Annual Report 2016
Creating sustainable value
The Company
2 Foreword
6 Report of the Supervisory Board
12 Henkel 2020+
14 Management Board
Combined management report
28 Management report subindex
29 Corporate governance
52 Shares and bonds
57 Fundamental principles of the Group
63 Economic report
88 Business units
100 Henkel AG & Co. KGaA (condensed
version according to the German
Commercial Code [HGB])
104 Risks and opportunities report
112 Forecast
Consolidated financial
statements
114 Consolidated financial statements
subindex
116 Consolidated statement of financial
position
118 Consolidated statement of income
118 Consolidated statement of
comprehensive income
119 Consolidated statement of changes
in equity
120 Consolidated statement of cash flows
121 Notes to the consolidated financial
statements
179 Subsequent events
180 Independent Auditor’s Report
183 Responsibility statement by the
Personally Liable Partner
184 Corporate management bodies of
Henkel AG & Co. KGaA
Further information
188 Quarterly breakdown of key financials
189 Multi-year summary
190 Index of tables and graphs
192 Glossary
194 Credits
195 Contacts
Financial calendar
Contents Our business units
Laundry & Home Care
Our top brands
+ 4.7 %
organic
sales growth
Sales
Beauty Care
Our top brands
+ 2.1 %
organic
sales growth
Sales
Adhesive Technologies
Our top brands
+ 2.8 %
organic
sales growth
Sales
| in million euros | 2015 | 2016 | +/– |
| Sales | 5,137 | 5,795 | 12.8 % |
| Operating profit (EBIT) | 786 | 803 | 2.2 % |
| Adjusted 1 operating profit (EBIT) | 879 | 1,000 | 13.7 % |
| Return on sales (EBIT) | 15.3 % | 13.9 % | – 1.4 pp |
| Adjusted 1 return on sales (EBIT) | 17.1 % | 17.3 % | 0.2 pp |
pp = percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
Key financials Laundry & Home Care 8 9
4,626
4,556
5,137
4,580
5,795
Sales Laundry & Home Care
in million euros
0 2,000 4,000 6,000 8,000
2014
2013
2012
2015
2016
10,000
| in million euros | 2015 | 2016 | +/– |
| Sales | 3,833 | 3,838 | 0.1 % |
| Operating profit (EBIT) | 561 | 526 | – 6.2 % |
| Adjusted 1 operating profit (EBIT) | 610 | 647 | 6.1 % |
| Return on sales (EBIT) | 14.6 % | 13.7 % | – 0.9 pp |
| Adjusted 1 return on sales (EBIT) | 15.9 % | 16.9 % | 1.0 pp |
pp = percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
Key financials Beauty Care 6
3,547
3,542
3,833
3,510
3,838
Sales Beauty Care 7
in million euros
0 2,000 4,000 6,000 8,000
2014
2012
2015
2016
2013
10,000
| in million euros | 2015 | 2016 | +/– |
| Sales | 8,992 | 8,961 | – 0.3 % |
| Operating profit (EBIT) Adjusted 1 operating profit (EBIT) |
1,462 | 1,561 6.8 % 1,629 6.2 % |
|
| 1,534 | |||
| Return on sales (EBIT) | 16.3 % | 17.4% | 1.1 pp |
| Adjusted 1 return on sales (EBIT) | 17.1 % | 18.2% | 1.1 pp |
pp = percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
Key financials Adhesive Technologies 4
8,127
8,256
8,992
8,117
8,961
Sales Adhesive Technologies 5
in million euros
0 2,000 4,000 6,000 8,000
2014
2013
2012
2015
2016
10,000
2016 2016
Highlights 2016
Sales
+3.1%
organic
sales growth
EBIT
16.9 %
adjusted 1 return on sales (EBIT):
up 0.7 percentage points
EPS
5.36euros
adjusted 1 earnings per preferred
share (EPS): up 9.8 percent
Dividend
1.62euros
dividend per
preferred share 2
Key financials 1
| in million euros | 2012 | 2013 | 2014 | 2015 | 2016 +/– 2015 – 2016 |
|
| Sales | 16,510 | 16,355 | 16,428 | 18,089 | 18,714 | 3.5 % |
| Operating profit (EBIT) | 2,199 | 2,285 | 2,244 | 2,645 | 2,775 | 4.9 % |
| Adjusted 1 operating profit (EBIT) | 2,335 | 2,516 | 2,588 | 2,923 | 3,172 | 8.5 % |
| Return on sales (EBIT) in % | 13.3 | 14.0 | 13.7 | 14.6 | 14.8 | 0.2 pp |
| Adjusted 1 return on sales (EBIT) in % | 14.1 | 15.4 | 15.8 | 16.2 | 16.9 | 0.7 pp |
| Net income | 1,526 | 1,625 | 1,662 | 1,968 | 2,093 | 6.4 % |
| Attributable to non-controlling interests | 46 | 36 | 34 | 47 | 40 | – 14.9 % |
| Attributable to shareholders of Henkel AG & Co. KGaA | 1,480 | 1,589 | 1,628 | 1,921 | 2,053 | 6.9 % |
| Earnings per preferred share in euros | 3.42 | 3.67 | 3.76 | 4.44 | 4.74 | 6.8 % |
| Adjusted 1 earnings per preferred share in euros | 3.63 | 4.07 | 4.38 | 4.88 | 5.36 | 9.8 % |
| Adjusted 1 earnings per preferred share in euros (2012 before IAS 19 revised) |
3.70 | 4.07 | 4.38 | 4.88 | 5.36 | 9.8 % |
| Return on capital employed (ROCE) in % | 18.7 | 20.5 | 19.0 | 18.2 | 17.5 | – 0.7 pp |
| Dividend per ordinary share in euros | 0.93 | 1.20 | 1.29 | 1.45 | 1.602 | 10.3 % |
| Dividend per preferred share in euros | 0.95 | 1.22 | 1.31 | 1.47 | 1.622 | 10.2 % |
pp = percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
2 Proposal to shareholders for the Annual General Meeting on April 6, 2017.
2 3
Adhesive
Technologies 48 %
Laundry &
Home Care 31 %
Beauty Care 20 %
Sales by business unit Sales by region
Corporate 1 %
Emerging
Western Europe 32 % markets 1 42 %
Japan / Australia /
New Zealand 3 %
North America 22 %
Corporate 1 %
Corporate = sales and services not assignable
to the individual business units.
1 Eastern Europe, Africa / Middle East, Latin America,
Asia (excluding Japan).
Our values
We put our customers and
consumers at the center of
what we do.
We value, challenge and reward
our people.
We drive excellent sustainable
financial performance.
We are committed to leadership
in sustainability.
We shape our future with a
strong entrepreneurial spirit
based on our family business
tradition.
Our vision
Leading with our innovations,
brands and technologies.
Our mission
Serving our customers and
consumers worldwide as the
most trusted partner with
leading positions in all relevant
markets and categories – as a
passionate team united by
shared values.
Creating
sustainable
value
Our purpose
2 Henkel Annual Report 2016
“Our ambition is to generate more profitable growth
and to become more customer-focused, innovative,
agile and digital.”
Hans Van Bylen
Chairman of the
Management Board
Henkel Annual Report 2016 3
2016 was a very special year for Henkel. We celebrated our 140th birthday, agreed and closed the
second-largest acquisition in our company’s history, achieved new record levels of sales and
earnings, met our financial targets for the year – and at the end of 2016, we announced our
ambitions and strategic priorities for 2020 and beyond.
We are committed to continue our successful development and create sustainable value based
on a strong foundation: We hold top positions with our different businesses in key markets,
categories and industry segments around the world and a well-diversified portfolio with strong
brands and leading technologies. We have an excellent track record of financial performance
and a strong reputation in the financial markets. As a recognized leader in sustainability, we
drive progress along the entire value chain – from our suppliers to our customers and consumers.
All of this is only possible thanks to a highly engaged and passionate global team, united by a
common purpose and strong values.
Strong performance in 2016
In fiscal 2016, we achieved new record levels for sales and earnings and met our financial
targets for the year in a challenging and volatile market environment. Our shares again outperformed the DAX.
Henkel Group sales grew to 18,714 million euros compared to 18,089 million euros in the previous
year. Organic sales growth was 3.1 percent. Adjusted¹ earnings before interest and taxes (EBIT)
grew by 8.5 percent to 3,172 million euros compared to 2,923 million euros. Adjusted return on
sales improved to 16.9 percent compared to 16.2 percent. Adjusted earnings per preferred share
grew to 5.36 euros, an increase of 9.8 percent compared to 4.88 euros in the previous year.
All three business units again delivered solid organic growth and further improved their results
in 2016. Emerging markets generated total sales of 7,814 million euros and strong organic
growth of 6.8 percent. We also achieved positive organic sales growth in our mature markets.
