) of June 18, 2007
2)
Comparable; 2004 restated and comparable
3)
Closing share prices, Xetra trading system
4.0
4)
Proposed
International Shareholder Structure
Share Data
Preferred
Ordinary
According to notices of disclosure received by the com-
Security Code No.
604843
604840
pany, the Henkel family owns a majority of the ordinary
ISIN Code
DE0006048432
DE0006048408
shares amounting to 52.18 percent. Dr. h.c. Christoph
Stock Exch. Symbol
HEN3.ETR
HEN.ETR
Henkel, London, holds 5.83 percent of the ordinary
Number of Shares
178,162,875
259,795,875
shares. On June 26, 2008, Silchester International Investors Limited headquartered in London, UK, informed us
The international significance of Henkel preferred shares
that, as of that date, it held 3.01 percent of the ordinary
derives not least from their inclusion in major indexes
shares. We have received no further notices of disclosure
that serve as important indicators for the capital mar-
from other shareholders indicating a notifiable share-
kets and as benchmarks for fund managers. Particularly
holding in excess of 3 percent of the voting shares. The
worthy of note in this respect are the MSCI World, the
ownership pattern of our preferred shares – the signifi-
Dow Jones Euro Stoxx, and the FTSE World Europe index.
cantly more liquid class of stock – is widely diversified.
Henkel is also listed in the Dow Jones Titans 30 Personal &
A majority of these shares are owned by institutional
Household Goods index, confirming our position as one
investors with globally distributed shareholdings.
of the 30 most important listed corporations operating
in the personal and household goods segments world-
Institutional Investors
wide. As of year-end 2008, the market capitalization of
Henkel Preferred Shares by Region
the DAX-relevant preferred shares was 4.0 billion euros,
placing Henkel 24th among the DAX companies (2007:
25th). In terms of trading volumes, Henkel was ranked
29th on the list (2007: 28th). Our DAX weighting is 0.91
Rest of World 7 %
USA 28 %
Rest of Europe 19 %
percent.
France 8 %
Germany 17 %
UK 21 %
Source: Thomson Reuters
Annual Report 2008
15
The Company » Shares and Bonds
Around 7.5 million preferred shares have been repurchased in the past by Henkel for the corporation’s Stock
Incentive Plan operated as an incentive for our senior ex-
Analyst Recommendations
Sell 20 %
Buy 47 %
ecutive personnel. As of December 31, 2008, our treasury
stock amounted to 4.8 million preferred shares.
Employee Shares in High Demand
Since 2001, Henkel has been operating a share ownership
plan for all employees worldwide, known as the Employee
Share Program or ESP. For each euro invested by an em-
Hold 33 %
At December 31, 2008; basis: 30 equity analysts
ployee (limited to 4 percent of salary up to a maximum
Henkel places great importance on meaningful dialog
of 5,000 euros per year), Henkel added an additional
with both investors and analysts. In more than 30 capi-
33 cents in the year under review. The number of par-
tal market conferences and roadshows held in Europe
ticipants in this plan increased once again in 2008, with
and North America, institutional investors and financial
some 12,000 employees in 54 countries buying Henkel
analysts were afforded the opportunity to talk directly
shares. At year-end, around 15,000 employees held a total
with our top management. The highlight of the year was
of 3.7 million shares within the ESP, representing roughly
our Analyst and Investor Conference held in London on
2.1 percent of total preferred shares outstanding. The
November 6, 2008. New Chairman of the Management
vesting period for newly acquired shares is three years.
Board Kasper Rorsted took this opportunity to present
the main elements of our strategy for the coming years
Henkel Bonds
and also our financial targets for 2012. In addition, there
Henkel is represented in the international bond markets
were numerous telephone conferences and one-to-one
by two bonds with a total volume of 2.3 billion euros.
meetings – amounting to more than 500 events in all.
Private investors are able to receive all relevant infor-
Bond Data
mation through telephone inquiry or via the Investor
Senior Bond
Hybrid Bond
Relations website:
Volume
1.0 bn euros
1.3 bn euros
as the medium for the live broadcast of telephone and
Nominal Coupon
4.25 %
5.375 %
analyst conferences. As well as the transmission of the
Coupon Payment Date
June 10
November 25
Annual General Meeting, the latter also offers the pos-
Maturity
June 10, 2013
Nov. 25, 21041)
sibility of obtaining extensive information from Henkel’s
Listing
Frankfurt
Luxembourg
Security Code No.
664196
A0JBUR
ISIN Code
DE0006641962
XS0234434222
1)
First call option for Henkel on November 25, 2015
www.henkel.com/ir. This also serves
management. In June, moreover, we reported on the latest news and developments at Henkel to a large group of
private investors attending the Düsseldorf Shareholder
Forum.
Further detailed information regarding these bonds,
The quality of our capital market communications
current developments in their respective prices and the
was again evaluated in 2008 by various independent
associated risk premium (credit margin) can be found
ranking organizations. And once more, our Investor Rela-
on our website:
www.henkel.com/ir
tions team garnered a number of major awards in various
comparisons with European corporations in the Home &
Committed to Capital Market Communication
Personal Care category.
Henkel is covered by numerous financial experts, primar-
16
ily in the UK, Germany and the USA. Over 40 equity and
You will find a Financial Calendar with all our important
debt analysts regularly publish studies and commentaries
publishing and announcement dates on the inside back
on the current performance of the company.
cover of this Annual Report.
Annual Report 2008
Group Management Report » Subindex
Group Management Report Subindex
18
Corporate Governance
41
18 Corporate Governance/
Corporate Management Report
30
30
32
34
Assets and Financial Analysis
41 Acquisitions and Divestments
22 Remuneration Report
42 National Starch:
Integration of Operational Activities
Operational Activities
42 Capital Expenditures
30 Overview
43 Balance Sheet Structure
30 Organization and Business Sectors
44 Financing
30 Corporate Governance
44 Cash Flow Statement
Strategy and Financial Targets for 2012
45 Key Financial Ratios
30 Point of Departure
45
Employees
31 Strategic Priorities
47
Procurement
32 Financial Targets for 2012
48
Production
Value-based Management and Control System
49
Research and Development
33 EVA® and ROCE in Fiscal 2008
50
Marketing and Distribution
34 Statutory and Regulatory Situation
52
Sustainability/
Corporate Social Responsibility
54
Performance by Business Sector
Business Performance
34 World Economy
35 Private Consumption and Developments
by Sector
54 Laundry & Home Care
35 Management Board Review
of Business Performance
62 Adhesive Technologies
58 Cosmetics/Toiletries
67
Risk Report
36 Sales and Profits
67 Opportunity and Risk Management System
39 “Global Excellence” Restructuring Program
67 Disclosure of Major Individual Risks
40 Expense Items
40 Other Operating Charges and Income
70 Overall Risk
71
Outlook for the Henkel Group
40 Financial Result
71 World Economy
40 Net Earnings
71 Sector Development
41 Dividends and Distribution Policy
71 Opportunities and Risks
41 Earnings Per Share (EPS)
72 Sales and Profits Forecast
72 Long-term Sales and Profits Forecast
72
Subsequent Events
Further Information
You will notice a number of cross references on the pages of this
Annual Report for 2008 indicating locations in this publication,
in our Sustainability Report for 2008 and in the internet where you
can find further information.
Annual Report
Sustainability Report
Internet
Annual Report 2008
17
Group Management Report » Corporate Governance
Group Management Report
Corporate Governance at
Henkel AG & Co. KGaA
There are three major differences with respect to an AG:
» At Henkel AG & Co. KGaA, the executive role is assigned
Corporate governance in the sense of responsible, trans-
to Henkel Management AG – acting through its man-
parent management and control of the corporation
agement board – as the sole personally liable partner
aligned to the interests of shareholders, has long been
(Clause 278 (2), Clause 283 AktG in conjunction with
an integral component of our corporate culture, and
Article 11 of the Articles of Association). All the shares of
will remain so into the future.
Henkel Management AG are held by the corporation.
Consequently, the Management Board, Sharehold-
» The rights and duties of the supervisory board of a KGaA
ers’ Committee and Supervisory Board have committed
are more limited compared to those of the supervisory
to the following principles:
board of an AG. In particular, the supervisory board of a
» Shareholder value creation as the foundation of our
KGaA is not entitled to appoint personally liable partners
managerial approach
» Sustainability as a criterion for socially responsible
management
» Transparency underpinned by an active and open
information policy
or to preside over the associated contractual arrangements; it may not issue rules of procedure governing the
actions of the management board, and it is not permitted
to rule on business transactions requiring shareholder
or partner consent. A KGaA is not required to appoint
a director of labor affairs, even if, like Henkel, the com-
I. Corporate Governance/
Corporate Management Report
pany is bound to abide by Germany’s Codetermination
Act of 1976.
This report describes the principles of the management
» The general meeting of a KGaA essentially has the same
and control structure, corporate stewardship and the
rights as the shareholders’ meeting of an AG. In addi-
essential rights of shareholders of Henkel AG & Co. KGaA;
tion, it votes on the adoption of the annual financial
in addition, it explains the special features that arise
statements of the corporation and formally approves the
from our particular legal form and our Articles of As-
actions of the personally liable partner. At Henkel, the
sociation (corporate bylaws) as compared to a joint stock
Annual General Meeting also elects the Shareholders’
corporation (AG in Germany). It takes into account the
Committee and formally approves its actions. Resolu-
recommendations of the German Corporate Governance
tions passed in general meeting require the approval of
Code and contains all the information and explanations
the personally liable partner where they involve mat-
required according to Clause 289 (4) and Clause 315 (4)
ters which, in the case of a partnership, are subject to
of the German Commercial Code (HGB).
the authorization of both the general and the limited
partners (Clause 285 (2) AktG) or relate to the adoption
Legal Form/Special Statutory Features of
of annual financial statements (Clause 286 (1) AktG).
Henkel AG & Co. KGaA
Henkel is a “Kommanditgesellschaft auf Aktien” (KGaA).
According to our Articles of Association, in addition to
A KGaA is a company with its own legal personality (i.e.
the Supervisory Board, Henkel also has a standing Share-
it is a legal person) in which at least one partner as-
holders’ Committee comprising a minimum of five and
sumes unlimited liability in respect of the company’s
a maximum of ten members, all of whom are elected by
creditors (general or personally liable partner). The other
the Annual General Meeting (Article 27 of the Articles of
partners participate in the capital stock, which is split
Association). Acting on behalf of the general meeting, its
into shares, and their liability is limited by these shares;
primary duties are to engage in the management of the
they are thus not liable for the company’s debts (limited
corporation’s affairs and to appoint and dismiss person-
partners per Clause 278 (1) German Joint Stock Corpora-
ally liable partners; it holds representative authority and
tion Act [AktG]).
power of management allowing it to preside over the
legal relationships between the corporation and Henkel
18
Annual Report 2008
Group Management Report » Corporate Governance
Management AG as the latter’s personally liable partner,
of shares is required by statute, by simple majority of
and it exercises the voting rights of the corporation in the
the voting stock represented (Art. 24 of the Articles of
General Meeting of Henkel Management AG (Clause 278
Association). This also applies to changes in the Articles
(2) AktG in conjunction with Clause 114 and Clause 161
of Association; however, modifications to the object of
HGB and Art. 8, 9 and 26 of the Articles of Association).
the company require a three-quarters’ majority (Clause
179 (2) AktG).
Division of the Capital Stock, Shareholder Rights
The par value of the capital stock of the corporation
Approved Capital, Share Buy-back
amounts to 437,958,750 euros. It is divided into a total of
According to Art. 6 (5) of the Articles of Association, there
437,958,750 bearer shares of no par value (share certifi-
is an authorized capital limit. Acting within this limit,
cates), of which 259,795,875 are ordinary bearer shares
the personally liable partner is authorized, subject to
(proportion of capital stock: 259,795,875 euros or 59.3 per-
the approval of the Supervisory Board and of the Share-
cent) and 178,162,875 preferred bearer shares (proportion
holders’ Committee, to increase the capital stock of the
of capital stock: 178,162,875 euros or 40.7 percent).
corporation in one or several acts until April 9, 2011, by
Each ordinary share grants to its holder one vote. The
up to a total of 25,600,000 euros through the issue for
preferred shares accord to their holder all shareholder
cash of new preferred shares with no voting rights. All
rights apart from the right to vote. Unless otherwise
shareholders are essentially assigned preemptive rights.
resolved in General Meeting, the unappropriated profit
However, these may be set aside provided that the issue
is distributed as follows: first, the holders of preferred
price of the new shares is not significantly below the
shares receive a preferred dividend in the amount of
quoted market price of the shares of the same class at the
0.04 euros per preferred share. The holders of ordinary
time of final stipulation of the issue price, or in order to
shares then receive a dividend of 0.02 euros per ordinary
facilitate the disposal of fractional amounts of shares.
share, with the residual amount being distributed to the
In addition, the personally liable partner is autho-
holders of ordinary and preferred shares in accordance
rized to purchase ordinary and/or preferred shares of the
with the proportion of the capital stock attributable to
corporation at any time up to October 13, 2009, subject
them (Article 35 (2) of the Articles of Association). If the
to the condition that the shares acquired on the basis
preferred dividend is not paid out either in part or in
of such authorization, together with the other shares
whole in a year, and the arrears are not paid off in the
that the corporation has already acquired and holds as
following year together with the full preferred share
treasury stock, shall not at any time exceed 10 percent
dividend for that second year, the holders of preferred
in total of the capital stock. This authorization can be
shares are accorded voting rights until such arrears are
exercised for any legal purpose. To the exclusion of the
paid (Clause 140 (2) AktG). Cancellation or limitation of
pre-emptive rights of existing shareholders, treasury
this preferred dividend requires the consent of the hold-
stock may be used to operate the Stock Incentive Plan
ers of preferred shares (Clause 141 (1) AktG).
of the Henkel Group or transferred to third parties for
The shareholders exercise their rights in the Annual
the purpose of acquiring companies or participating
General Meeting as per the relevant statutory provisions
interests in companies. Treasury stock may also be sold
and the Articles of Association of Henkel AG & Co. KGaA.
to third parties against payment in cash, provided that
In particular, they may vote (as per entitlement), speak
the selling price is not significantly below the quoted
on agenda items, ask relevant questions and propose
market price at the time of share disposal.
motions.
Unless otherwise required by mandatory provisions
Major Shareholders
of statute or the Articles of Association, the resolutions
According to notifications received by the company on
of the Annual General Meeting are adopted by simple
December 19, 2008, a total of 52.18 percent of the voting
majority of the votes cast and, inasmuch as a majority
rights are held by parties to the Henkel family’s share-
Annual Report 2008
19
Group Management Report » Corporate Governance
pooling agreement. This agreement was concluded be-
mittee. The Human Resources Subcommittee principally
tween members of the families of the descendants of
discusses personnel matters relating to the members of
company founder Fritz Henkel; it contains restrictions
the Management Board, human resources strategy, and
with respect to transfers of the ordinary shares covered
remuneration.
(Art. 7 of the Articles of Association).
The Supervisory Board has established an Audit Committee and a Nominations Committee. The Audit Com-
Interaction between Management Board,
mittee is made up of three elected shareholder and three
Shareholders’ Committee and Supervisory Board
elected employee representative members of the Super-
The Management Board of Henkel Management AG,
visory Board, each chosen by their fellow shareholder or
which is responsible for the corporation’s operating busi-
employee representative Supervisory Board members.
ness, the Shareholders’ Committee and the Supervisory
The chairperson of the Audit Committee is elected from
Board of the corporation cooperate closely for the benefit
candidates proposed by the shareholder representative
of the organization.
members of the Supervisory Board. The Audit Committee
The Management Board agrees the strategic align-
prepares the proceedings and resolutions of the Supervi-
ment of the corporation with the Shareholders’ Commit-
sory Board relating to adoption of the annual financial
tee and discusses with it at regular intervals the status
statements and the consolidated financial statements,
of implementation of said strategy.
and also the auditor appointment proposal to be made
In keeping with good corporate management prac-
to the Annual General Meeting. Acting on behalf of the
tice, the Management Board informs the Shareholders’
Supervisory Board, the Audit Committee also deals with
Committee and the Supervisory Board regularly, and
accounting, risk management and compliance issues.
in a timely and comprehensive fashion, of all issues of
The Nominations Committee comprises the chair-
relevance to the corporation concerning business policy,
person of the Supervisory Board and two further mem-
corporate planning, profitability, the business develop-
bers elected by the other shareholder representatives
ment of the corporation and of major Group companies,
on the Supervisory Board; the chairperson of the Su-
and also matters relating to risk and its management.
pervisory Board is also chairperson of the Nominations
For transactions of fundamental significance, the
Committee. The Nominations Committee prepares the
Shareholders’ Committee has established a right of
proposals to be submitted by the Supervisory Board to the
veto in the procedural rules governing the actions of
Annual General Meeting for the election of members to
Henkel Management AG in its function as sole Personally
the Supervisory Board (shareholder representatives).
Liable Partner (Article 26 of the Articles of Association).
Some members of the Supervisory Board and of the
This covers, in particular, decisions or measures that
Shareholders’ Committee are or were in past years hold-
materially change the net assets, financial position or
ers of leading managerial positions in other companies.
results of operations of the corporation. The Management
Inasmuch as Henkel pursues business activities with
Board complies with these rights of consent and also the
these companies, the same arm’s length principles apply
spheres of authority of the Annual General Meeting in
as those applicable to transactions with and between un-
matters subject to statutory control.
related third parties. This, in our view, ensures the inde-
The Shareholders’ Committee has established a
Finance Subcommittee and a Human Resources Sub-
For more details on the composition of the Manage-
committee, each of which comprises five members of the
ment Board, the Supervisory Board and the Shareholders’
Shareholders’ Committee. The Finance Subcommittee
Committee and also the committees established within
deals principally with the financial matters, accounting
the Supervisory Board and the subcommittees of the
issues including the year-end audit, taxation and account-
Shareholders’ Committee, please refer to
ing policy, and the internal audit and risk management
to 136.
of the corporation, preparing the ground for decisions
taken in the plenary sessions of the Shareholders’ Com-
20
pendence and impartiality of the members concerned.
Annual Report 2008
pages 132
For further details with respect to corporate governance
in general, please go to our website:
www.henkel.com/ir
Group Management Report » Corporate Governance
Principles of Corporate Stewardship/Compliance
Given the increasing requirements and growing complex-
The corporation, our management bodies and our em-
ities characterizing this sphere, Henkel has appointed a
ployees around the world orientate their activities to
Chief Compliance Officer (CCO). The CCO is responsible
our corporate vision and values so that our daily work
for compliance-related activities undertaken at the cor-
remains in compliance with the guiding principles of
porate level, oversees fulfillment of both internal and
sustainable development. We have created a uniform
external regulations, reports on findings in this respect
value system to which our more than 55,000 employees
and supports the corporation in the further development
of all cultures subscribe.
and implementation of the associated standards. He or
Henkel’s vision is to be a leader with brands and tech-
she is assisted in this capacity by the Internal Audit unit,
nologies that make people’s lives easier, better and more
and also by a Compliance Committee of interdisciplin-
beautiful. We want our products and technologies to
ary composition.
make a valuable contribution to society and to promote
Our corporate compliance activities are focused on
and support sustainable development in all the countries
the fields of safety, health and the environment, antitrust
in which we are active. The ten corporate values derived
law and the fight against corruption. Further compliance-
from this vision provide the guidelines governing the
relevant areas derive from capital market law. In addition
conduct and actions of Henkel employees in all areas of
to the legal provisions, internal codes of conduct have
business and in all cultures in which Henkel is found.
been put in place to regulate the treatment of informa-
They are an expression of our corporate culture.
tion that could potentially affect share prices. There are
From this vision and these common values are derived
also rules that go beyond the legal requirements, govern-
rules of behavior which we have formulated in a series
ing the behavior of the members of the Management
of codes. Our Code of Conduct supports our employees
Board, the Shareholders’ Committee and the Supervisory
in dealing with ethical and legal issues. Our Code of
Board, and also employees of the corporation who, due
Teamwork and Leadership defines the actions and at-
to their function or involvement in projects, have access
titudes to be adopted by management and employees in
to insider information.
their interpersonal dealings. And the Code of Corporate
For further information relating to the principles
Sustainability describes the principles and expectations
guiding our corporate stewardship, please go to our web-
that underlie our approach to sustainable, socially re-
site:
www.henkel.com/sustainability
sponsible development. These various sets of principles
are further expanded in Group-wide standards. Together,
Application of the German Corporate
theses codes also form the basis for Henkel’s contribution
Governance Code
to achieving the goals specified in the United Nations
Notwithstanding the special features arising from our
Global Compact.
legal form and Articles of Association, Henkel AG & Co.
Henkel is committed to ensuring that all business
KGaA complies with the main recommendations (“shall”
transactions are conducted in an ethically and legally
provisions) of the German Corporate Governance Code,
irreproachable manner. In order to maintain compliance
with three exceptions: (1) The contracts of employment
in this regard, the Management Board has introduced
for members of the Management Board contain no sev-
a range of binding rules and regulations in the form of
erance pay cap in the event of premature termination
various codes and derivative standards and directives.
of their tenure as executives of the corporation without
Reviewed and revised as and when appropriate, these
good reason, i.e. there is no limitation to a possible sever-
rules also cover the procedures to be adopted in the event
ance payout to the usual maximum of two years’ emolu-
of infringements or suspicion of malpractice. In addition
ments. (2) In order to protect the legitimate interests and
to our internal reporting system and complaint regis-
private spheres of the members of the corporate bodies
tration channels, employees may also, for the purpose
who are also members of the Henkel family, their indi-
of reporting serious violations, use a Compliance Line
vidual shareholdings are not disclosed unless required
operated by an external service-provider.
by law. The Code requires disclosure of shareholdings in
Annual Report 2008
21
Group Management Report » Corporate Governance
excess of 1 percent. (3) The members of the committees
the information required according to the provisions
of the Supervisory Board receive no additional remunera-
of the German Commercial Code (HGB) as amended by
tion. However, a proposal for compensating the members
the Disclosure of Management Remuneration Act; this
of the Audit Committee is to be put before the 2009 An-
information has therefore not been repeated in the Notes
nual General Meeting for its approval; the members of
to the Consolidated Financial Statements.
the Nominations Committee will continue to perform
their duties without any special remuneration.
1. Remuneration of the Management Board
Henkel also complies with all the suggestions (“may/
should” provisions) of the Code in keeping with our
Regulation
legal form and the special statutory features anchored
Regulation and confirmation of compensation for mem-
in our Articles of Association. The corresponding dec-
bers of the Management Board of Henkel Management AG
larations of compliance can be found on our website:
is the responsibility of the Supervisory Board of Henkel
www.henkel.com/ir
Management AG, which is comprised of three members
In accordance with the Declaration of Compliance,
of the Shareholders’ Committee. Its deliberations also
the following details are disclosed in relation to notifi-
take into account the result of discussions held within
able shareholdings:
the Human Resources Subcommittee of the Sharehold-
The aggregate holdings of the members of the Super-
ers’ Committee. The compensation system is regularly
visory Board and of the members of the Shareholders’
reviewed in terms of the structure and the amounts in-
Committee exceed in each case 1 percent of the shares
volved. In order to ensure the competitiveness of the
issued by the corporation. The members of the Man-
compensation package, this process takes into account
agement Board together hold less than 1 percent of the
the size and international activities of the corporation,
shares issued by the Corporation.
our economic position and the level and structure of
In fiscal 2008, members of the Management Board,
remuneration encountered in similar companies.
Supervisory Board and Shareholders’ Committee or persons closely related to them notified 11 transactions per
Structure and Amounts
Clause 15a WpHG (Securities Trading Act, “Directors’
In accordance with the objective of achieving a sustain-
Dealings”). Members of the Management Board under
able increase in shareholder value, the remuneration
both the old and the new legal form purchased a total
of the Management Board is characterized by a high
of 12,458 preferred shares. Members of the Supervisory
proportion of performance-related compensation. The
Board and of the Shareholders’ Committee sold a total
package comprises three components: a fixed salary, a
of 881 preferred shares and purchased 30,054 ordinary
variable performance-related cash payment (short-term
shares. For further details in this regard, please go to
incentive/STI) and a variable performance-related long-
our website:
www.henkel.com/ir
term incentive (LTI) in the form of a share-based payment.
Added to these emoluments are ancillary benefits and
II. Remuneration Report
earnings-linked pension entitlements. The components
This Remuneration Report provides an outline of the
in detail:
compensation system for the Management Board, Henkel
Management AG as the personally liable partner, the
Fixed Salary
Supervisory Board and the Shareholders’ Committee
The amount of fixed salary is determined on the basis of
of Henkel AG & Co. KGaA, and the Supervisory Board of
the functions and responsibilities of the recipients con-
Henkel Management AG; it also indicates the level and
cerned, their time of tenure as members of the Manage-
structure of the remuneration paid.
ment Board (taking into account any membership on the
It takes into account the recommendations of the
German Corporate Governance Code and contains all
22
Annual Report 2008
former Management Board of Henkel KGaA), and prevailing market conditions. It is paid on a monthly basis.
Group Management Report » Corporate Governance
Short-Term Incentive (STI)
respective financial years as duly audited and provided
The performance criteria governing the short-term in-
with an unqualified opinion, with EPS also being first
centive are primarily return on capital employed (ROCE)
adjusted for exceptional items. The monetary value per
and earnings per preferred share (EPS). The individual
Cash Performance Unit essentially corresponds to the
performance of the Management Board member con-
reference price of the Henkel preferred share. A ceiling
cerned, and the size, significance and development of the
value (cap) is imposed in the event of extraordinary share
business/management sector(s) involved are also taken
price increases.
into account. Payment is made in arrears on an annual
basis as a function of the performance achieved in the
Other Emoluments
immediately preceding financial year.
The other emoluments largely relate to benefits arising
out of standard insurance policies and the provision of
Long-Term Incentive (LTI)
a company car.
Each member of the Management Board is allocated, as
a function of the absolute increase in the price of the
Other Regulatory Provisions
Henkel preferred share and the increase in the earnings
In the event of members of the Management Board tak-
per Henkel preferred share (EPS) achieved over a period
ing retirement, they are entitled to continued payment
of three years (performance period), the cash equivalent
of their remuneration for a further six months, but not
of up to 10,800 preferred shares – so-called Cash Perfor-
beyond the month of their 65th birthday.
mance Units – per financial year (= tranche). On expiry
The corporation maintains on behalf of members
of the performance period, the number and the value of
of corporate bodies and employees of Henkel a third-
the Cash Performance Units due are determined and the
party group insurance policy (D&O insurance) protecting
resulting tranche income is paid in cash. Each member of
against consequential loss, which policy also covers mem-
the Management Board participating in a tranche is re-
bers of the Management Board. An appropriate own-risk
quired to acquire a personal stake by investing in Henkel
deductible has been set with respect to the members of
preferred shares to the value of 25 percent of the gross
the Management Board.
tranche payout, and to place these shares in a blocked
custody account with a five-year drawing restriction.
Remuneration for 2008
In the event of an absolute rise in the share price
Effective the end of the Annual General Meeting on April
during the performance period of at least 15 percent,
14, 2008, Henkel Management AG joined the corporation
21 percent or 30 percent, each participant is allocated
as its sole personally liable partner, replacing the former
1,800, 3,600 or 5,400 Cash Performance Units (CPUs)
management of the corporation. With the exception of
respectively. To calculate the share price increase, the
Prof. Dr. Ulrich Lehner, who retired effective April 14,
average price in January of the tranche issue year is
2008, all the members of the former Management Board
compared to the average price in January of the third
of Henkel KGaA were appointed members of the Manage-
financial year following the issue year (reference price).
ment Board of Henkel Management AG. The remunera-
If, during the performance period, earnings per pre-
tion of the Management Board indicated below includes
ferred share increase by at least 15 percent, 21 percent
payments made or accruing to members of the Manage-
or 30 percent, each participant is allocated a further
ment Board of Henkel KGaA in the period from January
1,800, 3,600 or 5,400 CPUs respectively. To calculate the
1, 2008 to the end of the AGM on April 14, 2008.
increase in earnings per preferred share (EPS), the EPS
The total compensation paid to members of the Man-
of the financial year prior to the year of issue is com-
agement Board for the performance of their duties for and
pared to that of the second financial year following the
on behalf of Henkel AG & Co. KGaA and its subsidiaries
year of issue. The calculation is based on the approved
during the year under review amounted to 13,270k euros
and endorsed consolidated financial statements of the
(2007: 16,040k euros). Of the total cash emoluments of
Annual Report 2008
23
Group Management Report » Corporate Governance
11,743k euros (2007: 14,310k euros) paid in respect of
Pension Benefits
2008, 3,763k euros was in fixed salary (2007: 4,128k eu-
The retirement pension for members joining the Manage-
ros), 7,808k euros for the STI (2007: 9,969k euros) and
ment Board of the former Henkel KGaA before January 1,
172k euros in other emoluments (2007: 213k euros). Also
2005 amounts to a certain percentage of the last paid
included in the total remuneration are the Cash Perfor-
fixed salary (defined benefit). For these Management
mance Units granted to the members of the Management
Board members, the amount payable is set at 60 percent
Board for 2008 as LTI, which become payable in 2011
of the final fixed salary in the event of retirement after
depending on attainment of the associated performance
their 62nd birthday. The actual percentage individually
targets. It is a legal requirement that a value be disclosed
determined for each executive is made up of two com-
in the year of grant, and this value has been calculated
ponents: the so-called base percentage rate derived from
based on an assumed increase of both parameters (EPS/
the vested pension entitlement earned prior to entry into
share price) of 21 percent over the performance peri-
the former or latter Management Board, and an annual
od, giving an imputed amount of 1,527k euros (2007:
percentage increase of the base percentage during the
1,730k euros).
executive’s membership of the Management Board.
The emoluments received by the individual members
Effective January 1, 2005, we changed the pension
of the Management Board for the year under review are
system for new members of the Management Board to
indicated in the table below together with a breakdown
a defined contribution scheme. Once a covered event
according to the individual components referred to in
occurs, the affected members of the Management Board
the above.
Remuneration of the Management Board
Cash components
in k euros
Fixed
salary
Kasper Rorsted
Total cash
emoluments
Value of longterm incentive1)
Total remuneration1)
2008
856.5
1,820.6
53.8
2,730.9
293.8
3,024.7
2007
576.0
1,407.5
68.6
2,052.1
340.1
2,392.2
2008
262.5
706.2
14.1
982.8
28.6
1,011.4
(until April 14, 2008)
2007
900.0
2,286.3
38.3
3,224.6
146.4
3,371.0
Thomas Geitner
2008
501.0
975.6
24.1
1,500.7
277.4
1,778.1
(since March 1, 2008)
2007
–
–
–
–
–
–
Dr. Jochen Krautter
2008
–
–
–
–
–
–
(until June 30, 2007)
2007
300.0
705.0
13.5
1,018.5
56.7
1,075.2
Alois Linder2)
2008
280.0
794.5
11.1
1,085.6
45.7
1,131.3
(until June 18, 2008)
2007
600.0
1,427.5
20.7
2,048.2
166.3
2,214.5
Dr. Friedrich Stara
2008
621.0
1,133.8
30.2
1,785.0
293.8
2,078.8
2007
576.0
1,377.5
34.9
1,988.4
340.1
2,328.5
Dr. Lothar Steinebach
2008
621.0
1,203.8
22.7
1,847.5
293.8
2,141.3
2007
600.0
1,387.5
20.4
2,007.9
340.1
2,348.0
Hans Van Bylen
2008
621.0
1,173.8
15.8
1,810.6
293.8
2,104.4
Prof. Dr. Ulrich Lehner
2)
2007
576.0
1,377.5
16.9
1,970.4
340.1
2,310.5
Total
20082)
3,763.0
7,808.3
171.8
11,743.1
1,526.9
13,270.0
28.4 %
58.8 %
1.3 %
11.5 %
100.0 %
Total
20072)
4,128.0
9,968.8
213.3
14,310.1
1,729.8
16,039.9
25.7 %
62.2 %
1.3 %
10.8 %
100.0 %
1)
2)
24
Short-term
Other
incentive emoluments
2008 LTI payout in 2011; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period
2007/2008 LTI calculated for Messrs. Lehner/Linder only up to time of departure in 2008
Annual Report 2008
Group Management Report » Corporate Governance
Defined Benefit
Retirement pension p.a. on onset
of pension as of balance sheet date
Change in pension
provisions for 2008
Prof. Dr. Ulrich Lehner
(until April 14, 2008)
540,000.00
–644,422.00
Alois Linder
(until June 18, 2008)
385,200.00
443,948.00
Dr. Lothar Steinebach
369,150.00
285,838.00
in euros
Defined Contribution
in euros
Kasper Rorsted
Thomas Geitner
(since March 1, 2008)
Superannuation lump sum
Basic annuity
Total
lump sum
Addition to superannuation
lump sum 2008
Total basic
annuity (p.a.)
Addition to basic
annuity for 2008
996,300.00
396,540.00
1,030.87
255.60
81,030.00
81,030.00
178.99
178.99
Dr. Friedrich Stara
869,850.00
348,750.00
497.49
133.34
Hans Van Bylen
859,994.10
348,750.00
908.85
242.78
lump-sum payment comprises the total of annual con-
2. Remuneration of Henkel Management AG
for Assumption of Liability and Reimbursement of Expenses
tributions calculated on the basis of a certain percent-
For assumption of the liability and management of the
age of the fixed salary and of the short-term incentive,
businesses of the corporation, Henkel Management AG
this percentage being the same for all members of the
in its function as personally liable partner receives an
Management Board. Any vested pension rights earned
annual payment of 50,000 euros (= 5 percent of its capital
within the corporation prior to the executive’s joining
stock) plus any value-added tax (VAT) due, said fee being
the Management Board are taken into account as start-up
payable irrespective of any profit or loss made.
receive a superannuation lump-sum payment combined
with a continuing basic annuity. The superannuation
units. This ensures the establishment of a performancerelated pension system.
Henkel Management AG may also claim reimbursement from the corporation of all expenses incurred in
The pension benefits accruing to the members of the
connection with the management of the latter’s busi-
former and latter Management Boards as of the balance
nesses including the emoluments paid to its manage-
sheet date, and also the contributions to the pension
ment bodies.
scheme made in 2008 are shown in the tables above.
A total of 58,613k euros (2007: 61,878k euros) has
been provided for pension obligations to former members of the former and latter Management Boards and
3. Remuneration of the Supervisory Board
and of the Shareholders’ Committee of
Henkel AG & Co. KGaA
the former directors of the legal predecessor of Henkel
KGaA, and their surviving dependants. Amounts paid
Regulation
to such recipients during the year under review totaled
The remuneration for the Supervisory Board and the
12,200k euros (2007: 6,097k euros).
Shareholders’ Committee has been approved in General
Meeting; the corresponding provisions are contained in
Articles 17 and 33 of the Articles of Association.
Annual Report 2008
25
Group Management Report » Corporate Governance
Structure and Amounts
financial statements for the respective financial years as
The structure and amount of the remunerations are com-
duly audited and provided with an unqualified opinion,
mensurate with the size of the corporation, its economic
with EPS also being adjusted for exceptional items.
success and the functions performed by the Supervisory
Board and Shareholders’ Committee respectively.
The total of the dividend bonus and the long-term
incentive is, however, limited to 50,000 euros (cap).
The remuneration package comprises three components: a fixed fee, a variable, dividend-related bonus and
Remuneration for Chairpersons/
a variable performance-related long-term incentive (LTI)
Vice-chairpersons/Subcommittee Members
based on the success of the corporation. The components
The chairperson of the Supervisory Board and the chair-
in detail:
person of the Shareholders’ Committee each receives
double the amount, and the vice-chairperson in each
Fixed Fee
case one-and-a-half times the amount accruing to an ordi-
Each member of the Supervisory Board or of the Share-
nary member. Members of the Shareholders’ Committee
holders’ Committee receives a fixed fee of 20,000 euros
who are also members of one or more subcommittees of
or 50,000 euros per year respectively. The higher fixed
the Shareholders’ Committee each additionally receive
fee in the latter case is due to the fact that, as required by
remuneration equivalent to the initial amount; if they
the Articles of Association, the Shareholders’ Committee
are the chairperson of one or more subcommittees, they
is involved in business management activities.
receive double.
Dividend Bonus
Other Regulatory Provisions
Each member of the Supervisory Board and of the Share-
The members of the Supervisory Board receive an atten-
holders’ Committee further receives an annual bonus
dance fee amounting to 500 euros for each meeting in
of 2,400 euros for every full 0.02 euros by which the
which they participate. In addition, the members of the
preferred dividend paid out for the year under review
Supervisory Board and of the Shareholders’ Committee
exceeds 0.25 euros.
are reimbursed expenses arising from the pursuit of their
mandates. The members of the Supervisory Board are also
Long-term Incentive (LTI)
reimbursed the value-added tax (VAT) payable on their
As a long-term incentive, each member of the Supervisory
total remunerations and reimbursed expenses.
Board and of the Shareholders’ Committee receives an
The corporation maintains on behalf of members
additional cash payment each year, the amount of which
of corporate bodies and employees of Henkel a third-
depends on the increase in earnings per preferred share
party group insurance policy (D&O insurance) protect-
registered over a three-year reference period. The EPS of
ing against consequential loss, which policy also covers
the financial year preceding the payment-related year
members of the Supervisory Board and of the Sharehold-
is compared with the EPS of the second financial year
ers’ Committee. An appropriate own-risk deductible has
following the payment-related year. If the increase is
been set with respect to the members of both corporate
at least 15 percent, an amount of 600 euros is paid for
bodies.
each full percentage point of the total achieved increase.
26
If the increase reaches a minimum of 21 percent, the
Remuneration for 2008
amount paid per percentage point is 700 euros, and if
Total remuneration paid to the members of the Supervi-
the increase is a minimum of 30 percent, the amount
sory Board (fixed fee, dividend bonus, LTI for 2008 and
paid per percentage point is 800 euros. The calculation
attendance fee) for the year under review amounted to
is based on the approved and endorsed consolidated
1,231k euros plus VAT (2007: 1,226k euros plus VAT). Of
Annual Report 2008
Group Management Report » Corporate Governance
dend bonus and attendance fees) amounting to 974k
4. Remuneration of the Supervisory Board of
Henkel Management AG
euros plus VAT of 144k euros (2007: 969k euros plus VAT
In accordance with Article 14 of the Articles of Asso-
of 174k euros), 349k euros was for fixed fees, 587k euros
ciation of Henkel Management AG, the members of the
was in dividend bonus and 38k euros was for attendance
Supervisory Board of Henkel Management AG receive an
fees.
annual fee of 10,000 euros, although members of this
the total cash emoluments paid for 2008 (fixed fees, divi-
The total remuneration of the members of the Share-
body who are also members of the Supervisory Board or
holders’ Committee for the year under review (fixed fee,
Shareholders’ Committee of Henkel AG & Co. KGaA do
dividend bonus and LTI for 2008, including the com-
not receive such compensation.
ponents payable for subcommittee activity) amounted
As the Supervisory Board of Henkel Management AG
to 2,303k euros (2007: 2,260k euros). Of the total cash
is comprised entirely of members of the Shareholders’
emoluments paid for 2008 (fixed fee and dividend bonus,
Committee, no fees were paid to members of that Super-
including the components payable for subcommittee
visory Board in the year under review.
activity) amounting to 1,959k euros (2007: 1,922k euros),
1,172k euros was for fixed fees and 787k euros was in
dividend bonus.
The dividend bonus in each case was based on a dividend of 0.53 euros per preferred share.
Also included in the total remuneration figures is the
long-term incentive (LTI) for 2008 granted to the members
of the Supervisory Board and of the Shareholders’ Committee in the form of a deferred conditional payment
entitlement which will be paid out following the 2011
Annual General Meeting as a function of the earnings
per preferred share (EPS) achieved in fiscal 2010. It is
a legal requirement that an LTI value be disclosed in
the year of grant. According to our Articles of Association, the total of dividend bonus and LTI is limited to a
ceiling of 50k euros per ordinary member. Given this
specified upper maximum, and assuming an increase in
EPS of 21 percent in the performance period, the totals
applicable for 2008 are 257k euros for the Supervisory
Board and 344k euros for the Shareholders’ Committee
(including remuneration components for subcommittee
activity).
The emoluments received by the individual members
of the Supervisory Board and of the Shareholders’ Committee, broken down according to the above-mentioned
components, are presented in the tables on the following pages.
Annual Report 2008
27
Group Management Report » Corporate Governance
Remuneration of the Supervisory Board
Cash components
in euros
Dividend
bonus
Attendance fee
Total cash
emoluments
Value of
long-term
incentive1)
Total
remuneration1)
139,100
Dipl.-Ing. Albrecht Woeste,
2008
40,000
67,200
2,500
109,700
29,400
Chair
2007
40,000
67,200
2,000
109,200
29,400
138,600
Winfried Zander,
2008
30,000
50,400
2,500
82,900
22,050
104,950
Vice-chair
2007
30,000
50,400
2,000
82,400
22,050
104,450
Dr. Friderike Bagel
2008
20,000
33,600
2,500
56,100
14,700
70,800
2007
20,000
33,600
2,000
55,600
14,700
70,300
Dr. Simone Bagel-Trah
2008
14,317
24,052
2,000
40,369
10,523
50,892
(since April 14, 2008)
2007
–
–
–
–
–
–
Engelbert Bäßler
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
2,000
55,600
14,700
70,300
Jutta Bernicke
2008
14,317
24,052
1,500
39,869
10,523
50,392
(since April 14, 2008)
2007
–
–
–
–
–
–
Hans Dietrichs
2008
4,973
8,354
500
13,827
3,655
17,482
(until March 31, 2008)
2007
20,000
33,600
2,000
55,600
14,700
70,300
Fritz Franke
2008
14,317
24,052
2,000
40,369
10,523
50,892
(since April 14, 2008)
2007
–
–
–
–
–
–
Birgit Helten-Kindlein
2008
14,317
24,052
2,000
40,369
10,523
50,892
(since April 14, 2008)
2007
–
–
–
–
–
–
Bernd Hinz
2008
20,000
33,600
2,500
56,100
14,700
70,800
2007
20,000
33,600
2,000
55,600
14,700
70,300
Dr. Michael Kaschke
2008
14,317
24,052
1,500
39,869
10,523
50,392
(since April 14, 2008)
2007
–
–
–
–
–
–
Thomas Manchot
2008
20,000
33,600
2,500
56,100
14,700
70,800
2007
20,000
33,600
2,000
55,600
14,700
70,300
Prof. Dr. Dr. h.c. mult. Heribert Meffert
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
1,500
55,100
14,700
69,800
Thierry Paternot
2008
14,317
24,052
2,000
40,369
10,523
50,892
(since April 14, 2008)
2007
–
–
–
–
–
–
Andrea Pichottka
2008
20,000
33,600
2,500
56,100
14,700
70,800
2007
20,000
33,600
2,000
55,600
14,700
70,300
Prof. Dr. Dr. h.c. mult. Heinz Riesenhuber
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
1,500
55,100
14,700
69,800
Konstantin von Unger
2008
20,000
33,600
2,000
55,600
14,700
70,300
2007
20,000
33,600
2,000
55,600
14,700
70,300
Michael Vassiliadis
2008
20,000
33,600
2,000
55,600
14,700
70,300
2007
20,000
33,600
2,000
55,600
14,700
70,300
Bernhard Walter
2008
20,000
33,600
2,500
56,100
14,700
70,800
2007
20,000
33,600
2,000
55,600
14,700
70,300
Werner Wenning
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
2,000
55,600
14,700
70,300
Ulf Wentzien
2008
14,317
24,052
2,000
40,369
10,523
50,892
(since April 14, 2008)
2007
–
–
–
–
–
–
Dr. Anneliese Wilsch-Irrgang
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
2,000
55,600
14,700
70,300
Rolf Zimmermann
2008
5,683
9,548
500
15,731
4,177
19,908
(until April 14, 2008)
2007
20,000
33,600
2,000
55,600
14,700
70,300
Total
2008
349,290
586,806
38,000
974,096
256,728
1,230,824
2007
350,000
588,000
31,000
969,000
257,250
1,226,250
1)
28
Fixed fee
2008 LTI payout in 2011; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period; figures do not include VAT
Annual Report 2008
Group Management Report » Corporate Governance
Remuneration of the Shareholders’ Committee
Cash components
in euros
Fixed fee
Dividend
bonus
Fee for subcommittee
activity1)
Total cash
emoluments
Value of
long-term
incentive2)
Total
remuneration3)
2008
100,000
67,200
107,355
274,555
48,277
322,832
2007
100,000
67,200
167,200
334,400
58,800
393,200
2008
67,896
45,626
143,445
256,967
45,184
302,151
2007
50,000
33,600
83,600
167,200
29,400
196,600
Stefan Hamelmann, Member,
Vice-chair until April 14, 2008
(Vice-chair Finance Subcom.)
