Henkel: Fiscal-Year 2023 Guidance Confirmed After Solid Quarter; Some Weakness Likely on the Horizon

Narrow-moat Henkel HEN delivered revenue growth of 6.4% for the first quarter (out of which organic sales growth was 6.6%), significantly ahead of FactSet’s 3.5% consensus revenue growth estimate. Despite this relatively strong performance, management confirmed full-year organic sales growth guidance in the range of 1% to 3% for the group. Although we believe this is slightly conservative, we appreciate that there is substantial uncertainty with regard to the full-year volume and price development. Volume growth has been consistently deteriorating in recent quarters, and the strong pricing in the first quarter (12% contribution to growth) is likely to be in large part a carryover impact from the previous year’s pricing actions, with further pricing likely to be more muted. We don’t expect to make any changes to our 2023 forecast at this time, which is broadly aligned with the guidance, and therefore we reconfirm our EUR 82 fair value estimate.

The adhesive technologies segment delivered organic sales growth of 6.8% for the period (11.4% from price, negative 4.6% from volume). With the first-quarter results, Henkel has also provided more insight into the performance of the adhesives technologies segment by end market. A lot of the first-quarter growth has been driven by the mobility and electronics business area (12.6% organic revenue growth), as a result of solid automotive demand. In other areas, such as packaging and consumer goods, the performance has been more muted (1% organic sales growth), with packaging representing a drag on performance amid strong prior-year comparators. On the whole, we expect the segment to deliver organic sales growth of 2.5% for the full year, near the upper end of management guidance.

The consumer brands segment, which is now reported as a single business unit (compared with two distinct units last year: laundry and home care separate from beauty care) delivered organic sales growth of 7% (12.7% from price, negative 5.7% from volume).