At our Annual General Meeting on April 6, 2017, we will propose to our shareholders a dividend
payment of 1.62 euros per preferred share. This represents an increase of 10.2 percent compared
to the 1.47 euros paid out in 2016.
In summary, 2016 was a very important and successful year for Henkel: We delivered a strong
business performance, strengthened our company and laid the foundation to continue our
successful development in the future.
2016 was also a special year for me, personally. In January, the Shareholders’ Committee decided
to name me as new Chairman of the Management Board of Henkel. After more than 30 years with
the company and more than 10 years on the Management Board, I was honored by the trust
expressed through this appointment. On May 1, 2016, I took on my new role, committed to continue
the successful development of our company in the future together with our strong global team.
At this point, I would also like to thank Kasper Rorsted, Chairman of the Management Board
of Henkel from 2008 until 2016, for his significant contribution to Henkel’s successful evolution
during this period. Under his leadership, our company has become more competitive, more
efficient and more successful.
organic sales growth.
+3.1 %
adjusted 1 return
on sales.
16.9 %
adjusted 1 earnings
per preferred share.
+9.8 %
1 Adjusted for one-time
charges/gains and
restructuring expenses.
4 Henkel Annual Report 2016
Strategy cycle 2013 – 2016
The fiscal year 2016 also marks the end of our strategy cycle 2013 – 2016. For this period, Henkel
had defined ambitious financial targets of 20 billion euros in total sales, 10 billion euros of
which in emerging markets, and a compound annual growth rate (CAGR) of 10 percent in
adjusted earnings per preferred share.
Henkel delivered a strong business performance over the past four years. We delivered good
organic sales growth in key markets, gaining market share thanks to our strong brands and
innovations. However, we faced substantial negative currency impacts over the four-year
period, mostly in emerging markets. The translation to our reporting currency, the euro, had a
net negative effect in excess of 1 billion euros on our global sales and of around 1.5 billion euros
on our emerging markets sales ambition.
As we continuously improved efficiency, we were able to deliver 9.7 percent adjusted earnings
per preferred share CAGR over the period 2013 – 2016 despite significant negative currency
impacts on our earnings. This is a very strong performance which differentiates Henkel from its
key competitors in both the consumer and the industrial businesses.
Strengthening Henkel
In June 2016, we announced the acquisition of The Sun Products Corporation, based in Wilton,
Connecticut, USA, for a total value of around 3.2 billion euros. This is the second-largest acquisition in our company’s history. On September 1, we closed the transaction and started the
integration process, which is now well underway. The acquisition of The Sun Products Corporation marks a step change for our Laundry & Home Care business, adds highly attractive and
established brands to our portfolio and propels Henkel to a strong number 2 position in the
United States, the world’s largest laundry and home care market, as well as in Canada.
Shaping our successful future: Henkel 2020+
We are proud of our unique company culture, expressed by our purpose, vision, mission and
values, which create a clear framework for how we do business, run our company and act
responsibly in everything we do.
We want to create sustainable value – for all our stakeholders. This purpose unites our employees
and is complemented by a set of strong values: customers and consumers, people, financial
performance, sustainability, and family business.
Henkel Annual Report 2016 5
Through to 2020 and beyond, our ambition for Henkel is to generate more profitable growth
and to become more customer-focused, innovative, agile and digital. In addition, we will promote sustainability in our business activities along the entire value chain, reinforcing our
long-standing commitment to leadership in sustainability.
Over the next four years, we aim to generate average organic sales growth of between 2 and
4 percent. For adjusted earnings per preferred share, our target is a compound annual growth
rate (CAGR) of 7 to 9 percent. This ambition for EPS growth includes the impact of currency
developments but excludes major acquisitions and share buy-backs. In addition, we will strive to
improve our adjusted EBIT margin. We are also aiming for further expansion of our free cash flow.
In order to achieve our ambitions, we have defined four clear strategic priorities: drive growth,
accelerate digitalization, increase agility and fund growth. Together with our values, these
priorities define our focus areas through to 2020.
We thank you for your continued trust and support
On behalf of the Management Board, I would like to thank all our employees around the world
for their passion and relentless focus on driving business success, engaging with our customers
and consumers, developing innovative solutions and strengthening our brands. Their commitment makes the difference for our success.
We are grateful to our supervisory bodies for their valuable advice and would also like to thank
you, our shareholders, for your continued trust and support. And finally, we would like to thank
our customers and consumers around the world for their confidence in our company, our
strong brands and leading technologies.
We are fully committed to creating sustainable value for you.
Düsseldorf, January 30, 2017
Sincerely,
Hans Van Bylen
Chairman of the Management Board
6 Report of the Supervisory Board Henkel Annual Report 2016
“Given our successful business performance and
clear strategic priorities, we believe that Henkel
is well equipped to face the future.”
Dr. Simone Bagel-Trah
Chairwoman of
the Shareholders’ Committee
and the Supervisory Board
Henkel Annual Report 2016 Report of the Supervisory Board 7
The economic and political environment in which
Henkel operates again proved to be challenging
in 2016, with widespread uncertainty prevailing.
Global economic growth was no more than moderate
overall, and some emerging markets lost momentum.
Fluctuations on the currency markets were again
severe. In spite of these general conditions, we are
very satisfied with developments in fiscal 2016.
Henkel’s business performance was again strong,
with both sales and profits reaching new all-time
highs. All of our business units contributed to this
success with organic sales growth and a marked
improvement in earning power.
In the 140th year since it was founded, Henkel is
extremely well placed with its diversified portfolio,
leading positions in its markets and categories, and
its strong brands and innovative technologies.
On behalf of the Supervisory Board, I would like to
thank all of our employees at Henkel for their dedicated
commitment and help in securing the continuing
successful development of our company. My thanks
are equally due to the members of the Management
Board who have steered the company successfully
through these challenging times. I am also grateful to
our employees’ representatives and works councils
for their unwavering constructive support in growing
the company.
Last but not least, I extend my special thanks to you,
our shareholders, for your continued confidence in
our company, its management and employees, and
our brands and technologies over this past fiscal year.
Ongoing dialog with the Management Board
In fiscal year 2016, the Supervisory Board continued
to discharge its duties diligently in accordance with
the legal statutes, Articles of Association and rules of
procedure governing our actions. In particular, we
consistently monitored the work of the Management
Board, advising and supporting it in its stewardship,
in the strategic development of the corporation, and
in decisions relating to matters of major importance.
In 2016, the Management Board and Supervisory Board
continued to cooperate through extensive dialog
founded on mutual trust and confidence. The Management Board kept us regularly and extensively
informed of all major issues affecting the corporation’s
business and our Group companies with prompt
written and oral reports. Specifically, the Management
Board reported on the business situation, operational
development, business policy, profitability issues,
our short-term and long-term corporate, financial
and personnel plans, as well as capital expenditures
and organizational measures. Quarterly reports
focused on the sales and profits of Henkel Group as
a whole, with further analysis by business unit and
region. The members of the Supervisory Board
consistently had sufficient opportunity to critically
review and address the issues raised by each of these
reports and to provide their individual guidance in
both the Audit Committee and in plenary Supervisory
Board meetings.
Outside of Supervisory Board meetings, the Chairman
of the Audit Committee and I, as Chairwoman of the
Supervisory Board, remained in regular contact with
individual members of the Management Board or
with the Management Board as a whole. This procedure
ensured that we were constantly aware of current
business developments and significant events. The
other members were informed of major issues no
later than by the next Supervisory Board or committee
meeting.
8 Report of the Supervisory Board Henkel Annual Report 2016
The Supervisory Board and the Audit Committee
each held four regular meetings in the reporting year.
One extraordinary meeting of the Supervisory Board
was also convened. Attendance at the Supervisory
Board and committee meetings was around 95 percent and around 83 percent respectively.
There were no indications of conflicts of interest
involving Management Board or Supervisory Board
members that required immediate disclosure to
the Supervisory Board and reporting to the Annual
General Meeting.
Major issues discussed at Supervisory Board
meetings
In each of our meetings, we discussed the reports
submitted by the Management Board, conferring
with it on the development of the corporation and on
strategic issues. We also discussed the overall economic situation and Henkel’s business performance.
In our meeting on February 23, 2016, we focused on
approving the annual and consolidated financial
statements for 2015, including the risk report and
corporate governance report. We also discussed the
findings from the Supervisory Board efficiency audit,
and approved both the 2016 Declaration of Compliance and our proposals for resolution by the 2016
Annual General Meeting. A detailed report of this
was included in our last Annual Report. At the same
meeting, we discussed the performance of our business units, the initiatives of our Finance division,
and personnel management in Western Europe.