2008
57,104
38,374
83,600
179,078
31,489
210,567
2007
75,000
50,400
83,600
209,000
36,750
245,750
Dr. h.c. Christoph Henkel,
Vice-chair
(Chair Finance Subcom.)
2008
75,000
50,400
167,200
292,600
51,450
344,050
2007
75,000
50,400
167,200
292,600
51,450
344,050
Dr. Paul Achleitner
(Member Finance Subcom.)
2008
50,000
33,600
83,600
167,200
29,400
196,600
2007
50,000
33,600
83,600
167,200
29,400
196,600
Dr. h.c. Ulrich Hartmann
(Member Finance Subcom.)
2008
50,000
33,600
83,600
167,200
29,400
196,600
2007
50,000
33,600
83,600
167,200
29,400
196,600
Burkhard Schmidt
(until June 29, 2007)
(Member Finance Subcom.)
2008
–
–
–
–
–
–
2007
24,658
16,570
41,228
82,456
14,499
96,955
Prof. Dr. Ulrich Lehner
(since April 14, 2008)
(Member Finance Subcom.)
2008
35,792
24,052
59,845
119,689
21,046
140,735
2007
–
–
–
–
–
–
Konstantin von Unger
(Vice-chair HR Subcom.)
2008
50,000
33,600
83,600
167,200
29,400
196,600
2007
50,000
33,600
83,600
167,200
29,400
196,600
Karel Vuursteen
(Member HR Subcom.)
2008
50,000
33,600
83,600
167,200
29,400
196,600
2007
50,000
33,600
83,600
167,200
29,400
196,600
Werner Wenning
(since April 14, 2008)
(Member HR Subcom.)
2008
35,792
24,052
59,845
119,689
21,046
140,735
2007
–
–
–
–
–
–
Dr. Hans-Dietrich Winkhaus
(until April 14, 2008)
(Member Finance Subcom.)
2008
14,208
9,548
23,755
47,511
8,354
55,865
2007
50,000
33,600
83,600
167,200
29,400
196,600
Total
2008
585,792
393,652
979,445
1,958,889
344,446
2,303,335
2007
574,658
386,170
960,828
1,921,656
337,899
2,259,555
Dipl.-Ing. Albrecht Woeste, Chair
(Member HR Subcom., Chair HR
Subcom. until April 14, 2008)
Dr. Simone Bagel-Trah, Vice-chair,
Member until April 14, 2008,
(Chair HR Subcom., Member HR
Subcom. until April 14, 2008)
1)
2)
3)
Proportional fixed fee and dividend bonus
Including LTI amount arising from subcommittee activity
2008 LTI payout in 2011; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period
Annual Report 2008
29
Group Management Report » Operational Activities / Strategy and Financial Targets for 2012
Operational Activities
Henkel is organized into three business sectors/strategic
areas of competence:
Overview
» Laundry & Home Care
Henkel was founded in 1876. Consequently, the year un-
» Cosmetics/Toiletries
der review marked the 132nd in our corporate history.
» Adhesive Technologies
Today, Henkel boasts a global workforce of more than
55,000 employees, and day in, day out, people in more
Our product range in the Laundry & Home Care business
than 125 countries put their trust in our brands and
sector comprises heavy-duty detergents, special detergents
technologies.
and cleaning products. The portfolio of the Cosmetics/
Toiletries business sector encompasses hair cosmetics,
Global Operations
products for body, skin and oral care, and products for
the hair salon business. The Adhesive Technologies business sector offers decoration and renovation products,
adhesive and correction products for home and office,
building adhesives and industrial and structural adhesives, sealants and surface treatment products.
Our three business sectors are managed on the basis
of globally operational strategic business units. These
are supported by the central functions of Henkel AG &
Co. KGaA in order to ensure optimum utilization of cor-
Countries in which Henkel operates
porate synergies. Implementation of the strategies at a
local and regional level is the responsibility of the affili-
Organization and Business Sectors
ated companies. The executive bodies of these companies
Henkel AG & Co. KGaA is operationally active as well
manage their businesses in line with the relevant statu-
as being the parent company of the Henkel Group. In
tory regulations, supplemented by their own articles of
this latter capacity, it is responsible for defining and
association, internal procedural rules and the principles
pursuing Henkel’s corporate objectives as well as for the
incorporated in our globally applicable management
management, control and stewardship of our Group-wide
guidelines, standards and codes.
activities, including risk management and the distribution of resources. Henkel AG & Co. KGaA performs its
Corporate Governance, Remuneration
tasks within the legal scope afforded to it as part of the
Further details of corporate governance at Henkel AG &
Henkel Group, with the affiliated companies otherwise
Co. KGaA and the remuneration of the members of the
operating as legally independent entities.
Management Board, Supervisory Board and Shareholders’
As of the end of the Annual General Meeting on April
Committee are provided in the Corporate Governance
14, 2008, Henkel Management AG joined the corporation
Report starting on
as its sole personally liable partner, replacing the previ-
Report starting on
page 18 and the Remuneration
page 22.
ous Management Board. Now, the Management Board
of Henkel Management AG is responsible for managing
Strategy and Financial Targets for 2012
our operational activities, supported by the functions of
our Corporate unit.
Point of Departure
We intend to continue focusing on our three growth-generating strategic areas of competence. Within the more
mature markets, we already occupy leading positions in
each of these areas, and our sights are very much set on
30
Annual Report 2008
Group Management Report » Strategy and Financial Targets for 2012
further expansion as we move forward. In the growth
sector, we intend to further enhance profitability
markets too, our Laundry & Home Care and Cosmetics/
by strengthening our innovation leadership and ex-
Toiletries business sectors already boast leading posi-
panding the Schwarzkopf brand. Within the Adhesive
tions in more than 100 different categories. Meanwhile,
Technologies business sector we aim to improve our
Adhesive Technologies is the market leader in more than
profitability in the automotive segment and con-
30 emerging economies. We do not feel it is necessary
sumer adhesives business, drive growth in specialty
to have a presence absolutely everywhere – however, in
applications and utilize our advantages of scale with
those locations where we operate it is important that
innovations in the industrial adhesives segment.
we enjoy strong or expandable market positions. Today,
In addition, we intend to achieve disproportionate
we already generate some 37 percent of our total sales
expansion in the growth regions through increased
in the dynamically developing countries of the growth
capital expenditures, and increase the share of sales
regions. In 2004, the overall share of these emerging
accounted for by these markets over the next few years
markets was just 26 percent.
to 45 percent – while also improving our margins. At
In other words, with our three growth-generating
the same time, we also want to further increase our
strategic areas of competence and the leading positions
that we already occupy in both the mature markets and
market shares in the mature markets.
2. Concentrationonourtopbrands
the growth regions, today we already have a strong basis
Here, the focus is on fewer but stronger brands and
for generating profitable growth in the future.
further expansion of our strong regional and global
brands. Brand awareness is to be further enhanced
Strategic Priorities
through extensive investment. Our three top brands
We have specified three strategic priorities:
Schwarzkopf, Loctite and Persil already account for
25 percent of our sales. Our objective is to grow organically twice as fast with these and other top brands as
Henkel overall, and therefore to significantly expand
their share of total sales.
Achieve
our full
business potential
3. Innovationsandtheinnovationrate
With an innovation rate1) of more than 30 percent,
we already count among the most innovative companies in our strategic areas of competence. We are
Winning
Culture
Focus
more on
our customers
helped in this respect by the proximity we have to our
customers and consumers, incorporating both audiences in our product development activities where
appropriate. We have also made it our principle only
Strengthen
our global
team
to launch a new product onto the market if it has a
positive effect on the gross margin of the business
sector concerned.
Achieve our full business potential
4. Operationalexcellence
For this, we have identified the following drivers:
In our purchasing activities, our aim is to generate
1. Portfoliooptimization
economies of scale through the further development
Within the Laundry & Home Care business sector,
of our strategies. This includes concentrating on
we aim to increase our profitability in the mass cat-
strategic suppliers and on procuring materials from
egories such as heavy-duty detergents and hand dish-
low-wage countries. Our objectives with regard to
washing products, and drive growth in the profitable
production and supply chain management include
specialty categories such as household cleaners and
a reduction in the number of production sites, par-
fabric softeners. In the Cosmetics/Toiletries business
ticularly in the mature markets. This will enable us
1)
Percentage share of sales accounted for by new products launched onto the
market in the last three years
Annual Report 2008
31
Group Management Report » Strategy and Financial Targets for 2012 / Value-based Management and Control
to reduce the complexity of our structures and bet-
Financial Targets for 2012
ter utilize available capacities. With these measures
We have set ourselves new financial targets for 2012 and
and improvements in our administration, selling
are confident that, by following the strategic priorities
and distribution expenses (achieved, for example,
indicated above, we will achieve them:
through the systematic utilization of standardization opportunities, shared service centers and the
Financial targets for 2012
outsourcing of non-core activities), we expect to be
able to realize significant cost savings.
Annual organic sales growth (average):
3 – 5 percent
Focus more on our customers
In order to place our customers right at the center of
Adjusted1) return on sales (EBIT):
everything that we do, we need to prioritize expand-
14 percent
ing our contacts with them at the highest managerial
level (top-to-top contacts), coupled with the further de-
Annual growth in adjusted1) earnings per
preferred share (average):
velopment of our partnership structures. Our aims are
to establish a joint strategic approach to our markets, to
> 10 percent
expand services offering a measurable added value for
our customers, and to effectively marshal our own competences in the form of, for example, our leading role in
the field of sustainability/corporate social responsibility
Value-based Management and Control
(CSR). The objective is to generate organic growth with
To make achievement of our growth targets measurable,
our key accounts equivalent to 1.5 times the figure for
we have adopted a modern system of metrics with which
Henkel as a whole.
we calculate value-increase and return ratios in line with
capital market practice.
Strengthen our global team
We use economic value added (EVA®)2) as a central
Our employees are our most important asset. With clear
performance management parameter to assess growth
and unequivocal feedback, significant rewards in recog-
to date and to appraise future plans. EVA® is a measure
nition of individual performance, and tailored develop-
of the additional financial value created by a company
ment plans, we ensure that our competent and motivated
in a given reporting period. A company creates economic
team can master the challenges with which they are
value added if its operating profit exceeds its cost of
confronted. We are keen to develop and promote our
capital, the latter being defined as the return on capital
managers from within the corporation. At the same time,
employed expected by the capital market.
we are also aware of the need to bring in external talents
Operational business performance is measured on
who best know their local markets, the requirements
the basis of operating profit (EBIT). The capital employed
of our customers in those markets and the cultures of
figure is calculated from the assets side of the balance
the individual countries concerned. Already today, our
sheet. A reconciliation of the year-end figures in the bal-
Düsseldorf headquarters is staffed by people from 40
ance sheet to the average values used in determining
different countries; and the proportion of female manag-
capital employed can be found on
page 121.
ers is well above 25 percent worldwide, with the trend
The cost of capital employed is calculated as a weight-
clearly rising. The diversity of our global team constitutes
ed average of the cost of capital (WACC) comprising both
a competitive advantage for Henkel, and one we wish to
equity and debt. In fiscal 2008, we applied a WACC after
continuously extend.
tax of 7.5 percent. Before tax, the figure was 11 percent.
We regularly review our cost of capital in order to reflect
changing market conditions. Starting in fiscal 2009,
1)
2)
32
Annual Report 2008
Adjusted for one-time gains/charges and restructuring charges
EVA® is a registered trademark of Stern Stewart & Co.
Group Management Report » Value-based Management and Control
therefore, we have adopted a WACC of 11.5 percent before
tax and 8.0 percent after tax.
We further apply different WACC rates depending on
the business sector involved, based on sector-specific beta
factors. In the year under review, this resulted in a WACC
WACC Before Tax by Business Sector
2008 since 2009
Laundry & Home Care
10.5 %
10.5 %
Cosmetics/Toiletries
10.5 %
10.5 %
Adhesive Technologies
12.0 %
12.5 %
before tax of 10.5 percent (7.5 percent after tax) for both
Laundry & Home Care and Cosmetics/Toiletries, and of
EVA® serves to promote value-added decisions and profit-
12.0 percent before tax (8.5 percent after tax) for Adhesive
able growth in all our business sectors. Operations ex-
Technologies. Since the start of 2009, we have been ap-
hibiting consistently negative value contributions with
plying a WACC for Adhesive Technologies of 12.5 percent
no prospect of positive EVA® values in the future are
(8.5 percent after tax), while the values for the other two
divested or otherwise discontinued.
business sectors have remained unchanged.
In order to be better able to compare business units
At Henkel, EVA® is calculated as follows:
of varying size, we additionally apply return on capital
employed, calculated as follows:
EVA® = EBIT – (Capital Employed x WACC)
ROCE = EBIT / Capital Employed
Weighted Average Cost of Capital (WACC)
ROCE represents the average return on capital employed.
2008 since 2009
Risk-free interest rate
4.8 %
4.8 %
Market risk premium
4.5 %
4.5 %
Beta factor
We create value where this metric exceeds the cost of
capital.
0.90
1.00
Cost of equity after tax
8.9 %
9.4 %
Cost of debt capital before tax
5.6 %
5.3 %
–1.7 %
–1.6 %
3.9 %
3.7 %
Share of equity1) (target structure)
75 %
75 %
Share of debt capital1) (target structure)
25 %
25 %
7.5 %
8.0 %
of the previous year, while the 166 million euros posted
30 %
30 %
by Laundry & Home Care fell short of the 183 million eu-
11.0 %
11.5 %
ros of the previous year due to a decline in operating
Tax shield (30 %)
Cost of debt capital after tax
WACC after tax2)
Tax rate
WACC before tax2)
1)
At market values
2)
EVA® and ROCE in Fiscal 2008
In 2008, the Henkel Group generated a negative EVA® of
–466 million euros, representing a fall of 935 million euros compared to the previous year. This decline was due
in part to the increase of the weighted average cost of
capital (WACC) before tax from 10 to 11 percent. The
business sectors Laundry & Home Care and Cosmetics/
Toiletries generated a positive EVA®. At 150 million euros,
that of Cosmetics/Toiletries was slightly above the level
profit. Within the Adhesive Technologies business sec-
Rounded
EVA® and ROCE1)
in million euros
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesive
Technologies
Corporate
Group
439
376
658
–694
779
EBIT
Capital employed
2,604
2,151
6,590
–24
11,321
WACC2)
273
226
791
–3
1,2453)
EVA® 2008
166
150
–132
–692
–4663)
EVA® 2007
183
149
253
–116
469
ROCE 2008
in %
16.9
17.5
10.0
–
6.9
ROCE 2007
in %
16.7
16.7
16.9
–
15.4
1)
2)
3)
Calculated on the basis of units of 1,000 euros
Calculated on the basis of the different sector-specific WACC rates applied
Calculated on the basis of the WACC rate of 11.0 percent for the Henkel Group
Annual Report 2008
33
Group Management Report » Value-based Management and Control / Business Performance
tor, on the other hand, we generated a negative EVA®
been incorporated and implemented within and by our
amounting to –132 million euros. This is attributable
management systems, and are subjected to a regular
to the significant increase in capital employed result-
audit and review regime. This includes monitoring and
ing from the acquisition of the National Starch busi-
quickly implementing relevant legal requirements and
nesses. We also recorded a substantial decrease in the
statutory changes.
Corporate segment to –692 million euros due to the
One example of a change in the statutory environ-
negative influence on operating profit arising from
ment is the new European regulation on the registration,
the restructuring expenses incurred in the wake of our
evaluation, authorization and restriction of chemicals
“Global Excellence” program and the integration of the
(abbreviation: REACH), which controls the registration,
National Starch businesses.
evaluation and approval of chemical substances. The
Return on capital employed decreased from 15.4 per-
REACH regulation primarily affects Henkel as a user
cent to 6.9 percent. This is primarily attributable to nega-
of chemical materials; however, it also affects us as an
tive developments in operating profit arising from the
importer and manufacturer. In order to ensure the ef-
restructuring charges, and again the increase in capital
ficient implementation of the REACH requirements, we
employed arising from the acquisition of the National
have established a central REACH management team for
Starch businesses.
handling and controlling the main REACH processes.
Statutory and Regulatory Situation
Business Performance
Our business is governed by national rules and regulations and – within the European Union (EU) – increas-
World Economy
ingly by harmonized pan-European laws. In addition,
After a good start, 2008 began to be affected more and
some of our operations are subject to rules and regula-
more by the onset of a worldwide recession. The rapidly
tions derived from approvals, licenses, certificates or
rising raw material prices, the subprime and real estate
permits.
crisis in the USA, which also affected a number of other
Our product manufacturing operations are subject to
countries, and the general financial malaise and crisis of
rules and regulations with respect to the usage, storage,
confidence that arose as a result exerted an increasingly
transportation and handling of certain substances and
adverse influence on the real economy.
also in relation to emissions, wastewater, effluent and
In Western Europe, the decline in economic output
other waste. The construction and operation of produc-
occurred at an earlier stage than in the USA as the US
tion facilities and other plant and equipment are likewise
economy initially benefited from the introduction of
governed by framework rules and regulations.
tax concessions. However, the USA likewise slid into
Product-specific regulations of relevance to us relate
in particular to ingredients and input materials, safety of
There was also a tangible slowdown in growth in
manufacture, product handling, and the packaging and
many countries of Asia, particularly Japan and the Asian
marketing of the finished article. The control mechanisms
emerging nations. China and India once again revealed
involved range from material-related regulations, usage
themselves to be comparatively robust with better growth
prohibitions or restrictions, and procedural requirements
figures than for the world economy as a whole.
(test and inspection, identification marking, provision of
warning labels, etc.), to product liability law.
34
recession.
This also applied to most of the economies of Eastern
Europe.
Our internal standards ensure compliance with statu-
The economies of Latin America likewise remained rel-
tory regulations and the safety of our manufacturing
atively stable. However, Mexico was already beginning to
facilities and products. The associated requirements have
suffer from its proximity to the flagging US economy.
Annual Report 2008
Group Management Report » Business Performance
Private Consumption and Developments by Sector
aging industry and also in part metal manufacturing
The consumer climate clouded over noticeably in the in-
and processing underwent weaker growth, especially in
dustrial countries. At best, consumer spending increased
the industrialized countries. The rate of rise in machine
only minimally; in some Western European countries
construction and mechanical engineering slowed down,
such as Germany and Italy, private consumption actu-
albeit from a high base.
ally declined. In many emerging markets, consumers
The building industry and, in particular, the home
likewise behaved more cautiously than in previous years,
construction segment, went into a steep decline in many
although overall consumption here continued to develop
countries in 2008. This applies particularly to the USA
quite favorably; for example, most countries in Eastern
where home construction dipped significantly. How-
Europe were able to generate positive growth rates. In
ever, many Western European countries and Japan like-
Latin America, private consumption was an important
wise had to cope with a contraction in their building
factor in driving economic growth. In Asia, consumption
activity. In most of the emerging markets, on the other
lagged behind general economic expansion.
hand, the construction industry underwent appreciable
Fiscal 2008 was primarily characterized by an indus-
expansion.
trial downturn that affected most sectors and regions.
Further details on developments with respect to spe-
Once again, the industrial countries were more heavily
cific segments and regions can be found in the individual
impacted than the emerging markets. US industry, which
business sector reports starting on
page 54.
in the preceding years had only undergone moderate
expansion, had to cope with reductions in manufactur-
Management Board Review of Business
ing output. Industrial growth in Western Europe, which
Performance
previously had supported overall economic expansion,
Business performance at Henkel was characterized by the
came to a standstill. Many emerging nations were un-
above-described economic conditions which significantly
able to quite repeat the strong dynamism that they had
worsened as the year progressed. Having been able to
exhibited in previous years. China’s industry alone was
achieve a strong organic sales growth rate in excess of
once again able to exhibit expansion in the double-digit
our expectations in the first half of the year, we saw the
percentage range, albeit likewise with growth slightly
rate of growth of our worldwide sales markets signifi-
decelerating.
cantly slow in the second half of the year, particularly
The automotive industry counted among the primary
those served by the Adhesive Technologies business sec-
losers in the economic crisis. In the USA, the real estate
tor. Nevertheless, we were still able to grow more strongly
crisis and the recession led to a significant decline in
than the relevant markets in all our business sectors. The
demand for automobiles, with a corresponding impact
rate of organic sales growth for the Henkel Group for the
being felt by the producers. In Europe too, the crisis be-
year as a whole, at 3.0 percent, was within our forecast
came significantly more noticeable. The major Western
range of 3 to 5 percent.
European countries in particular experienced significant
reductions in both demand and production.
The situation in our procurement markets also became increasingly tense, particularly in the first nine
The performance of the automotive industry in the
months of 2008. The weak US dollar and a decline in
emerging nations of Asia and Latin America, on the
demand in our sales markets during this period also
other hand, was substantially more favorable. In some
burdened results. Nevertheless, having increased adjusted
cases, the expansion rates registered were double-digit
operating profit (adjusted1) EBIT) by 9.1 percent, we were
in magnitude, although even in China output growth
able to meet our forecast, updated as the year progressed,
noticeably slowed.
of “around 10 percent”.
The electronics industry lost much of its momentum
but was still able to show moderate growth. The pack1)
Adjusted for one-time gains/charges and restructuring charges, and before
amortization of intangible assets arising from the acquisition of the National
Starch businesses
Annual Report 2008
35
Group Management Report » Business Performance
Forecast and Target Achievement in 2008
Final figure
2008
3–5%
3.0 %
to the worsening economic climate.
around 10 %
9.1 %
Sales
Organic
sales growth
Growth
in adjusted EBIT1)
Growth in adjusted
earnings per
preferred share1)
1)
of growth nevertheless declined as the year progressed.
Updated
forecast 2008
While in the first half of 2008, the figure was 4.8 percent,
this fell to 1.2 percent in the second half of the year due
in million euros
low single-digit
percentage range
3.2 %
Before amortization of intangible assets after purchase price allocation
14,131
14,000
11,974
10,500
Due to the worsening market conditions, back in Feb-
12,740
13,074
2006
2007
10,592
7,000
ruary 2008 Henkel resolved to introduce an efficiency
enhancement program under the name “Global Excel-
3,500
lence”. The implementation of this program, the purpose
0
of which is to increase the profitability and competitive-
2004
2005
2008
ness of Henkel over the long term, progressed according
to plan in the year under review.
A further major event in 2008 was the successful closing of the acquisition of the National Starch businesses
Adhesives and Electronic Materials from Akzo Nobel. This
has enabled us to significantly strengthen our leading
position in the global adhesives market, particularly in
the industrial segment. The integration of the businesses
since the closing of the transaction in April 2008 has also
Sales Development1)
2008
Change versus previous year
8.1 %
Foreign exchange
–3.5 %
After adjusting for foreign exchange
11.6 %
Acquisitions/Divestments
8.6 %
Organic
3.0 %
1)
Calculated on the basis of units of 1,000 euros
progressed as scheduled.
The net debt of the Henkel Group, which increased
as a result of the acquisition of the National Starch busi-
Price and Volume Effects1)
nesses, was reduced again in the course of the year partly
in percent
as a result of cash flow from our operating activities
Organic
sales
growth
of which of which
price volume
and partly through the successful public offering of
Laundry & Home Care
3.8
3.2
0.6
our stake in Ecolab Inc. on the stock markets. Our solid
Cosmetics/Toiletries
4.7
1.8
2.9
financial structure was underlined by affirmation of
Adhesive Technologies
1.3
4.1
–2.8
our A ratings.
Henkel Group
3.0
3.2
–0.2
1)
Calculated on the basis of units of 1,000 euros
Sales and Profits
36
Henkel Group sales in 2008 amounted to 14,131 mil-
All our business sectors were able to post an increase in
lion euros, a rise of 8.1 percent compared to the figure for
organic sales. At Laundry & Home Care and also Adhesive
the previous year. After adjusting for foreign exchange,
Technologies, the contributions made to growth by prices
sales increased by 11.6 percent. This strong rise is due
and volumes during the course of the year showed a
primarily to the acquisition of the National Starch busi-
significant shift toward the price effect. In order to
nesses in April 2008. However, our organic sales growth,
compensate for the significant increase in raw material
i.e. growth adjusted for foreign exchange, acquisitions
costs, both business sectors implemented further price
and divestments, amounted to a good 3 percent. The rate
increases, particularly in the second half of the year.
Annual Report 2008
Group Management Report » Business Performance
Sales by Region1)
Sales by Business Sector1)
in million euros
in million euros
6,700
5,711
6,000
4,500
4,148 4,172
8,863
6,000
2,972 3,016
3,000
8,000
8,480
4,000
2,557 2,700
1,500
2,000
1,103
691 780
1)
0
Excluding Corporate
1,545
0
2007 2008
2007 2008
2007 2008
2007 2008
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesive
Technologies
Europe/Africa/ North America Latin America
Middle East
1)
2007 2008
2007 2008
2007 2008
Asia-Pacific
Excluding Corporate
The growth in volume, which in the first six months
By contrast, Laundry & Home Care and particularly
had amounted to a still strong 3.5 percent, declined in
Cosmetics/Toiletries posted further increases in organic
the second half of the year in all three business sectors,
sales within a difficult market environment. The share
finishing at –0.2 percent for the year as a whole – partly
of total Group sales accounted for by the North America
as a reaction to the price increases and partly as a conse-
region decreased from 20 to 19 percent.
quence of the worsening economic environment.
Latin America continued to perform very well, posting
In the regional breakdown too, the acquisition of the
an increase in sales of 12.8 percent to 780 million euros.
National Starch businesses had a positive effect, further
After adjusting for foreign exchange, sales in this region
accelerating the growth in sales in all regions. Europe/
grew by 18.5 percent in total, and 10.7 percent in organic
Africa/Middle East posted a significant sales increase of
terms, with all our business sectors contributing. The
4.5 percent to 8,863 million euros. At 3.7 percent, or-
share of total Group sales attributable to Latin America
ganic growth in this region was also above the level of
remained constant at 5 percent.
the Henkel Group as a whole, with all three business
The effects of the decline in economic growth were
sectors making similar contributions. The increase was
most apparent in the Asia-Pacific region. While sales grew
predominantly attributable to the subregions of Eastern
by 40.1 percent to 1,545 million euros, and by 47.0 percent
Europe and Africa/Middle East, both of which once again
after adjusting for foreign exchange, this was primar-
turned in substantial double-digit growth rates. Sales in
ily due to the acquired National Starch businesses. The
Western Europe underwent a slight decline. Overall, the
region’s share of total Group sales also increased signifi-
share of sales accounted for by the Europe/Africa/Middle
cantly from 8 to 11 percent. Organic sales growth came
East region decreased from 65 percent to 63 percent. This
in at 2.2 percent. While growth in the first half of the
is due predominantly to the smaller share of sales gener-
year was encouraging, it tailed off during the second half.
ated in this region by the National Starch businesses.
Nevertheless, all our business sectors were able to also
Sales in North America rose by 5.6 percent to
2,700 million euros. The increase after adjusting for
post an increase in organic sales, the highest rates coming
from Laundry & Home Care and Cosmetics/Toiletries.
foreign exchange was 13.3 percent. In organic terms,
Our growth regions of Eastern Europe, Africa, Middle
specifically after adjusting for the National Starch busi-
East, Latin America and Asia (excluding Japan) posted an
nesses, sales decreased by 1.4 percent. This is attribut-
increase in sales of 17.8 percent to 5,167 million euros. As
able to the results of the Adhesive Technologies business
a result, their share of total sales also rose further – from
sector which suffered significantly in the second half
34 to 37 percent. After adjusting for foreign exchange,
of the year as world economic conditions deteriorated.
growth amounted to 22.4 percent. Organic growth came
Annual Report 2008
37
Group Management Report » Business Performance
in at a robust 12.9 percent, with all our business sectors
acquisition of the National Starch businesses. As the
contributing in roughly equal measure. Although the
purchase price allocation had not yet been completed at
rate of business expansion also slightly weakened in the
the time of issue of our last forecast at the beginning of
growth regions as the year progressed, our business sec-
November, this did not take into account this amortiza-
tors were able to sustain double-digit growth rates in all
tion. The relevant comparable figure for assessing our
these emerging markets with the exception of Asia.
target achievement is therefore an adjusted operating
At 779 million euros, operating profit (EBIT) was well
below the prior-year figure of 1,344 million euros.
profit of 1,495 million euros. This corresponds to a rise
of 9.1 percent with respect to the comparable prior-year
figure of 1,370 million euros and lies within the range of
EBIT
our updated forecast delivered in November of “around
in million euros
10 percent”. This increase is predominantly due to the
1,344
1,298
1,200
consolidation of the National Starch businesses.
1,162
Return on sales amounted to 5.5 percent. Adjusted
996
900
779
600
return on sales decreased by 0.2 percentage points to
10.3 percent; before amortization of intangible assets
arising from the acquisition of the National Starch businesses, return on sales rose by 0.1 of a percentage point to
300
10.6 percent. Our two business sectors Laundry & Home
Care and Adhesive Technologies were particularly af-
0
2004
2005
2006
2008
2007
fected by substantial price increases in the raw material markets. We were able to pass on a large portion
This decrease is mainly due to the restructuring charges
of the rise in material costs through price increases of
and one-time expenses incurred in relation to our effi-
our own, or offset these additional expenses through
ciency enhancement program “Global Excellence” and
internal measures aligned to cost reduction and effi-
the integration of the National Starch businesses.
ciency improvements. The first savings realized from our
The following commentary on our operating perfor-
“Global Excellence” program and the integration of the
mance ignores the one-time gains/charges and restruc-
National Starch businesses, plus additional cost-reducing
turing charges.
measures, also had a positive effect on our profitability,
We succeeded in increasing adjusted operating profit
particularly in the fourth quarter. As a result, adjusted
(“adjusted EBIT”) by 6.6 percent to 1,460 million euros.
return on sales for this quarter rose to 10.7 percent and
Included in this figure is amortization of intangible
The rapid rise in raw material costs and the difficult
Adjusted EBIT
EBIT by Business Sector1)
in million euros
2007
2008
%
EBIT (as reported)
1,344
779
–42.0
–8
–30
–
48
34
663
1,370
1,460
–
35
1,370
1,495
One-time gains
One-time charges
Restructuring charges
Adjusted EBIT
Amortization of intangible assets
(National Starch)
Adjusted EBIT before amortization
after purchase price allocation
(basis for 2008 forecast)
38
remained roughly constant over the year as a whole.
assets amounting to 35 million euros arising from the
Annual Report 2008
in million euros
621
600
450
658
459 439
372 376
6.6
300
150
9.1
1)
0
Excluding Corporate
2007 2008
2007 2008
2007 2008
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesive
Technologies
Group Management Report » Business Performance
market conditions encountered also impacted the earn-
Further details relating to our business performance can
ings performance of the individual regions:
also be found in the reports dealing with the individual
business sectors starting on
page 54.
EBIT by Region
1)
in million euros
1,000
“Global Excellence” Restructuring Program
1,005 962
In February 2008, Henkel announced the main framework of a worldwide efficiency enhancement program
750
under the heading “Global Excellence”. This initiative
was undertaken in the face of accelerating change in pre-
500
vailing market conditions, an increasingly challenging
308 299
250
competitive environment and rising cost pressures.
58 66
0
2007 2008
2007 2008
2007 2008
Europe/Africa/ North America Latin America
Middle East
1)
81
146
2007 2008
Asia-Pacific
Excluding Corporate
“Global Excellence” provides for a number of individual measures extending to 2011 and affecting all our
business sectors, regions and functions. In total, we spent
504 million euros on this program in 2008. Due to the
strategic alignment of the program and its importance
In Europe/Africa/Middle East, operating profit fell by
for the further development of the Henkel Group, these
4.3 percent (–2.8 percent after adjusting for foreign ex-
expenses are reported in the Group segment report under
change). While Cosmetics/Toiletries was able to post a
the Corporate segment with a breakdown by business
slight increase in EBIT after adjusting for foreign ex-
sector.
change, there was a decline in this metric in the other two
Of this amount, 189 million euros is attributable to the
business sectors. At 10.9 percent, return on sales in this
Laundry & Home Care business sector, 100 million euros
region fell versus the prior-year level of 11.9 percent.
to Cosmetics/Toiletries, 161 million euros to Adhesive Tech-
In North America, operating profit decreased by
nologies and 54 million euros to Corporate functions.
2.8 percent. This is due exclusively to adverse foreign
In regional terms, 363 million euros is attributable
exchange movements. After adjusting for this impact,
to Europe/Africa/Middle East, 99 million euros to North
profits increased both in the region as a whole (by 4.9 per-
America, 9 million euros to Latin America and 33 mil-
cent), and also in all our business sectors, despite the
lion euros to Asia-Pacific.
difficult economic environment. However, return on
The purpose of the “Global Excellence” initiative is
sales fell to 11.1 percent, due primarily to the decline
to achieve annual savings of around 150 million euros
suffered by Adhesive Technologies.
effective from 2011.
We increased operating profit in Latin America by
Essentially, we have introduced the “Global Excel-
14.3 percent (20.3 percent after adjusting for foreign
lence” program in order to strengthen the long-term
exchange), with all our business sectors contributing.
profitability and competitiveness of Henkel. This initia-
Return on sales in this region improved by 0.1 of a per-
tive has enabled us to respond to changes in our markets,
centage point to 8.5 percent.
improving our production network and expanding our
The Asia-Pacific region also saw a further significant
utilization of shared services.
increase in profitability, with the operating result im-
A major step in this regard was the reorganization of
proving by 80 percent (92 percent after adjusting for for-
Corporate Research. Effective July 1, 2008, this central
eign exchange). Growth here was generated by Cosmetics/
division was dissolved and its research departments in-
Toiletries and Adhesive Technologies. Return on sales in
corporated into the research units of our three operat-
Asia-Pacific improved by 2.1 percentage points to 9.4 per-
ing business sectors, strengthening their specific R&D
cent, driven primarily by Adhesive Technologies.
activities and reducing time to market.
Annual Report 2008
39
Group Management Report » Business Performance
A further important “Global Excellence” measure relates
charges included in that figure, the rise amounted to
to the consolidation of our liquid detergent production
7.7 percent. The precise distribution of the restructur-
activities in Europe. We have already begun implement-
ing charges between the various functions is explained
ing this process, which entails the closure of manufactur-
on
page 74.
ing facilities in Germany and Spain with transfer of the
associated volumes to more favorably located sites.
Other Operating Charges and Income
We stepped up the process of transferring our fi-
The increase in the positive balance between operating
nancial processes to our in-house shared service cen-
income and charges of 40 million euros is partly due to
ters in Bratislava in Slovakia and Manila in the Philip-
the first-time consolidation of the National Starch busi-
pines. The Bratislava site is primarily responsible for
nesses and partly due to the disposal in the year under
our European activities while Manila supports Asia and
review of our water treatment business, which yielded
North America.
a gain of 8 million euros.
Expense Items
Financial Result
The cost of sales for the year under review rose by 16.8 per-
The financial result for 2008 reflects the gain of 1,042 mil-
cent to 8,190 million euros. Consequently, gross profit
lion euros arising from the sale of our participating inter-
decreased to 5,941 million euros; gross margin declined
est in Ecolab Inc. Overall, the financial result increased by
to 42.0 percent. There were two main reasons for this: the
942 million euros to 848 million euros. Income from this
further strong increases in raw material prices which we
investment consolidated at equity was 5 million euros
were unable to fully offset through our countermeasures;
below the level of the previous year due to the sale of
and the restructuring charges arising primarily from our
our Ecolab stake in November 2008, resulting in the
efficiency enhancement program “Global Excellence”.
at-equity income being recognized on a pro rata tempo-
The consolidation of the National Starch businesses
ris basis. Net interest expense was primarily affected by
also had an impact, albeit more minor in magnitude.
the financing of the acquisition of the National Starch
Without the restructuring charges and the acquisition,
businesses, resulting in an increase of 97 million euros
gross margin would have decreased only slightly. The
to –275 million euros.
following expense items were also impacted by the two
aforementioned factors:
At 3,993 million euros, marketing, selling and dis-
Earnings before tax increased by 30.2 percent to 1,627 mil-
tribution expenses rose by 6.5 percent compared to
lion euros. Taxes on income amounted to 394 million
the prior-year figure. After adjusting for restructuring
euros. At 24.2 percent, the tax rate was slightly below
charges, the rise was 3.6 percent.
the level of the previous year.
Our research and development expenses totaled
Net earnings for the year increased by 292 million
429 million euros, representing an increase of 22.6 per-
euros to 1,233 million euros. After deducting minority
cent. The R&D ratio, i.e. research and development ex-
interests of 12 million euros, earnings totaled 1,221 mil-
penses expressed as a proportion of sales, came in at
lion euros. Adjusted net earnings after minority interests,
0.3 percentage points above the 2.7 percent recorded
i.e. the figure after allowing for one-time gains/charges
for 2007. After adjusting for restructuring charges, and
and restructuring charges, increased by 4 million euros
particularly those relating to the dissolution of the Cor-
to 945 million euros.
porate Research division as of July 1, 2008 retroactive to
The annual financial statements of the parent com-
January 1, 2008, the R&D ratio remained at the level of
pany of Henkel AG & Co. KGaA are summarized on
the previous year.
Administrative expenses increased by 24.2 percent to
825 million euros. After adjusting for the restructuring
40
Net Earnings
Annual Report 2008
page 129.
Group Management Report » Business Performance / Assets and Financial Analysis
Earnings per Preferred Share1)
Net Earnings
in euros
in million euros
2.83
1,233
2.50
1,000
750
941
748
770
871
2.00
1.75
1.77
2004
2005
1.99
2.14
1.50
500
1.00
250
0.50
0
0
2004
2005
2006
2007
2008
1)
2006
2007
2008
Basis: share split (1:3) of June 18, 2007
Dividends and Distribution Policy
The Stock Incentive Plan introduced in 2000 resulted in
The level of dividend distribution is primarily aligned to
a dilution of earnings per ordinary and preferred share.
earnings after deducting minority interests and excep-
The options from all five tranches issued were “in the
tional items. The payout ratio should be around 25 per-
money” based on the average stock market price for the
cent. In view of our earnings performance, the proposal
preferred share. This effect derives from 337,396 pre-
to be put before the Annual General Meeting will be for
ferred shares that could potentially flow back into the
the dividends payable on both classes of share to remain
market. The resultant dilution in earnings per ordinary
unchanged. This will yield payouts of 0.53 euros per pre-
and preferred share amounts to 2 eurocents compared
ferred share and 0.51 euros per ordinary share.
to basic earnings per share.
Preferred Share Dividends1)
Assets and Financial Analysis
in euros
0.50
0.50
0.43
0.53
0.532)
0.45
The Laundry&HomeCare business sector acquired the
0.40
shares from minority shareholders in Egypt and Serbia
for a total of around 7 million euros.
0.30
With the acquisition of Hakanit Oy, Finland, Cosmet-
0.20
ics/Toiletries took over an earlier distributor for 17 mil-
0.10
lion euros in order to be able to better utilize existing
0
2004
1)
2)
Acquisitions and Divestments
2005
2006
2007
2008
Basis: share split (1:3) of June 18, 2007
Proposal
potential in the market through a direct presence. In
addition, this business sector disposed of a number of
relatively small brands in the USA and the UK for a total
of approximately 5 million euros as part of its ongoing
Earnings Per Share (EPS)
portfolio review.
Basic earnings per share are calculated by dividing earn-
The focus of the acquisition activities undertaken at
ings after minority interests by the weighted average
AdhesiveTechnologies in 2008 was on the purchase of
number of shares outstanding during the reporting
the Adhesives and Electronic Materials businesses owned
period. Earnings per preferred share increased from
by National Starch. As a result of this strategic acquisition,
2.14 euros in 2007 to 2.83 euros in 2008. Earnings per
we have been able to expand our leading position with
ordinary share rose from 2.12 euros to 2.81 euros. Ad-
respect to adhesives for industrial applications and also
justed earnings per preferred share for 2008 amounted
in the electronics industry, and especially in the growth
to 2.19 euros, the same figure as in the previous year.
markets of Asia. This acquisition was supplemented by
Annual Report 2008
41
Group Management Report » Assets and Financial Analysis
smaller, complementary acquisitions and takeovers of
working on their implementation. We have confirmed
minority shareholdings in the Maghreb region and in
our synergy target of 250 million euros for 2011.
Ukraine. The total spend was 3.7 billion euros. The busi-
In 2009, the integration emphasis will lie particularly
ness sector sold its European water treatment business
in the areas of sales synergies, production and informa-
and also a minority shareholding in the Japanese com-
tion technology. We will also continue to drive forward
pany Cemedine. Total proceeds of these sales amounted
the measures instigated, some of which have already
to around 55 million euros.
been completed, with the focus on achieving advantages
In November, we successfully placed our sharehold-
of scale in production and development.
ing in Ecolab Inc. on the stock exchange. Including the
Our priorities lie in securing the permanently high
over-allotment option (green shoe), the proceeds of the
quality of our products and services while continuing
sale amounted to some 1.7 billion euros.
to communicate with and provide support to our customers. A further aim during the integration phase is
National Starch:
to consolidate and further expand our positions in the
Integration of Operational Activities
marketplace.
Through the integration of the National Starch businesses, we have been able to significantly improve our
Capital Expenditures
product and service portfolio for both existing and po-
Capital expenditures (excluding financial assets) totaled
tential Henkel customers in the global adhesives market.
4,069 million euros in the year under review. Investments
The integration of customer relationships, the extended
in property, plant and equipment for our continuing
know-how in research and development and the com-
operations amounted to 473 million euros and were thus
bination of the capabilities of our two internationally
3 million euros above the prior-year figure. A majority
successful organizations have created an outstanding
share of these expenditures went into the establishment
basis for sustainable, profitable growth.
and expansion of production capacities. A further por-
The transaction was conducted as a back-to-back
tion was spent on structural improvements such as the
agreement with Akzo Nobel. This had a significant in-
merging of certain administrative and manufacturing
fluence on the integration procedure adopted. Following
sites. The major individual projects implemented in 2008
the takeover of ICI (and thus the complete portfolio of
were as follows:
National Starch businesses) by Akzo Nobel at the begin-
» Relocation of our Turkish detergent manufacturing
ning of 2008, carve-out transactions were initiated in
operation from Izmir to Ankara, accompanied by an
order to disentangle the businesses to be acquired by
increase in capacity (Laundry & Home Care).
Henkel. Achievement of this initial process constituted
a prerequisite for the closing on April 3, 2008.
Back in 2007, a management team was put together
centrated liquid detergents in St. Louis, Missouri, USA
(Laundry & Home Care).
and this has since focused on the integration of the
» Completion of the new main administration building
National Starch businesses. Even before the closing, a
and the development center in Scottsdale, Arizona, USA
detailed integration plan had already been drafted.
(Laundry & Home Care and Cosmetics/Toiletries).
A merging of the organizational structures has now
been completed. The overall concept for realizing the
planned synergies has been finalized and broken down
into individual projects and we are now successfully
42
» Construction of a production plant for highly con-
Annual Report 2008
» Expansion of our production plant for methyl cellulose
in Düsseldorf (Adhesive Technologies).
» Commissioning of a new factory for building adhesives
in Kazakhstan (Adhesive Technologies).
Group Management Report » Assets and Financial Analysis
Capital Expenditures 2008
in million euros
Continuing
operations
Acquisitions
Total
Intangible assets
20
3,224
3,244
Property, plant
and equipment
473
352
825
Total
493
3,576
4,069
and other additions made in the course of the year
valued at 473 million euros were offset by disposals and
write-downs of 71 million euros and 447 million euros
respectively. Currency translation losses amounted to
23 million euros.
Financial assets decreased as a result of the sale of our
at-equity investment in Ecolab Inc. in November 2008.
In regional terms, the emphasis of our capital expenditures in 2008 lay in North America and Europe.
