New Henkel chief eyes renewed focus on growth
Hans Van Bylen aims to exploit opportunities offered by digitalisation
On the day that Henkel announced its chief executive was stepping down, the German consumer goods conglomerate behind Persil washing powder and Loctite glue lost €1bn of its market value.
Nine months on, however, those investor concerns over the loss of Kasper Rorsted — the man credited with reviving the 140-year-old group — seem to have faded. Henkel’s market value has surged by €11bn since then, to €47bn, making it the 10th-biggest company in Germany’s blue-chip index. And, last month, investors in effect agreed to pay a fee to lend the group money, by buying a Henkel bond carrying a yield to maturity of minus 0.05 per cent.
Hans Van Bylen, who succeeded Mr Rorsted in May, says the negative-yielding bond tells a story about Henkel and the wider market. “It means that the world financial system is quite shaky,” he says. “But, within this environment, it is also a vote of confidence in our company.”
This recent upturn in sentiment has been helped by the fast start enjoyed by Mr Van Bylen. In June, the softly spoken Belgian oversaw Henkel’s biggest purchase since 2008: buying US laundry group Sun Product for €3.2bn. In doing so, he not only strengthened Henkel’s sub-scale US presence, but also allayed fears that the group might miss out on consolidation opportunities, having failed to buy Procter & Gamble’s haircare business last year. Then, in August, Mr Van Bylen raised his guidance on Henkel’s full-year profit margin, saying it would exceed an earlier target of 16.5 per cent.
With Henkel’s latest four-year plan due next month, however, the big question for investors is how Mr Van Bylen can build on the achievements of Mr Rorsted.
“In a sense they’re a victim of their own success,” says James Targett, an analyst at Berenberg. “They have had over five years of very strong improvement in margins and returns; their acquisitions and disposals have generally been successful. The task for them now is to show that they can keep the momentum up.”
Mr Van Bylen says his priorities for the next four years will be a renewed focus on growth, as well as an effort to make Henkel more efficient and more agile, and a push to exploit the opportunities offered by digitalisation.
To meet those growth ambitions, Mr Van Bylen says that Henkel will work to reduce the gaps, or “white spots”, in its geographical presence and its mix of products.
“There are more white spots in our consumer goods businesses, compared to our industrial adhesives business,” he says. “Part of it will be in the emerging markets but we are also convinced that we can grow strongly in mature markets. Because, even if a mature market is quite stable, we always find segments which are growing.”
Henkel will also aim to derive a greater share of its earnings from providing services to customers, rather than simply selling them products. “If you look at automobiles, the product is moving from the automobile to mobility. We also see this in our businesses, and we want to expand our product to a complete service offering,” explains Mr Van Bylen. As an example, he cites Henkel’s “Persil service” in Germany, which collects laundry from customers before cleaning and returning it.
This new strategy will be implemented under Henkel’s current structure, with three divisions specialising in adhesives, laundry and homecare, and beauty. But Mr Van Bylen concedes that there is scope for further acquisitions within those categories. “M&A will be a concrete part of our strategy,” he says.
On top of this, Henkel will push for greater digitalisation to boost its e-commerce activities. Here, Mr Van Bylen sees “huge potential”, recounting how Henkel — which owns the Schwarzkopf shampoo brand — was able to become market leader in online haircare sales in China via a partnership with Alibaba.
To fund its investments in growth, Henkel plans further efficiency programmes. Mr Van Bylen says that these will not affect the overall number of staff, but concedes that resources may be shifted between business areas.
Henkel’s progress towards two of its key 2016 targets — overall and emerging market revenues — were thwarted by currency movements which have knocked roughly €1.5bn off its sales over the past four years. Another set of revenue and profitability targets will be announced next month — but Mr Van Bylen hints that this time, the group is likely to focus on organic growth, rather than absolute numbers. “The lesson,” he says “is … not to take parameters that we cannot control.”