Key items on the agenda for our meeting on April 11,
2016 included the constitution of the Supervisory
Board and general business performance in the first
few months of the year, together with the status of
our ONE!Global Supply Chain project and the initiatives and actions that were put in place in the individual regions to strengthen our global team, such as
improved recruitment concepts, flexible work time
models, job rotations and training programs. We also
addressed the integration of our newly acquired
companies.
Our meeting on September 23, 2016 included a
detailed discussion of the acquisition and integration of The Sun Products Corporation, a laundry and
home care company based in Wilton, Connecticut,
USA, and of business performance and market trends
in North America. We also addressed issues relating
to Henkel’s future strategic direction.
In an extraordinary meeting on November 16, 2016,
we concentrated specifically on our new strategic
priorities that will shape the company up to 2020
and beyond, on the implementation of these priorities in the individual business units and on our
financial ambition for the period between 2017 and
2020.
Our meeting on December 9, 2016 focused on the
expected results for 2016 and our assets and financial
planning for fiscal 2017. We also discussed in detail
the associated budgets of our business units based
on comprehensive documentation. The challenges
that our people face as a result of increasing digitalization formed a further topic for discussion.
Supervisory Board committees
In order to enable us to efficiently comply with the
duties incumbent upon us according to legal statute
and our Articles of Association, we have established
an Audit Committee and a Nominations Committee.
The Audit Committee was chaired in the year under
review by Prof. Dr. Theo Siegert, who complies with
the statutory requirements of impartiality and expertise in the fields of accounting or auditing and brings
experience in the application of accounting principles
and internal control procedures. For more details on
the responsibilities and composition of these committees, please refer to the corporate governance
report on pages 29 to 38 and the membership lists
on page 185 of this Annual Report.
Henkel Annual Report 2016 Report of the Supervisory Board 9
Committee activities
Following the appointment of the external auditor by
the 2016 Annual General Meeting, it was mandated
by the Audit Committee to audit the annual financial
statements and the consolidated financial statements, and to review the interim financial reports
for 2016. The audit fee and focus areas of the audit
were also established. The Audit Committee again
obtained the necessary validation of auditor independence for the performance of these tasks. The
auditor has informed the Audit Committee that
there are no circumstances that might give rise to
a conflict of interest in the execution of its duties.
The Audit Committee met four times in the year
under review. The Chairman of the Audit Committee
also remained in regular contact with the auditor
outside of the meetings. The meetings and resolutions were prepared through the provision of reports
and other information by the Management Board.
The Chair of the Committee reported promptly and
in full to the plenary Supervisory Board on the content and results of each of the Committee meetings.
The company and Group accounts, including the
interim (quarterly and half-year) financial reports
were discussed at all Audit Committee meetings,
with all matters arising being duly examined with
the Management Board. The three meetings at which
we discussed and approved the interim financial
reports were attended by the auditor. The latter
reported on the results of the reviews and on the
main issues and occurrences relevant to the work
of the Audit Committee. There were no objections
raised in response to these reports.
The Audit Committee also focused in greater detail
on the accounting process and the efficacy and further development of the Group-wide Internal Control
and Risk Management systems. The efficiency of the
risk management system was reviewed, based on
the risk reports of previous years. In addition, the
Audit Committee received the report of the General
Counsel & Chief Compliance Officer regarding major
litigations and compliance within the Group, as well
as the status report of the Head of Internal Audit, and
approved the audit plan prepared and submitted by
Internal Audit. This extends to examining the functional efficiency and efficacy of the Internal Control
System and our compliance organization. Another
key item on the agenda was implementation of the
EU Audit Reform: We revised the catalog of permissible non-audit-related services that an auditor may
provide, and defined relevant approval processes,
including monetary caps. The Audit Committee likewise discussed treasury risks and their management.
At its meeting on February 20, 2017, attended by the
auditor, the Audit Committee discussed the annual
and consolidated financial statements for fiscal
2016, including the audit reports, the associated proposal for appropriation of profit, and the risk report,
and prepared the corresponding resolutions for the
Supervisory Board. It also recommended that the
Supervisory Board should propose to the Annual
General Meeting the election of KPMG as auditor for
fiscal year 2017. A declaration from the auditor
asserting its independence was again duly received,
accompanied by details pertaining to non-audit services rendered in fiscal 2016 and those envisioned
for fiscal 2017. There was no evidence of any bias or
partiality on the part of the auditor.
As in previous years, other members of the Supervisory Board took part as guests in this specifically
accounting-related meeting of the Audit Committee.
As already reported, the members of the Nominations Committee prepared the resolution for the
Supervisory Board relating to its recommendations
for the election of new shareholder representatives
at the 2016 Annual General Meeting.
10 Report of the Supervisory Board Henkel Annual Report 2016
Corporate governance and declaration of
compliance
The Supervisory Board again dealt with questions of
corporate governance in the reporting year. Details of
Henkel’s corporate governance can be found in the
management report on corporate governance (pages
29 to 38 of this Annual Report), with which we fully
acquiesce.
At our meeting on February 21, 2017, we discussed
and approved the joint Declaration of Compliance
for 2017 to be submitted by the Management Board,
Shareholders’ Committee and Supervisory Board, as
specified in the German Corporate Governance Code
[DCGK]. The full wording of the current and previous
declarations of compliance can be found on the company website.
Annual and consolidated financial
statements / Audit
In its capacity as auditor appointed for 2016 by the
Annual General Meeting, KPMG examined the annual
financial statements prepared by the Management
Board in accordance with the provisions of the German Commercial Code [HGB], and the consolidated
financial statements, together with the consolidated
management report, which has been combined with
the management report for Henkel AG & Co. KGaA for
2016. The consolidated financial statements were
prepared in accordance with International Financial
Reporting Standards (IFRS) as endorsed by the European Union (EU), and in accordance with the supplementary German statutory provisions pursuant to
Section 315a (1) of the HGB. The consolidated financial
statements in their present form exempt us from the
requirement to prepare consolidated financial statements in accordance with German law.
KPMG conducted its audits in accordance with Section 317 of the HGB and German generally accepted
standards for the audit of financial statements promulgated by the Institute of Public Auditors in
Germany [Institut der Wirtschaftsprüfer, IDW].
Unqualified audit opinions were issued for both the
annual and the consolidated financial statements.
The annual financial statements, consolidated financial statements and combined management report,
the audit reports of KPMG and the recommendations
by the Management Board for the appropriation of
the profit made by Henkel AG & Co. KGaA were presented in good time to all members of the Supervisory Board. We examined these documents and
discussed them at our meeting on February 21, 2017.
This was attended by the auditor, which reported on
its main audit findings. We received and approved
the audit reports. The Chair of the Audit Committee
provided the plenary session of the Supervisory
Board with a detailed account of the treatment of the
annual financial statements and the consolidated
financial statements by the Audit Committee. Having
received the final results of the review conducted by
the Audit Committee and concluded our own examination, we see no reason for objection to the aforementioned documents. We have agreed to the results
of the audit. The assessment by the Management
Board of the position of the company and the Group
coincides with our own appraisal. At our meeting
on February 21, 2017, we concurred with the recommendations of the Audit Committee and therefore
approved the annual financial statements, the consolidated financial statements and the combined
management report as prepared by the Management
Board.
Additionally, we discussed and approved the proposal
by the Management Board to pay out of the unappropriated profit of Henkel AG & Co. KGaA a dividend of
1.60 euros per ordinary share and of 1.62 euros per
preferred share, and to carry the remainder and the
amount attributable to the treasury shares held by
the company at the time of the Annual General
Meeting forward to the following year. This proposal
takes into account the financial and earnings position of the corporation, its medium-term financial
and investment planning, and the interests of our
shareholders.
In our meeting on February 21, 2017, we also ratified
our proposal for resolution by the Annual General
Meeting relating to the appointment of the external
auditor for the next fiscal year, based on the recommendations of the Audit Committee. Neither the
recommendation by the Audit Committee nor the
Supervisory Board’s proposal to elect KPMG as auditor
for 2017 were unduly influenced by any third party; nor
were agreements reached that might have restricted
the choice of possible auditors.
Henkel Annual Report 2016 Report of the Supervisory Board 11
Risk management
Risk management issues were examined not only by
the Audit Committee but also the plenary Supervisory
Board, with emphasis on the risk management system
in place at Henkel and any major individual risks of
which we needed to be notified. There were no identifiable risks that might jeopardize the continued
existence of the corporation as a going concern.
The structure and function of the risk early warning
system were also integral to the audit performed by
KPMG, which found no cause for reservation. It is
also our considered opinion that the risk management
system corresponds to the statutory requirements
and is fit for the purpose of early identification of
developments that could endanger the continuation
of the corporation as a going concern.