Under current assets, the total of which decreased
by 304 million euros, there was an acquisition-related
In 2009, spending on property, plant and equipment
is to focus on Europe. Major investments in our Laundry
increase in trade accounts receivable and inventories
amounting to 352 million euros.
& Home Care and our Cosmetics/Toiletries business sec-
Due to the uncertainty of the financial markets, we
tors will involve the construction of production facili-
refrained from depleting our liquid funds. Intent on
ties for the manufacture of innovative products coupled
securing our liquidity, we did not use the proceeds from
with structural optimization measures. For the Adhesive
the sale of our Ecolab investment to redeem the so-called
Technologies business sector, the capital expenditure
bridge loan, which would have been possible in prin-
focus in 2009 will again be on the integration of the
ciple, instead investing these funds in short-term fixed
production capacities and information technology of
deposits. These have been offset against the bridge loan.
National Starch.
Assets shown as available for sale relate to a production
facility belonging to the Cosmetics/Toiletries business
Balance Sheet Structure
sector and the Consumer Adhesives unit of the Adhesive
Following the acquisition of the National Starch busi-
Technologies business sector in North America.
nesses, total assets as of the end of fiscal 2008 increased
Shareholders’ equity including minority interests
by 3,026 million euros (23.2 percent) to around 16.1 bil-
increased by 829 million euros to 6,535 million euros.
lion euros. There was an increase in virtually every bal-
This was due to net earnings of 1,233 million euros and
ance sheet item. Non-current assets rose by 3,330 mil-
foreign currency translation gains of 103 million euros
lion euros. Included under intangible assets are the
taken to equity from the financial statements of our af-
goodwill and other separately measured asset items
filiated companies, offset by dividend payouts of 232 mil-
arising from the acquisition. Property, plant and equip-
lion euros, actuarial losses amounting to 186 million eu-
ment rose by 284 million euros. The additions arising
ros, and impairment losses on derivatives in the amount
from the acquisition amounting to 352 million euros
of 100 million euros. The equity ratio decreased compared
Balance Sheet Structure
in million euros
Assets
Shareholders’ Equity and Liabilities
of which in %
16,074
of which in %
16,074
13,048
13,048
41
Shareholders’ equity
44
Property, plant and equipment/Intangible assets
1)
Financial assets
Other non-current assets
Current assets1)
28
Liquid funds/Marketable securities
11
Including assets held for sale
67
54
5
4
3
0
3
28
15
5
6
11
18
22
22
Pension provisions
Long-term borrowings
Other non-current liabilities
Short-term borrowings
Other current liabilities
5
6
2
2007
2008
2008
2007
Annual Report 2008
43
Group Management Report » Assets and Financial Analysis
to the previous year by 3.1 percentage points due to the
Our financial strategy is aligned to the single-A rating
higher balance sheet total resulting from the acquisition
category as a means to maintaining our financial flex-
of the National Starch businesses.
ibility. Cash flows from operating activities and from
Non-current liabilities increased by 595 million euros.
divestments are used to reduce our net debt exposure.
The rise is attributable to higher provisions for pensions
Essentially, we pursue a conservative borrowing
and similar obligations as of the balance sheet date and
policy, again aligned to flexibility, within a balanced
to provisions for restructuring measures related to the
financial portfolio. This is based on a core platform of
efficiency enhancement program “Global Excellence” and
syndicated credit facilities and a multi-currency com-
the integration of the National Starch businesses. Current
mercial paper program.
liabilities increased to 5,293 million euros attributable
At December 31, 2008, our long-term financial li-
to the higher borrowings arising from the acquisition
abilities amounted to 2.4 billion euros. Included in this
of the National Starch businesses.
figure are the hybrid bond with a nominal value of 1.3 bil-
Net debt amounted to 3,881 million euros, an increase of 2,179 million euros compared to the prior-year
lion euros, issued in November 2005, and also the fixedinterest bond of 1 million euros issued in May 2003.
Our current liabilities, i.e. those with maturities of
figure.
less than 12 months, amounted to 1.8 billion euros at
Financing
year-end. These essentially comprise interest-bearing loans
The finances of the Group are, to a large extent, central-
and overdrafts from banks. The rise in short-term bor-
ly managed by Henkel AG & Co. KGaA. Financial funds
rowings compared to the previous year is essentially due
constitute a global resource and are, as a rule, centrally
to the difference between the funds obtained to finance
procured and then distributed within the Group. The
the purchase price for the two businesses Adhesives and
primary goals of financial management are to achieve a
Electronic Materials from Akzo Nobel (former National
sustainable increase in shareholder value and to secure
Starch divisions) and the funds received from the sale
the creditworthiness and liquidity of the Group. Reduc-
of our investment in Ecolab Inc.
ing our capital costs and improving our cash flow from
The hybrid bond is treated by Moody’s as 75 percent
financing activities make a major contribution to the
equity and by Standard & Poor’s as 50 percent equity. This
attainment of these objectives, as do optimization of our
reduces the rating-specific borrowing ratios of the Group
capital structure and effective risk management.
(see table showing financial ratios on
Our creditworthiness is regularly checked by independent rating agencies.
page 45).
For further information on our financial management approach and our financial instruments, please
The long- and short-term ratings (“A/A2” and “A–1/P1”)
attributed to Henkel have remained unchanged since
refer to Notes 41 and 42 to the consolidated financial
statements starting on
page 110.
August 13, 2007. Following the sale of our investment
in Ecolab Inc. in November 2008, they were once again
Cash Flow Statement
affirmed both by Standard & Poor’s and by Moody’s.
At 1,165 million euros, cashflowfromoperatingactivities was 156 million euros below the prior-year figure.
Credit Ratings
Long-term
Outlook
Short-term
At December 31, 2008
44
Annual Report 2008
Outflows due to the restructuring measures implemented
Standard & Poor’s
Moody’s
as part of our efficiency enhancement program “Global
A
A2
Excellence” and the integration of the National Starch
stable
negative
businesses, coupled with increased income tax payments,
A–1
P1
had a burdening effect on operating cash flow. Strict
management of our net working capital, i.e. inventories
Group Management Report » Employees
and trade accounts receivable and payable, continued to
Employees
have a stabilizing effect on our cash flow level. Despite
The number of people employed by the corporation at
the significant higher business volumes recorded in fis-
the end of fiscal 2008 was 55,142.
cal 2008, the consumption of funds remained virtually
unchanged.
Cashflowfrominvestingactivities/acquisitions was
significantly affected by outgoings from acquisitions in
In the course of the year, headcount rose by 2,514. Per
capita sales increased further to 254,600 euros. Henkel
Group payroll costs increased by 88 million euros to
2,436 million euros.
the amount of 3,708 million euros, primarily in relation
The main reason for the rise in the number of employ-
to the purchase of the National Starch businesses. These
ees was the acquisition of the National Starch businesses.
outflows were offset by proceeds from the disposal of
This involved the integration of almost 6,000 people in
non-current assets arising from the sale of our shares
around 40 countries on all continents. After a period of
in Ecolab Inc.
intensive preparations in the first quarter of 2008, we
Cashflowfromfinancingactivities reflects in
were able to welcome the new employees to Henkel as
particular the financing of the National Starch acquisi-
of April 3 – referred to as Day One. In order to promote
tion. The outflow of funds arising from the payment
rapid integration, we issued a comprehensive question-
of interest and dividends rose by 306 million euros,
naire in advance of this date aimed at determining the
due primarily to contributions to pension fund assets.
commonalities and differences that exist between the two
The acquisition-related increase in borrowings led to a
corporate cultures. Based on this, a thorough analysis of
cash inflow from financing activities in the amount of
the newly acquired businesses and assessments of some
757 million euros.
150 senior managers around the world, we were able to
make appointments to the first three tiers of the new or-
Key Financial Ratios
ganization by the end of the second quarter, duly assign-
Our key financial ratios were significantly affected in
ing personnel to the most important management posi-
2008 by the financing of the acquisition of the National
tions. During the second half of the year, we examined
Starch businesses. The increase in net borrowings had a
the personnel instruments of National Starch in detail
burdening effect on both our debt coverage and gearing
with the objective of incorporating the new employees
ratios. The increase in interest expense in conjunction
from most of the countries involved within the personnel
with expenditures for restructuring, which are charged
systems of Henkel by the beginning of 2009.
against EBIT, resulted in a decrease in the interest cover-
Meanwhile, we also instituted measures at an early
age ratio. The gain from the sale of our investment in
stage through our “Global Excellence” program in order
Ecolab Inc., on the other hand, had a positive effect on
to adjust to the changes taking place in the economic con-
these financial ratios.
ditions underlying our businesses. The program focuses
on efficiency enhancement, the optimization of our
Key Financial Ratios
2007
2008
9.4
4.8
Debt coverage ratio
(Net earnings before minority interests + Amortization and depreciation +
Interest element of pensions / Net borrowings and pension provisions)1)
74.3 %
44.1 %
Equity ratio
(Equity / Total assets)
43.7 %
40.6 %
0.41
0.72
Interest coverage ratio (EBITDA / Net interest expense
including interest element of pension provisions)
Gearing
(Net borrowings and pensions / Equity)
1)
Hybrid bond included on 50 percent equity basis
Annual Report 2008
45
Group Management Report » Employees
Employees
(at December 311))
Europe/Africa/Middle East
2004
2005
%
2006
%
2007
%
2008
%
65.5 33,267
63.8 33,326
64.3 33,687
64.0
33,485
60.7
North America
6,772
13.4
7,271
14.0
6,651
12.8
6,438
12.2
7,360
13.4
Latin America
4,325
8.5
4,208
8.1
4,297
8.3
4,268
8.1
4,293
7.8
Asia-Pacific
Total
1)
33,227
%
6,411
12.6
7,355
14.1
7,545
14.6
8,235
15.7
10,004
18.1
50,735
100.0
52,101
100.0
51,819
100.0
52,628
100.0
55,142
100.0
Prior-year figures restated; base: permanent employees excluding trainees
processes and structures, and the streamlining of our
professions. Overall, we hired 10 percent more trainees
workflows. In February 2008, we announced the loss of
at our German sites in 2008 than in the year before. The
around 3,000 jobs as part of this program, spread across
number of applications increased significantly, confirm-
all our regions, business sectors and functions. We will
ing the attractiveness of training positions at Henkel. And
implement the redundancies in a socially responsible
we have extended our training curriculum for 2009 to
manner in keeping with the principles of our organiza-
include so-called dual study courses.
tion. And these redundancies will likewise be distributed
over all levels of our corporate hierarchy.
In addition to modifying our talent-finding processes,
we have also thoroughly revised our approach toward per-
Despite the need for efficiency enhancement, we have
sonnel development and expertise retention. In future,
continued to hire new people around the world, particu-
line managers will discuss the potential and performance
larly in our growth regions. In this process, we are relying
of their employees within the framework of talent devel-
more and more on the facilities of online recruitment.
opment panels, chaired by personnel managers, in order
In 2008, we also converted our career-related suitability
to enable the creation of tailored, individual development
test to a purely internet-based tool. In order to attract
plans. The experience gained with the upper manage-
the attention of top talents at an early stage in their
ment tiers in 2008 has fully confirmed the efficacy of this
development, we instituted an internet student competi-
new instrument. Consequently, we intend to introduce it
tion under the “Henkel Innovation Challenge” banner in
worldwide for our employees at all levels in 2009.
2008, similar to that of 2007, but this time extending it
We have begun to review our monetary compensa-
to further business sectors and to applicants from eleven
tion systems, focusing on increasing the performance
countries. The 2007/2008 competition was a great success
differential and creating a clear link between personal
and brought the added benefit of underpinning the at-
contribution, individual remuneration and the economic
tractiveness of Henkel as a prospective employer.
success of the corporation.
In Germany, Henkel offers apprenticeships and entry
We aim to promote managers primarily from within
qualifications at twelve sites, covering more than 20
our own organization, with the selection process essen-
Employees by Function
Employees by Business Sector
Research and Development 5 %
Production and
Engineering 47 %
Corporate 13 %
Laundry & Home Care 24 %
Administration 17 %
Marketing, Selling
and Distribution 31 %
46
Annual Report 2008
Adhesive
Technologies 48 %
Cosmetics/
Toiletries 15 %
Group Management Report » Procurement
tially based on technical and managerial competence,
in the year under review amounted to 6.6 billion euros.
performance delivery and entrepreneurial approach. Our
This represents an increase of around 1 billion euros
managerial staff are regularly trained using our “Henkel
compared to the previous year, largely due to the acqui-
Global Academy” resource covering topics such as “Lead-
sition of the National Starch businesses. We were able
ership”, “Change Management” and “Business Strategy”.
to mitigate the partly very high price increases for our
They are also individually evaluated in our “Global Assess-
raw materials through the implementation of global
ment Centers”, enabling us to provide specific support
procurement strategies, albeit without being able to
in the development of their managerial skills.
fully offset the ensuing effects.
During 2008, we defined and implemented a range
Aside from price increases – affecting in particular
of ground-breaking measures aligned to establishing
petrochemical and natural base stocks – also certain
a global strategy for diversity and inclusion. Among
supply and demand scenarios and foreign exchange in-
other things, we expect that the final three candidates
fluences had a significant effect on prices at the various
shortlisted for new positions and replacements satisfy
stages of the global value chain. Due to the downstream
certain diversity criteria in relation to age, gender or
position of the raw materials we use within the differ-
nationality. The strategic significance of our diversity
ent value chains, the impact of the price developments
and inclusion measures is also underlined by the fact
in basic raw materials only reached us with a time lag.
that “strengthening our global team” is one of our three
Adopting an active price management approach, we in-
strategic priorities.
stituted strategies aimed at safeguarding prices over the
long term using both contracts and also – where possible
Procurement
and reasonable – financial hedging instruments.
Fiscal 2008 was characterized by severe price fluctua-
A key success factor in offsetting material price in-
tions on the raw material and packaging markets, the
creases is our global program for the reduction in overall
like of which have never been seen before. These were
procurement cost. In this program, Purchasing works
accompanied by significant shortages in a number of key
together with the business sectors, Research and De-
segments which resulted in substantial price increases in
velopment, and Supply Chain Management in an ongo-
the procurement markets during the first nine months.
ing effort to reduce product complexity, be it through
In the fourth quarter, by contrast, we began to see the
re-engineering, substitution or the standardization of
first effects of the global economic crisis with the ac-
packaging and raw materials. Progress in these endeav-
companying decrease in demand reflected in declining
ors provides us with stronger negotiating positions and
prices.
creates scope for the further consolidation of our sup-
Our expenditures on direct materials (raw materials,
plier base. Another part of the program is dedicated to
packaging, contract manufacturing and traded goods)
the further globalization of that supplier base in order
Management Structure
Total managerial staff
Senior executive personnel
26.4 % women
13.7 % women
9,711 employees; average age: 42.6; 77 nationalities
795 employees; average age: 47.1; 44 nationalities
Annual Report 2008
47
Group Management Report » Procurement / Production
Expenditures by Type
Contract manufacturing
and traded goods 19 %
Expenditures by Business Sector
Raw Materials 62 %
Adhesive Technologies 50 %
Laundry & Home Care 31 %
Packaging 19 %
Cosmetics/
Toiletries 19 %
to further reduce our dependency on market price de-
Production
velopments and market-dominating suppliers.
Henkel has production sites in 57 countries around the
With the purchasing synergies available to us from
world. Our largest site is in Düsseldorf, Germany, where
the newly acquired National Starch businesses, we have
we manufacture detergents and cleaning products, ad-
been able to negotiate new contractual conditions and
hesives for craftsmen and consumers, and products for
select strategic vendors so that, in the next phase of this
our industrial customers.
process, we can work together with them in order to
The largest production site serving the Laundry &
significantly reduce the complexity of our materials
Home Care business sector is likewise located in Düs-
portfolio.
seldorf. Here we primarily manufacture powder deter-
Our five most important raw material groups are
gents, although liquid cleaners, high-compact detergents
surfactants, raw materials for polyurethane-based ad-
(Megaperls) and detergents in tablet form (tabs) are also
hesives, plastisols for use in adhesives and sealants, raw
produced. Our largest facility serving our Cosmetics/
materials for the manufacture of hotmelt adhesives, and
Toiletries business sector is located in Wassertrüdingen,
inorganic base stocks for use in manufactures such as
Germany. In addition to body and hair care products
detergents and surface pre-treatment products. These
for consumers, we also manufacture specialties for the
account for around 28 percent of our total direct materi-
salon business there. The two largest sites for Adhesive
als expenditure. Our five largest suppliers account for
Technologies are likewise located in Germany, in Düs-
around 13 percent of our cost of direct materials.
seldorf – with a portfolio of high-quality specialty ad-
Increasing importance is also being assigned to the
hesives for industrial and consumer applications – and
fields of indirect materials, services and logistics. To-
in Heidelberg where we manufacture a wide range of
gether, these represent an annual outlay of some 3.5 bil-
adhesives and sealants.
lion euros, or around one third of total procurement
As part of the efficiency enhancement program an-
expenditure at Henkel. Here we have been able to com-
nounced in February 2008, we want to further improve
bat price and cost increases, particularly in the fields of
our production network with the focus on reducing the
fleet management, utility supplies and logistics, through
number of manufacturing sites in the more mature mar-
savings measures. These were initiated both regionally
kets. We also intend to further eliminate complexity at
and globally in all the relevant categories on the basis
the product level and want to increase collaboration
of cross-functional procurement strategies.
with external partners, for example with suppliers and
contract manufacturers.
Particularly where compact products with a low specific weight are concerned, the cost of transportation is
less of a factor so that these can be produced at central,
highly automated facilities. For large-volume products,
we strive to reduce transport costs and the associated
48
Annual Report 2008
Group Management Report » Research and Development
environmental burden through the establishment of
R&D Expenditures
local production sites.
in million euros
We are also permanently engaged in the improvement
4291)
400
of existing facilities and the development of new plants,
processes and structures for the purpose of constantly
enhancing the safety of our sites while reducing resource
consumption and environmental burden. Moreover, comprehensive measures aligned to increasing product qual-
300
272
324
340
350
2005
2006
2007
200
100
ity and production efficiency have been implemented
in all our business sectors. As a result, we have been
able to further improve on many of our environmental
parameters (for more details, see “Sustainability” starting on
page 52).
0
2004
R&D ratio
2.6 %
2.7 %
2.7 %
2.7 %
(research expenditures as a proportion of sales)
1)
2008
3.0 %
Includes restructuring charges of 52 million euros
Research and Development
The biggest challenge in the year under review involved
In fiscal 2008, we dissolved our Corporate Research di-
integrating the National Starch organization which, by
vision, distributing the resources to our three business
contributing 500 employees, now supports our research
sectors. As a result, our R&D structure is now even more
and development effort.
market-aligned, resulting in an even faster rate of new
product launches.
The concept of “open innovation” plays an important
role in the research and development strategy pursued
by Henkel. Consequently, we have increased the funds
R&D Expenditures by Business Sector
Corporate 14 %
allocated to collaborations with external partners, en-
Laundry & Home Care 24 %
abling us to harness expertise on a global scale to the
best possible benefit of the Group as a whole.
We have now integrated our collaboration partner
Phenion of Düsseldorf as an independent department
within the research and development unit of the Cosmetics/Toiletries business sector. Its successful research
into skin and hair follicle models, and the development
Adhesive
Technologies 47 %
Cosmetics/
Toiletries 15 %
of alternatives to animal testing remain among our primary R&D projects.
On the other hand, we have now ended our nine years
Expenditures on research and development at Henkel
of successful collaboration with SusTech in Darmstadt,
amounted to 429 million euros in 2008, compared to
Germany.
350 million euros in the previous year. About half of this
As a result of the integration of the National Starch
increase is due to the restructuring charges incurred. The
businesses, we have been able to expand our core com-
R&D ratio expressed as a share of sales was 3.0 percent.
petences in the fields of polymer chemistry, material
Without the restructuring charges, the figure would have
science and scientific computing, leading to a further
been 2.7 percent as in the previous year. As an annual av-
strengthening of these important R&D areas within the
erage, the number of employees working in research and
organization.
development at our sites around the world was 2,942, the
Our scientists have made valuable contributions to
majority of whom are deployed in Germany and the USA.
our corporate success in the following areas:
Our new research facility in Shanghai, which opened in
» Fungicidal sealants with improved resistance to aging
2007, reached full capacity in 2008.
» Development of innovative benzoxazine-based polymers
as matrix resins for high-performance composites
Annual Report 2008
49
Group Management Report » Research and Development / Marketing and Distribution
» Structural adhesives for various applications in the
automotive and construction industries
» Development of computation models to facilitate the
Major R&D Sites
Bridgewater, USA
Dublin, Ireland
Irvine, USA
Düsseldorf, Germany
Hamburg, Germany
Shanghai, China
formulation of new hair colorants
» Development of innovative styling products in line with
Rocky Hill,
USA
the latest market trends
» Development of an innovative two-component dishwashing detergent offering consumers maximum freedom
Scottsdale,
USA
in dosage selection
Vienna,
Austria
» Further development of enzymes to reduce laundry
washing temperatures (e.g. Persil with Cold Power Formula from 20 degrees Celsius)
paving the way to the introduction of our new brand
Terra Activ in five product categories.
Driving forward sustainable development also con-
» TaftPowerwithCashmereTouch: The first styling
stitutes one of the focal points of our research effort.
line offering innovative performance to combine ultra-
Worthy of particular mention within this context are
strong hold and cashmere-like suppleness. We have
the following:
especially developed its unique formulations for dry and
» Development of non-hazardous products for safe hand-
stressed hair. And the use of renewable raw materials
ling by customers
» Development of lead-free products for the electronics
industry
» Development of heavy-metal-free pre-treatment processes
substantially reduces its carbon footprint. This innovation has enabled Schwarzkopf to significantly underpin
the market leadership enjoyed by Taft in Europe.
» PattexConstructionAdhesives–fixingwithoutdrilling,dustornoise: While in the past it was necessary to
» Development of low-temperature cleaners
use additional mechanical means in order to fix heavy
» Development of innovative body care products based
or stressed components in assemblies, our new genera-
on renewable raw materials
tion of construction adhesives with instant tack ensure
that even these materials can be permanently secured
Each year we select a number of our outstanding devel-
without any such aids, and without slippage.
opments for our “Fritz Henkel Award for Innovation”. In
2008, this accolade went to three interdisciplinary project
We currently have around 7,000 patents in place, protect-
teams in recognition of their efforts in the realization
ing our technologies around the world. We also have
and commercialization of the following concepts:
some 5,000 patent applications pending, and we have
» PurexNaturalElements: Exemplifying our Laundry &
approximately 2,300 registered designs safeguarding
Home Care strategy “Performance Based on Sustainability”
– in other words our commitment to provide outstanding
our intellectual property.
Further information on our research and develop-
product quality combined with the best possible degree
ment activities can be found on our website:
of environmental compatibility (Quality & Responsibility)
henkel.com/innovation
www.
– this liquid detergent contains wash-active substances
50
based exclusively on renewable raw materials and natu-
Marketing and Distribution
ral fragrance essences, and is also readily biodegradable.
Our customers and consumers are the focus of all our
Purex Natural Elements was included as the first leading
thoughts and actions. Consequently, we align our mar-
detergent brand within the “Design for the Environment”
keting and distribution activities in each of our business
(DfE) program of the US Environmental Protection Agency
sectors to the respective requirements of these primary
(EPA). It also served as the initial concept and precursor
target groups.
Annual Report 2008
Group Management Report » Marketing and Distribution
At Laundry & Home Care, our marketing activities are con-
tions to small and medium-sized industrial companies
trolled from headquarters and the regional competence
and from professional craftsmen to private households
centers. Our sales and distribution activities, on the other
and do-it-yourselfers.
hand, are managed on a country-specific basis and coordinated at the regional level.
For the most part, our customers are addressed individually and personally by our own sales force. Cus-
Our direct customer group in this business segment
tomers in this context are direct purchasers in the form
is the grocery retail trade with distribution channels in
of industrial companies, distributors or trade outlets.
the form of supermarkets, mass merchandisers/hyper-
Supermarkets, DIY stores and specialty retailers are es-
markets and discount stores. In Western Europe, drug
sential to the private user, while professional craftsmen
stores are also extremely important, while in the markets
tend to purchase from various types of specialty whole-
outside Europe and North America, a large proportion
saler. Due to our unique global position, we are able to
of sales continues to be channeled via wholesalers and
support globally active customers such as automobile
distributors. As the trade’s first point of contact, the
manufacturers or large retail chains effectively and com-
Sales unit provides a full range of competences in serv-
prehensively with key account management teams. As
ing our customers.
many of our products require explanations of a technical
In marketing, however, we focus on the requirements
nature, our Technical Customer Services and the training
of the end consumer. Our Marketing unit initiates inno-
of customer personnel in this field play an important role
vation processes and applies knowledge acquired from
in the overall process. Our Technical Customer Services
market research and analysis activities. It also develops
people have detailed knowledge both of the properties
and implements media strategies and advertising formats
of our products and their application, and can therefore
aligned to the consumer.
assist our customers in everything from the choice of the
At the Cosmetics/Toiletries business sector, our marketing strategies are centrally planned and globally
right product and its usage to fine adjustment of their
production processes.
implemented with respect to both consumers and the
For us, communication with end users is also of cen-
professional hair salon business. We begin by focusing
tral importance. While our marketing strategy is devel-
on the needs and requirements of the consumer, with
oped at the global or regional level, implementation of
Marketing, Research and Development and also Packag-
the measures takes place at the national and local level.
ing Development all working hand in hand in order to
In the case of the private consumer, we chiefly use media
satisfy identified customer requirements.
advertising with complementary promotional and sup-
In the hair salon business, we serve our customers
port activities at the point of sale. We serve professional
via an established distribution system, or address them
craftsmen and industrial customers primarily through
directly through the members of our dedicated field sales
our sales organization, with technical advice, product
force. These also demonstrate product applications and
demonstrations, training courses and regular appear-
provide technical advice at the local level.
ances at key industrial fairs. The internet is also becoming
We communicate with consumers primarily through
increasingly important as a platform for marketing and
media advertising and point-of-sale activities. However,
communication. Our websites contain not only infor-
the success of an innovation is based not only on ac-
mation relating to our products and services but also
ceptance among consumers but also on our ability to
order processing portals for our customers, including
accommodate the requirements of the trade. Our rela-
wholesalers, retailers and distributors. We utilize a com-
tionships with our retail partners are internationally
bination of classic information brochure and website
coordinated but managed and controlled at the national
page in order to encourage interest among our industrial
level.
customers for our system solutions.
Our Adhesive Technologies business sector serves all categories of clientèle from major multi-national corpora-
Annual Report 2008
51
Group Management Report » Sustainability / Corporate Social Responsibility
Sustainability/
Corporate Social Responsibility
As long ago as the 1980s, in our “Principles and Objectives
Henkel is dedicated to sustainability and corporate social
to promoting occupational health and safety, conserving
responsibility. We clearly state this principle as one of the
resources and reducing emissions. These objectives have
corporate values binding on all our employees around
been applied at both the corporate and local site level,
the world. In generating our sales and profits, we con-
and we have been able to achieve major improvements.
duct all of our business in a socially responsible manner.
Taking this as our basis, at the beginning of 2008 we
We are convinced that sustainable business practices
defined the following four targets for the Group over
– that is to say providing the best possible product qual-
the next five years:
ity combined with effective environmental protection
» To reduce energy consumption per ton of output by
of Environmental Protection and Safety,” we committed
and social responsibility – are essential to our long-term
entrepreneurial success.
a further 15 percent
» To reduce water consumption per ton of output by
Our customers expect from us not only best-quality
products and persuasive innovations but also proof of our
a further 10 percent
» To reduce waste per ton of output by a further 10 per-
commitment to sustainable development and corporate
social responsibility. In meeting these expectations, we
cent
» To reduce occupational accidents per million hours
are able to call upon decades of experience that have en-
worked by a further 20 percent
abled us to set the pace as a leading partner for retailers,
consumers and industry alike. Henkel’s constant endeav-
Sustainability Performance 2004 – 2008
ors to reconcile economic, ecological and social aims are
Environmental indicators per ton of output
a salient feature of our long corporate history.
Energy consumption
–11 %
Waste
–30 %
Water consumption
–35 %
Occupational accidents1)
– 63 %
At the center of our activities lies our vision which
states: “Henkel is a leader with brands and technologies
that make people’s lives easier, better and more beautiful.” From this we derive our corporate values and
through them our commitment to sustainable development. We deliberately and systematically focus our
Per million hours worked
Indicators and production volumes include National Starch businesses as from
date of acquisition (April 2008)
1)
activities throughout the entire value chain on the chal-
52
lenges of sustainable development. We have grouped
Again in the year under review, we were able to improve
these according to five focal areas: Energy and Climate,
our sustainability performance on a number of impor-
Water and Wastewater, Materials and Waste, Health and
tant points. For example, the savings we have made with
Safety, and Social Progress.
respect to energy consumption not only help to mitigate
It is central to our commitment that all new products
the effect of rising energy prices but also – through the
contribute to sustainable development in at least one of
associated reduction of carbon dioxide emissions – make
these areas. Therefore, we focus our efforts on those in-
a contribution to achieving the climate protection targets
novations combining product performance and quality
of those countries in which Henkel operates. In addition
with responsibility toward people and the environment.
to optimizing our own production processes, we focus
We endeavor to properly and effectively communicate
particularly on the development of products and tech-
the added value of these innovations to our customers
nologies that save energy in the use phase. In order to
and consumers. Our common focus and the credible
promote and actively assist in the development of sound
implementation of our sustainability strategy in the
and credible methods for determining the contributions
marketplace serve to strengthen both our brands and
made in this regard, we are participating in the “Product
the reputation of our organization, consolidating our
Carbon Footprint” pilot project with analyses of products
market positions worldwide.
from all three of our business sectors.
Annual Report 2008
Group Management Report » Sustainability / Corporate Social Responsibility
The Henkel Management Board bears overall responsibili-
mental, Social, Governance) – jointly conferred by the
ty for our sustainability policy. Our Sustainability Council
DVFA (German Association for Financial Analysis) and
steers our global sustainability activities in collaboration
the business magazine Wirtschaftswoche – within the
with our operating business sectors, our corporate func-
DAX Corporations category. In June, the Ethisphere In-
tions and our regional and national companies.
stitute and Forbes business magazine included Henkel in
By joining the United Nations Global Compact in
their ranking of the “World’s Most Ethical Companies”.
July 2003, we publicly underscored our commitment to
And in December, Henkel was presented the first ever
respect human rights and fundamental labor standards,
“German Sustainability Award” in the category “Most
to promote environmental protection and to work against
Sustainable Brand”.
all forms of corruption. Our understanding of socially re-
Viable solutions for sustainability can only be devel-
sponsible behavior has been specified and communicated
oped through consultation and collaboration with all
throughout the entire corporation through our Code of
social groups. In order to be able to take into consider-
Corporate Sustainability and our Code of Conduct. From
ation and evaluate the interests of these different com-
these codes are derived our more detailed internal SHE
munities, we constantly seek dialog with stakeholders at
standards governing safety, health and environmental
the local, regional and international level. These include
protection, our social standards and our Group purchas-
our employees, shareholders, customers, suppliers, public
ing standards. Compliance with these rules and require-
authorities, trade associations and non-governmental
ments is regularly monitored throughout the Group by
organizations, as well as representatives of the sciences,
means of internal audits. In addition, Henkel compa-
academia and the general public.
nies have their management systems externally certified
We deploy a wide range of communication instru-
where this yields competitive advantage. At the end of
ments in order to meet the specific information require-
2008, 54 percent of our production volume was gener-
ments of our stakeholders. More details and background
ated at sites certified in accordance with the worldwide
information on the subject of sustainability can be found
environmental management standard ISO 14001.
in our
Sustainability Report. With this, we document
As a responsible corporate citizen, Henkel provides
the high priority assigned to the principles of sustainable
financial and in-kind support for undertakings aligned to
development by our corporation, at the same time sat-
social need, the environment, education, science, health,
isfying the reporting obligations laid down in the United
sport, art and culture. Since 1998, we have also actively
Nations Global Compact.
supported the volunteer work performed by our employ-
Further information, reports, background details and
ees and retirees through the vehicle of our MIT Initiative
the latest news on sustainable development at Henkel can
(Make an Impact on Tomorrow). In 2008, we supported
be found on our website:
www.henkel.com/sustainability
a total of 1,306 charitable MIT projects in 76 countries,
of which 336 were children-related.
Our performance in relation to sustainability and
corporate social responsibility was again recognized by
external experts in the year under review and our accomplishments in this domain are reflected in various
national and international sustainability ratings. For
example, we are listed in the Dow Jones Sustainability World index and in the European Dow Jones Stoxx
Sustainability index as a “sustainability leader” in the
market sector “Nondurable Household Products”. Our
inclusion in the FTSE4Good has also been reconfirmed.
In March, we received the top “ESG Award” (Environ-
Annual Report 2008
53
Group Management Report » Laundry & Home Care
Driving Change
Achieve
our full
business potential
Winning
Culture
Focus
more on
our customers
54
Annual Report 2008
Strengthen
our global
team
It is becoming increasingly important for us at
Laundry & Home Care to focus on our customer
relationships as key factors for success. We are
aware that competent and motivated employees are our greatest asset – and not just with
respect to those customer relationships but in
all the other functions too. Continuous investment in their training and further development
coupled with careful selection and promotion
of our managers of the future therefore count
among the primary areas on which we intend to
concentrate. With this platform, we are confident of being able to achieve even more of our
business potential with our strong brands and
proven innovative strengths.
Group Management Report » Laundry & Home Care
Laundry & Home Care
Sales
Key Financials1)
in million euros
4,000
3,617
4,088
4,117
4,148
4,172
3,000
in million euros
2007
2008
+/–
Sales
4,148
4,172
0.6 %
Proportion of Henkel sales
32 %
30 %
–2 pp
Operating profit (EBIT)
459
439
–4.2 %
2,000
Return on sales (EBIT)
11.1 %
10.5 %
–0.6 pp
1,000
Return on capital employed
(ROCE)
16.7 %
16.9 %
0.2 pp
166
–9.6 %
EVA
0
2004
2005
2006
2007
2008
» Organic sales growth of 3.8 percent
» Operating profit of 439 million euros
» EBIT margin of 10.5 percent
» ROCE increased to 16.9 percent
1)
®
183
Calculated on the basis of units of 1,000 euros
pp = percentage points
view, continuing its dynamic development. Growth in
the markets for special detergents and machine dishwashing products was especially strong with our brands
Perwoll and Somat particularly benefiting. We were
able to expand our strong number two position in the
Economic Environment and Market Position
laundry and home care market within this region, at
The volume of the market for laundry and home care
the same time further reducing the gap to our biggest
products in 2008 was estimated at around 85 billion eu-
competitor.
ros. The markets of relevance to Henkel grew by around
Most of our markets in Africa/Middle East, Latin
3.5 percent compared to the previous year. Market expan-
America and Asia posted double-digit growth in 2008.
sion was driven both by increasing volumes and a rise in
And thanks to our own strong expansion, we were able
the average price level. The latter is due to price increases
to further consolidate our market positions in these im-
in all regions implemented by manufacturers and the
portant growth regions.
trade as a response to the considerable increases in raw
material and energy prices.
Developments on the North American laundry and
home care market were mixed: while sales in detergents
The situation in Western Europe is characterized by
and air fresheners increased due to higher volumes, sales
a generally stable market for laundry and home care
in cleaning products declined slightly. We were able to
products. However, the necessary price rises and the
consolidate our market position with our laundry brand
increasing price sensitivity of consumers observed in the
Purex and succeeded in positioning ourselves well within
course of the economic downturn contributed to further
an environment of increasing price competition.
growth in the market share accounted for by private label
products. Against this background, we were however able
Business Activity and Strategy
to maintain our leading market position.
The business sector is globally active in the marketing,
The Eastern European market once again underwent
selling and distribution of branded products for the
double-digit percentage growth in the year under re-
laundry and home care market. The Laundry segment
World Market for Laundry & Home Care Products
Sales Development1)
Insecticides 6 %
Air Fresheners 7 %
2008
Detergents 52 %
Change versus previous year
Foreign exchange
After adjusting for foreign exchange
Acquisitions/divestments
Organic
1)
0.6 %
–2.4 %
3.0 %
–0.8 %
3.8 %
Calculated on the basis of units of 1,000 euros
Cleaning Products 35 %
Annual Report 2008
55
Group Management Report » Laundry & Home Care
includes not only heavy-duty and special detergents but
high prior-year base generated by our pan-European “Best
also fabric softeners, laundry performance enhancers
Ever” campaign and Persil’s brand centennial, this de-
and laundry care products. The product portfolio of our
cline was also due to the price increases implemented.
Home Care segment includes cleaners for bath and WC
We registered our highest organic growth rates in
applications together with household, glass and specialty
Africa and the Middle East. Leveraging our leading mar-
cleaners. We also manufacture hand and machine dish-
ket positions, we continued to develop very positively in
washing products and have a market presence in selected
important countries of this region.
regions with air fresheners and insecticides.
We were also able to increase organic sales in the
Our objective is to further promote profitable growth
growth regions of Latin America and Asia, passing on
by driving the organic expansion of our continuing op-
the significant rise in input costs through price increases
erations. To this end, we intend to expand our world
of our own.
market positions from our strong platform in Europe
Our business in North America likewise contributed
and North America, to harness the dynamic expansion in
to the organic sales growth achieved, benefiting from
sales taking place in our growth regions, and to further
a favorable positioning of Purex in the medium price
improve our profitability.
segment and boosted by the performance of our air
Successful innovations will remain important con-
fresheners.
tributors to profitable growth going forward. We con-
Until well into the second half of the year, the steep
tinue to place great importance on quickly identifying
rise in raw material and energy prices burdened our
consumer trends, harnessing these and converting them
profits to an extent never before experienced. However,
into viable products. We also regularly review our exist-
with the aid of a number of global measures to reduce
ing product portfolio and respond to changing consumer
cost and enhance efficiency, and through price increases
requirements by appropriately adapting our product
of our own, we were able to largely compensate for this
range. We will continue to use our successful and proven
negative effect. Nevertheless, operating profit (EBIT) fell
brand concepts in the modification of existing products
in comparison to the previous year by 4.2 percent to
for different countries.
439 million euros, and by 2 percent after adjusting for
foreign exchange. Included in this figure are expenses
Sales and Profits
of 14 million euros previously attributable to the former
We nominally increased sales by 0.6 percent to 4,172 mil-
Corporate Research division. Due to the decline in profits,
lion euros in the year under review, despite the negative
return on sales decreased by 0.6 percentage points to
effects of foreign exchange. Organic growth came in at
10.5 percent. After adjusting for the reassigned research
an encouraging 3.8 percent, outpacing the rate of expan-
and development costs, return on sales was 10.9 percent.
sion of our markets. The improvement in organic sales
Return on capital employed (ROCE) amounted to 16.9 per-
was primarily price-driven, illustrating the success of
cent, an increase of 0.2 percentage points compared to
the measures implemented in this respect. Indeed, we
the previous year.
managed to increase organic sales in all our regions,
56
although a large proportion of this growth was attribut-
Business Segments
able to the Europe/Africa/Middle East zone. With double-
In the Laundry business segment, the strongest boost
digit growth rates achieved in some countries of Eastern
to growth in the year under review came from our
Europe, we were able to disproportionately participate
heavy-duty detergents and fabric softeners. Our largest
in the dynamic expansion of those markets.
brand Persil made a particularly good contribution to
By contrast, we were unable to repeat the sales figure
the improvement in sales generated by our heavy-duty
of the previous year for Western Europe. Aside from the
detergents, with high growth rates achieved especially
Annual Report 2008
Group Management Report » Laundry & Home Care
in Eastern Europe and Africa/Middle East. We further im-
We also invested in optimizing and harmonizing prod-
proved our premium Western European detergent brands
uct packaging and expanded office space capacity in
Persil, Dixan, Le Chat and Wipp with a high-performance
certain locations. In all, we invested 163 million euros in
active stain remover offering even better cleanliness at
property, plant and equipment compared to 168 million
just 20 degrees Celsius. This enables consumers to both
euros in the previous year.
save energy and help protect the environment. Sales of
our fabric softeners increased primarily in the European
Outlook
markets and in North America. Our successful European
We expect our markets to exhibit a decline in their
brands Vernel and Silan benefited both from the rollout
growth dynamics in 2009 due to the slowdown in eco-
of existing fragrance variants to further European coun-
nomic development. However, the extent of that decline
tries and from product innovations such as new Vernel
is difficult to forecast. We anticipate that our markets in
Crystal, which is added to the wash as a fine crystal pow-
North America and Eastern Europe will be particularly
der. In North America too, a product innovation helped
affected by the deterioration in the overall economic
underpin sales growth: with the introduction of the
climate.
fabric softener Purex Natural Elements, we were able to
Within this environment, we intend to expand our
add to the success of our environmentally compatible
market positions in 2009 and to once again outperform
heavy-duty detergent, increasing our market share in
our markets. Implemented cost-reducing measures,
the fabric softener category.
particularly those relating to the “Global Excellence”
The main contributors to organic sales growth in
the Home Care business segment were our dishwashing
restructuring program, will support the development
of our operating profit.
detergents and WC products. While sales in machine
We see opportunities arising from the cost situation
dishwashing products increased primarily in Europe,
due to the decrease in material prices. There are risks
hand dishwashing product sales especially rose in the
associated with the implementation of price increases for
Africa/Middle East region with our well-known brand
our products and – particularly in the growth regions – in
Pril achieving double-digit percentage growth rates in
the form of credit exposure arising from the declining
a number of important countries there. In the case of
financial strength of our trade customers.
our WC products, our highest rates of growth were again
achieved in Eastern Europe. Overall, our rate of growth
here outstripped that of the market as a whole, resulting
in an increase in our market share. In the fourth quarter,
we launched a series of household cleaners onto the
German and Swiss home care markets under the new
brand Terra Activ. While ensuring gleaming cleanliness
in the household, this range also contributes to conserving nature’s finite resources – such as oil – through the
use of ingredients based predominantly on renewable
raw materials.
Capital Expenditures
Our investments in the year under review were primarily geared to adapting our liquid and powder detergent
production capacities to prevailing market conditions.
Annual Report 2008
57
Group Management Report » Cosmetics/Toiletries
Driving Change
Achieve
our full
business potential
Winning
Culture
Focus
more on
our customers
58
Annual Report 2008
Strengthen
our global
team
A strong, highly motivated and well
qualified global team is key to our
success at Cosmetics/Toiletries in
attaining the targets that we have
set ourselves. Our main priority is
to generate further profitable growth
so that we can better achieve our
full business potential. Consequently,
people management and talent development are also at the focus of our
activities. Capable employees enable
us to meet the requirements of our
consumers and retail partners with
successful innovations.
Group Management Report » Cosmetics/Toiletries
Cosmetics/Toiletries
Sales
Key Financials1)
in million euros
3,000
2,250
2,477
2,629
2,864
2,972
3,016
1,500
750
in million euros
2007
2008
+/–
Sales
2,972
3,016
1.5 %
Proportion of Henkel sales
23 %
21 %
–2 pp
Operating profit (EBIT)
372
376
0.9 %
Return on sales (EBIT)
12.5 %
12.5 %
0 pp
Return on capital employed
(ROCE)
16.7 %
17.5 %
0.8 pp
150
0.7 %
EVA
0
2004
2005
2006
2007
2008
» Organic sales growth of 4.7 percent
» Operating profit increased to 376 million
euros
» EBIT margin of 12.5 percent
» ROCE increased to 17.5 percent
1)
®
149
Calculated on the basis of units of 1,000 euros
pp = percentage points
Developments in the international hair salon sector were
sluggish. The primary growth drivers here were again
Eastern Europe and Latin America. As a globally aligned,
innovative salon specialist, Schwarzkopf Professional
enjoyed above-average participation in market development, further extending its position as number 3 in the
Economic Environment and Market Position
world.
Our cosmetics market was valued at some 135 billion
The Cosmetics/Toiletries business sector holds lead-
euros in 2008, an increase of around 2 percent versus the
ing positions in the markets of relevance to us around
previous year. While growth in the regions of Western
the world.
