Second lockdown would hit companies ‘harder’, warns Henkel chief
Persil-maker reports strong pandemic sales but warns momentum will slow as demand eases
The chief executive of Henkel, the maker of Persil washing powder and Loctite glue, is urging policymakers to avoid a full-scale second lockdown in a plea to limit economic damage from the fight against coronavirus.
“Many companies were able to cushion the fallout from the first lockdown, but they would be hit harder by a second one,” Carsten Knobel told the Financial Times on Friday, after the group pre-released better than expected results for the third quarter as well as a cautiously optimistic outlook for the full year.
The company warned that momentum would slow in the fourth quarter as demand diminished.
Shares in family-controlled Henkel, which is valued at €38bn on the German stock market, rose up to 2.8 per cent in early trading on Friday.
The popularity of new products such as environmentally friendly washing powder and pent-up demand after lockdowns ended earlier this year led to a 3.9 per cent year-on-year rise in organic sales in the third quarter. All three business units — adhesives, hair and beauty as well as laundry and homecare — reported rising revenue.
As long as a second lockdown could be avoided, Henkel said its full-year performance would be better than analyst expectations. The company now expects a drop in revenue of between 1 and 2 per cent, compared with a 3.6 per cent forecast by analysts polled by Vara Research.
The operating profit margin, which stood at 16 per cent in 2019, is expected to drop to 13 to 13.5 per cent. “Compared to our expectations at the onset of the pandemic half a year ago, we are doing better so far,” Mr Knobel told the FT. Over the first nine months, sales were down 2.1 per cent year on year. He would not be drawn on expectations for the coming year.
Mr Knobel praised the German government for “doing a good job” in fighting the pandemic. Looking forward, he said that the country needed strategies different to heavy restrictions on economic life that were imposed in March to contain the pandemic.
In Germany, the number of new infections per day has risen to above 4,000, the highest level since April.
Mr Knobel has been in charge of Henkel since the start of this year after his predecessor Hans van Bylen left the company following a series of revenue and profit warnings last year.
Shortly after taking on the job, the new chief promised to “rigorously optimise and shape” the brands that Henkel owned and announced plans to sell or close down underperforming businesses accounting for €500m in revenue by 2021. He has also earmarked operations generating a further €500m in revenue for restructuring.
“Henkel is doing the right things for the business and — coincidentally or not — is seeing positive results,” wrote James Edwardes Jones, an analyst at RBC Capital Markets, in a note to clients.