Changes in the Supervisory Board and
Management Board
A number of changes took place in the composition
of the Supervisory Board and Management Board,
some of which we already reported on last year.
Béatrice Guillaume-Grabisch resigned from the
Supervisory Board effective end of business on
March 31, 2016. Boris Canessa and Ferdinand Groos
left the Supervisory Board following the routine
election of new shareholder representatives by the
2016 Annual General Meeting. Johann-Christoph
Frey, Benedikt-Richard Freiherr von Herman and
Timotheus Höttges were newly appointed to the
Supervisory Board; all other shareholder representatives were re-elected.
During its constituent meeting, I was elected to chair
the Supervisory Board, and Winfried Zander was
confirmed as Vice Chair. We also made new appointments to the Audit and Nominations Committees.
Effective January 1, 2017, Mayc Nienhaus, employee
representative, left the Supervisory Board and was
replaced by Angelika Keller.
Kasper Rorsted left the company on April 30, 2016, at
his own request. Hans Van Bylen was appointed new
Chairman of the Management Board with effect from
May 1, 2016.
Hans Van Bylen started his successful career at Henkel
back in 1984 and has many years of experience managing different businesses of Henkel at international
level. Prior to his appointment as Chairman of the
Management Board, he had held responsibility on
the Management Board for our Beauty Care business
unit since 2005.
Pascal Houdayer, who had previously held the position
of Corporate Senior Vice President in the Laundry &
Home Care business unit since 2011, was appointed
to the Management Board effective March 1, 2016,
and succeeded Hans Van Bylen as Executive Vice
President with lead responsibility for the Beauty Care
business unit as of May 1, 2016.
We thanked the departing members of the Supervisory Board and Management Board – some of
whom had been members for many years – for their
successful dedication to the interests of the company.
Our particular thanks go to Kasper Rorsted, who spent
eight of his eleven years on the Management Board
as Chairman, for driving Henkel’s successful business
performance.
We are delighted to close fiscal 2016 on a successful
note. At the same time, we expect 2017 and beyond to
pose further challenges for both our employees and
the company’s management. Given our successful
business performance and clear strategic priorities,
we believe that Henkel is well equipped to face the
future.
We thank you for your ongoing trust and support.
Düsseldorf, February 21, 2017
On behalf of the Supervisory Board
Dr. Simone Bagel-Trah
(Chairwoman)
Drive
Growth
Accelerate
Digitalization
Increase
Agility
Fund
Growth
We shape our future guided by a clear, long-term strategy based on our
purpose, our vision, our mission and our values.
Clear priorities
for the future
Henkel 2020+
12 Henkel 2020+ Henkel Annual Report 2016
Drive growth
Driving growth in mature and emerging markets will
be a key strategic priority for Henkel. In order to
achieve this, we will focus on targeted initiatives to
create superior customer and consumer engagement,
strengthen our leading brands and technologies,
develop exciting innovations and services, and capture
new sources of growth.
Accelerate digitalization
Accelerating digitalization will help us to successfully
grow our business, strengthen the relationships with
our customers and consumers, optimize our processes
and transform the entire company. By 2020, we will
implement a range of initiatives to drive our digital
business, leverage Industry 4.0, and eTransform the
organization.
Increase agility
In a highly volatile and dynamic business environment, increasing the agility of the organization will
be a critical success factor for Henkel in the future.
This will require energized and empowered teams,
fastest time-to-market as well as smart and simplified
processes.
Fund growth
In order to fund growth, we will implement new
approaches to optimize resource allocation, focus on
net revenue management, further increase efficiency
in our structures, and continue to expand our Global
Supply Chain organization. Together, these initiatives
will contribute to further improving profitability and
enable us to fund our growth ambitions for 2020 and
beyond.
We want to create sustainable value – for our customers
and consumers, for our people, for our shareholders
as well as for the wider society and communities in
which we operate.
We have a clear ambition for our future: We want to
generate sustainable profitable growth through to
2020 and beyond. To achieve this, we want to become
more customer-focused, more innovative, agile and
digital. In addition, we aim to promote sustainability
in all our business activities, reinforcing our leading
positions in the future.
Over the next four years, we are aiming to achieve average organic sales growth of between 2 and 4 percent.
For adjusted earnings per preferred share, we are
targeting a compound annual growth rate (CAGR) of
7 to 9 percent. This ambition for EPS growth includes
the impact of currency developments but excludes
major acquisitions as well as share buy-backs. In
addition, we are aiming for continued improvements
of our EBIT margin and free cash flow expansion.
In order to achieve our ambitions, we will be focusing
on four strategic priorities over the coming years:
drive growth, accelerate digitalization, increase agility
and fund growth.
We are also pursuing ambitious sustainability targets.
We want to reinforce our commitment to sustainability and improve our resource efficiency. With
this goal in mind, we have set challenging interim
targets through to 2020: Compared to the base
year 2010, we are aiming for an overall efficiency
improvement of 75 percent by 2020. In addition, we
want to train all employees worldwide to become
sustainability ambassadors.
Henkel Annual Report 2016 Henkel 2020+ 13
Fully engaged
Hans Van Bylen
Chairman of the
Management Board
Born in Berchem, Belgium
on April 26, 1961;
with Henkel since 1984.
In Düsseldorf, Germany
Kathrin Menges
Executive Vice President
Human Resources /
Infrastructure Services
Born in Pritzwalk, Germany
on October 16, 1964;
with Henkel since 1999.
In Santa Fe, Mexico City, Mexico
Carsten Knobel
Executive Vice President
Finance (CFO) / Purchasing /
Integrated Business Solutions
Born in Marburg / Lahn, Germany
on January 11, 1969;
with Henkel since 1995.
In Vienna, Austria
In a series of employee meetings around the world at the end of 2016, the Management Board presented and discussed in detail the ambition and strategic direction
of Henkel through to 2020 and beyond. This has laid the foundation for all our
people worldwide to fully engage with our strategic priorities.
Henkel 2020+
14 Management Board Henkel Annual Report 2016
Jan-Dirk Auris
Executive Vice President
Adhesive Technologies
Born in Cologne, Germany
on February 1, 1968;
with Henkel since 1984.
In Shanghai, China
Pascal Houdayer
Executive Vice President
Beauty Care
Born in Eaubonne, France
on July 5, 1969;
with Henkel since 2011.
In Moscow, Russia
Bruno Piacenza
Executive Vice President
Laundry & Home Care
Born in Paris, France
on December 22, 1965;
with Henkel since 1990.
In Milan, Italy
Henkel Annual Report 2016 Management Board 15
Adhesive Technologies
Global
leader
Modern adhesive technologies
make a difference in virtually all
areas of business activity and our
everyday lives: from smartphones
to food packaging, from cars
to airplanes, from construction to
industrial plants. Around the world,
we offer high-impact solutions
and products as the leading supplier of adhesive technologies.
Together with our customers, our experts develop
pioneering innovations and customized products
that generate competitive advantages and create
sustainable value.
For example, Henkel has been a partner in the aviation and aerospace industry for more than 40 years,
predominantly for its high-performance adhesives
and system solutions for surface treatment applications.
Our compound and structural adhesives allow
increased use of lightweight construction materials
made of carbon and glass fibers in aircraft engineering. They enable wings, tail components and
fuselage segments to bear loads ten times greater
than the capacity of equivalent conventional metal
structures.
We have, for example, a long-standing partnership
with Airbus built on our exceptional technological
expertise and innovative strengths. The photo taken
in the Airbus assembly hall in Hamburg shows Guido
Adolph from Henkel (right) discussing the optimal
application of our 2C adhesive, Loctite EA 9394, with
Andre Aldag, who heads up the Manufacturing Engineering team at Airbus.
www.annualreport.henkel.com/stories/
adhesive-technologies
17
Beauty Care
Passion
for hair
Our mega-brand Schwarzkopf
generates more than 2 billion
euros in sales per year and is the
core of our Beauty Care business
unit. For almost 120 years,
Schwarzkopf has been setting
trends, defining new looks and
developing successful innovations for millions of consumers
around the world as well as for
professional hairdressers.
Schwarzkopf Professional, the Hair Salon business
of our Beauty Care business unit, works with more
than 500,000 clients globally. With our strong
“passion for hair,” we support our partners, the hairdressers, in successfully running and growing their
salon business – with our innovative products but
also with inspiration for new creations, technical
training and business advice. The world of hairdressing is constantly evolving and successfully
developing with new global techniques, trends and
innovations.