Europe and North America, in which we generate around
two thirds of our sales, was well below this rate, here we
Business Activity and Strategy
succeeded in outpacing the market. Supported by the
The Cosmetics/Toiletries business sector is active both in
positive developments in our hair cosmetics business,
the branded consumer goods segments of hair cosmetics,
we were able to significantly expand our positions in
body care, skin care and oral care, and in the professional
Western Europe, gaining market share in the process. In
hair salon business. Our intention is to further grow the
North America, we significantly improved our position
branded consumer goods business with the emphasis on
in the body care segment. We were likewise once again
developing our strong market positions in Europe and
able to outstrip the strong economic growth encountered
North America, expanding our activities in Eastern Europe
in Eastern Europe and the Middle East. We enjoyed dis-
and driving forward our selectively focused operations in
proportionate growth in the Asia-Pacific region despite
Asia and Latin America. We will also be resolutely pursuing
stagnation in our core markets of Japan and Australia.
the globalization strategy of our hair salon business.
In Latin America too, we outpaced market growth with
We intend to achieve growth primarily through the
our selective regional presence.
organic expansion of our businesses, and especially
World Market for Cosmetics/Toiletries
Sales Development1)
Oral Care 11 %
Hair Cosmetics &
Salon Products 33 %
2008
Change versus previous year
Foreign exchange
After adjusting for foreign exchange
Body Care 26 %
Acquisitions/divestments
Organic
1)
1.5 %
–2.7 %
4.2 %
–0.5 %
4.7 %
Calculated on the basis of units of 1,000 euros
Skin Care 30 %
Annual Report 2008
59
Group Management Report » Cosmetics/Toiletries
through the development and speedy launch of inno-
We increased operating profit (EBIT) to 376 million euros.
vative products. We will nevertheless continue to con-
After adjusting for foreign exchange, operating profit was
sider appropriate acquisitions to supplement our organic
4.1 percent above the prior-year figure, despite contain-
growth strategy in both our branded consumer goods
ing 7 million euros in expenses relating to the former
and our hair salon business.
Corporate Research division. Without this exceptional
As proponents of the proactive portfolio management
item, we increased return on sales by 0.2 percentage
approach, we also regularly scrutinize our businesses,
points to 12.7 percent. These encouraging results are
disposing of non-strategic marginal activities as appro-
due primarily to systematic cost saving measures, a sub-
priate. 2008 therefore saw us part with brands in the
stantial reduction in portfolio complexity, and successful
USA and the UK which were considered to no longer be
innovations.
compatible with our core.
Return on capital employed (ROCE) increased by a
In our branded consumer goods business, we are fo-
further 0.8 percentage points to 17.5 percent. This is pri-
cusing on the international expansion of our core busi-
marily attributable to a strict approach in reducing our
nesses of hair cosmetics, body care, oral care and skin
net working capital.
care. The emphasis in our hair cosmetics strategy is on
further developing our leading umbrella brand Schwarz-
Business Segments
kopf and driving consumer-led innovation in the key
Our highly successful Hair Cosmetics segment once again
product categories of colorants, hair care and styling.
raised its market shares to new record levels with all
In our body care business, we intend to continue build-
three core businesses posting their best ever results.
ing on the momentum generated by the latest market
Our colorants business was characterized by numer-
successes achieved in Europe through our innovation
ous innovations. The launch of our Coloriste brand,
offensive; in North America we are concentrating on the
which provides natural, intensive high-gloss colors in
expansion of our core brand Dial and our Right Guard
just ten minutes, was an outstanding success. And the
brands portfolio. In growing our successful skin care
relaunch of the Brillance brand – the first colorant offer-
brand Diadermine, we will be concentrating on Europe,
ing ten-carat diamond glossiness – added further impetus
as we will in the further development of our oral care
to results.
business. Our hair salon business, currently the number
The substantial growth in sales of our Palette brand
three in the world, is to be further strengthened with
was driven by a number of new developments. Among
product innovations. Here, we also want to develop new
others, the Palette Permanent Natural series met with
regional potential on a selective basis. Our strategy of
great consumer response. And the new color mix tech-
expanding and further strengthening our core businesses
nology of our Natural and Easy brand offering natural
and key competences is aligned to the objective of achiev-
care and striking hair coloration also contributed to the
ing further, continuous improvements in profitability.
gratifying results achieved.
Sales and Profits
Kur and Schauma performed very well. Gliss Kur was able
With organic sales rising by 4.7 percent, the Cosmetics/
to further extend its leading position in the core segment
Toiletries business sector achieved expansion well above
of intensive care with the launch of our innovative Cell
the growth rate of our markets. In nominal terms, sales
Repair technology. The comprehensive relaunch of the
increased by 1.5 percent to 3,016 million euros, despite
Schauma brand in our core markets contributed to a
the removal of marginal activities from our portfolio
substantial increase in sales and business value.
In the hair care business, our two core brands Gliss
60
and negative foreign exchange impact. We once again
Within the category served by our styling segment,
succeeded in generating significant double-digit organic
our Taft brand is the clear market leader in Europe. Taft
growth in the emerging markets, both with respect to
Power and Power with Cashmere Touch, the first line for
our branded consumer goods business and in the hair
dry and damaged hair, both performed very well within
salon segment.
this business, while the trend-setting styling brand Göt2b
Annual Report 2008
Group Management Report » Cosmetics/Toiletries
made a significant impact with a range of new lines such
Capital Expenditures
as Göt2b magnetik.
At the core of the “Global Excellence” program are meas-
Our Body Care business performed well, due in part
ures for optimizing our structures and processes. The ac-
to achievements under our Fa brand with the innovative
tions taken are making a significant contribution to par-
series Fa Rice Dry – the first deodorant with rice extract
tially offsetting the rapid rise in raw material, packaging
– augmented by the relaunch of the highly popular Fa
and energy prices. Total expenditures on property, plant
Yogurt range. Growth was also supported by the expan-
and equipment amounted to 84 million euros in 2008
sion of our Natural series.
compared to 69 million euros in the previous year.
We have been driving forward our Dial brand business with the introduction of various new lines and the
Outlook
launch of the first body wash series in the USA to feature
Given the adversity of the current economic climate, we
yogurt proteins, expanding market share in the process.
expect 2009 to bring a decline in the growth dynamics
The new, natural body care brand Pure & Natural has also
exhibited by the cosmetics/toiletry markets of relevance
made a very good start. In the deodorant segment, we
to us.
launched our high-performance Professional Strength
Within this environment, we intend to once again
series under Right Guard and the Clinical range under
outperform our markets in 2009. Implemented cost-
Dry Idea.
reducing measures, particularly those relating to the
The biggest contribution to the Skin Care business
was made by the Diadermine brand with an extension
“Global Excellence” restructuring program will support
the development of our operating profit.
to its Age ExCellium premium line, and the addition to
We see opportunities arising from the further de-
its Lift+ line of the preventative anti-wrinkle cream Lift+
velopment of our Schwarzkopf megabrand and in the
Anti-Oxidants.
resolute pursuit of our ongoing innovation offensive. We
The good results generated in the growing Oral Care
see risks arising from a further increase in competition
business were again achieved on the basis of our core
within our already highly combative markets, particu-
Theramed brand. This reporting period saw the introduc-
larly in Western Europe and North America. Additional
tion of Theramed 2in1 OxiWhite for exceptional teeth
risks may arise from the impact of the global recession
whiteness and fresh breath.
on consumer demand for cosmetics and toiletries.
In the Hair Salon business, Schwarzkopf Professional
was able to expand its worldwide market position by
once again posting strong growth. Much of our success
was due to innovations adding further impetus to the
market. In the coloration segment, for example, we introduced Igora Absolutes, the first high-fashion range of
colorants offering 100 percent gray coverage. The further
rollout of the Blond Me brand extended its run of success,
and with Color Save and Sensitive under the Bonacure
brand in the care segment, we were able to offer the first
care series for long-lasting color protection and sensitive scalps respectively. We launched a new brand in the
fourth quarter in the form of Essensity. In all the care,
styling and coloration products in this line, we have essentially replaced the synthetic ingredients with natural
components. The Essensity range is the first to offer a
successful combination of product performance and
natural ingredients in each of these three categories.
Annual Report 2008
61
Group Management Report » Adhesive Technologies
Driving Change
Achieve
our full
business potential
Winning
Culture
Focus
more on
our customers
Strengthen
our global
team
Adhesive Technologies is a world leader in
its field, offering global presence, a broad
technological base, strong brands and experienced employees. We intend to achieve our
full business potential by resolutely utilizing the
opportunities that exist for growth. To this end,
we are working on further extending and deepening our already close customer relationships,
because collaboration with leading customers
generates innovations capable of changing
and expanding the market. At the same time,
we are investing around the world in consolidating the foundation for our success, namely
the skills and capabilities of our employees
and the efficiency of our processes.
Group Management Report » Adhesive Technologies
Adhesive Technologies
Sales
Key Financials1)
in million euros
2007
2008
+/–
Sales
5,711
6,700
17.3 %
Proportion of Henkel sales
43 %
47 %
4 pp
Operating profit (EBIT)
621
658
6.0 %
3,000
Return on sales (EBIT)
10.9 %
9.8 %
–1.1 pp
1,500
Return on capital employed
(ROCE)
16.9 %
10.0 %
–6.9 pp
–132
–152 %
in million euros
6,700
6,000
4,500
4,237
5,008
5,510
5,711
EVA
0
2004
2005
2006
2007
2008
» Acquisition of the National Starch businesses
successfully closed on April 3, 2008
» Organic sales growth of 1.3 percent
» Operating profit increased to
658 million euros
» EBIT margin of 9.8 percent
» Market-related downturn in the fourth
quarter
1)
®
253
Calculated on the basis of units of 1,000 euros
pp = percentage points
here too market growth flattened toward the end of the
year, and by the fourth quarter every region was suffering
the effects of the downturn.
Certain long-term megatrends are, however, expected to continue to support the growth of the adhesives
markets going forward. Increasing consumption in the
emerging economies is leading to higher adhesive usage;
and the ongoing need for energy efficiency and carbon dioxide reduction is adding growth impetus to our markets.
Economic Environment and Market Position
For example, the increased use of lightweight construc-
Our market for adhesives, sealants and surface treatment
tion materials and also thermal insulation measures in
products in 2008 amounted to around 48 billion euros.
buildings makes the employment of modern adhesive
In the course of the last few years, this global sector
systems increasingly necessary.
has consistently grown by between 3 and 4 percent a
The unique breadth of our product portfolio, now
year; however, in the second half of 2008, we observed
further strengthened through the acquisition of the
a growth slowdown in the wake of the global financial
National Starch businesses, has given us leading positions
and economic crisis. Developments in the individual
on both the global scale and also in our separate regions.
market segments and regions were once again mixed.
And having once again generated organic growth above
The emerging markets continued to register significantly
the market average in 2008, we have succeeded in further
above-average growth rates in which we also participated
expanding our market shares.
thanks to our strong position in these regions. However,
World Market for Adhesives,
Sealants and Surface Treatment Products
Craftsmen and
Consumers 20 %
Sales Development1)
2008
Industry 49 %
Change versus previous year
17.3 %
Foreign exchange
–4.8 %
After adjusting for foreign exchange
22.1 %
Acquisitions/divestments
20.8 %
Organic
1)
1.3 %
Calculated on the basis of units of 1,000 euros
Building Adhesives 31 %
Annual Report 2008
63
Group Management Report » Adhesive Technologies
Business Activity and Strategy
able to expand our product range through the addition
The Adhesive Technologies business sector serves a wide
of the high-performance lubricants under the Acheson
range of user groups with a comprehensive range of tech-
brand acquired with the National Starch businesses.
nologies comprising adhesives, sealants and surface treatment products.
strengthened and expanded through the merging of the
In the Adhesives for Craftsmen and Consumers business, we
Henkel and National Starch operations. Our customers
serve private households, schools, offices, do-it-yourselfers
from the electronics industry use our range of high-tech
and professional tradespeople. We offer a wide range
adhesives under the brands Hysol and Ablestik and also
of adhesives and sealants for refurbishment and home
soldering pastes from Multicore in the manufacture of
construction applications, including our Pattex power
microchips and printed circuit boards.
adhesives, Sista sealants and Metylan home decoration
The Adhesive Technologies business sector serves a
products. For applications in home, school and office,
broad range of different customer groups and industries
we offer adhesives under our international Loctite and
around the world. Since we have at our disposal a wide
Pattex brands, also glue and correction products under
technology portfolio, we can offer a tailored selection
the Pritt brand.
of services capable of creating optimized customer ben-
In the Building Adhesives business, we focus on products
efits. Our high level of diversification enables us both
and system solutions for professional craftsmen work-
to participate immediately in new growth trends and to
ing in construction-related trades. These include tiling,
compensate for any downturns in activity encountered
humidity protection and thermal insulation products,
in individual markets. This provides us with a good basis
distributed under the Ceresit brand. Flooring adhesive
for sustainable and stable growth.
systems are marketed internationally under the wellknown Thomsit brand.
Our business involving industrial customers from
a wide range of different sectors is divided into three
strategic business units.
64
Our Electronics business has also been significantly
The factors governing the success of the various operations that make up the business sector differ substantially, necessitating a diverse range of management and
control instruments and strategies.
In the case of branded products for private consumers
Our Packaging, Consumer Goods and Construction Adhesives
sold via the retail trade, particular emphasis is placed on
business has been permanently strengthened by the ac-
distribution and brand management with the associated
quisition of the National Starch operations. Here, our
advertising and point-of-sale activities. With our leading
customers can rely not only on our Technomelt adhe-
brands and often high market shares, we occupy good
sives but also hotmelt adhesives under the Dispomelt
positions right across the board.
brand taken over from National Starch. We also offer
In the case of our industrial customers, we distin-
high-performance laminating adhesives for the manu-
guish between two major categories of business. In our
facture of composite films for food packaging under the
volume operations (involving, for example, packaging
Liofol brand. Our brands Adhesin for the paper industry
adhesives), our primary aim is to further increase profit-
and Dorus for the woodworking industry likewise offer
ability through the effective use of economies of scale
the twin benefits of quality and outstanding product
and strict cost management. As a leading supplier in the
properties.
relevant segments, Henkel has a very good platform to
Our product portfolio in the Specialty Adhesives and
work from. With respect to our specialty product busi-
Surface Treatment business encompasses our Loctite range
nesses for industrial applications (for example, products
for industrial maintenance, repair and overhaul, our
for the electronics industry), the focus is on providing
Teroson sealants and also, for example, our industrial
customer-specific solutions backed up by appropriate
cleaners under the P3 brand. Our customers are manu-
support and advisory services. Our many years of close
facturers from a wide range of segments including the
contact with our customers, and our detailed knowledge
automotive, aircraft and household appliance industries.
of their requirements provide us with a viable basis for
In the metal fabrication and processing field, we were
sustainable business success in this regard.
Annual Report 2008
Group Management Report » Adhesive Technologies
We intend to further expand our strong positions in the
organic growth amounted to 1.3 percent. Posting double-
regions of Eastern Europe, Asia, Latin America and Africa/
digit percentage increases, our growth regions of Eastern
Middle East in order to harness even more effectively
Europe, Africa/Middle East, Latin America and Asia once
the dynamics of these growth regions, and to selectively
again performed very well. Due to the rapidly deterio-
fill identified white spots in our regional structure. The
rating conditions encountered in the mature markets
acquisition of the National Starch businesses has substan-
of Western Europe and North America, sales in these
tially strengthened our position, particularly in Asia, and
regions were below the prior-year levels.
successful business models are now being transferred
between the growth regions.
Operating profit improved by 6.0 percent to 658 million euros. After adjusting for foreign exchange, profit
As part of our proactive portfolio management ap-
growth came in at 10.8 percent. Included in this figure
proach, we regularly scrutinize our businesses with the
are charges of 36 million euros relating to the integra-
specific view of divesting any non-strategic marginal
tion of the National Starch businesses and also costs
activities. In January 2008, for example, we sold our in-
incurred by the former Corporate Research division of
dustrial water treatment business to BK Giulini, Ludwigs-
10 million euros. We were confronted in the course of
hafen, a subsidiary of Israel Chemicals Limited (ICL).
the year with a substantial rise in average raw material
We endeavor to maintain high innovation rates while
prices. Despite implementing price increases of our own
gaining and retaining innovation leadership in all our
and modifying our formulations, we were unable to fully
business segments in order to achieve sustainable, prof-
offset the ensuing increase in costs. Declining markets
itable sales growth. Innovations serve to distinguish us
in Europe and North America also had a negative effect
from our competition and to increase our earning power.
on our profitability. As a consequence, return on sales
Identifying individual user requirements provides us with
decreased by 1.1 percentage points to 9.8 percent. After
a solid basis for the development of new, market-aligned
adjusting for the reassigned research and development
problem solutions. For this reason, forging close contacts
costs, return on sales was 10.0 percent.
with our customers at all levels of our organizations is
Return on capital employed (ROCE) decreased by
one of our particular priorities. With reallocation of the
6.9 percentage points to 10.0 percent, primarily as a result
Group’s Corporate Research activities, we have expanded
of the acquisition of the National Starch businesses.
the development capacities of all Henkel’s business sectors in order to enhance our ability to develop solutions
Business Segments
focused on market and customer demands.
In the Adhesives for Craftsmen and Consumers business, we
Following the rapid acquisition-led expansion of our
once again posted a slight increase in sales despite the
business over the last few years, our priority going for-
difficult conditions prevailing in major craftsmen mar-
ward will be on achieving profitable organic growth.
kets within Western Europe, and despite the real estate
In order to achieve this, we intend to fully utilize the
crisis in North America. This success was due to good
improvement in our position as a supplier in the vari-
performance in the regions of Eastern Europe and Latin
ous market segments and to fully utilize the synergies
America. While demand for paper glues and correction
that derive from the acquisition of the National Starch
products weakened slightly, our bonding adhesives under
businesses.
the Pattex brand and the launch of a number of innovations in the Loctite instant adhesives range contributed to
Sales and Profits
growth. We were able in particular to profitably expand
In the year under review, the Adhesive Technologies busi-
our business with the introduction of Loctite Flex Gel.
ness sector increased sales by 17.3 percent to 6,700 mil-
The growth of our Building Adhesives business con-
lion euros. This rise is primarily attributable to the acqui-
tinued unabated. With substantial double-digit rates of
sition of the National Starch businesses. After adjusting
expansion, the biggest boost came from Eastern Europe
for foreign exchange and acquisitions and divestments,
and Africa/Middle East. The market in Western Europe,
Annual Report 2008
65
Group Management Report » Adhesive Technologies
on the other hand, continued to decline. Aside from tile
capacity in the growth markets of Asia. We are addition-
adhesives, our product systems for thermal insulation in
ally supporting the integration of the National Starch
buildings again exhibited dynamic growth.
businesses around the world with appropriate capital
The Packaging, Consumer Goods and Construction Adhesives
expenditure measures. In fiscal 2008, this resulted in
business was significantly strengthened as a result of the
an increase in our capital expenditures on property,
acquisition of the National Starch operations. However,
plant and equipment to 201 million euros, compared
even without this influence, we were able to increase
to 197 million euros in the previous year.
sales compared to the previous year. In particular, we generated expansion through both our Liofol adhesives for
Outlook
flexible packaging and our adhesives for consumer goods,
Due to the extraordinary nature of the current economic
with our innovative hotmelts under the Technomelt
climate, market development forecasts have become dif-
Supra brand adding further momentum. However, our
ficult. Given the – in some cases – substantial decline
operations involving the graphic arts industry and the
undergone by important market segments toward the
paper-converting sector performed less well.
end of 2008, we anticipate that the market as a whole
Our Specialty Adhesives and Surface Treatment business
will contract in 2009. Performance in the growth regions
also showed mixed developments with the overall re-
is likely to be better than that exhibited in the mature
sults slightly below those of the previous year due to
markets. In the case of Europe and North America, our
prevailing market conditions. As expected, there was a
current expectation is for the persistence of the diffi-
decline in our automotive business and also – due to a
cult situation affecting a number of important market
prevailing reluctance to invest – in our operations serv-
segments.
ing manufacturers of durable consumer goods. We selectively combated these developments with the launch
Overall, we expect prices for raw materials and packaging to decrease.
of new products such as TecTalis, an innovative metal
Our objective in 2009 is again to outperform our
pre-treatment product. Our business with products for
markets. The synergies arising from the integration of
industrial maintenance, repair and overhaul under the
the National Starch businesses and the improvements
Loctite brand again underwent expansion in 2008. As
in our cost structure brought about by the economies
a result of the acquisition of the National Starch busi-
implemented in 2008 as part of the “Global Excellence”
nesses, we were able to substantially expand our mar-
program will support the development of our operat-
ket position with respect to the metals industry, with
ing profit.
Eastern Europe and Asia-Pacific exhibiting particularly
strong growth.
We see opportunities arising primarily in the further
substitution of conventional mechanical fastening and
The Electronics business likewise benefited substan-
joining techniques by adhesive bonding systems, and in
tially from the merger with the National Starch opera-
positive market dynamics in the growth regions. Addi-
tions. Consumer reluctance to purchase new electronic
tional opportunities are likely to arise as we harness the
products had an adverse effect on the sector as a whole,
growth momentum emanating from the acquisition of
resulting in our business volumes easing somewhat over-
the National Starch businesses. We envisage risks arising
all, despite the encouraging performance of products
primarily from a further deterioration in the underlying
used in the assembly of printed circuit boards.
economic conditions, which may also result in individual
customers and suppliers ceasing business.
Capital Expenditures
2008 saw a continuation of our investment strategy from
the previous years, which is geared toward the expansion
of our Eastern European sites manufacturing building
adhesives. We also further expanded our production
66
Annual Report 2008
Group Management Report » Risk Report
Risk Report
Controlling is responsible for coordinating the overall
process and also the aggregation and analysis of the in-
Opportunity and Risk Management System
ventorized risks and opportunities. All the opportunity
At Henkel, the risk management system is an integral
and risk management procedures are supported by an
component of the comprehensive planning, control
intranet-resident database to ensure transparent com-
and reporting regime practiced in the individual com-
munication throughout the entire corporation. Within
panies, in our business sectors and at corporate level.
the framework of their 2008 audit of the financial state-
The principles, processes and responsibilities relating
ments, the auditors examined the structure and func-
to risk management are defined in a corporate standard
tion of our opportunity and risk management system,
that is binding throughout the Group. The implemented
confirming its adequacy and regulatory compliance.
regulations and systems are the subject of regular external and internal checks and audits. The findings of such
Risk Management System
activities are taken into consideration as we continuously
Laundry &
Home Care
further develop our guidelines and systems.
At Henkel, therefore, risk management is performed
on a holistic, integrative basis involving the systematic
assessment of all opportunities and risks identified as
likely to affect our businesses. We understand risk as
being a negative deviation from a financial target or
KPI resulting from an event or change in circumstances.
As opportunity and risk are essentially the two sides
Cosmetics/
Toiletries
Adhesive
Tech­
nologies
Corporate
Functions
(HR, IT ...)
Regional
Officer 1
Regional
Officer 2
Regional
Officer 3
Corporate Controlling:
Coordination/Analysis
Regional
Officer ...
of entrepreneurial endeavor, opportunities generally
arise from a complementary view of the risk structure.
Consequently, we are able both to minimize potential
Disclosure of Major Individual Risks
exposure at an early stage and effectively exploit identi-
The following explains in more detail the individual
fied opportunities.
risks identified within the main risk categories incorpo-
The additional risk reporting process, performed
rated in the risk inventory. Relevant opportunities are
annually, begins with identifying risks using checklists
described in the “Outlook for the Henkel Group” section
based on predefined operating risk categories (e.g. pro-
on
curement and production) and predefined functional
maries starting on
page 71 and in the individual business sector sumpage 54.
risk categories (e.g. information technology and human
Economic and sector-specific risks: We see an in-
resources). The results are evaluated in a two-stage process
creasing threat to sales volumes and revenues arising
according to occurrence likelihood and potential loss. The
from the recession in North America and Europe. More-
material limit applied is risk of a potential loss upward of
over, weakening market growth in both the consumer
one million euros. We initially determine the gross risk
goods and the industrial segments coupled with increas-
and then, in a second stage, the net risk after taking into
ing competition continue to give rise to risk (for an ap-
account our countermeasures. Initially, risks are recorded
praisal of the underlying economic conditions, please see
on a decentralized basis by our affiliated companies,
page 71 under “Outlook for the Henkel Group”). Here
coordinated by our regional officers. The locally collated
we are currently observing a process of consolidation
risks are then examined by the experts in the business
within the retail trade, resulting in increased pressure
sectors and corporate functions, discussed in the ap-
with respect to both prices and terms of business. We are
propriate management committees and finally assigned
therefore focusing on achieving a continual increase in
to a segment-specific risk inventory. Opportunities are
our brand value and are committed to developing further
registered and assessed in a similar manner. Corporate
innovations. We see innovative products as enabling
Annual Report 2008
67
Group Management Report » Risk Report
68
us to differentiate ourselves from the competition, a
in an internal corporate guideline requiring that such
significant prerequisite for the continued success of our
investments be analyzed in advance on the basis of a
company.
detailed risk appraisal. Further auditing and analytical
Procurement market risks: Despite the easing of the
procedures accompanying projects at the appraisal and
raw material markets in the fourth quarter of 2008, we
implementation stage provide the basis for successful
see risks arising on the procurement side from unfore-
project management and effective risk reduction.
seen price rises with respect to important raw materials
Information technology risks: The risks associated
and packaging resources, and generally anticipate a con-
with our IT operations relate primarily to the potential
tinuing high level of raw material price volatility. We are
for unauthorized access and data loss. Appropriate ap-
combating such risks through the proactive management
proval procedures, authorization profiles and defensive
of our vendor portfolio and the establishment of a glob-
technologies are deployed in order to guard against such
ally engaged, cross-divisional sourcing function. We enter
eventualities. Daily data back-up runs are conducted to
into strategic partnerships with vendors of important and
shadow all critical databases, and the resultant files are
price-sensitive raw materials in order to minimize the
transferred to another site. We also carry out regular re-
concomitant price risks. We are also working hard within
store tests. External attacks that took place in 2008 – for
interdisciplinary teams (Research and Development,
example in the form of hacking, spamming or viruses
Supply Chain Management and Purchasing) in order to
– were successfully repelled by the security measures
devise alternative formulations and different forms of
implemented and therefore had no disruptive effect on
packaging that will enable us to respond to unforeseen
our business processes. Moreover, Henkel has put in place
fluctuations in raw material prices. Due to the risk of
a globally binding internal IT guideline to which our
non-availability of important raw materials, we operate
external service-providers are also bound. Major com-
a strict policy of independence from individual vendors
ponents of this code include measures for avoiding risk,
so as to better secure the constant supply of the goods
and descriptions of escalation processes and best-practice
and services that we require. The basis for our successful
technologies. Correct implementation is continuously
risk management approach in this domain is a compre-
monitored by our globally active Internal Audit func-
hensive procurement information system that ensures
tion. In addition, our safeguards are examined for their
permanent transparency of our purchasing volumes.
efficacy and efficiency by external specialists.
Production risks: Risks in the field of production
Personnel risks: The future economic development
arise in the Henkel case primarily from the occurrence
of Henkel is essentially dependent upon the commit-
of capacity bottlenecks and also the possibility of op-
ment and capabilities of our employees. We respond to
erational interruptions, especially at single-source sites.
the increasing competition for well-qualified technical
The negative effects of possible production outages can
and managerial staff by maintaining close contacts with
be offset through flexible production control and ap-
selected universities and conducting special recruitment
propriate insurance policies where economically viable.
campaigns. We combat the risk of failing to retain valu-
Generally, risks in the field of production are minimized
able employees over the long term through specifically
by ensuring a high level of employee qualification, es-
aligned personnel development programs. The basis for
tablishing clearly defined safety standards and carrying
these is provided by attractive qualification and further
out regular plant and equipment maintenance. Decisions
training opportunities combined with performance-
relating to capital expenditures on property, plant and
related compensation arrangements.
equipment are taken in accordance with defined, differ-
Financial risks: Under the influence of the general
entiated responsibility matrices and approval procedures
economic environment, Henkel is exposed not only to
in order to mitigate concomitant risk. These incorporate
currency, interest rate and pension risks but also and
all the relevant specialist functions and are regulated
increasingly to the risk of incurring bad debts.
Annual Report 2008
Group Management Report » Risk Report
Due to the strained financial situation in the automotive
Given the global alignment of our businesses, we are
industry particularly – including its components suppli-
exposed to two types of currency risk. Transaction risks
ers – our credit risk has risen compared to previous years.
arise from exchange rate fluctuations causing chang-
We mitigate this exposure within the framework of our
es in the value of future foreign currency cash flows.
global credit policy through standardized procedures,
Transaction risks arising from our operating business
a proactive credit management regime and the use of
are avoided primarily by the fact that we largely manu-
guarantees and payment default insurance policies. Aside
facture our products in those countries where they are
from meticulous local vigilance, we also monitor our
also sold. Residual transaction risks on the operating
key customer relationships at the global level. Default
side are proactively managed by Corporate Treasury. Its
and credit risks also arise in the case of financial invest-
remit includes the ongoing assessment of specific cur-
ments such as cash at bank and the positive fair value
rency risk and the development of appropriate hedging
of derivatives. However, such exposure is significantly
strategies. Because we strictly limit our potential losses,
limited by our Corporate Treasury specialists through
any negative impact on profits is restricted. The transac-
selection of banks of good reputation with at least an
tion risks arising from financial receivables and financial
A rating, and restriction of the amounts allocated to
liabilities are hedged in full. The risks are predominantly
individual investments. More detailed information with
mitigated by forward exchange contracts and currency
Note 42 starting
swaps. Translation risks, on the other hand, emanate
respect to our credit risk can be found in
on page 111.
from changes to items on the balance sheet and income
Risks arising from pension obligations relate to
statement of a subsidiary caused by foreign exchange
changes in interest rates, inflation rates, trends in wages
fluctuations and the effect these have on the translation
and salaries, and changes in the statistical life expectancy
of individual company financial statements into Group
of pension beneficiaries. The risks associated with our
currency. The risks arising from the translation of sales
pension funds are constantly monitored and managed
and profits of subsidiaries in foreign currencies and from
on the basis of risk and return criteria. Such risks are
net investments in foreign entities are only hedged in
controlled as far as possible by structuring pension fund
exceptional cases.
assets to match our pension obligations. Major pension
The interest rate risk encompasses those potentially
funds are administered by external fund managers in
positive or negative influences on profits, shareholders’
Germany, the USA, the UK, Ireland and the Netherlands.
equity or cash flow in current or future reporting peri-
The funds covering our pension obligations have been
ods arising from changes in interest rates. The deploy-
invested on the basis of asset-liability studies. The invest-
ment of interest-bearing financial instruments with the
ments in Germany are structured such that the risks
objective of optimizing the net interest result for the
arising from interest rate changes affecting the level of
Henkel Group constitutes an essential component of
pension liabilities are reduced by the expected return
our financial policy. The maturity structure is controlled
on the interest-bearing assets. In the event of adverse
both by choosing appropriate fixed-interest periods for
movements in the stock markets, the investments made
the underlying financial assets and financial liabilities
in shares and funds negatively affect the performance of
affecting liquidity, and by using interest rate derivatives.
the pension assets. This risk is countered by ensuring the
The interest rates on the bond for 1 billion euros issued
wide diversification of our investment portfolio. Risks
by Henkel in May 2003 and on the hybrid bond for 1.3 bil-
in this respect are quantified using sensitivity analyses.
lion euros issued by Henkel in November 2005 were both
Further information on the evaluation and management
converted in full from fixed to floating using interest
of risks arising from our pension obligations can be found
rate swaps. As the bonds and interest rate swaps are in a
in
Note 28 starting on page 101.
formally documented hedge accounting relationship, the
measurement of the bonds and the measurement of the
Annual Report 2008
69
Group Management Report » Risk Report
interest rate swaps match in practical terms. Depending
from or not fully covered by our insurance policies and
on interest rate expectations, Henkel also protects itself
where a reasonably accurate estimate of the potential loss
against short-term increases with additional interest rate
is possible. However, predicting the results of actions is
caps and forward rate agreements.
beset with considerable difficulties, especially in cases in
Liquidity risk describes the ability of a company
which the claimant is seeking substantial or unspecified
to meet its financial obligations at any given time. At
damages. Given these imponderables, we are unable to
Henkel, this risk can be regarded as extremely low due
predict what obligations may arise from such litigation.
to the fact that we are able to call upon long-term financ-
Consequently, major losses can arise from litigations
ing instruments and additional liquidity reserves in the
and proceedings that are not covered by our insurance
form of permanently secured credit lines.
policies or our provisions.
The basis of our currency, interest rate and liquidity
We do not currently foresee risks arising from liti-
risk control capability is provided by the treasury guide-
gations or proceedings either pending or threatened
lines introduced by the Management Board, which are
that could have a material influence on our net assets,
binding on the entire corporation. Defined in these are
financial position or results of operations.
the targets, principles, accountability and competences
of Corporate Treasury. They describe the fields of respon-
Overall Risk
sibility and establish the distribution of these responsi-
At the time of writing this report, there are no identifi-
bilities between the corporate level and our subsidiaries.
able risks relating to future developments that could
The Management Board is regularly and comprehensively
endanger the existence either of the holding company
informed of all major risks and of all relevant hedging
or of the Group as a going concern. Our risk analysis
transactions and arrangements. Additional information
indicates that the net assets, financial position and re-
on financial risk management can be found in
sults of operations of the holding company and of the
Note 42
starting on page 111.
by individual risks or by the aggregated exposure arising
also exposed in the course of our ordinary business activi-
from all risks combined. Moreover, such aggregation only
ties to a range of risks relating to litigations and other
takes into account the risk side of the equation without
proceedings or actions in which we are currently involved
allowing for the positive effect that the opportunities
or may become involved in the future. These include,
may bring. The system of risk categorization undertaken
in particular, risks arising from the fields of product
by Henkel clearly indicates that the most significant
liability, product deficiency, laws relating to competition
exposure currently relates to the impact of economic
and monopolies, the infringement of proprietary rights,
uncertainty on sales volumes and revenues, and the as-
and environmental protection. The possibility cannot be
sociated financial risks, to which we are responding with
discounted that the final decisions taken in some of these
the countermeasures described.
litigations and proceedings may go against us.
We counteract legal risks by issuing corresponding
binding guidelines and codes of conduct and by instituting appropriate training measures. We address current
actions and potential litigation risk by maintaining constant contacts between the corporate legal department
and local attorneys, and also through our separate reporting system. For certain legal risks, we have taken out
insurance policies that are standard for the industry and
that we consider to be adequate. We form provisions for
litigations to the extent that it is likely in our estimation
that obligations may arise which are either excluded
70
Group as a whole are not currently endangered either
Legal risks: As a globally active corporation, we are
Annual Report 2008
Group Management Report » Outlook
Outlook for the Henkel Group
than the emerging economies in which production increases are still possible.
World Economy
We anticipate that 2009 will be a year of marked
Within the electronics industry, we anticipate a decline in semiconductor production.
recession.
The situation is likely to be difficult for the packag-
We expect that the industrialized regions of West-
ing industry and also for the metals sector. Production
ern Europe, North America and Japan will experience
in the industrialized countries is unlikely to move be-
a decline in their overall economic performance based
yond stagnation point, while the emerging markets are
on the average for 2009. The emerging economies will
expected to exhibit below-average growth based on a
also be affected with their growth rates declining accord-
long-term comparison.
ingly. Despite the downturn, China and India are likely
There is no sign of any improvement in the construc-
to undergo further expansion. In Russia, the financial
tion sector of the industrialized countries, while the
crisis will have a dampening effect on growth.
emerging economies will benefit from a continuing re-
We are more positive with respect to the develop-
quirement for infrastructure improvement.
ment of raw material prices. Due to the bleak outlook
for business activity, the price for crude oil in particular
Opportunities and Risks
should remain appreciably below the 2008 level, based
Despite the expected recession in the industrialized coun-
on the annual averages.
tries, opportunities may well arise from the generally
We anticipate that the US dollar will strengthen
positive underlying conditions that still prevail in the
versus the euro as compared to the annual average for
emerging economies. Unlike in the case of the industrial-
2008.
ized countries, we expect these to continue exhibiting
Due to the expected decline in overall economic out-
growth, albeit at a lower rate. We also see opportunity
put in the USA and Western Europe, we expect short-term
emanating from our full pipeline of innovative products
interest rates to remain low. The numerous fiscal policies
scheduled to be launched by all three of our business
introduced in order to expand business activity should, in
sectors this year. Positive effects are also likely to ensue
our estimation, inject some small degree of momentum
both from a decline in raw material prices as compared
into the world economy.
to 2008, and from the momentum generated by our acquisition of the National Starch businesses. We likewise
Sector Development
see opportunities arising from the effective implementa-
We expect private consumption in the industrialized
tion of our three strategic priorities as detailed in the
countries to stagnate. The reasons for this lie in con-
section entitled “Strategy and Financial Targets 2012”
tinuing consumer reticence and the more restrictive
on
pages 30 to 32.
credit conditions. We also expect the previously strong
We see risks arising from the recession transferring to
growth rates exhibited by the emerging markets to de-
the emerging economies and the possibility of a lengthy
cline further.
phase of declining economic growth. Further risks lie
We anticipate that the downturn on the industrial
in a resurgence of raw material price volatility and in a
side will gradually bottom out toward the end of the
weakening US dollar. There are additional risks in fur-
year. In our estimate, however, there will be no increase
ther consolidation at the customer level and in the pos-
in output in the industrialized countries over the year
sibility of increasing competition, to which we would
as a whole.
need to respond with a further increase in our market
Overall, the automotive industry is likely to continue
investments.
suffering from the worldwide recession in 2009. Struc-
Further specific opportunities and risks are discussed
tural problems and purchasing reluctance will have an
in the individual business sector reports starting on
adverse effect on this sector. Here again, the industrial-
page 54.
ized countries are expected to be more heavily impacted
Annual Report 2008
71
Group Management Report » Outlook
Sales and Profits Forecast:
Long­term Sales and Profits Forecast:
General Appraisal of Economic Developments
Financial Targets for 2012
Expected in 2009
In placing our focus on our three strategic priorities, we
We expect that the difficult market conditions prevailing
have laid the foundation for future profitable growth.
in the real economy and also in the financial markets will
We expect 2009 to be a year of marked recession but
continue during the remainder of 2009. The general eco-
that the world economy will return to its long-term
nomic climate and its further development are difficult
growth path with rates of expansion of 3 to 4 percent
to predict, hampering specific forecasts for the current
between 2010 and 2012.
financial year. As soon as our markets enable us to make
Based on this assumption, we will be aiming in the
properly reasoned assumptions, we will communicate
coming years to achieve an average organic growth rate
quantified expectations.
of 3 to 5 percent above the rate of growth of the overall
Nevertheless, we are confident of outperforming our
market. Due to the expected savings emanating from the
markets in terms of organic growth (i.e. growth after
“Global Excellence” efficiency enhancement program,
adjusting for foreign exchange and acquisitions/divest-
the synergies arising from the integration of the National
ments). We have a solid competitive platform which, over
Starch businesses and the numerous measures geared to
the years, we have further underpinned and extended
achieving our full business potential, we are confident
through our innovative strength, our strong brands,
that, by 2012, we will also have met our targets of an
our leading market positions, and the quality of our
adjusted1) return on sales (EBIT) of 14 percent and an aver-
portfolio.
age annual increase in adjusted1) earnings per preferred
We have introduced a number of measures on the
share (EPS) in excess of 10 percent per year.
operational side from which we expect positive momentum to develop. For example, we anticipate appreciable
Financial targets for 2012
and sustainable contributions to earnings to emanate
from our “Global Excellence” efficiency enhancement
Annual organic sales growth
(average):
program, the synergies arising from the integration of
the National Starch businesses and also our generally
3 – 5 percent
strict cost discipline. We also expect raw material prices
to ease. All these factors will support the development
Adjusted1) return on sales (EBIT):
of our operating profit (EBIT) and earnings per preferred
14 percent
share (EPS) – as adjusted in each case for one-time gains/
Annual growth in adjusted1) earnings
per preferred share (average):
charges and restructuring charges.
We will continue to focus on – and if necessary step
> 10 percent
up our efforts in – generating liquid funds; further reducing our net working capital therefore remains a high
priority. In addition, our plans for acquisitions in fiscal
2009 have significantly decreased compared to 2008. We
Subsequent Events
have also adapted our budget for capital expenditures
Effective January 26, 2009 we completed the process of
on property, plant and equipment to the requirements
disposing of our production facility in Aurora, Illinois,
of the current economic environment.
USA. The assets held for sale disclosed in the present
We have the right structures and have taken the necessary measures in order to enable us to cope with and
consolidated annual financial statements were duly
transferred to the purchasing counterparty.
overcome the currently adverse market conditions. We
are confident that we will emerge from this difficult
economic environment further strengthened.
1)
72
Annual Report 2008
Adjusted for one-time gains/charges and restructuring charges
Consolidated Financial Statements » Subindex
Consolidated Financial Statements Subindex
74 Consolidated Statement of Income
77 Statement of Changes in Equity
75 Consolidated Balance Sheet
78 Group Segment Report by Business Sector
76 Consolidated Cash Flow Statement
79 Group Segment Report by Region
77 Consolidated Statement of Recognized Income
and Expense
80 Changes in Intangible Assets, Property, Plant
and Equipment and Financial Assets
87 Notes to the Consolidated Statement of Income
92 Notes to the Consolidated Balance Sheet
117 Supplementary Information on the Consolidated
Statement of Income/Balance Sheet
128 Recommendation for the Approval of the Annual
Financial Statements and the Appropriation of
the Profit of Henkel AG & Co. KGaA
129 Annual Financial Statements of
Henkel AG & Co. KGaA (summarized)
130 Statement by the Personally Liable Partner
131 Auditors’ Report
132 Corporate Management of Henkel AG & Co. KGaA
Annual Report 2008
73
Consolidated Financial Statements » Consolidated Statement of Income
Consolidated Statement of Income
in million euros
Note
2007
%
2008
%
Sales
1
13,074
100.0
14,131
100.0
8.1 %
Cost of sales1)
2
–7,013
–53.6
–8,190
–58.0
16.8 %
6,061
46.4
5,941
42.0
–2.0 %
Marketing, selling and distribution expenses1)
3
–3,748
–28.6
–3,993
–28.3
6.5 %
Research and development expenses1)
4
–350
–2.7
–429
–3.0
22.6 %
Administrative expenses1)
5
–664
–5.1
–825
–5.8
24.2 %
Other operating income
6
109
0.8
160
1.1
46.8 %
Other operating charges
7
Gross profit
Change
–64
–0.5
–75
–0.5
17.2 %
1,344
10.3
779
5.5
–42.0 %
88
0.7
83
0.6
–5.7 %
–
–
1,042
7.3
> 100.0 %
Net result from other investments
–4
–0.1
–2
0.0
–50.0 %
Investment result
84
0.6
1,123
7.9
> 100.0 %
Operating profit (EBIT)
Share of net profits of associates
Gain from sale of investment in Ecolab Inc.
