On April 24, 2023, Henkel held its Annual General Meeting in Düsseldorf. Two colleagues from the CapTrader team attended this year's meeting, which was of particular importance as it was the first AGM to be held in person since the COVID-19 pandemic. As both CapTrader and Henkel are based in Düsseldorf, Jonas Amend and Jan Heyder saw this as an opportunity to attend an important event for the local business community and gain valuable insights into Henkel's operations and future plans. In this blog post, Jonas Amend shares his experience of attending the Henkel AGM and summarizes some of the key learnings.
Why should you attend an Annual General Meeting?
Attending a company's Annual General Meeting can be of great benefit to shareholders and investors. It is an opportunity to get more information about the company and to get in touch with other shareholders and investors. One of the most important functions of the AGM is to obtain an assessment of the past financial year. By presenting key figures such as turnover, profit and loss, shareholders can better understand and evaluate the company's past financial year.
The Annual General Meeting also provides an insight into expectations for future business development. The management usually presents the current business plan and explains the company's growth and development targets. This information can help shareholders and investors with their decisions and enable them to evaluate the company. Information on profit sharing for shareholders in the form of a dividend and, in particular, details on the economic outlook are essential. The event also provides an opportunity to network and exchange views with other shareholders.
In addition to these important reasons, participation in an annual general meeting often includes free meals and drinks. Travel to and from the meeting by public transport is also usually sponsored by the stock exchange groups. These are pleasant side effects, but should not be the main motive for attending the meeting.
Henkel Annual General Meeting 2023 - an overview of the most important points
At this year's Annual General Meeting of Henkel, diverse and exciting insights into the company's business activities were provided. Dr. Simone Bagel-Trah, Chairwoman of the Supervisory Board and the Shareholders' Committee, welcomed the participants in her opening speech and emphasized the importance of shareholders and investors for Henkel as a company. She also highlighted changes in the committees, in particular the prominent change in the Supervisory Board, with Laurent Martinez, CFO of Orange S.A., replacing Timotheus Höttges.
In the report by CEO Carsten Knobel, the three most important events of the past year were presented. Firstly, the merger of the "Beauty Care" and "Laundry and Home Care" divisions to form the new "Consumer Brands" division was mentioned. Henkel is taking this step to increase profitability and leverage economies of scale. The aim is to save 500 million euros in expenses by 2025. At the same time, a separation of oral and skin care products has been completed with this step.
The company's reaction to the Russian war of aggression in Ukraine was also discussed. The company reacted by stopping all business in Russia and provided an aid package worth over EUR 6 million. This year, the sale of the Russian business is nearing completion, with proceeds of EUR 600 million expected. The proceeds from the sale are therefore significantly higher than the estimated EUR 150 million. It was important for Mr. Knobel to emphasize that no part of the business was sold to Russian companies or private individuals subject to sanctions. The Annual General Meeting sharply criticized the fact that the divestment of the Russian business took place so late. However, Ms. Beller-Heinacher, Managing Director of the Düsseldorf-based Deutsche Schutzvereinigung für Wertpapierbesitz (DSW), expressed her satisfaction with the sale price achieved.
The third highlight was the opening of the new Inspiration Center in Düsseldorf. With an investment volume of 130 million euros, an area of more than 47,000 m² and more than 650 employees, new innovative products are to be developed and researched here in order to further develop Henkel's largest division "Adhesive Technologies". This shows that Henkel not only has a defensive product portfolio, but also strives to develop and grow innovative products. In addition, Henkel's Inspiration Center is working on new technologies for surface treatment and thermal management to enable the implementation of more powerful processors in smartphones. The development of new coatings for batteries to produce more powerful batteries is also a focus of the research work. With these innovative products, Henkel aims to achieve growth and expand its position as a leading manufacturer of adhesives and technical adhesive tapes.
Results for 2022 and the outlook for 2023
DAX founding member Henkel had to contend with a number of challenges in the 2022 financial year. In particular, the dramatic rise in material and logistics costs burdened the company with an additional 2 billion euros. Despite these difficulties, Henkel was able to achieve a new Sales record were recorded: Sales rose to 22.4 billion euros, which corresponds to organic growth of 8.8%. The Industrial division in particular contributed to this strong growth, as rising costs were passed on to customers. The DAX-listed company has thus proven that it has pricing power and that customers are choosing Henkel products despite higher costs. However, the EBIT At just 1.81 billion euros, free cash flow was 18.2% lower and earnings per ordinary share fell by 22.1% to 2.93 euros. The decline in free cash flow was attributed to the one-off costs of the Consumer Brands merger. Nevertheless, the company again paid a stable dividend of €1.85 per preference share and €1.83 per ordinary share with a payout ratio of 46.6%. Henkel also launched the first share buyback program in the company's history with a volume of around €1 billion.
Henkel expects headwinds to persist in the current 2023 financial year. Due to the weaker economy and the current interest rate situation, Henkel finds itself in a difficult environment. Henkel's dependence on gas to manufacture its own products should also not be forgotten. The outlook is therefore pessimistic, with expected sales growth of 1% to 3% and EPS growth of between -10% to +10%, the Düsseldorf-based company expects business to virtually stagnate. Henkel is thus once again demonstrating that it remains a defensive company with conservative expectations.
Summary of the Henkel Annual General Meeting 2023
Overall, Henkel's Annual General Meeting provided a comprehensive insight into the 2022 financial year and the company's future plans. Despite difficult market conditions, Henkel recorded strong organic sales growth, which, however, did not result in a corresponding increase in profit. The dramatic rise in material and logistics costs had a significant impact on business results. The decision to launch a share buyback program met with interest, but has not yet had any discernible impact on the share price.
The questions from the shareholder representatives and answers from Henkel's management team showed that there are concerns about profit development and the performance of care products. Nevertheless, all speakers and participants agreed that the stable Dividend is a positive signal. However, Henkel's share price must rise above 100 euros per share in the medium term in order to satisfy shareholders.
In conclusion, all participants emphasized their appreciation for the traditional face-to-face event and the exchange among shareholders. A corresponding proposal by Henkel to hold the Annual General Meeting digitally for two years if necessary was met with great criticism. The next Annual General Meeting will hopefully take place in person again and offer shareholders the opportunity to meet and exchange ideas in a relaxed atmosphere and learn about the latest economic information at first hand.
For me personally, it was the first, but certainly not the last, physical Annual General Meeting.
Author: Jonas Amend
Jonas Amend is a Junior Sales Manager at CapTrader in Düsseldorf and looks after stock market enthusiasts and anyone who wants to become one. In his spare time, he analyzes US small caps.