The Berendowicz & Kublin salon in Warsaw, Poland,
has been working with Schwarzkopf Professional
since 2013. In our photo, salon owner Emil Zawisza
(left) is discussing the new BC Fibre Force product
range with Magdalena Wieczorek and Jaroslaw
Szendera from Schwarzkopf Professional after
applying it to his client’s hair. Schwarzkopf Professional’s Bonding Technology instantly recreates
the function of missing bonds in the hair matrix,
deeply reconstructing and sealing each individual
hair strand for superior hair quality and resistance
to breakage.
www.annualreport.henkel.com/stories/
beauty-care
19
Attractive
brands
North America is Henkel’s largest market. We
generate around 25 percent of our Group sales
there. The acquisition of Sun Products marks an
important step forward for Henkel in North America and is, moreover, of significant strategic importance for our Laundry & Home Care business unit.
The strong and attractive brands of Sun Products
such as All and Snuggle as well as laundry detergent brands for leading retail chains complement
and strengthen our attractive product portfolio in
the world’s biggest laundry care market. By combining our businesses, we will be able to better
leverage our capacity for innovation and further
improve the services we offer our customers and
consumers.
During the course of 2017, the consumer goods
businesses of Henkel and Sun Products will
be merged into a new shared site in Stamford,
Connecticut, USA.
At our research facility in Trumbull, Connecticut,
USA, Jens-Martin Schwärzler (second from right),
President Henkel Consumer Goods in North America,
discusses innovations in our joint portfolio with
Bibie Wu, Marketing, and Charles Crawford, Ph. D.
(left), Product Development. Right: Senior scientist
Michael Crisanti.
www.annualreport.henkel.com/stories/
laundry-and-home-care
Our Laundry & Home Care business
unit has been considerably
strengthened by the acquisition
of The Sun Products Corporation
in 2016. As a result of this acquisition, Henkel is the second-largest
laundry products supplier in
North America – the world’s
biggest laundry care market.
Laundry & Home Care
21
Finance
Excellence
in Finance
In September 2016, Henkel placed bonds with a total
value of 2.2 billion euros on the capital market to
fund the acquisition of The Sun Products Corporation.
Henkel was the first DAX corporation in Germany to
issue bonds with negative yields, which reflects
the confidence that the market has in our financial
strength, profitability and credit quality. Henkel has
excellent “Single A” ratings, and we aim to maintain
them going forward.
Financial KPIs are essential tools in successfully
steering our business. Our Treasury department
analyzes and assesses relevant key ratios in real
time in order to make the right decisions in a volatile market environment. This requires both efficient processes and agile structures. Standardizing
and digitalizing the workflows of our global purchasing and supply chain activities and throughout
the entire Finance function will reduce complexity,
accelerate processes and increase efficiency.
The photo shows Dr. Michael Reuter (standing), Head
of Treasury, discussing the latest performance of
key international financial market indicators with
his team. From the left: Renate Ohmen, Wenwen
Liao and Derk Wetzold.
www.annualreport.henkel.com/stories/finance
Excellent financial performance
is essential to securing our ongoing success. It allows us to continue to effectively fund growth.
We have ambitious targets for the
future, and we want to further
improve all our key financials.
23
People
Proud
team
To celebrate “Henkel Day” on September 26, 2016, a
broad range of events were organized for our people
at Henkel sites around the world – exactly 140 years
to the day after Henkel was founded in 1876. Photo
and video initiatives on Yammer, our internal
social network, team activities and fund-raising
events for social projects – these are just some of
the numerous ways in which our employees
demonstrated their pride in our company’s unique
history and the passion they put into bringing our
values to life. In Shanghai, China, where our AsiaPacific region is headquartered, Jeremy Hunter,
President Henkel China, Louise Cheung (left),
Head of Corporate Communications Asia-Pacific,
and Cynthia Yang, Head of Shared Service Center
Shanghai, take a 140 years celebration photo.
We also prepared a digital record of our company’s
history to mark its anniversary. It features our most
important brands, technologies and innovations,
together with the people who have steered the
company through the decades.
www.timeline.henkel.com
www.annualreport.henkel.com/stories/people
Henkel employees around the
world continuously demonstrate
their great commitment and passion for the company. Our shared
values, a strong entrepreneurial
spirit and long-term strategic
orientation have been shaping
the culture at Henkel for more
than 140 years. We are very proud
of this heritage.
25
Sustainability
New
ways
In 2016, we started partnering with TerraCycle in
North America. The company provides recycling
solutions for materials for which there are currently
no collection systems or which are typically nonrecyclable – due to product residue in packaging,
for example. Customers of our Adhesive Technologies
business unit can now recycle their used adhesives
packaging. Empty Loctite specialty adhesive bottles
are collected in dedicated recycling boxes and sent
to TerraCycle. Any residual adhesive is then removed
using a special process developed jointly with Henkel.
The cleaned bottles are melted down and processed
into pellets that are used to manufacture new
products such as garbage cans, watering cans or
yard furniture. Plans are underway to introduce
this recycling method in Europe.
The photo taken at TerraCycle headquarters in
Trenton, New Jersey, USA, shows TerraCycle’s
Rhandi Goodman demonstrating how to handle
the recycling boxes to her project partners from
Henkel, Simon Mawson (left) and Chris Stanford.
www.annualreport.henkel.com/stories/
sustainability
For us, acting sustainably is more
than just a duty; it is a passion.
We want to make processes
along our entire value chain more
sustainable – together with our
suppliers, in our supply chain, and
with our customers and consumers. To do this, we are constantly
seeking new ways to further
increase our performance in all
dimensions.
27
Combined management report
29 Corporate governance
29 Corporate governance report /
Statement on corporate governance
38 Statutory and regulatory situation
39 Remuneration report
52 Shares and bonds
54 Henkel represented in all major indices
54 International shareholder structure
55 Employee share program
55 Henkel bonds
56 Pro-active capital market communication
57 Fundamental principles of the Group
57 Operational activities
57 Overview
57 Organization and business units
58 Strategy and financial targets 2016
59 Henkel 2020+ – our ambition and
strategic priorities
59 Our ambition
60 Strategic priorities in summary
60 Sustainability strategy
62 Management system and performance indicators
62 Cost of capital
63 Economic report
63 Macroeconomic and industry-related conditions
64 Review of overall business performance
64 Results of operations
64 Sales and profits
67 Comparison between actual business
performance and guidance
68 Expense items
68 Other operating income and expenses
68 Financial result
68 Net income and
earnings per share (EPS)
69 Dividends
69 Return on capital employed (ROCE)
69 Economic Value Added (EVA®)
69 Net assets and financial position
69 Acquisitions and divestments
70 Capital expenditures
71 Net assets
72 Financial position
72 Financing und capital management
73 Key financial ratios
74 Employees
77 Procurement
79 Production
81 Research and development
86 Marketing and distribution
88 Business units
88 Adhesive Technologies
92 Beauty Care
96 Laundry & Home Care
100 Henkel AG & Co. KGaA
(condensed version according to the
German Commercial Code [HGB])
104 Risks and opportunities report
104 Risks and opportunities
104 Risk management system
106 Presentation of major risk categories
110 Major opportunity categories
111 Risks and opportunities in summary
112 Forecast
112 Macroeconomic development
112 Sector development
113 Outlook for the Henkel Group 2017
28 Combined management report Henkel Annual Report 2016
Corporate governance
at Henkel AG & Co. KGaA
The Management Board, the Shareholders’ Committee and the Supervisory Board are committed to
ensuring that the management and stewardship of
the corporation are conducted in a responsible and
transparent manner aligned to achieving a long-term
increase in shareholder value. With this in mind,
they have pledged themselves to the following three
principles:
• Value creation as the foundation of our
management approach
• Sustainability achieved through the application
of socially responsible management principles
• Transparency supported by an active and open
information policy
Corporate governance report /
Statement on corporate governance
The German Corporate Governance Code [DCGK] was
introduced in order to promote confidence in the management and oversight of listed German corporations.
It sets out the nationally and internationally recognized
regulations and standards of responsible corporate governance applicable in Germany. The DCGK is aligned to
the statutory provisions applicable to a German joint
stock corporation (“Aktiengesellschaft” [AG]). It is
applied analogously by Henkel AG & Co. KGaA (the corporation). For a better understanding of Henkel’s situation, this report describes the principles underlying the
management and control structure of the corporation. It
also outlines the special features distinguishing us from
an AG which derive from our specific legal form and our
Articles of Association. The primary rights of shareholders of Henkel AG & Co. KGaA are likewise explained. The
report takes into account the recommendations of the
DCGK and contains all disclosures and explanations
required according to Sections 289 (4), 289a and 315 (4)
and (5) of the German Commercial Code [HGB].
Legal form/Special statutory features of
Henkel AG & Co. KGaA
Henkel is a “Kommanditgesellschaft auf Aktien”
[KGaA]. A KGaA is a company with a legal identity
(legal entity) in which at least one partner has
unlimited liability with respect to the company’s
creditors (personally liable partner). The other partners’ liability is limited to their shares in the capital
stock and they are thus not liable for the company’s
debts (limited partners per Section 278 (1) German
Stock Corporation Act [AktG]).