Interest income
Interest expense
Net interest
Financial result
8
Earnings before tax
Taxes on income
9
Net earnings
– Attributable to minority shareholders
10
– Attributable to shareholders of
Henkel AG & Co. KGaA
1)
91
0.7
91
0.6
–
–269
–2.1
–366
–2.5
36.1 %
–178
–1.4
–275
–1.9
54.5 %
–94
–0.7
848
6.0
> 100.0 %
1,250
9.6
1,627
11.5
30.2 %
–309
–2.4
–394
–2.8
27.5 %
941
7.2
1,233
8.7
31.0 %
20
0.2
12
0.1
–40.0 %
921
7.0
1,221
8.6
32.6 %
Restructuring charges in 2008: 663 million euros, of which 373 million euros cost of sales, 111 million euros marketing, selling and distribution expenses, 52 million euros
research and development expenses, 127 million euros administrative expenses
Earnings per share (basic)
in euros
Note
2007
2008
Change
Ordinary shares
47
2.12
2.81
32.5 %
Non-voting preferred shares
47
2.14
2.83
32.2 %
Earnings per share (diluted)
in euros
Note
2007
2008
Change
Ordinary shares
47
2.12
2.79
31.6 %
Non-voting preferred shares
47
2.13
2.81
31.9 %
Additional voluntary information
in million euros
2007
2008
EBIT (as reported)
1,344
779
–8
–30
One-time gains
One-time charges1)
Restructuring charges2)
Adjusted EBIT
–
48
34
663
1,370
1,4603)
10.5
10.3
–
1.042
Adjusted financial result
–94
–194
Adjusted net earnings after minority interests
941
945
Adjusted earnings per preferred share 2.19
2.193)
Adjusted return on sales in %
Gain from sale of investment in Ecolab Inc.
in euros
2008 figure includes 36 million euros in charges arising from the integration of the National Starch businesses
2)
2008 figure includes 504 million euros “Global Excellence”, 142 million euros National Starch and 17 million euros ordinary activities
3)
Adjusted EBIT 1,495 million euros and adjusted earnings per preferred share 2.26 euros, both before amortization of intangible assets arising from the acquisition of the
National Starch businesses
1)
74
Annual Report 2008
Consolidated Financial Statements » Consolidated Balance Sheet
Consolidated Balance Sheet
Assets
in million euros
Note
2007
%
2008
%
Intangible assets
11
4,940
37.9
8,392
52.2
Property, plant and equipment
12
2,077
15.9
2,361
14.7
495
3.8
1
–
33
0.3
23
0.1
Investments in associates
Other investments
Financial assets
13
528
4.1
24
0.1
Other financial assets
14
66
0.5
172
1.1
4
–
3
–
Income tax refund claims
Other non-current assets
15
67
0.5
4
–
Deferred taxes
16
249
1.9
305
1.9
70.0
Non-current assets
7,931
60.8
11,261
Inventories
17
1,283
9.8
1,482
9.2
Trade accounts receivable
18
1,694
13.0
1,847
11.5
Other financial assets
19
170
1.3
575
3.6
Other current assets
20
315
2.4
256
1.6
90
0.7
202
1.3
2.1
Income tax refund claims
Liquid funds/Marketable securities
21
1,440
11.0
338
Assets held for sale
22
125
1.0
113
0.7
5,117
39.2
4,813
30.0
13,048
100.0
16,074
100.0
Current assets
Total assets
Shareholders’ Equity and Liabilities
in million euros
Note
2007
%
2008
%
Subscribed capital
23
438
3.3
438
2.7
Capital reserve
24
652
5.0
652
4.1
Retained earnings
25
5,963
45.7
6,805
42.3
Gains and losses recognized in equity
26
–1,410
–10.8
–1,411
–8.8
5,643
43.2
6,484
40.3
63
0.5
51
0.3
5,706
43.7
6,535
40.6
Equity excluding minority interests
Minority interests
27
Equity including minority interests
Pensions and similar obligations
28
657
5.0
833
5.2
Long-term income tax provisions
29
100
0.8
177
1.1
Other long-term provisions
29
119
0.9
336
2.1
Long-term borrowings
30
2,304
17.7
2,402
14.9
Non-current financial liabilities
31
147
1.1
77
0.5
Other non-current liabilities
32
10
0.1
9
0.1
Deferred taxes
33
314
2.4
412
2.5
3,651
28.0
4,246
26.4
2.1
Non-current liabilities
Current income tax provisions
34
152
1.2
343
Other current provisions
34
763
5.9
866
5.4
Short-term borrowings
35
838
6.4
1,817
11.3
Trade accounts payable
36
1,477
11.3
1,678
10.5
Current financial liabilities
37
246
1.9
272
1.7
Other current liabilities
38
200
1.5
306
1.9
15
0.1
11
0.1
3,691
28.3
5,293
33.0
13,048
100.0
16,074
100.0
Income tax liabilities
Current liabilities
Total equity and liabilities
Annual Report 2008
75
Consolidated Financial Statements » Consolidated Cash Flow Statement
Consolidated Cash Flow Statement
See Note 48
in million euros
2007
Operating profit (EBIT)
1,344
779
–305
–412
337
546
Income taxes paid
Amortization/depreciation/write-ups of non-current assets (excluding financial assets)
Net gains/losses on disposal of non-current assets (excluding financial assets)
Change in inventories
Change in trade accounts receivable
Change in other receivables and miscellaneous assets
Change in trade accounts payable
Change in other liabilities and provisions
Cash flow from operating activities
Purchase of intangible assets
Purchase of property, plant and equipment
–5
3
–60
–78
81
108
–24
60
56
–36
–103
195
1,321
1,165
–40
–20
–470
–473
Purchase of financial assets/acquisitions
–7
–3,708
Proceeds on disposal of subsidiaries and business units
93
57
Proceeds on disposal of other non-current assets
63
1,752
4
119
Cash flow from investing activities/acquisitions
–357
–2,273
Henkel AG & Co. KGaA dividends
–211
–224
–12
–8
Interest received
87
90
Dividends received
29
22
Interest paid
–314
–607
Dividends and interest paid and received
–421
–727
9
757
13
–10
Realization of net investment hedge
Subsidiary company dividends (to other shareholders)
Change in borrowings
Other financing transactions
Cash flow from financing activities
Change in cash and cash equivalents due to movement in funds
–399
20
565
–1,088
Change in cash and cash equivalents due to exchange rate movements
–54
–14
Change in liquid funds and marketable securities
511
–1,102
Liquid funds and marketable securities at January 1
929
1,440
1,440
338
Liquid funds and marketable securities at December 31
76
2008
Annual Report 2008
Consolidated Financial Statements / Notes to the Consolidated Financial Statements » Statement of Changes in Equity
Consolidated Statement of Recognized Income
and Expense
in million euros
Net earnings
Foreign exchange effects
2007
2008
941
1,233
–425
103
Financial instruments
–92
–100
Actuarial gains/losses
–7
–186
–52
33
–
–16
Share of net profits of associates
Effects arising from the current financial year
Elimination of cumulative foreign exchange effects since initial inclusion
Other gains and losses recognized in equity
Gains and losses recognized directly in equity
Total earnings for the period
– Attributable to minority shareholders
– Attributable to shareholders of Henkel AG & Co. KGaA
3
–
–573
–166
368
1,067
15
16
353
1,051
Notes to the Consolidated Financial Statements:
Statement of Changes in Equity
See Notes 23 to 27
Gains and losses
recognized in equity
in million euros
Ordinary
shares
Preferred
shares
Treasury
stock
Capital
reserve
Retained
earnings
222
152
–128
652
5,490
–881
Distributions
–
–
–
–
–211
Sale of treasury stock
–
–
9
–
5
Net earnings
–
–
–
–
Foreign exchange effects
–
–
–
Financial instruments
–
–
–
At January 1, 2007
Increase in share capital
out of corporate funds
Transla- Financial
tion
instrudifferments
ences
Minority
interests
Total
–20
60
5,547
–
–
–12
–223
–
–
–
14
921
–
–
20
941
–
–
–417
–
–8
–425
–
–
–
–92
–
–92
38
26
–
–
–64
–
–
–
–
Actuarial gains and losses
–
–
–
–
–7
–
–
–
–7
Other gains and losses
recognized in equity
–
–
–
–
–52
–
–
3
–49
260
178
–119
652
6,082
–1,298
–112
63
5,706
At December 31, 2007/
January 1, 2008
Distributions
–
–
–
–
–224
–
–
–8
–232
Sale of treasury stock
–
–
4
–
1
–
–
–
5
Net earnings
–
–
–
–
1,221
–
–
12
1,233
Foreign exchange effects
–
–
–
–
–
99
–
4
103
Financial instruments
–
–
–
–
–
–
–100
–
–100
Actuarial gains and losses
–
–
–
–
–186
–
–
–
–186
Other gains and losses
recognized in equity
At December 31, 2008
–
–
–
–
26
–
–
–20
6
260
178
–115
652
6,920
–1,199
–212
51
6,535
Annual Report 2008
77
Notes to the Consolidated Financial Statements » Group Segment Report by Business Sector
Group Segment Report
by Business Sector1)
See Note 46
in million euros
Laundry &
CosHome
metics/
Care Toiletries
Total
Adhesives Industrial
for Crafts- Adhesives Adhesive
Techmen and
nologies
Consumers
Operating
Corporate
Henkel
14,131
business
sectors
total
Sales 2008
4,172
3,016
2,092
4,608
6,700
13,888
243
Change from previous year
0.6 %
1.5 %
0.0 %
27.3 %
17.3 %
8.2 %
–
8.1 %
Proportion of Group sales
30 %
21 %
15 %
32 %
47 %
98 %
2%
100 %
Sales 2007
4,148
2,972
2,091
3,620
5,711
12,831
243
13,074
EBITDA 2008
551
427
281
593
874
1,852
–527
1,325
EBITDA 2007
569
422
280
492
772
1,763
–82
1,681
Change from previous year
–3.0 %
1.1 %
0.5 %
20.4 %
13.2 %
5.1 %
–
–21.1 %
Return on sales (EBITDA) 2008
13.2 %
14.1 %
13.5 %
12.9 %
13.0 %
13.3 %
–
9.4 %
Return on sales (EBITDA) 2007
13.7 %
14.2 %
13.4 %
13.6 %
13.5 %
13.7 %
–
12.8 %
112
51
48
168
216
379
167
546
58
35
4
33
37
130
23
153
–
–
–
–
–
–
–
–
110
50
50
101
151
311
26
337
of which impairment losses 2007
2
1
–
–
–
3
2
5
of which write-ups 2007
–
–
–
1
1
1
2
3
EBIT 2008
439
376
233
425
658
1,473
–6944)5)
779
EBIT 2007
459
372
230
391
621
1,452
–108
1,344
–42.0 %
Amortization/depreciation and
write-ups of trademark rights,
other rights and property, plant
and equipment 2008
of which impairment losses 2008
of which write-ups 2008
Amortization/depreciation and
write-ups of trademark rights,
other rights and property, plant
and equipment 2007
Change from previous year
–4.2 %
0.9 %
1.2 %
8.8 %
6.0 %
1.5 %
–
Return on sales (EBIT) 2008
10.5 %
12.5 %
11.1 %
9.2 %
9.8 %
10.6 %
–
5.5%
Return on sales (EBIT) 2007
11.1 %
12.5 %
11.0 %
10.8 %
10.9 %
11.3 %
–
10.3 %
Capital employed 20082)
2,604
2,151
1,299
5,291
6,590
11,345
–24
11,321
Capital employed 20072)
2,752
2,236
1,277
2,403
3,680
8,668
76
8,744
Change from previous year
–5.4 %
–3.8 %
1.8 %
120.2 %
79.1 %
30.9 %
–
29.5 %
Return on capital employed
(ROCE) 2008
16.9 %
17.5 %
17.9 %
8.0 %
10.0 %
13.0 %
–
6.9 %
Return on capital employed
(ROCE) 2007
16.7 %
16.7 %
18.0 %
16.3 %
16.9 %
16.8 %
–
15.4 %
169
103
137
3,624
3,761
4,033
36
4,069
Capital expenditures
(excl. financial assets) 2008
Capital expenditures
(excl. financial assets) 2007
180
77
83
153
236
493
47
540
Operating assets 20083)
3,893
2,763
1,641
6,439
8,080
14,736
398
15,134
Operating liabilities 2008
1,154
819
423
1,451
1,874
3,847
422
4,269
Net operating assets
employed 20083)
2,739
1,944
1,218
4,988
6,206
10,889
–24
10,865
Operating assets 20073)
4,123
2,917
1,665
3,025
4,690
11,730
361
12,091
Operating liabilities 2007
1,234
873
453
909
1,362
3,469
285
3,754
Net operating assets
employed 20073)
2,889
2,044
1,212
2,116
3,328
8,261
76
8,337
Calculated on the basis of units of 1,000 euros
2)
Including goodwill at cost prior to any accumulated amortization in accordance with IFRS 3.79b
3)
Including goodwill at net book value
4)
Distribution of restructuring charges for “Global Excellence” (504 million euros) and National Starch businesses (142 million euros) of 646 million euros by business sector
as follows: Laundry & Home Care 189 million euros; Cosmetics/Toiletries 100 million euros; Adhesive Technologies 303 million euros; Corporate 54 million euros;
the ordinary restructuring charges have been allocated to the operating business sectors
5)
From Corporate 31 million euros Corporate Research expenses allocated to business sectors as follows: Laundry & Home Care 14 million euros; Cosmetics/Toiletries
7 million euros; Adhesive Technologies 10 million euros
1)
78
Annual Report 2008
Notes to the Consolidated Financial Statements » Group Segment Report by Region
Group Segment Report
by Region1)
See Note 46
in million euros
Europe/
North
Latin
Africa/ America America
Middle
(USA,
East Canada)
AsiaPacific
Regions
total
Corporate
Henkel
Sales by location of company 2008
8,863
2,700
780
1,545
13,888
243
14,131
Change from previous year
4.5 %
5.6 %
12.8 %
40.1 %
8.2 %
–
8.1 %
Proportion of Group sales
63 %
19 %
5%
11 %
98 %
2%
100 %
Sales by location of company 2007
8,480
2,557
691
1,103
12,831
243
13,074
14,131
Sales by location of customer 2008
8,798
2,668
791
1,631
13,888
243
Change from previous year
4.8 %
4.9 %
11.6 %
38.0 %
8.2 %
–
8.1 %
Proportion of Group sales
62 %
19 %
6%
11 %
98 %
2%
100 %
Sales by location of customer 2007
8,397
2,543
709
1,182
12,831
243
13,074
EBITDA 2008
1,184
388
86
194
1,852
–527
1,325
EBITDA 2007
1,204
378
77
104
1,763
–82
1,681
Change from previous year
–1.6 %
2.6 %
11.8 %
86.9 %
5.1 %
–
–21.1 %
Return on sales (EBITDA) 2008
13.4 %
14.4 %
11.0 %
12.6 %
13.3 %
–
9.4 %
Return on sales (EBITDA) 2007
14.2 %
14.8 %
11.1 %
9.4 %
13.7 %
–
12.8 %
EBIT 2008
962
299
66
146
1,473
–6943)4)
779
EBIT 2007
1,005
308
58
81
1,452
–108
1,344
–42.0 %
Change from previous year
–4.3 %
–2.8 %
14.3 %
80.0 %
1.5 %
–
Return on sales (EBIT) 2008
10.9 %
11.1 %
8.5 %
9.4 %
10.6 %
–
5.5 %
Return on sales (EBIT) 2007
11.9 %
12.1 %
8.4 %
7.3 %
11.3 %
–
10.3 %
Return on capital employed (ROCE) 2008
23.8 %
5.6 %
13.5 %
9.6 %
13.0 %
–
6.9 %
Return on capital employed (ROCE) 2007
30.4 %
7.3 %
13.7 %
11.4 %
16.8 %
–
15.4 %
Operating assets 20082)
5,963
6,077
628
2,068
14,736
398
15,134
Operating liabilities 2008
2,480
597
160
610
3,847
422
4,269
Net operating assets employed 20082)
3,483
5,480
468
1,458
10,889
–24
10,865
Operating assets 20072)
5,215
4,980
529
1,006
11,730
361
12,091
Operating liabilities 2007
2,447
560
130
332
3,469
285
3,754
Net operating assets employed 20072)
2,768
4,420
399
674
8,261
76
8,337
Calculated on the basis of units of 1,000 euros
2)
Including goodwill at net book value
3)
Distribution of restructuring charges for “Global Excellence” (504 million euros) and National Starch businesses (142 million euros) of 646 million euros by region as follows:
Europe/Africa/Middle East 424 million euros; North America 159 million euros; Latin America 15 million euros; Asia-Pacific 48 million euros; the ordinary restructuring
charges have been allocated to the operating business sectors
4)
From Corporate 31 million euros Corporate Research expenses allocated to Europe/Africa/Middle East
1)
Intheoperatingbusinesssectors,affiliatedcompanieslocatedinGermany,includingtheparentcompany,achievedsalesin
2008of2,020millioneuros(2007:2,081millioneuros)andreportedintangibleassetsandproperty,plantandequipment
atDecember31,2008of1,123millioneuros(2007:990millioneuros).
TheaffiliatedcompaniesdomiciledinNorthAmericareportedintangibleassets,property,plantandequipmentat
December31,2008of5,793millioneuros(2007:3,841millioneuros).
Annual Report 2008
79
Notes to the Consolidated Financial Statements » Changes in Intangible Assets, Property, Plant and Equipment and Financial Assets
Changes in Intangible Assets, Property,
Plant and Equipment and Financial Assets
Cost
in million euros
Intangible assets Property, plant
and equipment
At January 1, 2007
Financial
assets
Total
5,945
5,327
579
11,851
Changes in the Group /Acquisitions
–2
–76
–31
–109
Additions
40
470
67
577
Disposals1)
–86
–242
–61
–389
Reclassifications
16
–16
–
–
–489
–126
–8
–623
At December 31, 2007/January 1, 2008
5,424
5,337
546
11,307
Changes in the Group /Acquisitions
3,222
342
3
3,567
Additions
20
473
66
559
Disposals1)
–41
–389
–662
–1,092
Translation differences
Reclassifications
Translation differences
At December 31, 2008
6
–6
–
–
297
–44
78
331
8,928
5,713
31
14,672
1)
of which assets held for sale 2008
–1
–188
–12
–201
1)
of which assets held for sale 2007
–65
–44
–
–109
Financial
assets
Total
Accumulated amortization/depreciation
in million euros
Intangible assets Property, plant
and equipment
At January 1, 2007
Changes in the Group /Acquisitions
Write-ups
Scheduled amortization /depreciation
Impairment losses
Disposals1)
Reclassifications
Translation differences
At December 31, 2007/January 1, 2008
458
3,249
17
3,724
–5
–51
–
–56
–
–3
–
–3
56
279
–
335
1
4
4
9
–19
–164
–3
–186
1
–1
–
–
–8
–53
–
–61
484
3,260
18
3,762
Changes in the Group /Acquisitions
–
–4
–
–4
Write-ups
–
–
–
–
95
298
–
393
Scheduled amortization /depreciation
Impairment losses
Disposals1)
Reclassifications
Translation differences
At December 31, 2008
4
149
3
156
–39
–330
–14
–383
–
–
–
–
–8
–21
–
–29
536
3,352
7
3,895
1)
of which assets held for sale 2008
–
–169
–8
–177
1)
of which assets held for sale 2007
–
–17
–
–17
Financial
assets
Total
Net book value
in million euros
Intangible assets Property, plant
and equipment
At December 31, 2008
8,392
2,361
24
10,777
At December 31, 2007
4,940
2,077
528
7,545
Theimpairmentlossesareallocatedtotherelevantfunctions.
80
Annual Report 2008
Notes to the Consolidated Financial Statements
General information
TheconsolidatedfinancialstatementsofHenkelAG&Co.KGaAhavebeenpreparedinaccordancewithInternational
FinancialReportingStandards(IFRS)asadoptedbytheEuropeanUnion.
TheindividualfinancialstatementsofthecompaniesincludedintheconsolidationaredrawnuponthesameaccountingdateasthoseofHenkelAG&Co.KGaA.
MembersoftheKPMGorganizationorotherindependentfirmsofauditorsinstructedaccordinglyhaveeitheraudited
thefinancialstatementsofcompaniesincludedintheconsolidationor,inexceptionalcases,conductedareviewofthose
financialstatements.OnJanuary30,2009,theManagementBoardofHenkelManagementAG–thepersonallyliablepartnerofHenkelAG&Co.KGaA–approvedthereleaseoftheconsolidatedfinancialstatementstotheSupervisoryBoard.The
SupervisoryBoardisresponsibleforreviewingtheconsolidatedfinancialstatementsanddeclaringwhetheritapproves
them.
Theconsolidatedfinancialstatementsarebasedontheprincipleofhistoricalcostwiththeexceptionthatcertainfinancial
instrumentsareaccountedforattheirfairvalues.TheGroupcurrencyistheeuro.Unlessotherwiseindicated,allamounts
areshowninmillioneuros.Inordertoimprovetheclarityandinformativevalueoftheconsolidatedfinancialstatements,
certainitemsarecombinedinthebalancesheetandinthestatementofincomeandshownseparatelyintheNotes.
Scope of consolidation
InadditiontoHenkelAG&Co.KGaA,theconsolidatedfinancialstatementsatDecember31,2008include11Germanand
233non-GermancompaniesinwhichHenkelAG&Co.KGaAhasthepowertogovernthefinancialandoperatingpolicies,
basedontheconceptofcontrol.ThisisgenerallythecasewhereHenkelAG&Co.KGaAholds,directlyorindirectly,amajorityofthevotingrights.CompaniesinwhichnotmorethanhalfofthesharesareheldarefullyconsolidatedifHenkel
AG&Co.KGaAhasthepower,directlyorindirectly,togoverntheirfinancialandoperatingpolicies.
ThecompositionoftheGrouphaschangedinthecourseof2008comparedtothepreviousyear.Therewere64companiesincludedintheconsolidatedGroupfiguresforthefirsttime,8companiesweremergedand17companiesareno
longerconsolidated.ThefinancialinvestmentinEcolabInc.,St.Paul,Minnesota,USA,whichhasbeenaccountedforusing
theat-equitymethod,wasdivestedonNovember18,2008(closing).
Acquisition of the National Starch businesses
OnApril3,2008,weacquiredtheAdhesivesandElectronicMaterialsbusinessesbelongingtotheNationalStarch&ChemicalCompanyfollowingthetakeoverofthelatterbyAkzoNobel.ThepurchasepriceaccordingtothecontractdatedAugust
13,2007,aso-calledback-to-backagreement,was3.7billioneuros(2.7billionpoundssterling).
Duetothesizeandcomplexityofthetransaction,thepurchasepriceallocationoftheacquisitioninaccordancewith
IFRS3“BusinessCombinations”hasnotyetbeencompleted.Theprovisionaldifferencedeterminedforthepurposeofthis
reportis2,903millioneuros.
Thestillongoingpurchasepriceallocationprocessservestofinallyassigntheacquisitioncoststothefairvaluesofthe
assets,liabilitiesandcontingentliabilities.Alsotakenintoaccountinthisregardarethefairvaluesofpreviouslyunrecognizedintangibleassetsassignabletotheacquiredactivities,suchascustomerrelationships,technologies,trademarksand
brands.Itshouldbenotedthatthepurchasepriceallocationwillleadtotherecognitionofhiddenreservesandhidden
chargesintheassets,liabilitiesandcontingentliabilitiesoftheacquiredbusinesses,andthustoexpensesintheformof
additionallyaccruingdepreciationandamortizationchargesagainstincome.
Thetableoverleafshowsthereconciliationbetweenthepurchasepriceandprovisionalgoodwillafterdeductionofthe
bookvaluesoftheacquiredassetsandliabilities.
InNovember2007,weenteredintoacashflowhedgetomitigatethecurrencyriskattachedtothepurchasepricepayable
fortheNationalStarchbusinesses.SettlementofthistransactioninApril2008gaverisetoafairvalueof–332millioneuros.
IncompliancewiththerequirementsofIAS39,wehaverecognizedthisamountasadeductioninGroupequityandhave
alsodeducteditfromthepurchasepriceasofApril3incalculatingtheprovisionaldifference.
Annual Report 2008
81
Notes to the Consolidated Financial Statements
ThebookvaluesoftheacquiredassetsandliabilitiescorrespondtothefiguresintheauditedopeningbalancesheetsrelatingtotheacquiredactivitiesasofApril3,2008,towhichtheaccountingandvaluationmethodsoftheHenkelGroup
wereapplied:
Reconciliation of purchase price with provisional goodwill as of April 3, 2008
in million euros
2008
Purchase price
3,676
Purchase price adjustment based on provisions of the sale agreement
173
Fair value of cash flow hedge
–332
Adjusted purchase price
3,517
Incidental acquisition costs
26
Cost of acquisition of the National Starch businesses
3,543
Book values of the acquired assets and liabilities
–640
Provisional difference
2,903
Customer relationships
289
Technologies
215
Trademarks and brands
98
Other intangible assets
61
Other assets and liabilities
3
Deferred taxes
–227
Provisional goodwill
2,464
TheinclusionoftheNationalStarchbusinesseshadthefollowinginfluenceontheassetsandliabilitiesoftheHenkel
Group:
Opening balance sheet as of April 3, 2008
in million euros
Book value
Adjustment
Fair value
–
2,464
2,464
18
663
681
329
15
344
Financial assets
4
–
4
Other non-current assets
8
–
8
83
–
83
Non-current assets
442
3,142
3,584
Inventories
165
11
176
Trade accounts receivable
306
–
306
Other current assets
298
–
298
84
–
84
853
11
864
1,295
3,153
4,448
Net assets
640
2,903
3,543
Provisions for pensions and similar obligations
130
–
130
Other long-term provisions and non-current liabilities
27
–
27
Deferred taxes
44
227
271
Non-current liabilities
201
227
428
Other short-term provisions and current liabilities
153
23
176
Short-term borrowings
51
–
51
Trade accounts payable
250
–
250
Provisional goodwill
Other intangible assets
Property, plant and equipment
Deferred taxes
Liquid funds / Marketable securities
Current assets
Total assets
Current liabilities
Total equity and liabilities
82
Annual Report 2008
454
23
477
1,295
3,153
4,448
Notes to the Consolidated Financial Statements
FromApril3,2008toDecember31,2008,theacquiredNationalStarchbusinessescontributed1,204millioneurosto
HenkelGroupsales.Thecontributiontonetearningsmadebythesebusinessesoverthesameperiod,afteradjustingfor
restructuringchargesof142millioneuros,amountedto23millioneuros.Iftheacquiredbusinesseshadbeenconsolidated
asofJanuary1,2008,HenkelsalesinthereportingperiodfromJanuary1toDecember31,2008wouldhaveincreasedby
1,609millioneuros,andnetearningsaftertaxwouldhavebeen31millioneuroshigher.
ThepurchasepriceandthereforethegoodwillfiguredeterminedfollowingprovisionalpurchasepriceallocationessentiallyrepresentsanticipatedsynergiesarisingfromtheintegrationoftheNationalStarchbusinesseswithintheHenkel
organization.
Other acquisitions and divestments
OnJanuary11,2008HenkelsoldHenkelConcordeS.A.S.andtheentireindustrialwatertreatmentbusinesstoBKGiulini,
Ludwigshafen.Thismeasurewasinaccordancewithourstrategyoffocusingonourcorebusinessesandofsheddingnon-core
activitiesasandwhenappropriate.BKGiuliniisasubsidiaryofIsraelChemicalsLtd.(ICL).Thewatertreatmentbusiness,
whichwasassignedtotheAdhesiveTechnologiesbusinesssector,generatedsalesofaround52millioneurosin2007.The
saleofthebusinessyieldedaprofitof8millioneuros.
Sale of the investment in Ecolab
OnNovember12,2008,Henkelsuccessfullyplacedits29.5percentstakeintheassociatedcompanyEcolabInc.,St.Paul,
Minnesota,USAbywayofapublicofferforsaleandastockrepurchasebyEcolab.ThepublicofferingclosedonNovember18,2008andthestockrepurchaseonNovember19,2008.Atotalof72.7millionsharesweresold.Thesaleproceedswere
1,712millioneurosafterdeductionoftransactioncosts(30millioneuros)andadjustmentfornegativeforeignexchange
effects(16millioneuros).
Untilthetimeofthesale,thesharesinEcolabwereaccountedforunder“Financialassets”usingtheequitymethodat
theappropriateproportionofitsnetassets(seealsoNotes8and13,
pages 88/89 and 96/97).Intheconsolidatedfinancial
statements,thesaleproceedsweretranslatedapplyingtheexchangerateof1.2465USdollars/europertainingatthetime
ofthetransaction.
NobusinessrelationshipsofnoteexistedbetweenEcolabandHenkel.
Calculation of gain from sale of Ecolab investment
in million euros
2008
Proceeds of sale
1,712
Book value of investment including items recognized in equity1)
Gain from sale of investment
1)
670
1,042
Including 16 million euros recycled from equity per IAS 27.30, and currency translation adjustments of 16 million euros
Consolidation methods
Thepurchasemethodisusedfortheconsolidationofcapital.Thismethodstipulatesthat,forbusinesscombinations,all
hiddenreservesandhiddenchargesinthecompanyacquiredarefullyreflectedatfairvalueandallidentifiableintangible
assetsareseparatelydisclosed.Anydifferencearisingbetweenthefairvalueofthenetassetsandthepurchasepriceis
recognizedasgoodwill.Companiesacquiredareincludedintheconsolidationforthefirsttimebyoffsettingthecarrying
amountoftheparentcompany’sinvestmentinthesubsidiarycompaniesagainsttheirassetsandliabilities.Insubsequent
years,thecarryingamountoftheparentcompany’sinvestmentinthesubsidiarycompaniesiseliminatedagainstthecurrentequityofthesubsidiarycompanies.
Allreceivablesandliabilities,sales,incomeandexpenses,aswellasintercompanyprofitsonnon-currentassetsor
inventoriessuppliedbyothercompaniesintheGroup,areeliminatedonconsolidation.Intra-Groupsuppliesareeffected
onthebasisofmarketortransferprices.
Annual Report 2008
83
Notes to the Consolidated Financial Statements
Currency translation
Thefinancialstatementsoftheconsolidatedcompaniesincludedintheconsolidation,includingthehiddenreservesand
hiddenchargesofGroupcompaniesrecognizedunderthepurchasemethod,andalsogoodwillarisingonconsolidation,
aretranslatedintoeurosusingthefunctionalcurrencymethodoutlinedinIAS21.Thefunctionalcurrencyisthemain
currencyinwhichtheforeigncompanygeneratesfundsandmakespayments.Asthefunctionalcurrencyforallthecompaniesincludedintheconsolidationisthelocalcurrencyofthecompanyconcerned,assetsandliabilitiesaretranslated
atclosingrates,whileincomeandexpensesaretranslatedattheaverageratesfortheyear,basedonanapproximationof
theactualratesatthedateoftranslation.Thedifferencesarisingfromusingaverageratherthanclosingratesaretakento
equityanddisclosedunderothergainsandlossesrecognizedinequity,withoutaffectingearnings.
Foreigncurrencyaccountsreceivableandpayablearetranslatedatclosingrates.ForthemaincurrenciesintheGroup,
thefollowingexchangerateshavebeenusedbasedononeeuro:
Currency
Average exchange rate
Closing exchange rate
ISO Code
2007
2008
2007
2008
British pounds
GBP
0.68
0.80
0.7334
0.9525
Swiss francs
CHF
1.64
1.59
1.6547
1.4850
Japanese yen
JPY
161.20
152.56
164.9300
126.1400
US dollars
USD
1.37
1.47
1.4721
1.3917
Ourtreatmentwithrespecttothemajortransactionsundertakenintheyearunderreviewwasasfollows:
»WevaluedandconvertedtheacquisitionoftheNationalStarchbusinessesusingtheclosingratespertainingasofthe
dateoftheacquisition.
»WevaluedandconvertedtheproceedsfromourdivestmentofEcolabInc.usingtheclosingratespertainingasofthe
closingdateofthepublicoffering.
Accounting estimates and assumptions
Preparationoftheconsolidatedfinancialstatementsisbasedonanumberofaccountingestimatesandassumptions.These
haveanimpactonthereportedamountsofassets,liabilitiesandcontingentliabilitiesatthebalancesheetdateandthe
disclosureofincomeandexpensesforthereportingperiod.Theactualamountsmaydifferfromtheseestimates.
Theaccountingestimatesandtheirunderlyingassumptionsarecontinuallyreviewed.Adjustmentsandrestatements
withrespecttoaccountingestimatesarerecognizedintheperiodinwhichthechangetakesplacewheresuchchange
exclusivelyaffectsthatperiod.Achangeisrecognizedintheperiodinwhichitoccursandinlaterperiodswheresuch
changeaffectsboththereportingperiodandsubsequentperiods.ThejudgmentsoftheManagementBoardregarding
theapplicationofthoseIFRSswhichhaveasignificantimpactontheconsolidatedfinancialstatementsarepresentedin
theexplanatorynotesontaxesonincome(Note9),intangibleassets(Note11),pensionsandsimilarobligations(Note28),
derivativesandotherfinancialinstruments(Note42)andshare-basedpaymentplans(Note43).
84
Annual Report 2008
Notes to the Consolidated Financial Statements
Accounting standards not applied in advance of their effective date
ThefollowinginterpretationsandrevisionstoexistingstandardsofpossiblerelevancetoHenkel,whichhavesincebeen
adoptedintoEUlaw(endorsementmechanism)butarenotyeteffective,havenotyetbeenapplied:
»InJanuary2008,theInternationalAccountingStandardsBoard(IASB)issuedarevisionofInternationalFinancialReportingStandard(IFRS)2“Share-basedPayment”.Thisrevisionrestrictsthedefinitionofvestingconditionstoincludeonly
serviceconditionsandperformanceconditions.Italsostipulatesthattheaccountingrulesrelatingtoearlytermination
ofaplanapplyirrespectiveofwhethertheplanisterminatedbytheentityitselforanotherparty.Theamendmentsare
applicableforfinancialyearsbeginningonorafterJanuary1,2009,withearlierapplicationpermitted.
»InSeptember2007,theIASBissuedarevisionofInternationalAccountingStandard(IAS)1“PresentationofFinancial
Statements:ARevisedPresentation”.Thisreplacestheversionissuedin2005.Thepurposeoftherevisionistoimprove
theeaseoftheanalysisandcomparabilityofannualfinancialstatementsfortheirusers.IAS1stipulatestheprinciples
forthepresentationandstructureoffinancialstatements.Italsospecifiestheminimumrequirementsgoverningthe
contentoffinancialstatements.ThenewstandardisapplicableforfinancialyearsbeginningonorafterJanuary1,2009,
withearlierapplicationpermitted.
»InMarch2007,theIASBissuedarevisionofthestandardIAS23“BorrowingCosts”.Thisrequiresthecapitalizationof
borrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofaqualifyingasset.Anasset
isdeemedtoqualifywhereitnecessarilytakesasubstantialperiodoftimetogetitreadyforitsintendeduseorsale.The
standardistobeappliedprospectivelytoborrowingcostsrelatingtoqualifyingassetswhicharecapitalizedonorafter
January1,2009.
»InFebruary2008,theIASBissuedamendmentstoIAS32“FinancialInstruments:Presentation”andtoIAS1“PresentationofFinancialStatements–PuttableFinancialInstrumentsandObligationsArisingonLiquidation”.Theamendments
primarilyrelatetotheclassificationofcertaintypesoffinancialinstrumentsasequityorafinancialliability.Italso
requirestheinclusionofadditionalnotestothefinancialstatementsdetailingthosefinancialinstrumentsaffectedby
thisclassificationrequirement.TheamendmentsareapplicableforfinancialyearsbeginningonorafterJanuary1,2009,
withearlierapplicationpermitted.
»InMay2008,theIASBissueditsfirstcollectivestandard“ImprovementstoIFRSs”aimedatimplementingminorchangesto
existingIFRSstandards.Thisstandardproposeschangesto20IFRSstandards.Thefirstpartrelatestoaccountingchanges
forpresentation,recognitionormeasurementpurposes.Thesecondpartcontainsamendmentscomprisedofterminology
oreditorialchangesonly.Unlessotherwisestipulatedinthestandard,theamendmentsareapplicableforfinancialyears
beginningonorafterJanuary1,2009,withearlierapplicationpermitted.
»TheamendmentsstipulatedinIFRS1andIAS27“CostofanInvestmentinaSubsidiary,Jointly-ControlledEntityorAssociate”relatetothefirst-timeapplicationofIFRSsandhavenorelevanceforHenkel.
»InternationalFinancialReportingInterpretationsCommitteeinterpretationIFRIC13“CustomerLoyaltyProgrammes”
relatestotherecognitionandmeasurementofsuchcustomerloyaltyprogramsinwhichgenerallycustomersareawarded
points(loyaltyawardcredits)thatallowthemtoobtaingoodsorservicesfreeofchargeoratdiscountedpricesfromthe
sellerorathirdparty.AccordingtoIFRIC13,theproceedsfromthesalehavetobedividedintotwocomponents.Onepart
oftherevenueisassignedtotheactualsaletransactiongivingrisetotheawardcredits.Theotherpartisassignedtothe
futuretransactionresultingfromredemptionoftheawardcredits.Theportionoftheproceedsallocatedtothegoods
Annual Report 2008
85
Notes to the Consolidated Financial Statements
alreadysoldorservicealreadyperformedistoberecognizedinprofitorloss.Theportionoftherevenueattributable
totheawardcreditsisregardedasdeferredandrecognizedasaliabilityinthesenseofapaymentinadvanceuntilthe
awardcreditsareredeemedbythecustomerandtherelatedobligationhasbeenfulfilled.Theinterpretationisapplicable
forfinancialyearsbeginningonorafterJuly1,2008,withearlierapplicationpermitted.
TheseinterpretationsandstandardswillbeappliedbyHenkelfromfiscal2009orlater.Weexpectthefutureapplication
ofIFRIC13andthechangestotheaforementionedstandardsnottohaveasignificantimpactonthepresentationofthe
financialstatements.
In2008,theIASBissuedthefollowingstandardsorinterpretationsofandamendmentstostandardsofrelevanceto
HenkelwhichstillhavetobeadoptedinEUlaw(endorsementmechanism)beforetheybecomeapplicable:
»RevisedIFRS3“BusinessCombinations”
»RevisedIAS27“ConsolidatedandSeparateFinancialStatements”
»AmendmenttoIAS39“EligibleHedgedItems–AmendmenttoIAS39FinancialInstruments:Recognitionand
Measurement”
»IFRIC15“AgreementsfortheConstructionofRealEstate”
»IFRIC16“HedgesofaNetInvestmentinaForeignOperation”
»IFRIC17“DistributionsofNon-cashAssetstoOwners”
»IFRIC18“TransfersofAssetsfromCustomers”
TheseinterpretationsandstandardswillbeappliedbyHenkelfromfiscal2009orlater.Weexpectthefutureapplication
ofIFRIC15–18andthechangestotheaforementionedstandardsnottohaveasignificantimpactonthepresentationof
thefinancialstatements.
86
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Statement of Income
Notes to the
Consolidated Statement of Income
(1) Sales and principles of income realization
Salescomprisesalesofgoodsandserviceslesssalesdeductions.Salesarerecognizedoncethegoodshavebeendeliveredor
theservicehasbeenperformed.Inthecaseofgoods,thiscoincideswiththephysicaldeliveryandtransferofrisk.Itmust
alsobeprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheGroupandthecostsincurred
inrespectofthetransactionmustbereliablymeasurable.Servicesaregenerallyprovidedinconjunctionwiththesaleof
goodsandrecordedoncetheservicehasbeenperformed.Nosaleisrecognizediftherearesignificantrisksrelatingtothe
receiptoftheconsiderationoritislikelythatthegoodswillbereturned.
Interestincomeisrecognizedonatimeproportionbasisthattakesintoaccounttheeffectiveyieldontheassetandthe
interestrateinforce.Dividendincomefrominvestmentsisrecognizedwhentheshareholder’srighttoreceivepayment
isestablished.
AnanalysisofsalesbybusinesssectorandgeographicalregionisshownintheGroupsegmentreportson
pages 78 and 79.
(2) Cost of sales
Costofsalescomprisesthecostofproductsandservicessoldandthepurchasecostofmerchandisesold.Itconsistsofthe
directlyattributablecostofmaterialsandprimaryproductioncost,aswellasindirectproductionoverheadsincludingthe
appropriateamountofwearandtearonnon-currentassets.
(3) Marketing, selling and distribution expenses
Inadditiontomarketingorganizationanddistributioncosts,thisitemcomprisesmainlyadvertising,salespromotionand
marketresearchcosts.Alsoincludedherearethecostsoftechnicaladvisoryservicesforcustomersandamountswritten
offaccountsreceivable.
(4) Research and development expenses
Researchexpensesmaynotberecognizedasanasset.Developmentcostsarerecognizedasanassetifallthecriteriafor
recognitionaremet,theresearchphasecanbeclearlydistinguishedfromthedevelopmentphaseandtheexpenditurecan
beattributedtodistinctindividualprojectphases.Currently,thecriteriasetoutinIAS38forrecognizingdevelopment
costsarenotallbeingmet,duetoahighlevelofinterdependencewithinthedevelopmentprojectsandthedifficultyof
assessingwhichproductswilleventuallybemarketable.
(5) Administrative expenses
Administrativeexpensesincludepersonnelandnon-personnelcostsofGroupmanagementandcostsrelatingtotheHuman
Resources,Purchasing,AccountsandITdepartments.
(6) Other operating income
Other operating income
in million euros
Gains on disposal of non-current assets
Profits on sale of businesses
Income from release of provisions
Income from release of valuation allowances for doubtful debts
Write-ups of non-current assets
Sundry operating income1)
Total
1)
2007
2008
14
14
–
8
35
44
6
6
3
–
51
88
109
160
Includes a net loss on translation of operating receivables and payables in foreign currency of 17 million euros and a net profit on the remeasurement to fair value of
operating derivative hedge transactions of 19 million euros
Annual Report 2008
87
Notes to the Consolidated Financial Statements » Notes to the Consolidated Statement of Income
Profitsonsaleofbusinessesrelatetothesaleofourwatertreatmentbusiness.
Theriseinsundryoperatingincomerelatestoanumberofindividualitemsfromouroperatingbusinessesandisfurther
attributabletothefirst-timeconsolidationoftheNationalStarchbusinessesintheyearunderreview.
(7) Other operating charges
Other operating charges
in million euros
Write-downs of miscellaneous assets
2007
2008
5
4
Foreign exchange losses on operating activities
6
–
Losses on disposal of non-current assets
9
17
Sundry operating expenses
44
54
Total
64
75
1)
1)
The 2007 figure includes a net loss on translation of operating receivables and payables in foreign currency of 7 million euros and a net gain on the remeasurement to fair
value of operating derivative hedge transactions of 1 million euros
(8) Financial result
Financial result
in million euros
2007
Share of net profits of associates
Gain from the sale of investment in Ecolab Inc., USA
Net result from other investments
Net interest
Total
2008
88
83
–
1,042
–4
–2
–178
–275
–94
848
2007
2008
–
3
Net result from other investments
in million euros
Income from other investments
Write-downs of shares in non-consolidated affiliated companies
and investments at amortized cost
–3
–3
Other
–1
–2
Total
–4
–2
2007
2008
Interest and similar income from third parties
66
54
Other financial income
16
37
Net interest
in million euros
Expected return on plan assets less interest expense for pension provisions
1)
Total interest income
Interest charges payable to third parties
Other financial charges
Interest expense for pension provisions less expected return on plan assets
–
91
–230
–306
–39
–47
–
–13
Total interest expense
–269
–366
Total
–178
–275
1)
1)
88
9
91
Interest expense of 179 million euros and expected interest income of 166 million euros (2007: interest expense of 151 million euros and expected interest income of
160 million euros)
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Statement of Income
OnNovember12,HenkelsuccessfullyplaceditsshareholdinginEcolabInc.,St.Paul,Minnesota,USAonthestockexchange.
IncludingthestocksoldbacktoEcolab,thetotalnumberofEcolabsharesdivestedwas72.7million.ThesaleoftheEcolab
investmentenablesustofocusmorefirmlyonourcoreoperatingbusinesses.
Thenetinterestfigureincludesthenetresultonthevaluationatfairvalueofmarketablesecuritiesof0millioneuros
(2007:netlossof–9millioneuros),thenetlossontranslationofnon-operatingreceivablesandliabilitiesinforeigncurrencyof–101millioneuros(2007:netlossof–149millioneuros)andthenetgainontheremeasurementtofairvalueof
non-operatingderivativehedginginstrumentsof78millioneuros(2007:netgainof157millioneuros).
(9) Taxes on income
Earnings before taxes on income and analysis of taxes
in million euros
2007
2008
Earnings before tax
1,250
1,627
290
570
Current taxes
Deferred taxes
Taxes on income
19
–176
309
394
Main components of tax expense and income
in million euros
2007
2008
Current tax expense / income in the reporting year
300
583
Current tax adjustments for prior years
–10
–13
Deferred tax expense / income from temporary differences
Deferred tax expense / income from changes in tax rates
Increase / decrease in valuation allowances on deferred tax assets
9
–144
–13
5
–3
8
Allocation of deferred taxes
in million euros
Deferred tax assets
Deferred tax liabilities
Dec. 31, 2007
Dec. 31, 2008
Dec. 31, 2007
Dec. 31, 2008
Intangible assets
40
127
401
664
Property, plant and equipment
16
37
81
86
Financial assets
66
69
25
4
Inventories
25
29
7
8
Other receivables and miscellaneous assets
78
62
31
107
5
9
71
57
Provisions
306
409
45
53
Liabilities
132
153
37
16
1
2
–
–
16
51
–
–
Special tax-allowable items
Tax credits
Unused tax losses
Amounts netted
685
948
698
995
–384
–583
–384
–583
Valuation allowances
–52
–60
–
–
Balance sheet figures
249
305
314
412
Atotalof220millioneurosoftheincreaseindeferredtaxliabilitieswithrespecttointangibleassetsisattributabletothe
acquisitionoftheNationalStarchbusinesses.
