Henkel's stock price plummeted around ten percent on Tuesday, March 11, 2025, following the company's forecast of a weak start to the year. CEO Carsten Knobel stated, "We expect an overall weak start to 2025" during the presentation of the annual results. The lackluster outlook was largely attributed to consumer caution, particularly influenced by current conditions in the United States.
The company anticipates a sales decline of up to two percent within its consumer goods division from January to March 2025. This projected downturn unsettled investors, who have seen stronger performance from competitors like Unilever and L'Oreal. "Investors are not at all pleased with such predictions," noted Christiane Hölz, Managing Director of the German Investor Protection Association (DSW). She added, "The outlook is not encouraging; other brand manufacturers are faring much besser and are more optimistic." Henkel’s management hopes for improved performance later in the year, but such optimism remains to be validated.
Despite the challenging forecast, Henkel's earnings figures for the previous year demonstrated resilience. The company's sales increased by 2.6 percent, reaching 21.6 billion euros, and its operating profit rose by 20.9 percent to 3.1 billion euros. The adjusted operating margin also improved significantly, climbing to 14.3 percent, which Henkel's board termed as "an excellent improvement." Notably, the dividend is set to rise by about ten percent to 2.04 euros per preferred share, reflecting Henkel’s commitment to rewarding investors amid these uncertain times.
To bolster its stock and showcase confidence, Henkel has initiated a new share buyback program valued at one billion euros. This program entails the purchase of preferred shares worth up to 800 million euros and common shares up to 200 million euros, accounting for approximately 2.7 percent of the company's share capital. The board plans to commence this share repurchase initiative as early as next month.
Looking forward to 2025, Henkel anticipates organic sales growth to fall between 1.5 percent and 3.5 percent. The Adhesive Technologies division, representing half of Henkel's business, is expected to experience up to four percent growth, whereas the consumer goods sector may achieve growth of one to three percent. While Knobel holds out hope for improved operating returns of up to 17 percent for adhesives, consumer goods may see returns between 13.5 percent and 15 percent.
So far, efforts to restructure the company have led to the elimination of 1,650 production positions globally, with plans for restructuring expected to conclude by the end of 2025. Despite these changes, Knobel emphasized there are no plans to shutter any consumer goods manufacturing facilities within Germany. Instead, Henkel is focused on optimizing logistics and operations.
On the one hand, the restructuring of the consumer goods segment is progressing faster than expected, but the sale of lower-margin consumer brands has resulted in a slight revenue drop of 0.9 percent for the division. The projected price increases, which Henkel hopes to implement at the beginning of 2025, should balance some of these losses, with the company having increased prices by 4.2 percent last year even as the quantity of goods sold slipped by 1.2 percent.
The cautious forecast and recent downturn reflect broader economic pressures. Geopolitical uncertainties, particularly involving trade barriers due to U.S. sanctions, could weigh heavily on Henkel's future growth potential. The confidence of investors was shaken by the report of significant losses, with shares briefly dipping to 69.95 euros, representing one of the largest drops on the DAX.
Analysts expressed concerns about the company’s ability to sustain positive growth, especially against the backdrop of weaknesses observed last quarter and sluggish demand anticipated within the North American market. Morgan Stanley highlighted discrepancies between Henkel’s organic growth rates and market expectations, indicating possible downward adjustments for consensus estimates for the coming year.
Henkel's leadership remains cautiously optimistic about the second half of 2025, anticipating growth acceleration. Nevertheless, uncertainty persists, with slowing demand and the need for operational adjustments driving concerns across the company’s sectors, particularly consumer brands, which have been identified as needing innovations to reinvigorate market appeal.
Analysts also anticipate limitations on Henkel’s ability to navigate stockholder expectations for dividends and returns quickly. The recent stock price plunge starkly marked the stock's return below the key psychological barrier of 80 euros, contradicting investor expectations following new highs reached just yesterday.
Overall, Henkel's solid performance figures from 2024 juxtaposed against the current caution for 2025 reflect the challenges and opportunities inherent within global markets. Henkel continues to face pressures from both its operational performance and external market factors, leaving investors with cautious optimism as they await clearer signals on recovery.