In terms of its legal structure, a KGaA is a mixture of
a joint stock corporation [AG] and a limited partnership [KG], with a leaning toward stock corporation
law. The differences with respect to an AG are primarily as follows: The duties of the executive board
of an AG are performed at Henkel AG & Co. KGaA by
Henkel Management AG – acting through its Management Board – as the sole Personally Liable Partner
(Sections 278 (2) and 283 AktG in conjunction with
Art. 11 of our Articles of Association).
The rights and duties of the supervisory board of a
KGaA are more limited compared to those of the
supervisory board of an AG. Specifically, the supervisory board is not authorized to appoint personally
liable partners, preside over the partners’ contractual
arrangements, impose procedural rules on the management board, or rule on business transactions.
A KGaA is not required to appoint a director of labor
affairs, even if, like Henkel, the company is bound to
abide by Germany’s Codetermination Act of 1976.
The general meeting of a KGaA essentially has the
same rights as the shareholders’ meeting of an AG.
For example, it votes on the appropriation of earnings, elects members of the supervisory board
(shareholder representatives), and formally approves
the supervisory board’s actions. It appoints the auditor and also votes on amendments to the articles of
association and measures that change the company’s
capital, which are implemented by the management
board. Additionally, as stipulated by the legal form,
it also votes on the adoption of the annual financial
statements of the company, formally approves the
actions of the personally liable partner(s), and elects
and approves the actions of the members of the shareholders’ committee as established under the articles of
association. Resolutions passed in general meeting
require the approval of the personally liable partner(s)
where they involve matters which, in the case of a
partnership, require the authorization of the personally liable partners and also that of the limited partners (Section 285 (2) AktG) or relate to the adoption of
annual financial statements (Section 286 (1) AktG).
According to our Articles of Association, in addition
to the Supervisory Board, Henkel also has a standing
Shareholders’ Committee comprising a minimum of
five and a maximum of 10 members, all of whom are
elected by the Annual General Meeting (Art. 27 of the
Articles of Association). The Shareholders’ Committee
is required in particular to perform the following
functions (Section 278 (2) AktG in conjunction with
Sections 114 and 161 HGB, and Articles 8, 9 and 26 of
the Articles of Association):
Henkel Annual Report 2016 Combined management report 29
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Combined management report
• It acts in place of the Annual General Meeting in
guiding the business activities of the corporation.
• It decides on the appointment and dismissal of the
Personally Liable Partner(s).
• It holds both the power of representation and
executive powers over the legal relationships
prevailing between the corporation and Henkel
Management AG, the Personally Liable Partner.
• It exercises the voting rights of the corporation in
the Annual General Meeting of Henkel Management AG, thereby choosing its three-member
Supervisory Board which, in turn, appoints and
dismisses the members of the Management Board.
• It issues rules of procedure incumbent upon
Henkel Management AG.
Capital stock denominations/Shareholder rights/
Amendments to the Articles of Association
The capital stock of the corporation amounts to
437,958,750 euros. It is divided into a total of
437,958,750 bearer shares of no par value, of which
259,795,875 are ordinary bearer shares (nominal proportion of capital stock: 1 euro per ordinary share or
a total of 259,795,875 euros, representing 59.3 percent)
and 178,162,875 are preferred bearer shares (nominal
proportion of capital stock: 1 euro per preferred
share or a total of 178,162,875 euros, representing
40.7 percent). All shares are fully paid in. Multiple
share certificates for shares may be issued. In accordance with Art. 6 (4) of the Articles of Association,
there is no right to individual share certificates.
Each ordinary share grants to its holder one vote
(Art. 21 (1) of the Articles of Association). The preferred shares grant to their holders all shareholder
rights apart from the right to vote (Section 140 (1) AktG).
The preferred shares carry the following preferential right in the distribution of profit (Section 139 (1)
AktG in conjunction with Art. 35 (2) of the Articles
of Association) unless otherwise resolved by the
Annual General Meeting:
• The holders of preferred shares receive a preferred
dividend in the amount of 0.04 euros per preferred
share. If the profit to be distributed in a fiscal year
is insufficient for payment of a preferred dividend
of 0.04 euros per preferred share, the arrears are
paid without interest from the profit of the following years, with older arrears to be paid in full
before more recent arrears and the preferred dividend from the profit of a particular fiscal year paid
only after the clearance of all arrears. The holders
of ordinary shares then receive a preliminary dividend from the remaining unappropriated profit of
0.02 euros per ordinary share, with the residual
amount being distributed to the holders of ordinary and preferred shares in accordance with the
proportion of the capital stock attributable to
them.
• If the preferred dividend is not paid out either in
part or in whole in a year, and the arrears are not
paid off in the following year together with the full
preferred share dividend for that second year, the
holders of preferred shares are accorded voting
rights until such arrears are paid (Section 140 (2)
AktG). Cancellation or limitation of this preferred
dividend requires the consent of the holders of
preferred shares (Section 141 (1) AktG).
The shareholders exercise their rights in the Annual
General Meeting as per the relevant statutory provisions and the Articles of Association of Henkel AG &
Co. KGaA. In particular, they may exercise their right
to vote (ordinary shares only) – either personally, by
postal vote, through a legal representative or through
a proxyholder nominated by the corporation (Section
134 (3) and (4) AktG in conjunction with Art. 21 (2 and
3) of the Articles of Association) – and are also entitled to submit motions on the resolution proposals
of management, speak on agenda items, and raise
pertinent questions and motions (Sections 126 (1)
and 131 AktG in conjunction with Art. 23 (2) of the
Articles of Association). The ordinary Annual General Meeting usually takes place within the first four
months of the fiscal year.
Shareholders whose shares jointly represent at least
one twentieth of the capital stock – corresponding to
21,897,938 ordinary or preferred shares or a combination of both – may request that a general meeting of
shareholders be called. If their proportionate amount
of the capital stock jointly amounts to 500,000 euros –
corresponding to 500,000 ordinary or preferred shares
or a combination of both – they may request that
items be placed on the agenda and published (Section
122 (1 and 2) AktG). In addition, shareholders whose
combined share of the capital stock amounts to
100,000 euros or more may, subject to certain conditions, request that a special auditor be appointed by the
court to examine certain matters (Section 142 (2) AktG).
Through the use of electronic communications, particularly the internet, the corporation makes it easy
for shareholders to participate in the Annual General
Meeting. It also enables them to be represented by
proxyholders nominated by the corporation for exercising their voting rights. The reports, documents
and information required by law for the Annual General Meeting, including the financial statements and
annual reports, are made available on the internet, as
are the agenda for the Annual General Meeting and
any countermotions or nominations for election by
shareholders that require publication.
30 Combined management report Henkel Annual Report 2016
Unless otherwise mandated by statute or the Articles
of Association, the resolutions of the Annual General
Meeting are adopted by simple majority of the votes
cast. If a majority of capital is required by statute,
resolutions are adopted by simple majority of the
voting capital represented (Art. 24 of the Articles of
Association). This also applies to changes in the Articles of Association. However, modifications to the
object of the corporation require a three-quarters’
majority (Section 179 (2) AktG). The Supervisory
Board and Shareholders’ Committee have the authority to resolve purely formal modifications of and
amendments to the Articles of Association (Art. 34
of the Articles of Association). By resolution of the
Annual General Meeting, the Supervisory Board is
also authorized to amend Articles 5 and 6 of the Articles of Association with respect to each use of the
Authorized Capital and upon expiration of the term
of the authorization.
Authorized Capital/Share buy-back/
Treasury shares
According to Art. 6 (5) of the Articles of Association,
there is an Authorized Capital. The Personally Liable Partner is authorized, with the approval of the
Shareholders’ Committee and of the Supervisory
Board, to increase the capital stock of the corporation until April 12, 2020, by up to a nominal total
of 43,795,875 euros through the issue of up to
43,795,875 new preferred shares with no voting
rights against cash and/or payment in kind. The
authorization can be used in full or also in one or
several partial amounts. The proportion of capital
stock represented by shares issued against payment
in kind on the basis of this authorization must not
exceed a total of 10 percent of the capital stock
existing at the time the authorization takes effect.
The Personally Liable Partner is authorized, with
the approval of the Shareholders’ Committee and of
the Supervisory Board, to set aside the pre-emptive
rights of shareholders in the case of a capital
increase against payment in kind, particularly for
the purpose of business combinations or the (direct
or indirect) acquisition of entities, operations,
parts of businesses, equity interests or other assets,
including claims against the corporation or companies dependent upon it within the meaning of
Section 17 AktG.