Annual Report 2008
89
Notes to the Consolidated Financial Statements » Notes to the Consolidated Statement of Income
Deferredtaxassetsandliabilitiesareaccountedforwithrespecttotemporarydifferencesbetweenthebalancesheetvaluationofanassetorliabilityanditstaxbase,andwithrespecttounusedtaxlossesandconsolidationproceduresaffecting
earnings.Amountsnettedrepresenttaxassetsandliabilitiesrelatingtothesametaxauthority.
ThedeferredtaxbalancesrecognizedbyGermanandforeigncompanieswithrespecttotemporarydifferencesonprovisionsrelatemainlytopensionsandsimilarobligations.
Germancompanieshaverecognizeddeferredtaxbalancesinrespectofspecialtax-allowableitemsrelatingtoproperty,
plantandequipmentandtoreinvestmentreserves.
Whetherdeferredtaxassetscanberecognizeddependsontheprobabilitythatthedeferredtaxassetscanactuallybe
realizedinthefuture.Thelevelofprobabilitymustbemorethan50percent.Includedundertheheading“Unusedtax
losses”aredeferredtaxassetsof19millioneurosinrespectofunusedtaxlossesinGermany,whichareexpectedtobe
utilizedbytheendof2010.
Thevaluationallowancesondeferredtaxassetsof60millioneuros(2007:52millioneuros)areinrespectoftemporary
differencesbetweenthebalancesheetvaluationofanassetorliabilityanditstaxbaseandarebasedonareassessmentof
thelikelihoodthattheywillbeutilizedinthefuture.
Deferredtaxeshavenotbeenrecognizedwithrespecttounusedtaxlossesof358millioneuros(2007:412millioneuros),
asitisnotsufficientlyprobablethattaxableprofitwillbeavailableagainstwhichtheymaybeutilized.Deferredtaxesof
2millioneuros(2007:1millioneuros)havebeenrecognizedwithrespecttotaxcredits.
Expiry dates of unused tax losses and tax credits
Unused tax losses
Tax credits
Dec. 31, 2007
Dec. 31, 2008
Dec. 31, 2007
Dec. 31, 2008
1 year
42
37
–
–
2 years
16
32
–
–
3 years
56
36
2
1
Must be utilized within
225
203
–
1
May be carried forward without restriction
more than 3 years
177
268
–
–
Total
516
576
2
2
Thistableincludesunusedtaxlossesarisingfromthedisposalofassetsof9millioneuros(2007:11millioneuros)which
maybecarriedforwardwithoutrestriction.Inmanycountries,differenttaxratesapplytolossesonthedisposalofassets
andtooperatingprofits,andinsomecaseslossesonthedisposalofassetsmayonlybeoffsetagainstprofitsonthedisposal
ofassets.
Deferredtaxliabilitieshavenotbeenrecognizedontheretainedprofitsofforeignsubsidiaries.Theretainedprofits
areavailabletothesubsidiariesforfurtherinvestment.
Theindividualcompanyreconciliations–preparedonthebasisofthetaxratesapplicableineachcountryandtaking
intoaccountconsolidationprocedures–havebeensummarizedinthereconciliationoverleaf.Theestimatedtaxcharge,
basedonthetaxrateapplicabletoHenkelAG&Co.KGaAof31percent(2007:40percent),isreconciledtothetaxcharge
disclosed.
90
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Statement of Income
Calculation of the tax charge disclosed
in million euros
2007
2008
Earnings before taxes on income
1,250
1,627
Tax rate (including trade tax) on income of Henkel AG & Co. KGaA
40 %
31 %
500
504
–153
–26
Tax reductions for prior years
–46
–61
Tax increases/reductions due to changes in tax rates
–13
5
32
10
Effects of different tax rates on net result from investments
(at-equity investments)
–34
–25
Tax reductions due to tax-free income and other items
–25
–22
48
52
Estimated tax charge
Tax reductions due to differences between
local tax rates and the hypothetical tax rate
Tax increases due to losses in respect of which deferred taxes have not been recognized
Tax increases due to non-deductible expenses
and other items
comprising
Non-deductible expenses
32
28
Trade tax additions
12
10
4
14
Non-deductible withholding tax
Tax effect of sale of Ecolab shares
–
–43
309
394
24.72 %
24.22 %
Tax charge disclosed
Effective tax rate
Effective2008,Germancorporationtaxlegislationstipulatesastatutorytaxrateof15percentplusthesolidaritysurcharge
of5.5percent.Aftertakingintoaccounttradetax,thisyieldsanexpectedtaxrateof31percent.
Ataxincomeof55millioneuroswasrecognizedinequity(2007:taxexpenseof26millioneuros).Thisrelatestoactuarialgainsandlossesonpensionobligationsandthevaluationofderivativefinancialinstruments.
(10) Minority interests
Theamountshownhererepresentstheshareofprofitsandlossesattributabletoothershareholders.
Theirshareofprofitsamountedto22millioneuros(2007:29millioneuros)andthatoflossesto10millioneuros(2007:
9millioneuros).
Annual Report 2008
91
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Notes to the Consolidated Balance Sheet
The accounting policies for balance sheet items are described in the relevant Note.
Non-current assets
All non-current assets with definite useful lives are amortized or depreciated using the straight-line method on the basis
of estimated useful lives standardized throughout the Group, with impairment losses being recognized when required.
The following standard useful lives continue to be used as the basis for calculating amortization and depreciation:
Useful life
in years
Intangible assets with definite useful lives
3 to 20
Residential buildings
50
Office buildings
40
Research and factory buildings, workshops, stores and staff buildings
25 to 33
Production facilities
10 to 25
Machinery
7 to 10
Other equipment
10
Vehicles
5 to 20
Factory and research equipment
2 to 5
(11) Intangible assets
Cost
in million euros
Assets with
indefinite
useful lives
Assets with
definite
useful lives
Internally
generated
intangible assets
with definite
useful lives
Goodwill
Total
1,170
919
74
3,782
5,945
Changes in the Group/Acquisitions
–
–11
–
9
–2
Additions
–
12
28
–
40
Disposals1)
–
–22
–
–64
–86
At January 1, 2007
Reclassifications
Translation differences
At December 31, 2007/January 1, 2008
Changes in the Group/Acquisitions
–
–5
21
–
16
–113
–41
–
–335
–489
1,057
852
123
3,392
5,424
3,222
86
597
–
2,539
Additions
–
10
10
–
20
Disposals1)
–
–41
–
–
–41
Reclassifications
–5
7
4
–
6
Translation differences
63
43
–1
192
297
1,201
1,468
136
6,123
8,928
At December 31, 2008
92
Trademark rights
and other rights
1)
of which assets held for sale 2008
–
–1
–
–
–1
1)
of which assets held for sale 2007
–
–3
–
–62
–65
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Accumulated amortization
in million euros
Trademark rights
and other rights
Assets with
indefinite
useful lives
Assets with
definite
useful lives
Internally
generated
intangible assets
with definite
useful lives
Goodwill
Total
At January 1, 2007
4
444
10
–
458
Changes in the Group/Acquisitions
–
–5
–
–
–5
Write-ups
–
–
–
–
–
Scheduled amortization
–
44
12
–
56
Impairment losses
–
1
–
–
1
Disposals
–
–19
–
–
–19
Reclassifications
–
–
1
–
1
Translation differences
–
–8
–
–
–8
At December 31, 2007/January 1, 2008
4
457
23
–
484
Changes in the Group/Acquisitions
–
–
–
–
–
Write-ups
–
–
–
–
–
Scheduled amortization
–
78
17
–
95
Impairment losses
–
4
–
–
4
Disposals
–
–39
–
–
–39
Reclassifications
–
–
–
–
–
Translation differences
–
–8
–
–
–8
At December 31, 2008
4
492
40
–
536
Assets with
indefinite
useful lives
Assets with
definite
useful lives
Internally
generated
intangible assets
with definite
useful lives
Goodwill
Total
At December 31, 2008
1,197
976
96
6,123
8,392
At December 31, 2007
1,053
395
100
3,392
4,940
Net book value
in million euros
Trademark rights
and other rights
Trademarks and other rights acquired for valuable consideration are stated initially at cost, while internally generated
software is stated at cost. Thereafter, goodwill and trademark rights and other rights with indefinite useful lives are subject to an impairment test at least once a year (impairment-only approach). In the course of our annual impairment test,
we reviewed the carrying values of goodwill and trademark rights and other rights with indefinite useful lives. Allocation
of trademark rights and other rights with indefinite useful lives, and also goodwill, to cash-generating units was, in the
context of the purchase price allocation (PPA) relating to the acquisition of the National Starch businesses, aligned to the
business areas of the Adhesive Technologies business sector, with the figures for the previous year being restated. The table
overleaf shows the cash-generating units together with the associated goodwill and trademark rights and other rights with
indefinite useful lives at book value at the balance sheet date.
Annual Report 2008
93
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Book value
Dec. 31, 2007
in million euros
Cash-generating units
Trademark rights
and other rights
with indefinite
useful lives
Dec. 31, 2008
Goodwill
Trademark rights
and other rights
with indefinite
useful lives
Goodwill
Detergents
321
631
338
661
Household cleaners
227
719
240
732
Total Laundry & Home Care
548
1,350
578
1,393
Retail products
444
970
466
1,006
Hair salon products
Total Cosmetics/Toiletries
Building adhesives
Adhesives for craftsmen and consumers
Packaging, consumer goods and
construction adhesives
Specialty adhesives, surface treatment
and electronics
Total Adhesive Technologies
14
32
13
48
458
1,002
479
1,054
7
30
6
63
36
340
38
326
4
63
53
1,642
–
607
43
1,645
47
1,040
140
3,676
The assessment for goodwill impairment according to the fair-value-less-cost-to-sell approach is based on future estimated
cash flows which are obtained from corporate budgets with a four-year financial forecasting horizon. For the period after
that, a growth rate in a bandwidth between 1 and 2 percent in the cash flows is assumed for the purpose of impairment
testing. The US dollar to euro exchange rate applied is 1.53. Taking into account specific tax effects, the cash flows in all
cash-generating units are discounted at different rates for the cost of capital (WACC) in each business sector: 7.5 percent
after tax for Laundry & Home Care and Cosmetics/Toiletries and 8.5 percent after tax for Adhesive Technologies.
No goodwill impairment losses were recognized as a result of the impairment test.
In the Laundry & Home Care business sector, we have assumed an average increase in sales during the four-year forecasting
horizon of approximately 4 percent per annum with a slight increase in share of world market.
Sales growth in the Cosmetics/Toiletries business sector over the four-year forecasting horizon is budgeted at around
3 percent per annum. With the cosmetics market relevant to Henkel expected to grow at an annual rate of 1 percent, this
would mean an increase in market share.
The anticipated average sales growth during the four-year forecasting horizon in the Adhesive Technologies business sector
is 7 percent per annum.
In all the business sectors, we have assumed that a future increase in the price of raw materials can be largely offset by
economies in purchasing. In conjunction with further measures to improve efficiency and proactive management of the
portfolio, we anticipate achieving higher gross margins in all the business sectors.
The trademark rights and other rights with an indefinite useful life are established in their markets and we will continue to vigorously promote them in the future.
In the impairment tests in 2008 for trademark rights and other rights with an indefinite useful life valued at 1,197 million euros, cash-generating units were identified and their recoverable amounts determined. No impairment losses were
recognized as a result of the impairment test.
94
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(12) Property, plant and equipment
Cost
Land, land
rights and
buildings
Plant and
machinery
1,612
2,651
884
180
–12
–54
–10
–
–76
Additions
62
144
83
181
470
Disposals1)
–67
–93
–73
–9
–242
71
64
21
–172
–16
–42
–59
–20
–5
–126
1,624
2,653
885
175
5,337
161
157
12
12
342
Additions
64
123
85
201
473
Disposals1)
–40
–233
–105
–11
–389
Reclassifications
134
72
23
–235
–6
–5
–20
–13
–6
–44
in million euros
At Jan. 1, 2007
Changes in the Group/Acquisitions
Reclassifications
Translation differences
At Dec. 31, 2007/Jan. 1, 2008
Changes in the Group/Acquisitions
Translation differences
At Dec. 31, 2008
Factory and
Payments on
office
account and
equipment assets in course
of construction
Total
5,327
1,938
2,752
887
136
5,713
1)
of which assets held for sale 2008
–31
–147
–8
–2
–188
1)
of which assets held for sale 2007
–30
–8
–6
–
–44
Land, land
rights and
buildings
Plant and
machinery
Factory and
Payments on
office
account and
equipment assets in course
of construction
Total
Accumulated depreciation
in million euros
761
1,867
621
–
3,249
Changes in the Group/Acquisitions
–6
–37
–8
–
–51
Write-ups
–2
–1
–
–
–3
Scheduled depreciation
46
147
86
–
279
At Jan. 1, 2007
Impairment losses
Disposals1)
Reclassifications
2
1
1
–
4
–27
–73
–64
–
–164
1
–2
–
–
–1
Translation differences
–13
–26
–14
–
–53
At Dec. 31, 2007/Jan. 1, 2008
762
1,876
622
–
3,260
–1
–2
–1
–
–4
–
–
–
–
–
50
160
88
–
298
Changes in the Group/Acquisitions
Write-ups
Scheduled depreciation
Impairment losses
Disposals1)
32
110
6
1
149
–25
–223
–82
–
–330
Reclassifications
–
–
–
–
–
Translation differences
4
–22
–3
–
–21
At Dec. 31, 2008
822
1,899
630
1
3,352
1)
of which assets held for sale 2008
–18
–144
–7
–
–169
1)
of which assets held for sale 2007
–8
–5
–4
–
–17
Annual Report 2008
95
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Net book value
in million euros
At December 31, 2008
At December 31, 2007
Land, land
rights and
buildings
Plant and
machinery
Factory and
Payments on
office
account and
equipment assets in course
of construction
1,116
853
257
135
2,361
862
777
263
175
2,077
Total
Additions are stated at purchase or manufacturing cost. The latter includes direct costs and appropriate proportions of
overheads; interest charges on borrowings are not included. Cost figures are shown net of investment grants and allowances. There were liabilities secured by mortgages at December 31, 2008 of 25 million euros (2007: 35 million euros). The
page 92. Scheduled
periods over which the assets are depreciated are based on their estimated useful lives as set out on
depreciation and impairment losses recognized are disclosed in the consolidated statement of income according to the
functions for which the assets are used.
Impairment losses were incurred primarily in relation to our “Global Excellence” restructuring program.
(13) Financial assets
Shares in affiliated companies and other investments disclosed in financial assets are measured initially at cost and subsequently at their fair values. Shares in affiliated companies and other investments for which the fair value cannot be reliably
determined are measured subsequently at amortized cost.
The shares in the associated company Ecolab Inc., St. Paul, Minnesota, USA, were accounted for until the time of divestment
on November 18, 2008 using the at-equity method at the appropriate proportion of its net assets (see Note 8,
page 88).
Cost
in million euros
At Jan. 1, 2007
Changes in the Group/Acquisitions
Investments in
associates
Other
investments
Total
45
496
38
579
–31
–
–
–31
Additions
7
59
1
67
Disposals
–2
–52
–7
–61
Reclassifications
–
–
–
–
Translation differences
–
–8
–
–8
19
495
32
546
At Dec. 31, 2007/Jan. 1, 2008
Changes in the Group/Acquisitions
2
1
–
3
Additions
–
64
2
66
Disposals1)
–
–637
–25
–662
Reclassifications
–
–
–
–
Translation differences
At Dec. 31, 2008
1)
96
Affiliated
companies
of which assets held for sale 2008
Annual Report 2008
–
78
–
78
21
1
9
31
–
–
–12
–
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Accumulated write-downs
Affiliated
companies
Investments in
associates
Other
investments
Total
At Jan. 1, 2007
2
–
15
17
Changes in the Group/Acquisitions
–
–
–
–
Write-ups
–
–
–
–
Write-downs
–
–
4
4
Disposals
–
–
–3
–3
Reclassifications
–
–
–
–
Translation differences
–
–
–
–
At Dec. 31, 2007/Jan. 1, 2008
2
–
16
18
Changes in the Group/Acquisitions
–
–
–
–
Write-ups
–
–
–
–
Write-downs
1
–
2
3
Disposals1)
–
–
–14
–14
Reclassifications
–
–
–
–
in million euros
Translation differences
–
–
–
–
At Dec. 31, 2008
3
–
4
7
–
–
–8
–
Affiliated
companies
Investments in
associates
Other
investments
Total
1)
of which assets held for sale 2008
Net book value
in million euros
At Dec. 31, 2008
18
1
5
24
At Dec. 31, 2007
17
495
16
528
Dec. 31, 2007
Dec. 31, 2008
29
26
(14) Other non-current financial assets1)
Other non-current financial assets
in million euros
Financial receivables from third parties
Derivatives with positive fair values
–
65
Miscellaneous non-current financial assets
37
81
Total
66
172
With the exception of derivatives, other financial assets are stated at amortized cost. As soon as risks are identified, valuation allowances are set up. All derivative financial instruments are measured initially at cost and subsequently at their
fair values on the balance sheet date.
Miscellaneous financial assets include receivables from employees, from insurance policies and from suppliers.
(15) Other non-current assets1)
Other non-current assets comprise miscellaneous tax receivables and, in particular, sundry prepaid expenses and deferred
charges.
1)
Improvements in data collection during the financial year have led to amounts being allocated differently between “Other non-current financial assets” and “Other
non-current assets”
Annual Report 2008
97
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(16) Deferred taxes
Deferred taxes result from the following factors:
» Timing differences between the balance sheet valuation of an asset or liability and its tax base
» Unused tax losses which are expected to be utilized
» Consolidation procedures at Group level
The allocation of deferred tax assets to the various balance sheet headings is shown in Note 9 (taxes on income,
page 89 to 91).
(17) Inventories
Inventories are stated at purchase or manufacturing cost. Inventories are measured using the FIFO (“first in, first out”)
method or the weighted average cost formula as appropriate.
Manufacturing cost includes – in addition to direct costs – appropriate proportions of necessary overheads (e.g. the goods
inward department, raw materials store, filling and other costs prior to the finished products store), as well as productionrelated administrative expenses and pension costs for employees engaged in the production process, and production-related
depreciation charges. Interest charges incurred during the period of manufacture are, however, not included.
Inventories are written down to their net realizable value if, on the basis of the lower of quoted or market prices,
this is lower than cost at the balance sheet date. The write-down, based on the gross value, was 87 million euros (2007:
69 million euros).
Analysis of inventories
in million euros
Dec. 31, 2007
Dec. 31, 2008
396
472
Raw materials and supplies
Work in process
Finished products and merchandise
Payments on account for merchandise
Total
64
65
818
943
5
2
1,283
1,482
(18) Trade accounts receivable
Trade accounts receivable are due within one year. Valuation allowances are recognized in respect of specific risks as appropriate. Total valuation allowances of 36 million euros (2007: 15 million euros) have been recognized. Trade accounts
receivable include an amount of 0 million euros (2007: 8 million euros) relating to receivables which have been sold to a
factoring company but are still included as assets in the balance sheet because the credit risk has not been fully transferred
to the factor. In 2007, the cash received was disclosed as a liability to the factoring company.
(19) Other current financial assets1)
Other current financial assets
in million euros
Amounts receivable from non-consolidated affiliated companies
Amounts receivable from companies in which an investment is held
Dec. 31, 2008
7
3
9
9
Financial receivables from third parties
48
166
Derivatives with positive fair values
59
241
Miscellaneous current financial assets
47
156
170
575
Total
1)
98
Dec. 31, 2007
Improvements in data collection during the financial year have led to amounts being allocated differently between “Other current financial assets” and “Other current assets”
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
With the exception of derivatives, other current financial assets are stated at amortized cost approximating to their fair
values. Impairment losses are recognized if any risks associated with them are identified. Derivative financial instruments
are measured initially at cost and subsequently at their fair values on the balance sheet date.
Miscellaneous current financial assets include the following:
» Amounts due from employees of 8 million euros (2007: 9 million euros)
» Amounts due from suppliers of 21 million euros (2007: 25 million euros)
» Amounts due from sureties and guarantee deposits of 20 million euros (2007: 15 million euros)
(20) Other current assets1)
Other current assets comprise other tax receivables of 165 million euros (2007: 117 million euros), payments on account of
18 million euros (2007: 26 million euros) and various prepaid expenses and deferred charges.
(21) Liquid funds/Marketable securities
Liquid funds/Marketable securities
in million euros
Dec. 31, 2007
Dec. 31, 2008
1,429
319
11
19
1,440
338
Liquid funds
Marketable securities
Total
Marketable securities are accounted for at their fair values at the balance sheet date. Changes in the value are recognized
directly in equity (see
Note 42 starting on page 111).
Liquid funds are set off against bank loans from the so-called bridge loan where the deposit and the loan are with the
same lender and are of similar maturity. Liquid funds set off amounted to 1,057 million euros.
(22) Assets held for sale
The remeasurement of the assets held for sale at the lower of their carrying amount and fair value less costs to sell did
not lead to the recognition of any impairment losses. Assets held for sale include the production plant in Aurora, Illinois,
USA, for soap bars and deodorants/anti-perspirants in the Cosmetics/Toiletries business sector and the consumer adhesives
business in North America, which is assigned to the Adhesive Technologies business sector.
(23) Subscribed capital
Subscribed capital
in million euros
Dec. 31, 2007
Dec. 31, 2008
260
260
Preferred bearer shares
178
178
Capital stock
438
438
Ordinary bearer shares
Comprising 259,795,875 ordinary shares and 178,162,875 non-voting preferred shares
1)
Improvements in data collection during the financial year have led to amounts being allocated differently between “Other current financial assets” and “Other current assets”
Annual Report 2008
99
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
According to Art. 6 (5) of the Articles of Association, the personally liable partner is authorized – with the approval of the
Shareholders’ Committee and of the Supervisory Board – to increase the capital stock of the corporation in one or more
installments at any time up to April 9, 2011, up to a total of 25.6 million euros by issuing new non-voting preferred shares
to be paid up in cash (authorized capital). The personally liable partner is authorized – with the approval of the Shareholders’ Committee and of the Supervisory Board – to exclude the statutory pre-emptive rights of existing shareholders.
Pre-emptive rights may only be excluded, however, for fractional entitlements or on condition that the issue price for the
new shares is not significantly less than the quoted market price of shares of the same category at the time the issue price
is finally fixed.
At the Annual General Meeting of Henkel AG & Co. KGaA on April 14, 2008, the personally liable partner was authorized
(with the simultaneous withdrawal of the authorization granted at the Annual General Meeting on April 16, 2007 with a
duration until October 15, 2008) to purchase ordinary or preferred shares in the corporation not exceeding 10 percent of
the capital stock at any time up to October 13, 2009.
The personally liable partner was authorized – with the approval of the Shareholders’ Committee and of the Supervisory
Board – to dispose of treasury shares acquired, without first offering them to existing shareholders, by:
» offering and transferring them to members of the Management Board and certain executive management personnel of
Henkel AG & Co. KGaA and to members of the management boards and certain executive management personnel of certain
affiliated companies in Germany and abroad under the terms of the Stock Incentive Plan of the Henkel Group, or
» selling them to third parties or transferring them in other ways for the purpose of acquiring businesses, parts of businesses or investments in businesses or forming business combinations, or
» selling them for cash in a way other than on the stock market or via an offer addressed to all the shareholders, provided
that the selling price of the shares is not significantly lower than the quoted market price at the time of the sale; in
this case, the number of shares sold, together with the new shares issued out of authorized capital, while excluding the
pre-emptive rights of existing shareholders, must not exceed 10 percent of the existing capital stock when the shares are
issued or sold.
The personally liable partner was also authorized – with the approval of the Shareholders’ Committee and of the Supervisory Board – to cancel treasury stock without any further resolution in General Meeting being required.
Treasury stock held by the corporation on December 31, 2008 amounted to 4,834,770 preferred shares. This represents
1.10 percent of the capital stock and a proportional nominal value of 4.8 million euros. Originally, 992,680 shares were
purchased in the year 2000, an amount of 808,120 shares were purchased in 2001 and 694,900 shares were purchased in
2002. This corresponds to a total of 2,495,700 shares or, following the share split implemented in 2007 (at a ratio of 1:3),
7,487,100 shares. Options were exercised for the first time under the Stock Incentive Plan in 2004. Since 2004, taking the
share split into account, the exercise of options has led to a reduction of 2,652,330 in treasury shares held, with a proportional nominal value of 2.7 million euros (0.61 percent of the capital stock). In 2008, the exercise of options led to a reduction of 196,020 in treasury shares held. The proportional nominal value of the capital stock amounted to 0.2 million euros
(0.04 percent). The selling prices were based on the stock market prices prevailing at the time of disposal. Total proceeds
on disposal were 5 million euros and this was recognized directly in equity.
(24) Capital reserve
The capital reserve comprises the amounts received in previous years in excess of the nominal value of preferred shares
and convertible warrant bonds issued by Henkel AG & Co. KGaA.
100
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(25) Retained earnings
Included in retained earnings are the following:
» Amounts allocated in the financial statements of Henkel AG & Co. KGaA in previous years
» Amounts allocated from consolidated net earnings less minority interests
» Buy-back of treasury stock by Henkel AG & Co. KGaA at cost and the gain on their disposal
» The recognition in equity of actuarial gains and losses
(26) Gains and losses recognized in equity
The items under this heading represent the differences on translation of the financial statements of foreign subsidiary
companies and the effects of the revaluation of derivative financial instruments and available-for-sale financial assets
recognized in equity. The derivative financial instruments take the form of either cash flow hedges or hedges of a net
investment in a foreign entity.
Mainly as a result of the increase in the value of the US dollar against the euro, the negative translation difference at
December 31, 2008 decreased by 103 million euros compared to December 31, 2007 (2007: negative translation difference
increased by 425 million euros).
(27) Minority interests
The minority interests comprise the shares of third parties in the equity of a number of companies included in the
consolidation.
(28) Pensions and similar obligations
Employees in companies included in the consolidated financial statements have entitlements under company pension
plans which are either defined contribution or defined benefit plans. These take different forms depending on the legal,
financial and tax regime in each country. The level of benefits provided is based, as a rule, on the length of service and
earnings of the person entitled.
The defined contribution plans are structured in such a way that the corporation pays contributions to public or private
sector institutions on the basis of statutory or contractual terms or on a voluntary basis and has no further obligations
regarding the payment of benefits to the employee.
In defined benefit plans, the liability for pensions and other post-employment benefits is calculated at the present value
of the future obligations (projected unit credit method). This actuarial method of calculation takes future trends in wages,
salaries and retirement benefits into account.
To provide protection under civil law of the pension entitlements of future and current pensioners against insolvency,
the proceeds of the bond issued in 2005 and certain other assets were allocated to Henkel Trust e.V. The trustee invests
the cash with which it has been entrusted in the capital market in accordance with investment policies laid down in the
trust agreement.
Annual Report 2008
101
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Trends in wages, salaries and retirement benefits
Germany
in percent
2007
USA
Rest of world1)
2008
2007
2008
2007
2008
5.3
5.9
5.9
6.4
4.4
5.6
3.25
3.25
4.3
4.3
4.1
3.7
Retirement benefit trend
2.0
2.0
4.3
4.3
2.8
3.3
Expected return on plan assets1)
6.2
6.3
7.0
7.0
5.6
3.9
–
–
9.5
8.5
8.6
9.1
Discount factor
Income trend
Expected increases in costs for
medical benefits
1)
Weighted average
The expected return on total plan assets was derived from the weighted expected long-term return on the various categories of assets.
Present value of pensions and similar obligations at December 31, 2007
in million euros
Germany
USA Rest of world
Total
2,072
722
558
3,352
–
–
–2
–2
Translation differences
–
–78
–23
–101
Actuarial gains/losses
–158
31
–54
–181
68
14
25
107
–
–1
1
–
85
40
26
151
At January 1, 2007
Changes in the Group
Current service cost
Amortization of past service costs
Interest expense
Employees’ contributions to pension funds
3
–
1
4
Retirement benefits paid out of plan assets
–110
–23
–20
–153
–22
–20
–13
–55
–1
–
–3
–4
1,937
685
496
3,118
122
215
75
412
1,815
470
421
2,706
Employer’s payments for pensions and similar obligations
Released
At December 31, 2007
of which unfunded obligations
of which funded obligations
Fair value of plan assets at December 31, 2007
in million euros
At January 1, 2007
1,690
USA Rest of world
497
377
Total
2,564
Changes in the Group
–
–
–
–
Translation differences
–
–54
–20
–74
Employer’s contributions to pension funds
60
–
25
85
Employees’ contributions to pension funds
3
–
1
4
Retirement benefits paid out of plan assets
–110
–23
–20
–153
104
32
24
160
Expected return on plan assets
Actuarial gains/losses
At December 31, 2007
Actual return on plan assets
102
Germany
Annual Report 2008
–134
11
–2
–125
1,613
463
385
2,461
–30
43
22
35
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Net pension cost in 2007
in million euros
Current service cost
Amortization of past service costs
Interest expense
Expected return on plan assets
Net pension cost
Germany
68
USA Rest of world
14
25
Total
107
–
–1
1
–
85
40
26
151
–104
–32
–24
–160
49
21
28
98
The underfunding of the obligations corresponded in 2007 to the reported provisions for pensions and similar
obligations.
Present value of pensions and similar obligations at December 31, 2008
in million euros
Germany
USA Rest of world
Total
1,937
685
496
3,118
Changes in the Group
7
178
163
348
Translation differences
–
47
–37
10
Actuarial gains/losses
–130
–50
–67
–247
36
28
26
90
–
–17
–
–17
100
48
31
179
At January 1, 2008
Current service cost
Gains/losses arising from the termination and curtailment of plans
Interest expense
Employees’ contributions to pension funds
2
–
1
3
Retirement benefits paid out of plan assets
–17
–28
–26
–71
–109
–23
–22
–154
Employer’s payments for pensions and similar obligations
Past service cost
At December 31, 2008
of which unfunded obligations
of which funded obligations
–
–11
–
–11
1,826
857
565
3,248
120
216
81
417
1,706
641
484
2,831
Fair value of plan assets at December 31, 2008
in million euros
Germany
USA Rest of world
Total
1,613
463
385
2,461
Changes in the Group
–
95
144
239
Translation differences
–
27
–38
–11
15
79
63
157
At January 1, 2008
Employer’s contributions to pension funds
Employees’ contributions to pension funds
2
–
1
3
Retirement benefits paid out of plan assets
–17
–28
–26
–71
Expected return on plan assets
Actuarial gains/losses
At December 31, 2008
Actual return on plan assets
102
35
29
166
–204
–181
–114
–499
1,511
490
444
2,445
–102
–146
–85
–333
Annual Report 2008
103
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Net pension cost in 2008
in million euros
Germany
Current service cost
USA Rest of world
36
28
26
Total
90
Amortization of past service costs
–
–8
–
–8
Gains/losses arising from the termination and curtailment of plans
–
–17
–
–17
Interest expense
Expected return on plan assets
Net pension cost
100
48
31
179
–102
–35
–29
–166
34
16
28
78
Reconciliation of overfunding/underfunding and reported provisions for pensions and similar obligations
as of December 31, 2008
in million euros
Germany
USA Rest of world
Total
–315
–367
–121
–803
Plan assets reported as net assets
–
–
–7
–7
Amount not recognized due to asset ceiling
–
–
–17
–17
Past service cost
–
–6
–
–6
–315
–373
–145
–833
Overfunding/underfunding of obligations
Recognized amount
Actuarial gains and losses are recognized in the year in which they arise as part of the pension provision and included in
the statement of recognized income and expense in accordance with IAS 19.93B. As of December 31, 2008, accumulated
actuarial gains and losses of 820 million euros had been offset against retained earnings.
Of the amounts added to the provision in 2008, 90 million euros (2007: 107 million euros) is included in operating profit
(pension costs as part of payroll costs,
financial result (
page 117) and an expense of –13 million euros (2007: gain of 9 million euros) in
page 88). The expenses shown in operating profit and all the releases from provisions are allocated by
function, depending on the spheres of activity of the employees. The employer’s contributions in respect of state pension
provisions are included as “Social security costs and staff welfare costs” under Note 43. In 2008, contributions to plan assets
amounted to 157 million euros (2007: 85 million euros).
Analysis of plan assets
in million euros
Dec. 31, 2007
Dec. 31, 2008
Fair value
in %
Fair value
in %
Invested in shares
931
37.8
441
18.1
Invested in bonds
552
22.5
939
38.4
Invested in investment funds
470
19.1
125
5.1
Invested in cash
328
13.3
616
25.2
19
0.8
33
1.4
159
6.4
190
7.7
Investment funds
Invested in sundry assets
Other assets
Cash
2
0.1
101
4.1
Total
2,461
100.0
2,445
100.0
At December 31, 2008, other assets making up the plan assets included the present value of a non-current receivable of
43 million euros (2007: 43 million euros) relating to claims pertaining to a hereditary building lease assigned by Henkel
AG & Co. KGaA to Henkel Trust e.V. Also shown here is a claim of 107 million euros (2007: 113 million euros) against Cognis
for indemnification of pension obligations.
104
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
In 2008, Henkel AG & Co. KGaA waived indemnification out of the assets held by Henkel Trust e.V. with respect to payments
made to pensioners. If these amounts had been indemnified, an amount of about 105 million euros would have been paid
out of the assets held by Henkel Trust e.V. This waiver had a positive effect on the funding ratio with respect to pension
obligations.
Effects of a trend change in medical costs
Dec. 31, 2007
in million euros
Dec. 31, 2008
Service cost
Interest
expense
Present value
of obligations
Service cost
Interest
expense
Present value
of obligations
Increase in medical costs
of one percent
0
1
10
0
1
9
Decrease in medical costs
of one percent
0
–1
–9
0
–1
–8
Additional information
in million euros
2005
2006
2007
2008
Present value of obligations
3,354
3,352
3,1181)
3,2483)
Fair value of plan assets
2,294
2,564
2,4612)
2,4454)
–1,060
–788
–657
–803
Overfunding/underfunding of obligations
Effect of experience adjustments on pension obligations
Effect of experience adjustments on plan assets
–11
–1
–14
5
29
31
–125
–499
Of which obligations with respect to post-retirement health care: 189 million euros
Of which plan assets funding obligations with respect to post-retirement health care: 4 million euros
Of which obligations with respect to post-retirement health care: 212 million euros
4)
Of which plan assets funding obligations with respect to post-retirement health care: 8 million euros
1)
2)
3)
(29) Long-term provisions
Changes in 2007
in million euros
Balance
Jan. 1,
2007
Other
changes
Utilized
Released
Added
Balance
Dec. 31,
2007
Income tax provisions
168
–33
116
1
82
100
Sundry long-term provisions
116
3
21
–
21
119
“Advanced Restructuring”
10
–10
–
–
–
–
294
–40
137
1
103
219
Balance
Jan. 1,
2008
Other
changes
Utilized
Released
Added
Balance
Dec. 31,
2008
Income tax provisions
100
3
53
–
127
177
Sundry long-term provisions
119
25
53
7
43
127
–
–
–
–
161
161
Total
Changes in 2008
in million euros
“Global Excellence”
Combination of the Adhesive Technologies
businesses
Total
–
–
–
–
48
48
219
28
106
7
379
513
The amounts recognized as long-term provisions are the best estimates of the expenditure required to settle the present
obligations at the balance sheet date. Provisions which include significant interest elements are discounted to the balance
sheet date.
Annual Report 2008
105
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
“Global Excellence” is the name given to our worldwide efficiency enhancement program. This initiative involves implementation of a number of individual measures affecting all our business sectors, regions and functions aimed at achieving
a sustainable improvement in our profitability and augmenting our long-term competitiveness.
The provisions allocated for the combination of the Adhesive Technologies businesses relate to restructuring charges
incurred during the process of integrating the acquired National Starch businesses within the Henkel organization.
Other changes include changes in the Group/acquisitions, movements in exchange rates and adjustments to reflect
changes in maturity as time passes.
The income tax provisions comprise accrued tax liabilities and amounts set aside for the outcome of external tax
audits.
The sundry long-term provisions include identifiable obligations toward third parties, which are costed in full.
Analysis of sundry long-term provisions by function
in million euros
Dec. 31, 2007
Dec. 31, 2008
8
10
Personnel
38
73
Production and engineering
50
20
Sales
Various other obligations
23
24
119
127
More than
5 years
Between 1
and 5 years
Dec. 31, 2007
Total
Bonds
(of which amounts secured)
2,218
2
2,220
(9)
Bank loans and overdrafts1)
(of which amounts secured)
10
26
36
(28)
Other financial liabilities
(of which amounts secured)
–
48
48
(–)
2,228
76
2,304
Total
(30) Long-term borrowings
The maturities of these obligations at December 31, 2007 were as follows:
Analysis
Residual term
in million euros
Total
1)
Obligations with variable rates of interest or interest rates pegged for less than one year
The bonds issued by Henkel AG & Co. KGaA at December 31, 2007 included the following:
Bonds
in million euros
Issued by
Type Nominal value
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +0.405%)
Bond
1,000
Receiver swap
1,000
Hybrid bond
1,300
Receiver swap
650
–48
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +1.80%)
Book value Market value1) Interest rate2) Interest fixed
962
965
4.2500
until 20133)
–35
–35
5.2891
3 months
1,249
1,179
5.3750
until 20154)
–48
6.4772
3 months
Market value of the bonds derived from the stock market price at December 31, 2007
2)
Interest rate on December 31, 2007
3)
Fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 10, 2008
(fair value hedge)
4)
Fixed-rate interest of bond coupon: 5.375 percent, 50 percent converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on
February 25, 2008 (fair value hedge)
1)
106
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Maturities of long-term borrowings at December 31, 2008:
Analysis
Residual term
in million euros
More than
5 years
Between 1
and 5 years
Dec. 31, 2008
Total
Bonds
(of which amounts secured)
1,339
1,024
2,363
(1)
Bank loans and overdrafts
(of which amounts secured)
6
27
33
(29)
Other financial liabilities
(of which amounts secured)
–
6
6
(6)
1,345
1,057
2,402
Total
The bonds issued by Henkel AG & Co. KGaA at December 31, 2008 were as follows:
Bonds
in million euros
Issued by
Type
Nom. value
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +0.405%)
Bond
1,000
1,024
1,007
4.2500
until 20133)
Receiver swap
1,000
26
26
3.8931
3 months
Hybrid bond
1,300
1,331
1,034
5.3750
until 20154)
Receiver swap
Receiver swap
650
650
37
2
37
2
5.8212
3.6970
3 months
3 months
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +1.80%)
(1-month Euribor +0.955 %)
Book value Market value1) Interest rate2) Interest fixed
Market value of the bonds derived from the stock market price at December 30, 2008
Interest rate on December 31, 2008
Fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 10, 2009
(fair value hedge)
4)
Fixed-rate interest of bond coupon: 5.375 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on February 25, 2009
(fair value hedge)
1)
2)
3)
The bond issued by Henkel AG & Co. KGaA for 1 billion euros in 2003 with a coupon of 4.25 percent matures in June
2013.
The 1.3 billion euro subordinated hybrid bond issued by Henkel AG & Co. KGaA in November 2005 to finance a large
part of the pension obligations in Germany matures in 99 years in 2104. Under the terms of the bond, the coupon for the
first ten years is 5.375 percent. After that period, from November 25, 2015, it will be possible to redeem the bond. If it is not
redeemed, the bond interest will be based on the 3-month Euribor interest rate plus a premium of 2.85 percent. The bond
terms also stipulate that if there is a “cash flow event”, Henkel AG & Co. KGaA has the option or the obligation to defer
the interest payments. A cash flow event is deemed to have occurred if the adjusted cash flow from ordinary activities is
below a certain percentage of the net liabilities (20 percent for optional interest deferral, 15 percent for mandatory interest
deferral); see Clause 3 (4) of the bond terms and conditions for the definition. On the basis of the cash flow calculated at
December 31, 2008, the percentage was 22.54 percent (2007: 80.28 percent).
(31) Non-current financial liabilities
Non-current financial liabilities comprise amounts due to employees of 77 million euros (2007: 61 million euros).
(32) Other non-current liabilities
Other non-current liabilities comprise in particular various deferrals and accruals.
Annual Report 2008
107
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(33) Deferred taxes
The provisions for deferred taxes relate to differences between the accounting base in the consolidated balance sheet and
the tax base used by the individual companies included in the consolidation to calculate their taxable profits (Note 9).
(34) Current provisions
Changes in 2007
in million euros
At Jan. 1,
2007
Other
changes
Utilized
Released
Added
At Dec. 31,
2007
Income tax provisions
108
28
115
34
165
152
Sundry current provisions
839
12
750
35
689
755
“Advanced Restructuring”
45
10
47
–
–
8
992
50
912
69
854
915
Released
Added
At Dec. 31,
2008
Total
Other tax provisions of 4 million euros were reclassified in sundry current provisions.
Changes in 2008
in million euros
At Jan. 1,
2008
Other
changes
Income tax provisions
152
48
86
1
230
343
Sundry current provisions
755
27
616
53
572
685
“Advanced Restructuring”
8
–
8
–
–
–
“Global Excellence”
–
–
–
–
129
129
Combination of the
Adhesive Technologies businesses
–
–
–
–
52
52
915
75
710
54
983
1,209
Total
Utilized
The amounts recognized as current provisions are the best estimates of the expenditures required to settle the present
obligations at the balance sheet date.
Please refer to Note 29 for further details relating to the items “Global Excellence” and “Combination of the Adhesive
Technologies businesses”.
Analysis of sundry current provisions by function
in million euros
Dec. 31, 2007
Dec. 31, 2008
Sales
175
212
Personnel
330
323
28
2
Various other obligations
222
148
Total
755
685
Production and engineering
108
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(35) Short-term borrowings
Analysis
in million euros
Dec. 31, 2007
Total
Dec. 31, 2008
Total
Bond interest liabilities
31
31
Commercial papers1)
(of which secured)
10
(10)
175
(175)
Loans from employee welfare funds of the Henkel Group
Bank loans and overdrafts
(of which secured)
2
–
368
(228)
1,099
(617)
Other financial liabilities
427
512
Total
838
1,817
1)
From the euro and US dollar Commercial Paper Program (total amount 2.1 billion euros)
Short-term bank loans from the so-called bridge loan are set off against liquid funds where the deposit and the loan are
with the same lender and are of similar maturity. The short-term borrowings set off amounted to 1,057 million euros.
Other financial liabilities comprise mainly interest-bearing loans. The market value of short-term borrowings is the
same as their book value, due to their short-term nature.
(36) Trade accounts payable
Trade accounts payable include purchase invoices and accruals for invoices outstanding in respect of goods and services
received.
(37) Current financial liabilities
Analysis
in million euros
Amounts due to non-consolidated affiliated companies
Derivatives with negative fair values
Sundry current financial liabilities
(of which secured)
Total
Dec. 31, 2007
Total
Dec. 31, 2008
Total
16
20
149
186
81
(–)
66
(–)
246
272
Sundry current financial liabilities include the following:
» Amounts due to customers of 16 million euros (2007: 27 million euros)
» Commission payable of 3 million euros (2007: 3 million euros)
» Amounts due to employees of 36 million euros (2007: 42 million euros)
(38) Other current liabilities
Other current liabilities include sundry deferred income and the following:
» Liabilities in respect of social security of 26 million euros (2007: 22 million euros)
» Advance payments received of 4 million euros (2007: 3 million euros)
» Liabilities relating to employees’ deductions of 41 million euros (2007: 40 million euros)
» Other tax liabilities of 117 million euros (2007: 94 million euros)
Annual Report 2008
109
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(39) Contingent liabilities
Analysis
in million euros
Dec. 31, 2007
Dec. 31, 2008
1
–
12
10
Bills and notes discounted
Liabilities under guarantee and warranty agreements
(40) Other financial commitments
Payment commitments under rent, leasehold and lease agreements are shown at the total amounts payable up to the
earliest date when they can be terminated. The amounts shown are the nominal values. At December 31, 2008, they were
due for payment as follows:
Rent, leasehold and lease commitments
in million euros
Dec. 31, 2007
Dec. 31, 2008
Due in the following year
35
49
Due within 1 to 5 years
90
88
3
16
128
153
Due after 5 years
Total
In the course of the 2008 fiscal year, 37 million euros became due for payment under operating leases (2007: 13 million euros).
