German consumer goods firm Henkel reported on Wednesday that strong first-quarter organic sales from its adhesives business helped compensate for falling laundry and beauty care sales due to delivery problems in North America.
Henkel said service levels had already improved significantly as it seeks to fix the delivery issues that it first reported in March, adding it was on track to return to normal in the course of the second quarter.
Analysts said the impact of the problems, which had sent Henkel's shares sliding, hurt profitability less than they expected, although the strong euro had a worse impact.
The impact from currencies was the highest in more than a decade, chief executive Hans van Bylen told analysts.
EPS Ahead Of Forecasts
The maker of Persil detergent and Loctite adhesives said group sales rose 1.1% to €4.84 billion ($5.72 billion), stripping out acquisitions and a hit from currencies, just short of average analyst forecasts.
Without the delivery problems, organic sales growth would have been about 2.5%, finance chief Carsten Knobel said.
Earnings per share rose 1.4% to €1.43, slightly ahead of average analyst forecasts for €1.41, as Henkel kept a tight control on costs to offset higher raw material costs and currency effects.
"Restated full-year guidance post-supply chain issues and the Q1 margin beat should be good for confidence," said Jefferies analyst Martin Deboo, who rates Henkel "buy".
Henkel shares were up 0.6% at 0720 GMT.
Adhesives And Beauty Care
The adhesives unit, which accounts for about half of sales and provides glue to makers of appliances, electronics and packaging, saw organic sales grow 4.7%.
German rival Beiersdorf also saw its first-quarter sales helped by its Tesa adhesives unit.
Beauty care, which includes Henkel's Schwarzkopf shampoo brand, reported a 4.3% fall and laundry and home care slipped 0.7%.
Excluding the delivery issues, beauty care sales would have been around the level of the previous year, while laundry and home care would have reported good growth, Henkel said.
Hair colouring and Schwarzkopf professional products performed well in the quarter, along with its Persil detergent brand in Germany and the Middle East and Africa.
Logistics Snags
Henkel hit problems as it tried to improve its logistics system in North America, with shortfalls in US freight capacities making the situation worse as a dearth of drivers and higher diesel prices makes transporting goods more expensive.
Henkel said it expects the volatile and uncertain market environment to continue, while it sees the US dollar continuing to weaken against the euro, but it confirmed its 2018 outlook for organic sales growth between 2 and 4% and adjusted EPS to rise between 5 and 8%.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