If capital is increased against payment in cash, all
shareholders are essentially assigned pre-emptive
rights. However, these may be set aside in three
cases, subject to the approval of the Shareholders’
Committee and of the Supervisory Board: (1) in order
to dispose of fractional amounts; (2) to grant to creditors/holders of bonds with warrants or conversion
rights or a conversion obligation issued by the corporation or one of the companies dependent upon it,
pre-emptive rights corresponding to those that
would accrue to such creditors/bondholders following exercise of their warrant or conversion rights or
on fulfillment of their conversion obligations; or (3)
if the issue price of the new shares is not significantly below the quoted market price at the time of
issue price fixing.
In addition, the Personally Liable Partner is authorized
to purchase ordinary and/or preferred shares of the
corporation at any time until April 12, 2020, up to a
maximum nominal proportion of the capital stock of
10 percent. This authorization can be exercised for any
legal purpose. To the exclusion of the pre-emptive
rights of existing shareholders, treasury shares may, in
particular, be transferred to third parties for the purpose of acquiring entities or participating interests of
entities. Treasury shares may also be sold to third parties against payment in cash, provided that the selling
price is not significantly below the quoted market
price at the time of share disposal. Treasury shares
may likewise be used to satisfy warrants or conversion
rights granted by the corporation. The Personally
Liable Partner has also been authorized, with the
approval of the Shareholders’ Committee and of the
Supervisory Board, to cancel treasury shares without
the need for further resolution by the Annual General
Meeting.
Insofar as shares are issued or used to the exclusion
of pre-emptive rights, the proportion of capital
stock represented by such shares shall not exceed
10 percent.
Concerning the number of treasury shares and their
use, please refer to the disclosures provided in the
notes to the consolidated financial statements under
Note 10 on pages 139 and 140.
Restrictions with respect to voting rights or the
transfer of shares
Treasury shares held by the company do not convey
any rights, including voting rights (Section 71b AktG).
Voting rights conveyed by the relevant shares are
also excluded by law in the instances listed in Section 136 AktG.
A share-pooling agreement has been concluded
between members of the families of the descendants
of company founder Fritz Henkel, pursuant to which
the members agree on how to exercise the voting
rights conveyed by their relevant ordinary shares in
Henkel AG & Co. KGaA. The agreement also contains
Henkel Annual Report 2016 Combined management report 31
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
restrictions with respect to transfers of the ordinary
shares covered (Art. 7 of the Articles of Association).
Henkel preferred shares acquired by employees
through the Employee Share Program, including
bonus shares acquired without additional payment,
are subject to a company-imposed contractual
lock-up period of three years, which begins on the
first day of the respective participation period.
Essentially, the shares should not be sold before the
end of this period. If employee shares are sold during
the lock-up period, the bonus shares are forfeited.
Contractual agreements also exist with members of
the Management Board governing lock-up periods
for Henkel preferred shares which they are required
to purchase out of their variable annual cash remuneration (for additional information, please see the
remuneration report on pages 39 to 51).
Major shareholders
According to notifications received by the corporation on December 17, 2015, a total of 61.02 percent of
the voting rights are held by members of the Henkel
family share-pooling agreement. (For additional
information, please see the disclosures provided in
the notes to the consolidated financial statements
under Note 40 on page 177.) No other direct or indirect investment in capital stock exceeding 10 percent
of the voting rights has been reported to us or is
known to us.
Shares with special rights
There are no shares carrying multiple voting rights,
preference voting rights, maximum voting rights or
special controlling rights.
Management Board
The Supervisory Board of Henkel Management AG
is responsible for the appointment and dismissal
of members of the Management Board of Henkel
Management AG (Management Board). The appointments are for a maximum tenure of five years. A
reappointment or extension of the tenure is permitted for a maximum period of five years in each case
(Section 84 AktG).
The Management Board is composed of at least two
members in accordance with Art. 7 (1) of the Articles
of Association of Henkel Management AG. The
Supervisory Board of Henkel Management AG is also
responsible for determining the number of members
on the Management Board. The Supervisory Board of
Henkel Management AG can appoint a member of
the Management Board as Chairperson.
As the executive body of the Group, the Management
Board is bound to uphold the interests of the business and is responsible for ensuring a sustainable
increase in shareholder value. The members of the
Management Board are responsible for managing
Henkel’s business operations in their entirety. The
individual Management Board members are assigned,
in accordance with a business distribution plan, areas
of competence for which they bear lead responsibility. The members of the Management Board cooperate
closely as colleagues, informing one another of all
major occurrences within their areas of competence
and conferring on all actions that may affect several
such areas. Further details relating to cooperation and
the division of operational responsibilities within the
Management Board are regulated by the rules of procedure issued by the Supervisory Board of Henkel
Management AG. The Management Board reaches its
decisions by a simple majority of the votes cast. In the
event of a tie, the Chairperson has the casting vote.
It is the duty of the Management Board to prepare
the annual financial statements of Henkel AG & Co.
KGaA, the consolidated and interim financial statements and also the corresponding management
reports. The Management Board is responsible for
management of the overall business including planning, coordination, allocation of resources, financial
control, and risk management. It must also ensure
compliance with legal provisions, regulatory requirements and internal company guidelines, and take steps
to ensure that Group companies also observe them.
Supervisory Board and Shareholders’ Committee;
other committees
It is the responsibility of the Supervisory Board to
advise and supervise the Management Board in the
performance of its business management duties. The
Supervisory Board regularly discusses business performance and planning with the Management Board.
It reviews the annual financial statements of Henkel
AG & Co. KGaA and the Group’s consolidated financial
statements as well as the associated management
reports, taking into account the reviews and audit
reports submitted by the auditor. It also votes on the
proposal of the Management Board regarding the
appropriation of profit and submits to the Annual
General Meeting a proposal indicating its recommendation for the appointment of the external auditor.
As a general rule, the Supervisory Board meets four
times per year. It passes resolutions by a simple
majority of the votes cast. In the event of a tie, the
Chairperson has the casting vote. The Supervisory
Board has established an Audit Committee and a
Nominations Committee.
of voting rights are
held by members
of the Henkel
family share-pooling agreement.
61.02 %
32 Combined management report Henkel Annual Report 2016
The Audit Committee is made up of three shareholder and three employee representative members
of the Supervisory Board. Each member is elected by
the Supervisory Board based on nominations of their
fellow shareholder or fellow employee representatives on the Board. The Chairperson of the Audit
Committee is elected based on a proposal of the
shareholder representative members. It is a statutory
requirement that at least one independent member
of the Supervisory Board has expertise in the fields of
accounting or auditing. The Chairperson of the Audit
Committee in 2016, Prof. Dr. Theo Siegert, who is
not the Chairperson of the Supervisory Board nor
a present or former member of the Management
Board, satisfies these requirements.
The Audit Committee, which generally meets four
times a year, prepares the proceedings and resolutions of the Supervisory Board relating to the adoption of the annual financial statements and the consolidated financial statements, and also the auditor
appointment proposal to be made to the Annual
General Meeting. It issues audit mandates to the
auditor and defines the focal areas of the audit as
well as deciding on the fee for the audit and other
advisory services provided by the auditor. It monitors the independence and qualifications of the auditor, requiring the latter to submit a declaration of
independence which it then evaluates. Furthermore,
the Audit Committee monitors the accounting process and assesses the effectiveness of the Internal
Control System, the Risk Management System and
the Internal Auditing and Review System. It is likewise involved in compliance issues. The Group’s
Internal Audit function reports regularly to the Audit
Committee. It discusses with the Management Board
– with the external auditor in attendance – the
quarterly reports and the financial report for the
half year, prior to their publication.
The Nominations Committee comprises the Chairperson of the Supervisory Board and two further
shareholder representatives elected by the Supervisory Board based on nominations of the shareholders’ representatives. The Chairperson of the Supervisory Board is also Chairperson of the Nominations
Committee. The Nominations Committee prepares
the resolutions of the Supervisory Board on election
proposals to be presented to the Annual General
Meeting for the election of members to the Supervisory Board (shareholder representatives).
The Shareholders’ Committee generally meets six
times per year and holds a joint conference with the
Management Board lasting several days. The Shareholders’ Committee reaches its decisions by a simple
majority of the votes cast. It has established Finance
and Human Resources Subcommittees that likewise
meet six times per year, as a rule. Each subcommittee
comprises five of the members of the Shareholders’
Committee.
The Finance Subcommittee deals primarily with
financial matters, questions of financial strategy,
financial position and structure, taxation and
accounting policy, as well as risk management
within the corporation. It also performs the necessary preparatory work for decisions to be made by
the Shareholders’ Committee in matters for which
decision authority has not been delegated to it.
The Human Resources Subcommittee deals primarily with personnel matters relating to members of
the Management Board, with issues pertaining to
human resources strategy, and with remuneration.