The order commitments for property, plant and equipment amounted to 51 million euros at the end of 2008 (2007:
42 million euros) and the purchase commitments from toll manufacturing contracts amounted to 3 million euros (2007:
15 million euros).
Payment commitments under the terms of agreements for capital increases and share purchases signed prior to December
31, 2008 amounted to 19 million euros (2007: 19 million euros).
(41) Capital management
The aims of capital management are derived from the financial strategy of the Group. These include ensuring liquidity
and access to the capital market at all times.
To achieve the capital management targets, the Group seeks to optimize its capital structure, manage its dividend
policy, take equity measures, make acquisitions and divestments, and reduce debt.
In the past fiscal year, the dividend was increased for ordinary and preferred shares. The cash flow not required for investment and dividend payments was used to reduce net debt. Short-term financing requirements were met by commercial papers
and bank loans. The bonds outstanding (senior and hybrid bonds) serve to cover long-term financing requirements.
Our financial management is based on the key performance indicators set out in our financial strategy. The interest
coverage ratio in 2008 was 4.8 (2007: 9.4), while operating debt coverage was 44.1 percent (2007: 74.3 percent). The equity
ratio was 40.6 percent (2007: 43.7 percent) and gearing was 0.72 (2007: 0.41). For further details, see the financial ratios
section in the Group management report (
page 45).
Due to the international nature of our business, the Group is required to comply with different legal and regulatory
provisions in different regions. The status of these regulations and any developments are monitored at the local level as
well as centrally, with changes being taken into account for the purpose of capital management.
110
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
(42) Derivatives and other financial instruments
Treasury guidelines and systems
The Corporate Treasury department manages currency exposure and interest rates centrally for the Group and therefore
all transactions with financial derivatives and other financial instruments. Trading, treasury control and settlement
(front, middle and back offices) are separated both physically and in terms of organization. The parties to the contracts
are German and international banks which Henkel monitors regularly, in accordance with Corporate Treasury guidelines,
for creditworthiness and the quality of their quotations. Financial derivatives are used to manage currency exposure and
interest rate risks in connection with operating activities and the resultant financing requirements, again in accordance
with the Treasury guidelines. Financial derivatives are entered into exclusively for hedging purposes.
The currency and interest rate risk management of the Group is supported by an integrated treasury system, which is
used to identify, measure and analyze the Group’s currency exposure and interest rate risks. In this context, “integrated”
means that the entire process from the initial recording of financial transactions to their entry in the accounts is covered.
Much of the currency trading takes place on internet-based, multi-bank dealing platforms. These foreign currency transactions are automatically transferred into the treasury system. The currency exposure and interest rate risks reported by all
subsidiaries under standardized reporting procedures are integrated into the treasury system by data transfer. As a result,
it is possible to retrieve and measure at any time all currency and interest rate risks across the Group and all derivatives
entered into to hedge the exposure to these risks. The treasury system supports the use of various risk concepts so that, for
example, the risk positions and the success of the risk management in each company, country and group of countries can
at any time be determined on a mark-to-market basis and compared to a benchmark.
Recognition and measurement of financial instruments
Financial instruments are measured initially at cost. Marketable securities which are managed on a portfolio basis, and
other investments quoted on the stock exchange, are categorized and recognized at fair value through profit or loss in
accordance with IAS 39. Changes in fair value are recognized in financial items in the statement of income. Other marketable securities and other investments held as non-current assets are classified as available for sale and also recognized at
fair value where this can be reliably determined. Changes in fair value are recognized directly in equity unless the asset is
permanently impaired, in which case the impairment loss is recognized in profit or loss. If the fair value of other marketable securities and other investments cannot be reliably determined, they are subsequently measured at amortized cost.
Shares in affiliated companies are measured at amortized cost as their fair value cannot be reliably determined. These are
also included in the available-for-sale category. We have no financial assets under the “held to maturity” category. Like all
other financial assets, long-term loans are accounted for in loans and receivables, and stated at amortized cost.
Specific financial instruments by category
in million euros
Marketable securities
Dec. 31, 2007
Dec. 31, 2008
11
19
– at fair value through profit or loss
–
–
– at fair value recognized in equity
11
19
Other investments/Shares in affiliated companies
33
23
5
–
28
23
– at fair value through profit or loss
– at amortized cost
Financial liabilities with a fixed maturity are measured at amortized cost using the effective interest method. Financial
liabilities in respect of which a hedging transaction has been entered into, and which meet the conditions set out in IAS 39
regarding a hedging relationship, are measured under hedge accounting rules.
Annual Report 2008
111
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
All derivative financial instruments entered into by the Group are measured initially at cost and subsequently at their fair
values on the balance sheet date. The accounting treatment of gains and losses on remeasurement to fair value depends
on whether the conditions set out in IAS 39 with respect to hedge accounting have been met.
Hedge accounting is not used for the majority of derivative financial instruments. The changes in the fair value of those
derivatives which, from an economic point of view, represent effective hedges in line with the corporate strategy, are recognized in profit or loss. These are virtually matched by changes in the fair value of the hedged underlying transactions.
Under hedge accounting, a derivative financial instrument is identified as a hedge of the exposure to changes in the
fair value of an asset or a liability (fair value hedge), a hedge of the exposure to variability in future cash flows (cash flow
hedge) or a hedge of a net investment in a foreign entity.
Fair value hedges: The gain or loss from remeasuring derivatives used to hedge the exposure to changes in fair value is
recognized in profit or loss together with the gain or loss on the hedged item. The interest rate derivatives used to hedge
the exposure to interest rate risks arising from the bonds issued by Henkel AG & Co. KGaA qualify as fair value hedges. To
determine the change in fair value of the bonds (see Note 30,
page 106), only that portion of the bond which relates to
the hedged interest rate risk is taken into account.
Interest rate hedging instruments at the balance sheet date had fair values of 65 million euros (2007: negative fair values
of –83 million euros). The gain or loss on remeasuring the derivatives at fair value based on market interest rate risk (2008:
gain of 148 million euros, 2007: loss of –38 million euros) and the gain or loss on the hedged bonds (2008: loss of –142 million euros, 2007: gain of 34 million euros) have both been included in financial items in the statement of income.
Cash flow hedges: Changes in the fair value of derivatives used to hedge the exposure to variability in cash flows are
recognized directly in equity. The portion of the gain or loss on the derivative that is determined to be ineffective in respect
of the risk being hedged is reported directly in the consolidated statement of income. If a firm commitment or an expected
and highly probable future transaction results in the recognition of an asset or a liability, the accumulated gains or losses
on the hedging instrument that were recognized directly in equity are included in the initial measurement of the asset or
liability. Otherwise, the amounts recognized directly in equity are included in the statement of income in those reporting
periods in which the hedged transaction impacts the statement of income. In the past fiscal year, no cash flow hedges were
entered into. No amounts were transferred in the course of the year from equity to the statement of income.
Cash flow hedges
(after tax)
in million euros
At January 1
Additions
(taken to equity)
Disposals
(taken to profit or loss)
At December 31
2008
–95
–170
–
–265
2007
–
–95
–
–95
The hedge of a portion of the purchase price payable in pounds sterling (GBP) for the National Starch businesses, which
was taken out in 2007 and arose from the back-to-back agreement with Akzo Nobel N.V., was terminated on the payment
date of April 3, 2008. The hedge result was recognized directly in equity.
Hedge of a net investment in a foreign entity: Hedges of net investments in foreign entities are accounted for similarly
to cash flow hedges. This is the case with forward exchange contracts that are used to hedge the exposure to currency
translation risks in foreign entities.
In the past fiscal year, hedges of a net investment in a foreign entity were entered into and the associated gains or
losses on remeasurement, after taking deferred tax into account, together with any gains or losses on the translation of
the financial statements of foreign companies, were recognized directly in equity. As in 2007, no hedges of a net investment
in a foreign entity were transferred from equity to the statement of income, nor were any ineffective portions of hedges
included in the statement of income.
112
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Hedge of a net investment in a foreign entity
(after tax)
in million euros
At January 1
Additions
(taken to equity)
Disposals
(taken to profit or loss)
At December 31
2008
–17
70
–
53
2007
–20
3
–
–17
The hedges relate to translation risks arising from net investments in Swiss francs (CHF) and US dollars (USD). At the balance sheet date there were no open forward exchange contracts relating to hedges of a net investment in a foreign entity.
Fair values of derivative financial instruments
The fair values of forward exchange contracts are calculated on the basis of current European Central Bank reference prices
taking account of forward premiums and discounts. Currency options are measured using market quotations or recognized
option pricing models. The fair values of interest rate hedging instruments are determined on the basis of discounted
future expected cash flows, using the market interest rates ruling over the remaining terms of the derivatives. These are
shown in the table below for the four most important currencies. In each case, these are the interest rates quoted on the
inter-bank market at December 31.
Interest rates in percent per annum
EUR
At December 31
Maturities
USD
JPY
GBP
2007
2008
2007
2008
2007
2008
2007
2008
3 months
4.65
2.95
4.85
1.75
0.93
0.95
5.95
2.80
6 months
4.63
2.93
4.63
1.70
0.97
1.16
5.83
2.76
1 year
4.69
3.00
4.26
2.35
1.05
1.35
5.58
2.93
2 years
4.46
2.64
3.81
1.40
0.92
0.74
5.21
2.60
5 years
4.49
3.20
4.22
2.05
1.19
0.91
5.08
3.18
10 years
4.68
3.75
4.77
2.51
1.69
1.24
4.99
3.49
In measuring derivative financial instruments, the payment default risk of the counterparty is taken into account in the
form of a lump-sum adjustment to the fair values, determined on the basis of credit risk premiums. This resulted in a
charge to income in fiscal 2008 of 1 million euros.
Derivative financial instruments with a positive fair value at the balance sheet date are included in other financial
assets and those with a negative fair value are included in financial liabilities.
The following positions were held at the balance sheet date:
Derivative financial instruments
Nominal value
At December 31
in million euros
Positive fair value
Negative fair value
2007
2008
2007
2008
2007
2008
Forward exchange contracts
7,087
5,457
56
240
–147
–186
(of which for hedging
loans within the Group)
(2,115)
(4,013)
(39)
(213)
(–5)
(–97)
–
25
–
1
–
–
1,650
2,300
–
65
–83
–
(1,650)
(2,300)
–
(65)
(–83)
(–)
5,563
901
3
–
–2
–
1)
Currency options1)
Interest rate swaps
2)
(of which designated for hedge accounting)
Other interest rate hedging instruments1)
(of which designated for hedge accounting)
Total derivative financial instruments
1)
2)
(–)
(–)
–
(–)
–
(–)
14,300
8,683
59
306
–232
–186
Maturity period < 1 year
Maturity period > 1 year
Annual Report 2008
113
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Most of the forward exchange contracts and currency options hedge risks arising from trade accounts receivable and Group
financing in US dollars.
Risks arising from financial instruments
Credit risk
In the course of its business activities with third parties, the Henkel Group is exposed to global credit risk in various lines
of business. The risk arises if a contracting party fails to meet its obligations. The maximum credit risk is represented by
the book value of the financial assets recognized in the balance sheet. Generally speaking, Henkel is confronted by a continuing process of concentration and consolidation on the customer side, which is expressed accordingly in receivables
from individual customers.
A credit risk management system operating on the basis of a globally applied credit policy ensures that credit risks are
constantly monitored and bad debts minimized. This policy, which applies to both new and existing customers, governs the
allocation of credit limits and compliance with those limits, individual analyses of customers’ creditworthiness employing
both internal and external financial information, risk classification and continuous monitoring of the risk of bad debts
at the local level. Our key customer relationships are also monitored at the regional and global level. In addition, hedging
measures, for instance payment default insurance policies, are implemented on a selective basis for particular countries
and customers.
As regards financial investment and derivatives trading with German and international banks, Henkel only enters into
transactions with counterparties of the highest financial standing. Financial investment is generally for periods of less
than one year. To minimize the credit risk, netting arrangements are agreed with counterparties and investment limits
set. These limits are based on the credit rating of the counterparty and are regularly monitored and adjusted. In addition
to ratings, certain other indicators such as the pricing of credit default swaps (CDS) by the banks are applied in determining the limits.
Collateral and other safeguards include country-specific and customer-specific protection afforded by credit insurance,
confirmed and unconfirmed letters of credit in the export business, as well as warranties, guarantees and cover notes.
The book value of receivables and loans which were potentially overdue or impaired, for which new due dates have been
negotiated, is less than 1 million euros, as in the previous year.
Age analysis of non-impaired loans and receivables
Analysis
in million euros
Less than 30 days
30 to 60 days
61 to 90 days
91 to 180 days
Total
At December 31, 2008
502
52
16
5
575
At December 31, 2007
312
42
15
5
374
In 2008, specific allowances for bad debts of 41 million euros (2007: 24 million euros) and general allowances for bad debts
of 6 million euros (2007: 3 million euros) were made in respect of loans and receivables.
Liquidity risk
The liquidity risk of the Henkel Group can be regarded as very low, because of the use of long-term financing instruments
and the availability of additional liquidity reserves. The Group has pledged credit lines of 2.1 billion euros at its disposal
to ensure its liquidity and financial flexibility at all times. These credit lines were opened to secure the Commercial Paper
Program. To finance the acquisition of the Adhesives and Electronic Materials businesses of National Starch, the Henkel
Group has already received loan pledges amounting to 1.6 billion euros as of December 31, 2008. The individual subsidiaries of the Henkel Group additionally have bilateral loan pledges of 0.6 billion euros at their disposal.
114
Annual Report 2008
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
Our credit rating is regularly monitored by independent rating agencies.
Cash flows from financial liabilities
Residual term
in million euros
Dec. 31, 2007
Book value
2,251
Bond1)
Commercial papers
2)
Bank loans and overdrafts
Loans from employee welfare funds of the Henkel Group
Up to Between 1
1 year and 5 years
143
451
More than
5 years
Dec. 31, 2007
Total
cash flow
2,560
3,154
10
10
–
–
10
404
374
32
12
418
2
2
–
–
2
1,477
1,477
–
–
1,477
Interest-bearing loans from third parties
473
446
52
–
498
Sundry financial instruments3)
163
101
48
14
163
4,780
2,553
583
2,586
5,722
232
164
47
5
216
5,012
2,717
630
2,591
5,938
Trade accounts payable
Original financial instruments
Derivative financial instruments
Total
The cash flows from the hybrid bond issued in 2005 are disclosed for the period until the first possible redemption date by Henkel on November 25, 2015
2)
From the euro and US dollar Commercial Paper Program (total amount: 2.1 billion euros)
3)
Sundry financial instruments include amounts due from employees, and finance bills
1)
Cash flows from financial liabilities
Residual term
in million euros
Dec. 31, 2008
Book value
Up to Between 1
1 year and 5 years
More than
5 years
Dec. 31, 2008
Total
cash flow
2,394
112
1,450
1,448
3,010
175
175
–
–
175
3)
34
9
2,213
–
–
–
–
–
1,678
1,678
–
–
1,678
Interest-bearing loans from third parties
512
523
6
–
529
Sundry financial instruments4)
169
92
42
35
169
6,060
4,750
1,532
1,492
7,774
186
186
–
–
186
6,246
4,936
1,532
1,492
7,960
Bond1)
Commercial papers2)
Bank loans and overdrafts
Loans from employee welfare funds of the Henkel Group
Trade accounts payable
Original financial instruments
Derivative financial instruments
Total
1,132
2,170
The cash flows from the hybrid bond issued in 2005 are disclosed for the period until the first possible redemption date by Henkel on November 25, 2015
From the euro and US dollar Commercial Paper Program (total amount: 2.1 billion euros)
Bank loans from the bridge loan facility are offset against liquid funds; cash flows are stated with no offset
4)
Sundry financial instruments include amounts due from employees, and finance bills
1)
2)
3)
Market risk
The market risk arising from financial instruments principally consists of currency and interest rate risks. This is monitored
by means of sensitivity analyses.
Currency risk
The global nature of our business activities results in a significant number of cash flows in different currencies. Hedging
the resulting exchange rate risks is a significant part of our centralized risk management system. The objective of our
currency hedging is to fix prices based on hedging rates, so that we are protected from future adverse fluctuations in
Annual Report 2008
115
Notes to the Consolidated Financial Statements » Notes to the Consolidated Balance Sheet
exchange rates. More detailed information about our currency management objectives and procedures are given in the
Group management report starting on
page 69.
The following table shows the value-at-risk analysis of the transaction risk of the Henkel Group at the balance sheet
date. The value-at-risk analysis assumes a risk horizon of one month and a unilateral confidence interval of 95 percent.
The calculation is based on the variance-covariance approach. Fluctuations and correlations are determined on the basis
of historical data. The value-at-risk analysis is based on the operating book positions and budgeted positions in foreign
currency, with a forecasting horizon of up to nine months.
Value-at-risk
in million euros
After hedging
Dec. 31, 2007
Dec. 31, 2008
19
40
The amounts shown represent the maximum expected risk of loss in a reporting month as a result of currency fluctuations.
The risk arises from imports and exports by Henkel AG & Co. KGaA and its foreign subsidiaries. Due to its international
nature, the Henkel Group has a portfolio with more than 50 different currencies. The main influence is exerted by the
Japanese yen, the British pound, the US dollar and the Ukrainian Hrywnja.
Interest rate risk
The Henkel Group obtains the cash it requires from the international money and capital markets. Some of the resulting
financial liabilities and our cash deposits may be exposed to the risk of changes in interest rates. The aim of our centralized
interest rate management system is to control and minimize this risk with derivative financial instruments. With respect
to hedging of the interest rate risk, only those derivative financial instruments may be used that can be monitored and
assessed in the risk management system.
Henkel’s interest management strategy essentially consists of fixing interest rates over the short term with pegging periods
of less than one year. To this end, the interest management team applies strategies involving the use of long-term interestbearing instruments in order to secure the liquidity of Henkel at all time while pegging short-term interest rates.
The risk of interest rate fluctuations with respect to the earnings of the Henkel Group is shown in the basis point value
(BPV) analysis in the table below.
Interest rate exposure
in million euros
Dec. 31, 2007
Dec. 31, 2008
8
38
Cash flow through profit or loss
8
38
Fair value through profit or loss
–
–
Cash flow through equity
–
–
Fair value through equity
–
–
Based on an interest rate rise of 100 basis points
of which
The calculation of the interest rate risk is based on a cash flow sensitivity analysis. This analysis examines all the main
financial instruments which attract interest at a variable rate as of the balance sheet date. Fixed-rate instruments and
interest rate hedging instruments are deducted from net borrowings (comprising liquid funds, marketable securities and
short-term and long-term borrowings). The interest risk figures shown in the table are based on this calculation at the relevant balance sheet date, assuming a parallel shift in the interest curve of 100 basis points. Interest rate risks arise mainly
from interest-bearing financial instruments in euros and US dollars.
116
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
Supplementary Information on the Consolidated
Statement of Income/Balance Sheet
(43) Payroll cost1)
Payroll cost
in million euros
2007
2008
Wages and salaries
1,885
1,949
Social security contributions and staff welfare costs
337
351
Pension costs
126
136
2,348
2,436
Total
1)
Excluding personnel-related restructuring charges of 343 million euros in 2008
Share-based payment plans
The objective of the Henkel Stock Incentive Plan introduced in 2000 is to provide additional motivation for about 700
senior executive personnel around the world. Participants in the plan are granted option rights to subscribe in Henkel
preferred shares, which may be exercised within a period not exceeding five years once a vesting period of three years has
elapsed. Under the plan, rights were issued annually on a revolving basis, the relevant terms being revised each year by
the Management Board and Shareholders’ Committee. In 2004, options were issued for the last time, in this case to the
members of the Management Board.
Each option granted originally carried the right to acquire up to eight Henkel preferred shares. After the 1:3 share
split on June 18, 2007, the number of preferred shares per option right was trebled. The exact number of shares that can
be bought per option at a specific price depends on the extent to which the performance targets are met. One target is
based on absolute performance – the performance of the Henkel preferred share price. The other takes into account relative performance, comparing the movement in value of the Henkel preferred share with that of the Dow Jones Euro Stoxx
(600) index. For both performance targets, the average market price of the Henkel preferred share at the date of issue is
compared with the average market price three years later. The average market price is calculated in each case on the basis
of 20 stock exchange trading days after the Annual General Meeting. For options issued prior to 2002, a period of 60 trading
days is applied. The calculation of relative performance takes account of dividend payments and other rights and benefits
as well as movements in the share price (total shareholder return). The subscription rights attached to an option are split
into two categories. Taking the share split into account, up to 15 subscription rights can be exercised by reference to the
absolute performance and up to nine subscription rights by reference to the relative performance.
Option rights are granted to members of the Management Board and corporate senior vice presidents, and to managers
of comparable status within German and foreign affiliated companies, on condition that they make a direct investment
of three preferred shares for each option right.
On February 19, 2004, IFRS 2 (Share-based Payment) was issued. We have applied this standard effective January 1, 2005.
As a result, the total value of stock options granted to senior executive personnel at the grant date is determined using an
option pricing model. The total value of the stock options calculated in this way is treated as a payroll cost spread over the
period in which the corporation receives the service of the employee. For fiscal years from 2005 onward, this cost in respect
of the option rights granted in 2003 (tranche 4) and 2004 (tranche 5) is required to be expensed.
The table shows the number of option rights granted per tranche and the number of shares in the various tranches,
taking into account the 1:3 share split of June 18, 2007. The vesting period has expired for all tranches. Because the exercise
period for the first tranche expired on July 10, 2008, option rights that were not exercised have lapsed. The table overleaf
also shows the expense for the period resulting from the valuation of each tranche issued.
In 2004 for the fourth tranche and in 2007 for the fifth tranche, the Management Board decided to avail itself of the
right to pay in cash the gain arising on the exercise of the options to the employees participating in the plan. The fifth
tranche is treated as if it had been paid in shares.
Annual Report 2008
117
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
Option rights / subscribable preferred shares
in number of shares/options
1st tranche 2nd tranche 3rd tranche 4th tranche 5th tranche
At January 1, 2008
expressed in preferred shares
Options granted
expressed in preferred shares
Options exercised1)
Total
21,997
26,814
41,444
55,891
9,000
155,146
197,970
241,325
372,995
838,370
189,000
1,839,660
210
105
315
105
–
735
1,890
945
2,835
1,575
–
7,245
12,967
2,100
2,505
2,525
–
20,097
116,700
18,900
22,545
37,875
–
196,020
210
630
1,140
825
–
2,805
expressed in preferred shares
1,890
5,670
10,260
12,375
–
30,195
Lapsed options
9,030
–
–
–
–
9,030
81,270
–
–
–
–
81,270
expressed in preferred shares
Options forfeited
expressed in preferred shares
At December 31, 2008
–
24,189
38,114
52,646
9,000
123,949
expressed in preferred shares
–
217,700
343,025
789,695
189,000
1,539,420
of which held by the Management Board
–
1,780
8,650
9,050
9,000
28,480
expressed in preferred shares
–
16,020
77,850
135,750
189,000
418,620
of which held by other senior executives
–
22,409
29,464
43,596
–
95,469
expressed in preferred shares
–
201,680
265,175
653,945
–
1,120,800
–
–
–
3.6
0.1
3.7
Payroll cost 2008
in million euros
Payroll cost 2007
in million euros
1)
–
–
–
Average price at exercise date = 28.19 euros
At December 31, 2008, there is a provision of 4.0 million euros (2007: 16.8 million euros) in respect of the fourth tranche.
The amount written back of 12.8 million euros had the effect of increasing earnings for the period. The intrinsic value of the
exercisable options in the fourth tranche at the end of the reporting period is 2.1 million euros (2007: 16.1 million euros).
The costs are calculated on the basis of the Black-Scholes option pricing model, modified to reflect the special features
of the Stock Incentive Plan. The cost calculation was based on the following factors:
Black-Scholes option pricing model
On issue
1st tranche
On issue
2nd tranche
At
On issue Dec. 31, 2008
3rd tranche 4th tranche
On issue
5th tranche
Exercise price (before share split)
in euros
63.13
71.23
74.67
57.66
71.28
Exercise price (after share split)
in euros
21.04
23.74
24.89
19.22
23.76
Expected volatility of the preferred share price
in %
35.0
33.1
32.4
29.8
26.6
Expected volatility of the index
in %
19.7
20.7
22.4
–
18.6
Expected lapse rate
in %
3
3
3
–
–
Risk-free interest rate
in %
5.19
4.18
4.78
2.12
3.96
The expected volatility rates are based on the historic volatility of the Henkel preferred share and of the Dow Jones Euro
Stoxx (600) index. The period to which the estimate of the volatility of the Henkel share relates starts at the beginning of
the remaining term of the option tranche and finishes on the date on which the tranche is valued.
The performance period relating to the first tranche ended on July 10, 2003, that of the second tranche on July 12,
2004, that of the third tranche on May 16, 2005, that of the fourth tranche on May 11, 2006 and that of the fifth tranche
on May 15, 2007. Hereafter, at any time during a five-year period, the option holders in the first three tranches may exercise
their right to acquire nine Henkel preferred shares per option. In the case of the fourth tranche, the option holders may
acquire 15 shares per option and in the case of the fifth tranche 21 shares per option. The allocation of nine shares per
option for the first tranche was made solely as a result of the Henkel preferred share outperforming the comparative index
(relative performance). The allocation for the fourth tranche was made solely as a result of the absolute performance. The
absolute performance targets were not met for the first three tranches and the relative performance target was not met for
118
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
the fourth tranche. The allocation for the fifth tranche was 15 shares as a result of absolute performance and six shares as a
result of relative performance. The option rights for the first tranche lapsed on July 10, 2008 as per the prescribed deadline.
The outstanding option rights for tranches two to five may be exercised at any time, except during blocked periods which
cover the four weeks prior to the reporting dates of the corporation.
Global Cash Performance Units (CPU) plan
Following the end of the Stock Incentive Plan, those eligible for that plan, the senior executive personnel of the Henkel
Group (excluding members of the Management Board) have, since 2004, been part of the Global CPU Plan, which enables
them to participate in any increase in price of the Henkel preferred share. If certain set targets are achieved, Cash Performance Units (CPUs) are granted, which give the member of the CPU Plan the right to receive a cash payment at a fixed
point in time. The CPUs are granted on condition that the member of the plan is employed for three years by Henkel AG &
Co. KGaA or one of its subsidiaries in a position senior enough to qualify to take part and that he or she is not under notice
during that period. This minimum period of employment pertains to the calendar year in which the CPUs are granted and
the two subsequent calendar years.
The number of CPUs granted depends not only on the seniority of the executive, but also on the achievement of set target
figures. For the periods to date, these targets have been operating profit (EBIT) and net earnings after minority interests.
The value of a CPU in each case is the average price of the Henkel preferred share as quoted 20 stock exchange trading days
after the Annual General Meeting following the performance period. In the case of exceptional increases in the share price,
there is an upper limit or cap. After the 1:3 share split of June 18, 2007, the number of CPUs was trebled.
The total value of CPUs granted to senior executive personnel is remeasured at each balance sheet date and treated as
a payroll cost over the period in which the plan member provides his or her services to Henkel. The first tranche, which
was issued in 2004, became due for payment in July 2007 and the second, issued in 2005, in July 2008. Across the world, at
December 31, 2008, the CPU Plan comprised 425,941 CPUs issued in the third tranche in 2006 (expense: 3.2 million euros),
378,814 CPUs from the fourth tranche issued in 2007 (expense: 2.8 million euros) and 494,761 CPUs from the fifth tranche
issued in the year under review (expense: 3.7 million euros). The corresponding provision amounted to 18.8 million euros
(2007: 28.4 million euros).
Cash Performance Units program
For members of the Management Board, the Stock Incentive Plan was superseded in 2005 by a new program. In accordance
with the program, each member of the Management Board is allocated, as a function of the absolute increase in the price of
the Henkel preferred share and the increase in the earnings per Henkel preferred share (EPS) achieved over a period of three
years (performance period), the cash equivalent of up to 10,800 preferred shares – so-called Cash Performance Units – per
financial year (= tranche). On expiry of the performance period, the number and the value of the Cash Performance Units
due are determined and the resulting tranche income is paid in cash. Each member of the Management Board participating
in a tranche is required to acquire a personal stake by investing in Henkel preferred shares to the value of 25 percent of the
gross tranche payout, and to place these shares in a blocked custody account with a five-year drawing restriction.
In the event of an absolute rise in the share price during the performance period of at least 15 percent, 21 percent or
30 percent, each participant is allocated 1,800, 3,600 or 5,400 Cash Performance Units (CPUs) respectively. To calculate the
increase in the share price, the average price in January of the year of issue of a tranche is compared with the average price
in January of the third fiscal year following the year of issue (reference price). If, during the performance period, earnings
per preferred share increase by at least 15 percent, 21 percent or 30 percent, each participant is allocated a further 1,800,
3,600 or 5,400 CPUs respectively. To calculate the increase in earnings per preferred share, the earnings per preferred share
of the fiscal year prior to the year of issue is compared with the earnings per preferred share of the second fiscal year after
the year of issue. The amounts included in the calculation of the increase are in each case the earnings per preferred share
as disclosed in the audited, approved and adopted consolidated financial statements of the relevant fiscal years, adjusted
for exceptional items. The monetary value per Cash Performance Unit essentially corresponds to the reference price of the
Henkel preferred share. A ceiling value (cap) is imposed in the event of extraordinary share price increases.
Annual Report 2008
119
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
The base prices for the 2006, 2007 and 2008 tranches were 29.35 euros, 39.04 euros and 33.72 euros respectively. We have
based the measurement of the provision for the tranche issued in 2008 on achieving medium targets; the pro rata provisions for the current tranches issued in the previous years were adjusted on the basis of current figures. This results in an
expense of 0.6 million euros in the fiscal year. The provision at December 31, 2008 for all tranches issued is 1.4 million euros
(2007: 4.1 million euros).
(44) Employee structure
Annual average excluding apprentices and trainees, work experience students and interns, based on quarterly figures:
Number of employees per function
2007
Production and engineering
24,426
2008
26,230
Marketing, selling and distribution
16,603
17,235
Research and development
2,794
2,942
Administration
8,480
9,106
52,303
55,513
Total
(45) Value added statement
Value added statement
in million euros
Sales
2007
in %
13,074
98.1
Other income
2008
14,131
in %
90.6
247
1.9
1,458
9.4
13,321
100.0
15,589
100.0
5,656
42.5
6,598
42.3
337
2.5
546
3.5
Other expenses
3,415
25.6
3,973
25.5
Value added
3,913
29.4
4,472
28.7
2,348
60.0
2,436
54.4
355
9.1
437
9.8
interest expense
269
6.9
366
8.2
shareholders
227
5.8
227
5.1
minority shareholders
20
0.5
12
0.3
Reinvested in the Group
694
17.7
994
22.2
Total sales/income
Other charges
Cost of materials
Amortization/depreciation of non-current assets
Paid to
employees
central and local government
Providers of capital
(46) Group segment reporting
The format for reporting the activities of the Henkel Group by segment is by business sector and additionally by region.
This classification corresponds to the way in which the Group manages its operating business.
The activities of the Henkel Group are divided into the following operating segments: Laundry & Home Care, Cosmetics/
Toiletries, Adhesives for Craftsmen and Consumers, and Industrial Adhesives.
Laundry & Home Care
This business sector produces and sells detergents, laundry care products, dishwashing and cleaning products and
insecticides.
Cosmetics/Toiletries
The portfolio of this business sector comprises hair cosmetics, body care, skin care and oral care products, and hair salon
products.
120
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
Adhesives for Craftsmen and Consumers/Industrial Adhesives
This business sector produces and sells cyanoacrylates, office products for gluing and correcting applications, adhesive
tapes, high-strength contact adhesives, adhesives for home decoration, building and DIY applications, adhesives and sealants for industrial applications and products for surface treatment.
In determining the segment results and the asset and liability values, essentially the same principles of recognition
and measurement are applied as in the consolidated financial statements.
For reconciliation with the figures for the Henkel Group, Group overheads are reported under Corporate together with
income and expenses that cannot be allocated to the individual business sectors.
In the year under review, the charges arising with respect to the items “Global Excellence” and “Combination of the
Adhesive Technologies businesses” have been disclosed under the Corporate segment as these are both centrally implemented, monitored and controlled programs; however, in the consolidated segment report they have been split between
the business sectors for information purposes.
Reconciliation between net operating assets/capital employed and balance sheet figures
Net operating assets
in million euros
Balance
sheet figures
Annual average1) 2008
Dec. 31, 2008
Dec. 31, 2008
Goodwill at book value
5,318
6,123
6,123 Goodwill at book value
Other intangible assets and property,
plant and equipment (total)
4,643
4,630
Other intangible assets and property,
4,630 plant and equipment (total)
24 Financial assets
305 Deferred tax assets
Inventories
1,645
1,482
1,482 Inventories
Trade accounts receivable
from third parties
2,092
1,847
Trade accounts receivable
1,847 from third parties
Intra-Group trade
accounts receivable
985
991
Other assets and
tax refund claims2)
451
432
–
Other assets and
1,212 tax refund claims
338 Liquid funds/Marketable securities
113 Assets held for sale
Operating assets (gross)
15,134
15,505
– Operating liabilities
4,269
4,185
of which
Trade accounts payable
to third parties
1,903
1,678
Intra-Group trade
accounts payable
985
991
Other provisions and
other liabilities2)
1,381
1,516
Net operating assets
10,865
11,320
– Goodwill at book value
5,318
–
+ Goodwill at acquistion cost3)
5,774
–
Capital employed
11,321
–
16,074 Total assets
Trade accounts payable
1,678 to third parties
Other provisions and
3,026 other liabilities
The annual average is calculated on the basis of the twelve monthly figures
2)
Only amounts relating to operating activities are taken into account in calculating net operating assets
3)
Before deduction of accumulated amortization pursuant to IFRS 3.79b
1)
Annual Report 2008
121
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
(47) Earnings per share
starting on page 117) currently results in a dilution of earnings per ordinary share and
The Stock Incentive Plan (Note 43,
per preferred share amounting to 2 eurocents.
Earnings per share
in million euros (rounded)
2007
2008
Net earnings after minority interests
921
1,221
Dividends, ordinary shares
132
132
Dividends, preferred shares
92
92
Total dividends
224
224
Retained profit per ordinary share
419
598
Retained profit per preferred share
278
399
Retained profit
697
997
259,795,875
259,795,875
0.51
0.514)
0.02
0.02
Retained profit per ordinary share in euros
1.61
2.30
EPS per ordinary share in euros
2.12
2.81
172,951,042
173,238,398
0.53
0.534)
Number of ordinary shares
Dividend per ordinary share in euros
of which advance dividend per ordinary share in euros1)
Number of outstanding preferred shares
2)
Dividend per preferred share in euros
0.04
0.04
Retained profit per preferred share in euros
of which advance dividend per preferred share in euros
1.61
2.30
EPS per preferred share in euros
2.14
2.83
259,795,875
259,795,875
0.51
0.514)
1)
Number of ordinary shares
Dividend per ordinary share in euros
of which advance dividend per ordinary share in euros1)
0.02
0.02
Retained profit per ordinary share in euros
1.61
2.28
EPS dilution per ordinary share in euros
2.12
2.795)
173,371,289
173,575,794
0.53
0.534)
0.04
0.04
Number of potential outstanding preferred shares2)
Dividend per preferred share in euros
of which advance dividend per preferred share in euros1)
Retained profit per preferred share in euros
1.60
2.28
Diluted EPS per preferred share in euros
2.13
2.815)
See Group management report, page 19: Corporate Governance, Division of Capital Stock, Shareholder Rights
Weighted annual average of preferred shares
3)
Weighted annual average of preferred shares adjusted for the potential number of shares arising from the Stock Incentive Plan
4)
Proposed
5)
Based on earnings attributable to one shareholder of Henkel AG & Co. KGaA of 1,212 million euros (IAS 33.59)
1)
2)
(48) Cash flow statement
Cash flow from investing activities/acquisitions includes under the heading “Purchase of financial assets/acquisitions”
funds used to make acquisitions of 3,708 million euros (2007: 7 million euros). Investments in acquisitions comprised 7 million euros attributable to the Laundry & Home Care business sector, 17 million euros attributable to Cosmetics/Toiletries
and 3,684 million euros attributable to Adhesive Technologies.
Dividends and interest paid and received include dividends received from Ecolab Inc., St. Paul, Minnesota, USA of 19 million euros (2007: 29 million euros). Interest payments include contributions to the contractual trust arrangement (CTA)
(262 million euros; 2007: 42 million euros). Included in the figure for cash and cash equivalents are marketable securities
which are short-term in nature and are exposed only to an insignificant risk of a change in price.
122
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
(49) Voting rights, related party transactions
Information required by Clause 160 (1) No. 8 of the German Joint Stock Corporation Act (AktG):
The company has been notified that the share of voting rights of the parties to the Henkel share-pooling agreement
at December 19, 2008 represented in total 52.18 percent of the voting rights (135,570,762 votes) in Henkel AG & Co. KGaA
and is held by:
» 64 members of the families of the descendants of Fritz Henkel, the company’s founder
» Four charitable foundations set up by members of those families
» One civil-law partnership set up by members of those families
» Eight private limited companies set up by members of those families, seven limited partnerships with a limited company
as a general partner (GmbH & Co. KG) and one limited partnership (KG)
under the terms of a share-pooling agreement (agreement restricting the transfer of shares) pursuant to Clause 22 (2) of
the German Securities Trading Law (WpHG), whereby the shares held by the eight private limited companies, the seven
limited partnerships with a limited company as a general partner and the one limited partnership representing a total of
14.02 percent (36,419,097 voting rights) are attributed (pursuant to Clause 22 (1) No. 1 WpHG) to the family members who
control those companies.
Dr. h.c. Christoph Henkel, London, has exceeded the 5 percent threshold of voting rights in Henkel AG & Co. KGaA, with
15,132,417 ordinary shares in Henkel AG & Co. KGaA, representing a rounded percentage of 5.825 percent. No other party
to the share-pooling agreement has a notification obligation if the threshold of 3 percent or more of the total voting rights
in Henkel AG & Co. KGaA is reached or exceeded, even after adding voting rights expressly granted under the terms of
usufruct agreements.
The authorized representative of the parties to the Henkel share-pooling agreement is Mr. Albrecht Woeste,
Düsseldorf.
Silchester International Investors Limited, headquartered in London, Great Britain, has informed us that its share of
voting rights in Henkel AG & Co. KGaA exceeded the 3 percent threshold on June 23, 2008 and stood at 3.01 percent on that
day, with 7,824,150 voting rights. All voting rights are attributed to Silchester International Investors Limited pursuant to
Clause 22 (1) No. 6 WpHG.
Members of the families of descendants of the company’s founder Fritz Henkel, and charitable foundations under their
sphere of influence, who/which hold shares in Henkel AG & Co. KGaA, and members of the Shareholders’ Committee advanced funds on loan to the Henkel Group in the year under review, on which interest has been payable at an average rate
of 5.11 percent (2007: 4.18 percent). The average total amount of capital advanced to the Henkel Group in fiscal 2008 was
530 million euros (2007: 446 million euros), while the balance at December 31, 2008 was 512 million euros (December 31,
2007: 472 million euros).
Members of the Supervisory Board who are not also members of the Shareholders’ Committee advanced funds on loan
to the Henkel Group in the year under review averaging 4.9 million euros (2007: 3.2 million euros), while the balance at
December 31, 2008 was 3.9 million euros (December 31, 2007: 6 million euros), carrying an average interest rate of 5.13 percent (2007: 4.16 percent).
Henkel’s investment in Ecolab Inc., St. Paul, Minnesota, USA, was sold on November 18/19, 2008. Some companies in
the Henkel Group and Ecolab supplied goods and services to each other on prevailing market terms in the course of their
normal business activities.
(50) Remuneration of the corporate bodies
The total remuneration of the members of the Supervisory Board and of the Shareholders’ Committee of Henkel AG & Co.
KGaA amounted to 1,231k euros plus value-added tax (2007: 1,226k euros plus value-added tax) and 2,303k euros (2007:
2,260k euros) respectively. The total remuneration of the former Management Board of Henkel KGaA and members of the
Management Board of Henkel Management AG amounted to 13,270k euros (2007: 16,040k euros). For further details regarding the emoluments of the corporate bodies, see the remuneration report starting on
page 22.
Annual Report 2008
123
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
(51) Declaration of compliance with the Corporate Governance Code
In February 2008, the then Management Board and the Supervisory Board and the Shareholders’ Committee approved
a joint declaration of compliance with the recommendations of the German Corporate Governance Code as required by
Clause 161 of the German Joint Stock Corporation Act (AktG). The declaration is permanently available to shareholders on
the company website:
www.henkel.com/ir
(52) Subsidiaries and other investments
Details relating to the investments held by Henkel AG & Co. KGaA and the Henkel Group are provided in a separate schedule
which will be available via the commercial register and can also be inspected at the Annual General Meeting.
(53) Information on shares in affiliated companies and other investments
The major subsidiaries of the Group are as follows:
Share in percent
Algeria
Henkel Algérie S.P.A.
Wilaya d’Alger
100.00
Australia
Henkel Australia Pty. Ltd.
Silverwater
100.00
Austria
Henkel Central Eastern Europe GmbH
Vienna
100.00
Belgium
Henkel Belgium N.V.
Brussels
100.00
Brazil
Henkel Ltda.
São Paulo
100.00
Canada
Henkel Canada Corporation
Halifax
100.00
Henkel Consumer Goods Canada Inc.
Toronto
100.00
China
124
Henkel (China) Co. Ltd.
Shanghai
Henkel Loctite (China) Co. Ltd.
Beijing
100.00
97.49
Czech Republic
Henkel CR spol.s.r.o.
Prague
100.00
Egypt
Henkel Trading Egypt SA
Cairo
100.00
France
Henkel France S.A.
Boulogne-Billancourt
100.00
Henkel Technologies France SAS
Boulogne-Billancourt
100.00
Germany
Schwarzkopf & Henkel Production
Europe Holding GmbH & Co. KG
Düsseldorf
100.00
Great Britain
Henkel Ltd.
Hatfield
100.00
Hungary
Henkel Magyarország Kft
Budapest
100.00
India
Henkel Marketing India Ltd.
Hyderabad
Ireland
Loctite (Overseas) Ltd.
Dublin
100.00
Italy
Henkel Italia S.p.A.
Ferentino
100.00
Japan
Henkel Japan Ltd.
Tokyo
100.00
48.94
Henkel Technologies Japan Ltd.
Tokyo
100.00
Mexico
Henkel Capital S.A. de C.V.
Ecatepec de Morales
100.00
Netherlands
Henkel Nederland B.V.
Nieuwegein
100.00
Poland
Henkel Polska Sp. z o.o.
Warsaw
100.00
Romania
Henkel Romania Srl
Bucharest
100.00
Russia
OAO Henkel ERA
Tosno
100.00
OOO Rushenk
Moscow
100.00
ZAO Schwarzkopf & Henkel
Moscow
100.00
Serbia
Henkel Merima d.o.o.
Krusevac
99.60
Slovak Republic
Henkel Slovensko spol. s.r.o
Bratislava
100.00
South Korea
Henkel Korea Ltd.
Jincheon-Kun
100.00
Spain
Henkel Ibérica S.A.
Barcelona
100.00
Sweden
Henkel Norden AB
Stockholm
100.00
Switzerland
Henkel & Cie. AG
Pratteln
100.00
Turkey
Türk Henkel Kimya Sanayi ve Ticaret A.S.
Istanbul
100.00
Ukraine
Henkel Bautechnik (Ukraine) TOB
Vyshgorod
100.00
Henkel Ukraine TOW
Kiev
100.00
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
Share in percent
USA
Henkel Consumer Goods, Inc.
Dover
100.00
Henkel Corporation
Wilmington
100.00
Henkel Corporation Finance, Inc.
