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Henkel counts on new products to tackle weak sales growth

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The maker of Persil laundry detergent, adhesives brand Loctite and Schwarzkopf hair products, said sales of professional beauty care products were robust in April to June. SOURCE: REUTERS

[FRANKFURT] Consumer goods group Henkel plans to roll out new beauty products in major markets France and Italy to bolster business after its second quarter growth in organic sales was the weakest in eight years.

The maker of Persil laundry detergent, adhesives brand Loctite and Schwarzkopf hair products, said sales of professional beauty care products were robust in April to June.

But the retail business, which sells products such as Schwarzkopf and Syoss shampoos and Fa shower gel, had fallen short of the group's expectations.

"The team is looking at where we can innovate in the second half of the year, we have a strong pipeline of products and are doing more rollouts," CEO Hans van Bylen told journalists during a conference call on Thursday.

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The group would also step up promotions of shower gels and shampoos in Italy and France, as sales had declined in those markets in the second quarter, he said.

The German group earlier reported organic sales growth of 2.2 per cent for the second quarter, at the bottom of its annual guidance range and sending its shares down more than 4 per cent to a six-month low.

Bernstein Research said the growth figure, the weakest result in eight years, fell short of analyst expectations for 3.2 per cent.

Recent sales figures from European rivals L'Oreal and Unilever - which also makes Persil products - fell short of analyst expectations too, but Henkel's results were perceived to be more disappointing.

Organic sales at Henkel's beauty care business, which accounts for around a fifth of group revenue, were flat year-on-year, as a decline in volumes offset a small increase in prices.

"The weak topline result at beauty care might raise eyebrows if Henkel is strategically well enough positioned," analysts at Baader Helvea Equity Research said.

According to a recent Baader Helvea research note, Henkel is the world's No 4 player in retail hair care, behind L'Oreal, Procter & Gamble and Unilever and has market share of around 3 per cent in body care, making it the fourth-biggest player in that sector as well.

Growth at Henkel's other two businesses, adhesives and laundry and home care, also slowed in the second quarter.

Quarterly group earnings before interest and taxes (EBIT), adjusted for one-offs, rose 11 per cent to 839 million euros (S$1.34 billion) on sales of 5.1 billion euros, missing average analyst estimates for 915 million and 5.23 billion respectively.

Liberum analysts, who recommend selling shares in Henkel, said the results showed that Henkel would have to rely on acquisitions to reach its 2020 profit targets as developed markets remain intensely competitive.

Henkel stuck to its standard forecast for underlying sales growth in 2017 of 2 to 4 per cent, and a 7 to 9 per cent increase in adjusted earnings per preferred share.

Shares in Henkel were down 4.7 per cent at 113.70 euros by 1040 GMT, putting them among the biggest decliners on the STOXX Europe 600 index.

REUTERS

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