Sales and profits

Nominally, sales increased 5.9 percent to 4,556 million euros for the year. Organically – i.e. adjusted for foreign exchange and acquisitions/divestments – we succeeded in increasing sales by 4.7 percent, significantly outstripping the positive growth of our relevant markets. In order to compensate for material price increases, we continued to raise our own prices – despite the difficult market environment. Increased volumes also contributed to our organic sales growthGrowth in revenues after adjusting for effects arising from acquisitions, divestments and foreign exchange differences – i.e. “top line” growth generated from within.
.

In the following, we comment on our organic sales performance.

All regions contributed to the positive business performance achieved. Western Europe – despite the persistently difficult market environment in the Southern European countries – recorded positive sales growth and benefited significantly from the very good performances in Germany (in spite of the insolvency of the drug store chain Schlecker), France and Italy. Our sales growth in North America was solid, despite a highly competitive and still declining market. We managed to increase sales in our emerging markets by a high single-digit percentage overall. Eastern Europe showed a very strong sales increase, mainly driven by again double-digit growth rates in Russia and Turkey. In the Africa/Middle East region, we were able to record double-digit increases in sales despite the ongoing unrest in Egypt and civil war in Syria. Latin America also registered strong growth, mainly benefiting from the very good performance in Mexico, where we launched Persil in 2011 and have successfully gained a foothold in the premium detergent segment. Effective August 31, 2012, we acquired the laundry cleaning business of Colgate-Palmolive in the Dominican Republic. This acquisition is an example of our strategy to grow our core categories in selected emerging markets. It also significantly strengthens our position in the laundry and home care market in Central America. In the Asia-Pacific region, business benefited from our launch of Persil in South Korea. The successful performance of our newly launched WC products also contributed to double-digit sales growth.

Operating profit (EBIT) increased by 48.3 percent compared to the previous year. In addition to a positive business performance, we spent less on restructuring than in the previous year, which also contributed to this marked increase. Adjusted operating profit rose significantly by 15.5 percent, and adjusted return on sales improved by 1.3 percentage points, from 13.2 percent in 2011 to 14.5 percent in 2012.

Following significant increases in the previous year, raw material costs stabilized at high levels in 2012, and only showed moderate increase. We succeeded in significantly increasing our gross marginIndicates the percentage by which a company’s sales exceed cost of sales, i.e. the ratio of gross profit to sales.
through price increases and ongoing measures to reduce costs and enhance efficiency in both production and supply chainEncompasses purchasing, production, storage, transport, customer services, requirements planning, production scheduling and supply chain management.
. Further progress in optimizing our cost structures in administration additionally contributed to the increase in return on sales.

To further support the success of our new products with marketing activities, we increased spending on promotional activities and advertising. As a result of the increased advertising spending, our share of advertising/share of marketA company’s share of total advertising spend in relation to its market share, specific to its active markets.
ratio1 rose in fiscal year 2012.

We posted a substantial improvement in return on capital employedCapital invested in company assets and operations. Equity + interest-bearing liabilities.
(ROCEReturn on Capital Employed (ROCE)) of 7.6 percentage points to 25.8 percent. This increase was mainly due to the improvement in operating profit. Net working capitalNet balance of inventories, trade accounts receivable, and trade accounts payable.
was –3.6 percent of sales and therefore below the already very low level of the previous year. Economic value added (EVA®)The EVA concept reflects the net wealth generated by a company over a certain period. A company achieves positive EVA when the operating result exceeds the weighted average cost of capital. The WACC corresponds to the yield on capital employed expected by the capital market. EVA is a registered trademark of Stern Stewart & Co.
rose from 211 million euros in 2011 to 393 million euros in the year under review.

Overall, 2012 was the best financial year recorded for this business sector. The successful implementation of our “Change to Lead” program played a major role in this success. In this program, we introduced a new organizational model to ensure leaner structures and more efficient decision-making processes.

1
Ratio of a company‘s share of total advertising spending to its market share, specific to the markets in which Henkel is active.

+4.7 %

organic sales growthGrowth in revenues after adjusting for effects arising from acquisitions, divestments and foreign exchange differences – i.e. “top line” growth generated from within.
.