Wilmington
100.00
Henkel of America, Inc.
Wilmington
100.00
Indopco Inc.
Sacramento
100.00
National Starch & Chemical Investment Holding Corporation
Wilmington
100.00
Pure & Natural Company
Phoenix
100.00
The Dial Corporation
Wilmington
100.00
In each of the following companies, Henkel AG & Co. KGaA holds, either directly or indirectly, not more than half of the shares,
but has the power to govern the financial and operating policies of the company. Therefore the company is consolidated.
Share in percent
Austria
Biozym GmbH
Kundl
49.00
Egypt
Henkel Polybit Egypt Co. Ltd.
Badr City
49.00
India
Henkel Marketing India Ltd.
Hyderabad
48.94
Lebanon
Detergenta Holding S.A.L.
Beirut
49.97
Henkel Lebanon S.A.L.
Beirut
50.00
Syria
Henkel Syria S.A.S.
Aleppo
49.97
Turkey
Eczacibasi Schwarzkopf Kuafor Urunleri Pazarlama A.S.
Istanbul
50.00
United Arab Emirates
Henkel Polybit Industries Co. Ltd.
Umm Al Quwain
49.00
Roof Care Co.
Sharjah
49.00
The following dormant companies or companies with insignificant operations are immaterial to the net assets, financial
position and results of operations of the Group and are stated at amortized cost:
Share in percent
Argentina
The Dial Corporation Argentina S.A.
Buenos Aires
100.00
Austria
Persil-Altersunterstützung GmbH
Vienna
100.00
Schwarzkopf & Henkel GmbH
Vienna
100.00
Germany
CALMATO Grundstücks-Vermietungsgesellschaft mbH
Düsseldorf
49.00
CANTICA Beteiligungsgesellschaft mbH
Schönefeld
49.00
CHEMPHAR Handels- und Exportgesellschaft mbH
Hamburg
100.00
Clynol GmbH
Hamburg
100.00
Entsorgungszentrum Düsseldorf Süd GmbH
Düsseldorf
Erste Deutsche Walfang GmbH
Hamburg
Fandus Grundstücksvermietungsgesellschaft
mbH & Co. Objekt Willich KG
Düsseldorf
68.62
Fix Point Vertriebs GmbH
Dinslaken
73.00
Forstverwaltung Brannenburg Geschäftsführungs-GmbH
Düsseldorf
100.00
Forstverwaltung Brannenburg GmbH & Co. OHG
Brannenburg
100.00
Hans Schwarzkopf & Henkel Verwaltungs-GmbH
Grünwald
100.00
Henkel Erste Verwaltungsgesellschaft mbH
Düsseldorf
100.00
Henkel Holding Verwaltungs-GmbH
Düsseldorf
100.00
Henkel Wasch- und Reinigungsmittel GmbH
Düsseldorf
100.00
Henkel Zweite Verwaltungsgesellschaft mbH
Düsseldorf
100.00
Indola GmbH
Hamburg
100.00
50.00
100.00
Annual Report 2008
125
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
Share in percent
Germany (cont.)
Greece
MATERNA Grundstücks-Vermietungsgesellschaft mbH & Co.
Objekt Reisholz KG
Düsseldorf
49.00
Phenion GmbH & Co. KG
Düsseldorf
100.00
Phenion Verwaltungs GmbH
Düsseldorf
100.00
Schwarzkopf & Henkel GmbH
Düsseldorf
100.00
Schwarzkopf & Henkel Production Management GmbH
Düsseldorf
100.00
SusTech GmbH & Co. KG
Darmstadt
100.00
SusTech Verwaltungs GmbH
Darmstadt
100.00
Henkel Pelikan Office Products EPE
Koropi
51.00
Schwarzkopf & Rilken Hellas A.E.E.K.
Athens-Kato Kifissia
Ireland
Chambois Ltd.
Cork
100.00
74.58
Pakistan
Henkel Industrial Adhesives Pakistan Pvt. Ltd.
Karachi
100.00
Russia
OOO Henkel Rus
Moscow
100.00
Slowenia
Henkel-Storitve d.o.o.
Maribor
100.00
USA
Dial Argentina Holdings. Inc.
Phoenix
100.00
Henkel AG & Co. KGaA holds more than 20 percent but not more than 50 percent in the following companies, either directly
or indirectly. As the holdings are immaterial to the net assets, financial position and results of operations of the Group,
they are stated at amortized cost:
Share in percent
Bahrain
Henkel Adhesives Middle East E.C.
Bur Dubai
50.00
Egypt
Henkel Adhesives Trading Egypt SAE
Cairo
50.00
Henkel Technologies Egypt SAE
Cairo
50.00
DATASOUND Gesellschaft zur Entwicklung und Vermarktung
digitaler Audio- und Informationssysteme mbH
Ludwigshafen
24.98
Purbond International Holdings Ltd.
Hatfield
50.00
Ten Lifestyle Management Ltd.
London
36.72
Guatemala
Tanques del Atlántico S.A.
Guatemala City
30.00
Indonesia
PT Dongsung NSC
Tangerang
49.00
Mexico
Hysol Indael de México S.A. de C.V.
Mexico City
49.00
Saudi Arabia
Ashwa Technologies Ltd.
Jeddah
50.00
Saudi Arabian Adhesives Factory Ltd.
Riyadh
50.00
Switzerland
Purbond AG
Neukirch
50.00
USA
AMT Capital L.P.
Dallas
20.90
Purbond Inc.
New Castle
50.00
Germany
Great Britain
126
Annual Report 2008
Notes to the Consolidated Financial Statements » Supplementary Information on the Consolidated Statement of Income/Balance Sheet
(54) Auditors’ fees and services
The fees charged for the services of the auditors KPMG in the 2007 and 2008 fiscal years were as follows:
Type of fee
in million euros
2007
2008
Audit (including outlays)
8.1
11.1
Other audit-related services
0.2
1.7
Tax advisory services
0.1
3.1
Other services
0.1
1.0
Total
8.5
16.9
Audit fees comprise the total fees (including outlays) paid or payable to the KPMG organization in respect of the audit of
the Group accounts and reporting thereon, and the audit of the individual company financial statements of Henkel AG &
Co. KGaA and its affiliated companies as required by law. The increase in the year under review is due to expansion of the
scope of consolidation resulting from the acquisition of the National Starch businesses.
Fees for other audit-related services comprise fees for audits in connection with information risk management and
audits of compliance with contractual terms and conditions, and audit of the opening balance sheets of April 3, 2008 for
the National Starch businesses.
Fees for tax advisory services include fees for tax advice relating to employees of Henkel AG & Co. KGaA who live outside
Germany and for employees of Henkel sent from Germany to work in Group companies outside Germany (International
Executive Services) and for performing tax compliance work for affiliated companies outside Germany. In the year under
review, extensive information gathering and analysis work was additionally performed with respect to the National Starch
businesses.
Other services comprise fees for agreed-upon procedures and support for process improvement activities, again with
significant work relating to the National Starch businesses.
Annual Report 2008
127
Notes to the Consolidated Financial Statements
Recommendation for the Approval of the Annual Financial
Statements and the Appropriation of the Profit of
Henkel AG & Co. KGaA
It is proposed that the annual financial statements of Henkel AG & Co. KGaA be approved as presented and that the unappropriated profit of 548,737,876.54 euros for the year ended December 31, 2008 be applied as follows:
a) Payment of a dividend of 0.51 euros per ordinary share on 259,795,875 shares
= 132,495,896.25 euros
b) Payment of a dividend of 0.53 euros per preferred share on 178,162,875 shares
= 94,426,323.75 euros
c) Carry-forward of the remaining amount of
321,815,656.54 euros
to the following year (retained earnings)
548,737,876.54 euros
Shares held as treasury stock are not entitled to dividend. The amount in unappropriated profit which relates to the treasury
stock held by the corporation at the date of the Annual General Meeting is carried forward to the following year.
Düsseldorf, January 30, 2009
Henkel Management AG
(personally liable partner of Henkel AG & Co. KGaA)
Management Board
128
Annual Report 2008
Notes to the Consolidated Financial Statements
Annual Financial Statements of
Henkel AG & Co. KGaA (summarized)1)
Statement of income
in million euros
2007
2008
Sales
3,132
3,099
Cost of sales
–2,135
–2,217
Gross profit
997
882
Selling, research and administrative expenses
–1,233
–1,330
Other income (net of other expenses)
373
726
Operating profit
137
278
Financial result
440
348
Profit on ordinary activities
577
626
Change in special accounts with reserve element
Earnings before tax
19
44
596
670
Taxes on income
–13
–24
Net earnings
583
646
Profit brought forward
Transfer to retained earnings
Transfer from reserve for treasury stock
Unappropriated profit2)
152
220
–291
–323
–
6
444
549
2007
2008
Balance sheet
in million euros
687
674
Financial assets
7,681
6,857
Non-current assets
8,368
7,531
210
213
2,719
4,528
119
109
Intangible assets and property, plant and equipment
Inventories
Receivables and miscellaneous assets/
Deferred charges
Marketable securities
Liquid funds
Current assets
Total assets
Shareholders’ equity
Special accounts with reserve element
Provisions
Liabilities, deferred income and accrued expenses
Total equity and liabilities
919
40
3,967
4,890
12,335
12,421
4,328
4,750
227
183
2,513
2,590
5,267
4,898
12,335
12,421
The full financial statements of Henkel AG & Co. KGaA with the auditors’ unqualified opinion are filed with the commercial register; copies can be obtained from
Henkel AG & Co. KGaA on request; the financial statements are based on the German Commercial Code (HGB)
2)
Statement of income figures are rounded; unappropriated profit: 444,192,003.61 euros for 2007 and 548,737,876.54 euros for 2008
1)
Annual Report 2008
129
Notes to the Consolidated Financial Statements
Statement by the Personally Liable Partner
The annual financial statements, the consolidated financial statements and the management reports for Henkel AG &
Co. KGaA and the Group have been prepared by the Management Board of Henkel Management AG, the personally liable
managing partner of Henkel AG & Co. KGaA, which is responsible for the content and objectivity of the information contained therein.
The Group financial reports have been prepared on the basis of International Financial Reporting Standards (IFRS) as
adopted by the European Union.
The Management Board has taken steps to ensure the integrity of the reporting process and compliance with the
relevant legal regulations by establishing effective internal control systems at the companies which are included in the
consolidated financial statements.
Appropriate training is provided to make sure that the employees responsible are suitably qualified to meet the required
standards. Staff training is centered on the corporation’s mission statement and principles and strategies developed within
the corporation. Compliance with these principles is continually monitored by the corporate management. Compliance
with regulations and the reliability and functional efficiency of the control systems are kept under constant review across
the Group by the Internal Audit department.
These measures, coupled with reporting procedures based on standard guidelines throughout the Group, ensure that
the financial records properly reflect all business transactions. They also enable the corporate management to recognize
changes in business circumstances and the ensuing risks to assets and financial arrangements as they occur.
The risk management systems in place for Henkel AG & Co. KGaA and the Henkel Group ensure, in accordance with the
requirements of company law, that any developments which could endanger the future of Henkel AG & Co. KGaA or of the
Henkel Group are recognized in good time and that appropriate measures can be taken where necessary. They also provide
the foundation for the accuracy of information disclosed in the consolidated financial statements and Group management
report and in the individual company financial statements incorporated therein.
The Management Board is committed to delivering a steady increase in shareholder value. The Group is managed on
principles of sustainable development in the interests of shareholders and in full awareness of its responsibility toward
employees, society and the environment in every country in which Henkel operates.
In February 2008, as required by Clause 161 of the German Joint Stock Corporation Act (AktG), the then Management
Board of Henkel KGaA, the Supervisory Board and the Shareholders’ Committee approved a joint declaration of compliance
with the recommendations of the German Corporate Governance Code.
KPMG AG Wirtschaftsprüfungsgesellschaft in accordance with a resolution adopted by shareholders at the Annual
General Meeting and as instructed by the Supervisory Board, has audited the consolidated financial statements and the
associated management reports. The auditor has also examined the existing risk management system and issued the general auditors’ opinion reproduced on
page 131. The annual financial statements, the consolidated financial statements
and the management reports for Henkel AG & Co. KGaA and the Group and the audit reports will be discussed, with the
auditors present, at a meeting of the Supervisory Board held for that purpose.
Düsseldorf, January 30, 2009
Henkel Management AG
Management Board
130
Annual Report 2008
Notes to the Consolidated Financial Statements
Auditors’ Report
We have audited the consolidated financial statements prepared by Henkel AG & Co. KGaA comprising the consolidated
balance sheet, the consolidated statement of income, the consolidated statement of recognized income and expense, and
the consolidated cash flow statement, and the notes to the consolidated financial statements, together with the Group
management report for the business year from January 1, 2008 to December 31, 2008. The preparation of the consolidated
financial statements and the Group management report in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union, and the additional requirements of German commercial law pursuant to § 315a
(1) HGB (German Commercial Code) are the responsibility of the personally liable partner of Henkel AG & Co. KGaA. Our
responsibility is to express an opinion on the consolidated financial statements and on the Group management report
based on our audit.
We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally
accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW) and in
supplementary compliance with International Standards on Auditing (ISA). Those standards require that we plan and
perform the audit such that misstatements materially affecting the presentation of the net assets, financial position
and results of operations in the consolidated financial statements prepared in accordance with the applicable financial
reporting framework, and in the Group management report, are detected with reasonable assurance. Knowledge of the
business activities and of the economic and legal environment of the Group and expectations as to possible misstatements
are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control
system and the evidence supporting the disclosures in the consolidated financial statements and the Group management
report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual
financial statements of those entities included in the consolidated financial statements, the determination of the entities
to be included in the consolidation, the accounting and consolidation principles used and significant estimates made by
the personally liable partner of the company, as well as evaluating the overall presentation of the consolidated financial
statements and Group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRS as adopted
by the European Union and the additional requirements of German commercial law pursuant to § 315a (1) HGB and give
a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these
requirements. The Group management report is consistent with the consolidated financial statements, and as a whole
provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.
Düsseldorf, January 30, 2009
KPMG AG
Wirtschaftsprüfungsgesellschaft
(formerly
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft)
Thomas Sauter
Michael Gewehr
Wirtschaftsprüfer
Wirtschaftsprüfer
Annual Report 2008
131
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Corporate Management of Henkel AG & Co. KGaA
Boards/Memberships as defined by Clause 125 (1) sentence 3 of the German Stock Corporation Act (AktG)
as at January 2009
Supervisory Board of Henkel AG & Co. KGaA
Members of the Supervisory Board of
Henkel AG & Co. KGaA
Membership of statutory
supervisory boards
Membership of comparable
supervisory boards
Dipl.-Ing. Albrecht Woeste
Chair,
Private Investor, Düsseldorf
Born in 1935
Member since June 27, 1988
Henkel Management AG
Henkel AG & Co. KGaA
(Shareholders’ Committee)
Henkel Management AG
Henkel AG & Co. KGaA
(Shareholders’ Committee)
Winfried Zander1)
Vice-Chair,
Chairman of the General Works Council of
Henkel AG & Co. KGaA and Chairman of the
Works Council of Henkel AG & Co. KGaA,
Düsseldorf site
Born in 1954
Member since May 17, 1993
Dr. Friderike Bagel
Attorney at Law/Tax Consultant, Düsseldorf
Born in 1971
Member since April 18, 2005
Dr. Simone Bagel-Trah
Private Investor, Düsseldorf
Born in 1969
Member since April 14, 2008
Engelbert Bäßler1)
(until April 14, 2008)
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1951
Member from March 1, 2005
Jutta Bernicke1)
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1962
Member since April 14, 2008
Hans Dietrichs1)
(until March 31, 2008)
Chairman of the Works Council of
Henkel AG & Co. KGaA, Genthin site
Born in 1943
Member from May 4, 1998
Fritz Franke1)
Member of the General Works Council of
Henkel AG & Co. KGaA and Chairman of the
Works Council of Henkel AG & Co. KGaA,
Genthin site
Born in 1955
Member since April 14, 2008
Birgit Helten-Kindlein1)
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1964
Member since April 14, 2008
1)
132
Employee representative
Annual Report 2008
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Supervisory Board of Henkel AG & Co. KGaA
Members of the Supervisory Board of
Henkel AG & Co. KGaA (continued)
Membership of statutory
supervisory boards
Membership of comparable
supervisory boards
Siltronic AG
Carl Zeiss Group mandates:
Carl Zeiss Financial Services GmbH (Chair),
Carl Zeiss MicroImaging GmbH (Chair)
Carl Zeiss Group mandates:
Carl Zeiss Japan Co. Ltd. (Chair)
Carl Zeiss Far East (Chair)
Carl Zeiss Korea (Chair)
Carl Zeiss Singapore (Chair)
Carl Zeiss Australia (Chair)
Kaufhof Warenhaus AG
UNIPLAN International GmbH & Co. KG
Bernd Hinz1)
Member of the General Works Council of
Henkel AG & Co. KGaA and Vice-chairman
of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1951
Member since May 4, 1998
Dr. sc. nat. Michael Kaschke
Member of the Executive Board of
Carl Zeiss AG, Oberkochen
Born in 1957
Member since April 14, 2008
Thomas Manchot
Private Investor, Düsseldorf
Born in 1965
Member since April 10, 2006
Prof. Dr. Dr. h.c. mult. Heribert Meffert
(until April 14, 2008)
Former Director of the Institute of Marketing,
University of Münster
Born in 1937
Member from May 4, 1998
Thierry Paternot
Operating Partner, Duke Street Capital, Paris
Born in 1948
Member since April 14, 2008
SGD SA (Chair), France
FullSix International SAS (Chair), France
Bio DS SAS, France
Andrea Pichottka1)
Secretariat of the General Executive of
IG Bergbau, Chemie, Energie, responsible
for research/technology, women/equal
opportunities, employees, advertising,
Hannover
Born in 1959
Member since October 26, 2004
Siltronic AG
Prof. Dr. Dr. h.c. mult.
Heinz Riesenhuber
(until April 14, 2008)
Former Federal Minister for Research and
Technology, Frankfurt/Main
Born in 1935
Member from May 4, 1998
Kabel Deutschland GmbH (Chair)
Konstantin von Unger
Founding Partner,
Blue Corporate Finance, London
Born in 1966
Member since April 10, 2006
Michael Vassiliadis1)
Member of the Executive Committee of
IG Bergbau, Chemie, Energie,
Hannover
Born in 1964
Member since May 4, 1998
1)
HBM BioVentures AG, Switzerland
Heidelberg Innovation BioScience
Venture II GmbH & Co. KG
Ten Lifestyle Management Ltd.,
Great Britain
BASF SE
K + S AG (Vice-chair)
K + S Kali GmbH (Vice-chair)
Evonik Steag GmbH (Vice-chair)
Employee representative
Annual Report 2008
133
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Supervisory Board of Henkel AG & Co. KGaA
Members of the Supervisory Board of
Henkel AG & Co. KGaA (continued)
Membership of statutory
supervisory boards
Bernhard Walter
Former Chairman of the Executive Board of
Dresdner Bank AG, Frankfurt/Main
Born in 1942
Member since May 4, 1998
Bilfinger Berger AG (Chair)
Daimler AG
Deutsche Telekom AG
Hypo Real Estate Holding AG
(Vice-chair)
Werner Wenning
(until April 14, 2008)
Chairman of the Executive Board
of Bayer AG, Leverkusen
Born in 1946
Member from April 14, 2003
Deutsche Bank AG
E.ON AG
Bayer Group mandate:
Bayer Schering Pharma AG (Chair)
Membership of comparable
supervisory boards
Ulf Wentzien1)
Commercial Executive, Düsseldorf
Representative of the Senior Staff of Henkel
AG & Co. KGaA
Born in 1963
Member since April 14, 2008
Dr. Anneliese Wilsch-Irrgang1)
(until April 14, 2008)
Chemist, Düsseldorf
Representative of the Senior Staff of
Henkel AG & Co. KGaA
Born in 1958
Member from May 4, 1998
Rolf Zimmermann1)
(until April 14, 2008)
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1953
Member from October 9, 2002
1)
Employee representative
Subcommittees of the Supervisory Board
134
Functions
Members
Nominations Committee
The Nominations Committee prepares the
resolutions of the Supervisory Board on
election proposals to be presented to the
Annual General Meeting for the election
of members to the Supervisory Board
(representatives of the shareholders).
Dipl.-Ing. Albrecht Woeste, Chair
Dr. Friderike Bagel
Bernhard Walter
Audit Committee
The Audit Committee prepares the resolutions of the Supervisory Board on the
approval of the annual financial statements and the consolidated financial statements, and the proposal to be put before
the Annual General Meeting regarding
appointment of the auditor. It further deals
with accountancy, risk management and
compliance issues.
Bernhard Walter, Chair
Dr. Friderike Bagel
Birgit Helten-Kindlein
Michael Vassiliadis
Dipl.-Ing. Albrecht Woeste
Winfried Zander
Annual Report 2008
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Shareholders’ Committee of Henkel AG & Co. KGaA
Members of the Shareholders’ Committee
of Henkel AG & Co. KGaA
Membership of statutory
supervisory boards
Dipl.-Ing. Albrecht Woeste
Chair,
Private Investor, Düsseldorf
Born in 1935
Member since June 14, 1976
Henkel AG & Co. KGaA
Henkel Management AG
Dr. Simone Bagel-Trah
Vice-chair,
Private Investor, Düsseldorf
Born in 1969
Member since April 18, 2005
Henkel AG & Co. KGaA
Henkel Management AG
Dr. h.c. Christoph Henkel
Vice-chair,
Managing Partner Canyon Equity LLC,
San Francisco
Born in 1958
Member since May 27, 1991
Dr. Paul Achleitner
Member of the Executive Board of Allianz SE,
Munich
Born in 1956
Member since April 30, 2001
Membership of comparable
supervisory boards
Texas Syngas Inc., USA
Bayer AG
RWE AG
Allianz Group mandates:
Allianz Deutschland AG
Allianz Global Investors AG
Stefan Hamelmann
Private Investor, Düsseldorf
Born in 1963
Member since May 3, 1999
Dr. h.c. Ulrich Hartmann
Chairman of the Supervisory Board of
E.ON AG, Düsseldorf
Born in 1938
Member since May 4, 1998
Deutsche Lufthansa AG
E.ON AG (Chair)
Münchener RückversicherungsGesellschaft AG
Prof. Dr. Ulrich Lehner
Former Chairman of the Management Board
of Henkel KGaA, Düsseldorf
Born in 1946
Member since April 14, 2008
Deutsche Telekom AG (Chair)
E.ON AG
Henkel Management AG
HSBC Trinkaus & Burkhardt AG
Porsche Automobil Holding SE
Dr. Ing. h.c. F. Porsche AG
ThyssenKrupp AG
Dr. August Oetker KG
Novartis AG, Switzerland
Konstantin von Unger
Founding Partner,
Blue Corporate Finance, London
Born in 1966
Member since April 14, 2003
Ten Lifestyle Management Ltd.,
Great Britain
Karel Vuursteen
Former Chairman of the
Executive Board of Heineken N.V.,
Amsterdam
Born in 1941
Member since May 6, 2002
Akzo Nobel N.V., Netherlands
Heineken Holding N.V., Netherlands
ING Groep N.V., Netherlands
Tom Tom N.V., Netherlands
Werner Wenning
Chairman of the Executive Board of
Bayer AG, Leverkusen
Born in 1946
Member since April 14, 2008
Deutsche Bank AG
E.ON AG
Bayer Group mandate:
Bayer Schering Pharma AG (Chair)
Annual Report 2008
135
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Shareholders’ Committee of Henkel AG & Co. KGaA
Members of the Shareholders’ Committee
of Henkel AG & Co. KGaA (continued)
Membership of statutory
supervisory boards
Membership of comparable
supervisory boards
Dr. Hans-Dietrich Winkhaus
(until April 14, 2008)
Former Chairman of the Management Board of
Henkel KGaA, Düsseldorf
Born in 1937
Member from May 8, 2000
Subcommittees of the Shareholders’ Committee
Functions
Members
Finance Subcommittee
The Finance Subcommittee deals principally with financial matters, accounting
issues including the statutory year-end
audit, taxation and accounting policy,
and risk management.
Dr. h.c. Christoph Henkel, Chair
Stefan Hamelmann, Vice-chair
Dr. Paul Achleitner
Dr. h.c. Ulrich Hartmann
Prof. Dr. Ulrich Lehner (since April 14, 2008)
Dr. Hans-Dietrich Winkhaus
(until April 14, 2008)
Human Resources Subcommittee
The Human Resources Subcommittee
deals principally with personnel matters
concerning members of the Management
Board, and issues relating to human resources strategy and remuneration.
Dr. Simone Bagel-Trah, Chair
Konstantin von Unger, Vice-chair
Karel Vuursteen
Werner Wenning (since April 14, 2008)
Dipl.-Ing. Albrecht Woeste
Until April 14, 2008 Management Board of Henkel KGaA
Members of the Management Board
Prof. Dr. Ulrich Lehner
Chair and sole Personally Liable Partner,
Born in 1946
Member from April 1, 1995
Kasper Rorsted
Vice-chair,
Human Resources/
Infrastructure Services
Born in 1962
Member from April 1, 2005
Thomas Geitner
Special Tasks
Born in 1955
Member from March 1, 2008
Alois Linder
Adhesive Technologies
Born in 1947
Member from January 1, 2002
Dr. Friedrich Stara
Laundry & Home Care
Born in 1949
Member from July 1, 2005
Dr. Lothar Steinebach
Finance/Purchasing/IT/Law
Born in 1948
Member from July 1, 2003
Hans Van Bylen
Cosmetics/Toiletries
Born in 1961
Member from July 1, 2005
136
Annual Report 2008
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA
Personally Liable Partner of Henkel AG & Co. KGaA (since April 14, 2008)
Henkel Management AG
Düsseldorf,
Commercial Register HRB 58139,
District Court, Düsseldorf
Management Board of Henkel Management AG
Members of the Management Board of
Henkel Management AG
Membership of statutory
supervisory boards
Membership of comparable
supervisory boards
Kasper Rorsted
Chairman,
Human Resources/Infrastructure Services
Born in 1962
Member since February 15, 2008
(Member of the Management Board of
Henkel KGaA: April 1, 2005 – April 14, 2008)
Cable & Wireless, Plc., Great Britain
Henkel Norden AB, Sweden
Thomas Geitner
Adhesive Technologies
Born in 1955
Member since March 1, 2008
(Member of the Management Board of
Henkel KGaA: March 1, 2008 – April 14, 2008)
Henkel Corp. (Chair), USA
Alois Linder
(until June 18, 2008)
Adhesive Technologies
Born in 1947
Member from February 15, 2008
(Member of the Management Board of
Henkel KGaA: January 1, 2002 – April 14, 2008)
Henkel Corp. (Chair), USA
Dr. Friedrich Stara
Laundry & Home Care
Born in 1949
Member since February 15, 2008
(Member of the Management Board of
Henkel KGaA: July 1, 2005 – April 14, 2008)
The Dial Corp. (Chair), USA
Wiener Städtische Allgemeine
Versicherung AG, Austria
Dr. Lothar Steinebach
Finance/Purchasing/IT/Law
Born in 1948
Member since February 15, 2008
(Member of the Management Board of
Henkel KGaA: July 1, 2003 – April 14, 2008)
Hans Van Bylen
Cosmetics/Toiletries
Born in 1961
Member since February 15, 2008
(Member of the Management Board of
Henkel KGaA: July 1, 2005 – April 14, 2008)
LSG Lufthansa Service Holding AG
Ashwa Technologies Ltd., Saudi Arabia
Henkel Adhesives Middle East E.C., Bahrain
Henkel (China) Investment Co. Ltd., China
Henkel & Cie AG, Switzerland
Henkel Central Eastern Europe GmbH
(Chair), Austria
Henkel Consumer Goods Inc. (Chair), USA
Henkel Ltd., Great Britain
Henkel of America Inc. (Chair), USA
Henkel Technologies Egypt SAE, Egypt
Saudi Arabian Adhesives Factory Co.,
Saudi Arabia
Türk Henkel Kimya Sanayi ve Ticaret AS
(Chair), Turkey
Henkel Belgium N.V., Belgium
Henkel Nederland BV, Netherlands
Annual Report 2008
137
Notes to the Consolidated Financial Statements » Corporate Management of Henkel AG & Co. KGaA / Further Information
Supervisory Board of Henkel Management AG
Members of the Supervisory
Board of Henkel Management AG
Membership of statutory
supervisory boards
Membership of comparable
supervisory boards
Dipl.-Ing. Albrecht Woeste
Chair,
Private Investor, Düsseldorf
Born in 1935
Member since February 15, 2008
Henkel AG & Co. KGaA
Henkel AG & Co. KGaA
(Shareholders’ Committee)
Dr. Simone Bagel-Trah
Vice-chair,
Private Investor, Düsseldorf
Born in 1969
Member since February 15, 2008
Henkel AG & Co. KGaA
Henkel AG & Co. KGaA
(Shareholders’ Committee)
Prof. Dr. Ulrich Lehner
Former Chairman of the Management Board
of Henkel KGaA, Düsseldorf
Born in 1946
Member since February 15, 2008
Deutsche Telekom AG (Chair)
E.ON AG
HSBC Trinkaus & Burkhardt AG
Porsche Automobil Holding SE
Dr. Ing. h.c. Porsche AG
ThyssenKrupp AG
Henkel AG & Co. KGaA
(Shareholders’ Committee)
Dr. August Oetker KG
Novartis AG, Switzerland
Corporate Senior Vice Presidents
Jan-Dirk Auris
Adhesive Technologies
Asia-Pacific
Prof. Dr. Ramón Bacardit
Adhesive Technologies
Research
Alain Bauwens
Laundry & Home Care
Business Development &
MENA/Asia-Pacific/
Central America Regions
Wolfgang Beynio
Finance/Controlling
Dr. Andreas Bruns
Infrastructure Services
Pierre Brusselmans
Corporate Development
(until March 3, 2009)
Brad Casper
Dial Corporation North America
Henkel Consumer Goods, Inc.
Julian Colquitt
Adhesive Technologies
North America
138
Annual Report 2008
Bertrand Conquéret
Global Purchasing
Norbert Koll
Schwarzkopf Professional
Jean Fayolle
Industrial Adhesives SBU
Libor Kotlik
Adhesive Technologies
Supply Chain & Operations
Dr. Attilio Gatti
Specialty Adhesives SBU
Adhesive Technologies
Latin America Region
Enric Holzbacher
Consumer & Craftsmen Adhesives/Building Adhesives SBUs
Adhesive Technologies
Western Europe/Central Eastern
Europe/MEA Regions
Dr. Joachim Jäckle
Financial Operations
(since February 1, 2009)
Carsten Knobel
Cosmetics/Toiletries –
Financial Director
Finance – Corporate Controlling
(since February 1, 2009)
Dirk-Stephan Koedijk
Chief Compliance Officer
Thomas Gerd Kühn
Law
Andreas Lange
Laundry & Home Care
Western Europe Region
Tina Müller
SBU Hair, Skin & Oral Care
Prof. Dr. Thomas
Müller-Kirschbaum
Laundry & Home Care
R&D/Technology/Supply Chain
Bruno Piacenza
Cosmetics/Toiletries Southern
Europe/Western Europe/MENA
and Asia-Pacific Regions
Dr. Matthias Schmidt
Adhesive Technologies –
Financial Director
(since February 1, 2009)
Stefan Sudhoff
Body Care SBU,
Cosmetics/Toiletries Central &
Eastern Europe/CIS/North and
Latin America Regions
Alan Syzdek
Adhesive Technologies
Global Electronic Materials
Business
Günter Thumser
Henkel Central Eastern Europe
Christian-André Weinberger
Global Chief Marketing Officer
GMU Laundry & Home Care
Dr. Juliane Wiemerslage
Human Resources
Dr. Peter Wroblowski
Information Technology
At February 1, 2009
Further Information
Management Circle I Worldwide
Giacomo Archi
Faruk Arig
Georg Baratta-Dragono
Francisco Beltran
Paul Berry
Cedric Berthod
Amy Bloebaum
Dr. Joachim Bolz
Oriol Bonaclocha
Robert Bossuyt
Ingo Brauckmann
Hanno Brenningmeyer
Daniel Brogan
Beat Buser
Sergej Bykovskikh
Michelle Cheung
Jürgen Convent
Susanne Cornelius
Paul de Bruecker
Ivan de Jonghe
Patrick de Meyer
Joseph Debiase
Hermann Deitzer
Nicola delli Venneri
Serge Delobel
Dr. Alexander Ditze
Eric Dumez
Christof Eibel
Wolfgang Eichstaedt
Ashraf El Afifi
Steven Essick
Charles Evans
Sam Ewe
Thomas Feldbrügge
Dr. Peter Florenz
Dr. Thomas Förster
Timm Rainer Fries
Holger Gerdes
Roberto Gianetti
Dr. Karl W. Gladt
Ralf Grauel
Peter Günther
Rainer M. Haertel
James Hardy
Andreas Haupt
Ludger Hazelaar
Georg Hoebenstreit
Dr. Alois Hoeger
Jos Hubin
Dr. Stefan Huchler
Dr. Hans-Georg Hundeck
Jeremy Hunter
Will Jacobs
Dr. Regina Jäger
John Kahl
Patrick Kaminski
Peter Kardorff
Klaus Keutmann
Dr. Christian Kirsten
Dr. Wolfgang Klauck
Nurierdem Kocak
Dr. Harald Köster
Dr. Marcus Kuhnert
Satish Anavangot Kumar
Luis Carlos Lacorte
Daniel Langer
Tom Linckens
Oliver Luckenbach
Dr. Carlo Mackrodt
Andreas Mader
Dr. Klaus Marten
Lutz Mehlhorn
Kathrin Menges
Dr. Clemens Mittelviefhaus
Scott Moffitt
Juan Morcego
Georg Müller
Dr. Heinrich Müller
Julio Munoz-Kampff
Liam Murphy
Wolfgang Schäufele
Rolf Schlue
Dr. Berthold Schreck
Dr. Hans-Willi Schroiff
Jens-Martin Schwärzler
Dr. Johann Seif
Brian Shook
Dr. Simone Siebeke
Dr. Walter Sterzel
Klaus Strottmann
Monica Sun
Marco Swoboda
Christoph Neufeldt
Helmut Nuhn
Dr. Boris Tasche
Richard Theiler
Greg Tipsord
Thomas Tönnesmann
Patrick Trippel
Christian Twehues
Joseph O’Brien
Björk Ohlhorst
Michael Olosky
Carlos Eduardo Orozco
Dr. Uwe Over
Campbell Peacock
Jerry Perkins
Thomas Perlitz
Jeffrey Piccolomini
Arnd Picker
Michael Prange
Ernst Primosch
Dr. Volker Puchta
Michael Rauch
Gary Raykowitz
Birgit Rechberger-Krammer
Dr. Michael Reuter
Robert Risse
Gabriele Rusconi
Jean Baptiste Santoul
Robert Uytdewillegen
Tracy Van Bibber
Amelie Vidal-Simi
Dr. Vincenzo Vitelli
Dr. Dirk Vollmerhaus
Paul Voordeckers
Douglas Weekes
Dr. Jürgen Wichelhaus
Dr. Hans-Christof Wilk
Dr. Rudolf Wittgen
Eric Yaszemski
At January 1, 2009
Annual Report 2008
139
Further Information
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable accounting principles for financial reporting, the
consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of
the Group, and the management report of the Group includes a fair review of the development, performance and results
of the business and the position of the Group, together with a cogent description of the principal opportunities and risks
associated with the expected development of the Group.
Düsseldorf, January 30, 2009
Henkel Management AG
Management Board
Kasper Rorsted,
Thomas Geitner, Dr. Friedrich Stara,
Dr. Lothar Steinebach, Hans Van Bylen
140
Annual Report 2008
Further Information
Financial Highlights by Quarter
1st quarter
in million euros
2nd quarter
3rd quarter
4th quarter
Full year
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
1,069
1,031
1,024
1,012
1,053
1,068
1,002
1,061
4,148
4,172
704
708
769
779
768
770
731
759
2,972
3,016
1,406
1,364
1,440
1,816
1,474
1,860
1,391
1,660
5,711
6,700
58
59
60
61
63
62
62
61
243
243
3,237
3,162
3,293
3,668
3,358
3,760
3,186
3,541
13,074
14,131
Cost of sales
–1,726
–1,687
–1,748
–2,149
–1,797
–2,188
–1,742
–2,166
–7,013
–8,190
Gross profit
1,511
1,475
1,545
1,519
1,561
1,572
1,444
1,375
6,061
5,941
–937
–920
–975
–1,063
–963
–1,039
–873
–971
–3,748
–3,993
–85
–86
–91
–98
–87
–149
–87
–96
–350
–429
–169
–166
–153
–254
–156
–214
–186
–191
–664
–825
3
17
13
9
4
21
25
38
45
85
117
100
111
92
126
117
105
130
459
439
Sales
Laundry & Home Care
Cosmetics/Toiletries
Adhesive Technologies
Corporate
Henkel Group
Marketing, selling and distribution expenses
Research and development expenses
Administrative expenses
Other operating charges and income
EBIT
Laundry & Home Care
Cosmetics/Toiletries
Adhesive Technologies
82
87
98
98
95
96
97
95
372
376
149
150
162
192
164
169
146
147
621
658
Corporate
–25
–17
–32
–269
–26
–191
–25
–217
–108
–694
Henkel Group
323
320
339
113
359
191
323
155
1,344
779
Investment result
Net interest
19
19
24
24
22
24
19
1,056
84
1,123
–49
–38
–37
–84
–44
–72
–48
–81
–178
–275
Financial result
–30
–19
–13
–60
–22
–48
–29
975
–94
848
Earnings before tax
293
301
326
53
337
143
294
1,130
1,250
1,627
Taxes on income
–83
–78
–87
–11
–92
–36
–47
–269
–309
–394
Net earnings
210
223
239
42
245
107
247
861
941
1,233
Minority interests
Earnings after minority interests
Earnings per preferred share
in euros
–5
–4
–5
–4
–7
–6
–3
2
–20
–12
205
219
234
38
238
101
244
863
921
1,221
0.48
0.51
0.54
0.09
0.55
0.23
0.57
2.00
2.14
2.83
1st quarter
in million euros
2nd quarter
3rd quarter
4th quarter
Full year
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
323
320
339
113
359
191
323
155
1,344
779
One-time gains
–
–8
–8
–3
–
–
–
–19
–8
–30
One-time charges
–
–
–
6
–
19
–
23
–
48
EBIT (as reported)
Restructuring charges
Adjusted EBIT
Adjusted earnings
per preferred share
in euros
9
6
14
256
9
181
2
220
34
663
332
318
345
372
368
391
325
379
1,370
1,460
0.50
0.51
0.55
0.52
0.57
0.59
0.57
0.57
2.19
2.19
The quarterly figures are specific to the quarter to which they refer and have been rounded for commercial convenience.
Annual Report 2008
141
Further Information
Five-Year Summary
in million euros
20045)
2005
2006
2007
2008
10,592
10,592
11,974
12,740
13,074
14,131
Operating profit (EBIT)
8004)
996
1,162
1,298
1,344
779
Earnings before tax
4)
808
1,007
1,042
1,176
1,250
1,627
Net earnings
5514)
748
770
871
941
1,233
Sales
Earnings after minority interests
4)
550
747
757
855
921
1,221
Earnings per preferred share (EPS)1)
1.294)
1.75
1.77
1.99
2.14
2.83
Total assets
13,138
13,287
13,944
13,346
13,048
16,074
Non-current assets
7,400
7,989
9,065
8,664
7,931
11,261
Current assets
5,738
5,248
4,879
4,682
5,117
4,813
Debt
8,937
8,941
8,545
7,799
7,342
9,539
Shareholders’ equity
4,201
4,346
5,399
5,547
5,706
6,535
as % of total assets
32.0
32.7
38.7
41.6
43.7
40.6
Net return on sales in %2)
5.124)
7.06
6.43
6.84
7.20
8.72
Return on equity in %
4)
16.1
17.2
17.7
16.1
17.0
21.6
Dividend per ordinary share in euros
0.41
0.41
0.43
0.48
0.51
0.516)
Dividend per preferred share in euros
0.43
0.43
0.45
0.50
0.53
0.536)
Total dividends
185
185
193
214
227
2276)
4,628
4,678
1,119
897
548
4,074
43.7
43.7
9.3
7.0
4.2
28.8
3)
Capital expenditures (including financial assets)
Investment ratio as % of sales
Research and development costs
272
272
324
340
350
429
49,947
49,947
51,724
51,716
52,303
55,513
of which in Germany
10,488
10,488
10,264
9,995
9,899
9,892
of which abroad
39,459
39,459
41,460
41,721
42,404
45,621
Number of employees (annual average)
Basis: share split (1:3) of June 18, 2007
Net earnings / sales
3)
Net earnings / shareholders’ equity at the start of the year
4)
Before exceptional items
5)
Restated and comparable
6)
Proposed
1)
2)
142
2004
Annual Report 2008
Konzernabschluss
Further
» Konzernanhang
Information
Vision & Values
Henkel is a leader with brands and technologies that make
people’s lives easier, better and more beautiful.
» We are customer driven.
» We develop superior brands and technologies.
» We aspire to excellence in quality.
» We strive for innovation.
» We embrace change.
» We are successful because of our people.
» We are committed to shareholder value.
» We are dedicated to sustainability and corporate social responsibility.
» We communicate openly and actively.
» We preserve the tradition of an open family company.
Annual Report 2008
143
Credits
Credits
Published by:
Henkel AG & Co. KGaA
40191 Düsseldorf, Germany
Phone: +49 (0)211/7 97-0
© 2009 Henkel AG & Co. KGaA
The collages on the cover and other photographic
pages of the Annual Report are mosaics. They are
composed of more than 300 portraits of Henkel
employees as well as logos and photos of products
of our top brands. We would like to thank all of the
employees who agreed to let us take their picture.
Edited by:
Corporate Communications, Investor Relations
English Translation: Paul Knighton
Coordination: Rolf Juesten, Oliver Luckenbach,
Jens-Bruno Wilhelm, Wolfgang Zengerling
Concept and Design: Kirchhoff Consult AG, Hamburg
Photographs: Henkel, Oliver Blobel, Olaf Döring,
Andreas Fechner
Produced by: Schotte, Krefeld
Date of publication of this report:
February 25, 2009
Corporate Communications
Phone: +49 (0)211 797-3533
Fax: +49 (0)211 798-2484
E-mail: [email protected]
Investor Relations
Phone: +49 (0)211 797-3937
Fax: +49 (0)211 798-2863
E-mail: [email protected]
PR. No.: 02 09 11,000
ISSN: 07244738
ISBN: 978-3-941517-09-7
The Annual Report is printed on PROFIsilkFSC from Sappi. The paper is made from pulp bleached without chlorine.
It consists of wood fibers originating from sustainably managed forests and certified according to the rules of the
Forest Stewardship Council (FSC). This publication was bound so as to be suitable for recycling, using Purmelt MicroEmission from Henkel for the highest occupational health and safety standards, and cover-finished with water-based
Adhesin laminating adhesives from Henkel. The printing inks contain no heavy metals.
All product names are registered trademarks of Henkel AG & Co. KGaA, Düsseldorf, or its affiliated companies.
This document contains forward-looking statements which are based on the current estimates and assumptions made by the corporate management of
Henkel AG & Co. KGaA. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate,
anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be
accurate. Future performance and the results actually achieved by Henkel AG & Co. KGaA and its affiliated companies depend on a number of risks and
uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel’s control and cannot
be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace.
Henkel neither plans nor undertakes to update any forward-looking statements.
144
Annual Report 2008
Calendar
Annual General Meeting of
Henkel AG & Co. KGaA 2009:
Monday, April 20, 2009
Publication of Report
for the First Quarter 2009:
Wednesday, May 6, 2009
Publication of Report
for the Second Quarter/Half Year 2009:
Wednesday, August 5, 2009
Publication of Report
for the Third Quarter/Nine Months 2009:
Wednesday, November 11, 2009
Press Conference for Fiscal 2009
and Analysts’ Conference 2010:
Thursday, February 25, 2010
Annual General Meeting of
Henkel AG & Co. KGaA 2010:
Monday, April 19, 2010
Up-to-date facts and figures on Henkel also
available on the internet: www.henkel.com
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