It performs the necessary preparatory work for decisions to be made by the Shareholders’ Committee in
matters for which decision authority has not been
delegated to it. The Subcommittee also addresses
issues concerned with succession planning and
management potential within the individual business units, taking into account relevant diversity
aspects.
At regular intervals, the Supervisory Board and the
Shareholders’ Committee hold an internal review to
determine the efficiency with which they and their
committees/subcommittees carry out their duties.
This self-assessment is performed on the basis of an
extensive checklist, whereupon points relating to
corporate governance and improvement opportunities are also discussed.
Conflicts of interest must be disclosed in an appropriate manner to the Supervisory Board or Shareholders’ Committee, particularly those that may arise
as the result of a consultancy or committee function
performed in the service of customers, suppliers,
lenders or other business partners. Members
encountering material conflicts of interest that are
not of a merely temporary nature are required to
resign their mandate.
Some members of the Supervisory Board and of the
Shareholders’ Committee are or were in past years
holders of senior managerial positions in other companies. If and when Henkel pursues business activities with these companies, the same arm’s length
principles apply as those applicable to transactions
with and between unrelated third parties. In our
view, such transactions do not affect the impartiality
of the members in question.
Henkel Annual Report 2016 Combined management report 33
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Interaction between Management Board,
Supervisory Board and Shareholders’ Committee
The Management Board, Supervisory Board and
Shareholders’ Committee work in close cooperation
for the benefit of the corporation.
The Management Board agrees the strategic direction
of the corporation with the Shareholders’ Committee
and discusses with it the status of strategy implementation at regular intervals.
In keeping with good corporate governance, the Management Board informs the Supervisory Board and the
Shareholders’ Committee regularly, and in a timely
and comprehensive fashion, of all relevant issues concerning business policy, corporate planning, profitability, the business development of the corporation
and our major affiliated companies, and also matters
relating to risk exposure and risk management.
For transactions of fundamental significance, the
Shareholders’ Committee has established a right of
veto in the procedural rules governing the actions
of Henkel Management AG in its function as sole
Personally Liable Partner (Art. 26 of the Articles of
Association). This covers, in particular, decisions
or measures that materially change the net assets,
financial position or results of operations of the
corporation. The Management Board complies with
these rights of consent of the Shareholders’ Committee and also duly submits to the decision authority
of the corporation’s Annual General Meeting.
Principles of corporate governance /Compliance
The members of the Management Board conduct the
corporation’s business with the care of a prudent and
conscientious business director in accordance with
legal requirements, the Articles of Association of
Henkel Management AG and the Articles of Association of Henkel AG & Co. KGaA, the rules of procedure
governing the actions of the Management Board, the
provisions contained in the individual contracts of
employment of its members, and also the compliance
guidelines and resolutions adopted by and within
the Management Board.
Corporate management principles which go beyond
the statutory requirements are derived from our purpose, our vision, our mission and our values. For our
corporation to be successful, it is essential that we
share a common approach to entrepreneurship. We
have defined a clear strategic framework with a longterm horizon. It guides us in making the right decisions and helps us to concentrate on our strategic
priorities and focus strictly on our ambition for the
future.
We want to create value – for our customers and
our consumers, for our people, for our shareholders
as well as for the wider society and communities in
which we operate.
Our purpose:
• Creating sustainable value.
Our vision:
• Leading with our innovations, brands and
technologies.
Our mission:
• Serving our customers and consumers worldwide
as the most trusted partner with leading positions
in all relevant markets and categories – as a passionate team united by shared values.
Our values:
• We put our customers and consumers at the
center of what we do.
• We value, challenge and reward our people.
• We drive excellent sustainable financial
performance.
• We strive to continually extend our leadership
in sustainability.
• We shape our future with a strong entrepreneurial
spirit based on our family business tradition.
The corporate management bodies of Henkel and our
employees worldwide are guided by this purpose,
this vision, this mission, and these values. They
reaffirm our ambition to meet the highest ethical
standards in everything we do. And they guide our
employees in all the day-to-day decisions they make,
providing a compass for their conduct and actions.
Henkel is committed to ensuring that all business
transactions are conducted in an ethically irreproachable, legal fashion. Consequently, Henkel
expects all our employees not only to respect the
corporation’s internal rules and all relevant laws, but
also to avoid conflicts of interest, to protect Henkel’s
assets and to respect the social values of the countries and cultural environments in which the corporation does business. The Management Board has
therefore issued a series of Group-wide codes and
standards with precepts that are binding worldwide.
These regulatory instruments are periodically
reviewed and amended as appropriate, evolving in
step with the changing legal and commercial conditions that affect Henkel as a globally active corporation. The Code of Conduct supports our employees
in ethical and legal issues. The Leadership Principles,
for example, define the scope of responsibilities
for managers. The Code of Corporate Sustainability
34 Combined management report Henkel Annual Report 2016
describes the principles that drive our sustainable,
socially responsible approach to business. This code
also enables Henkel to meet the commitments
derived from the United Nations Global Compact.
Ensuring compliance in the sense of adherence to
laws and regulations is an integral component of
our business processes. Henkel has established a
Group-wide compliance organization with locally
and regionally responsible compliance officers led
by a globally responsible General Counsel & Chief
Compliance Officer (CCO). The General Counsel &
CCO, supported by the Corporate Compliance Office
and the interdisciplinary Compliance & Risk Committee, manages and controls compliance-related
activities undertaken at the corporate level, coordinates training courses, oversees fulfillment of both
internal and external regulations, and takes appropriate action in the event of compliance violations.
The local and regional compliance officers are
responsible for organizing and overseeing the training activities and implementation measures tailored
to the specific requirements of their locations. They
report to the Corporate Compliance Office. The General Counsel & CCO reports regularly to the Management Board and to the Audit Committee of the Supervisory Board on identified compliance violations.
The issue of compliance is also a permanent item in
the target agreements signed by all managerial staff
of Henkel. Due to their position, it is particularly
incumbent on them to set the right example for
their subordinates, to effectively communicate the
compliance rules and to ensure that these are
obeyed through the implementation of suitable
organizational measures.
The procedures to be followed in the event of complaints or suspicion of malpractice also constitute
an important element of the compliance policy. In
addition to our internal reporting system and complaint registration channels, employees may also,
for the purpose of reporting serious violations to
the Corporate Compliance Office, anonymously use
a compliance hotline operated by an external service provider. The Head of the Corporate Compliance Office is mandated to initiate the necessary
follow-up procedures.
Our corporate compliance activities are focused on
antitrust law and the fight against corruption. In
our Code of Conduct, the corporate guidelines based
upon it, and other publications, the Management
Board clearly expresses its rejection of all violations
of the principles of compliance, particularly antitrust violations and corruption. We do not tolerate
such violations in any way. For Henkel, bribery,
anticompetitive agreements, or any other violations
of laws are no way to initiate or conduct business.
A further compliance-relevant area relates to capital
market law. Supplementing the legal provisions,
internal codes of conduct have been put in place to
regulate the treatment of information that has the
potential to affect share prices. The corporation has
an Ad Hoc Committee comprised of representatives
from various departments. In order to ensure that
all insider information is handled as required by law,
this Committee reviews developments and events
for their possible effect on share prices, determining the need to issue reports to the capital markets
on an ad hoc basis. There are also rules that go beyond
the legal requirements, governing the behavior of
the members of the Management Board, the Supervisory Board and the Shareholders’ Committee, and
also employees of the corporation who, due to their
function or involvement in projects, have access to
insider information.
Transparency/Communication
An active and open communication policy ensuring
prompt and continuous information dissemination
is a major component of the value-based management approach at Henkel. Hence shareholders,
shareholder associations, participants in the capital
market, financial analysts, the media and the public
at large are kept informed of the current situation
and major business changes relating to the Henkel
Group. All stakeholders are treated equally in this
respect. All such information is also promptly made
available on the internet.
Up-to-date information is likewise incorporated in
the regular financial reporting undertaken by the
corporation. The dates of the major recurring publications, and also the dates for the press conference
on the preceding fiscal year and the Annual General
Meeting, are announced in our financial calendar,
which is also available on the internet.
The corporation’s advancements and targets in relation to the environment, safety, health and social
responsibility are published annually in our Sustainability Report. Shareholders, the media and the
public at large are further provided with comprehensive information through press releases and information events, while occurrences with the potential
to materially affect the price of Henkel shares are
communicated in the form of ad hoc announcements.
Henkel Annual Report 2016 Combined management report 35
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Further information on corporate governance can
be found in the section “Principles of corporate
governance / Compliance” on pages 34 and 35. The
composition of the Management Board is shown on
page 187. For more details on the composition of the
Supervisory Board and the Shareholders’ Committee
or the (sub)committees established by the Supervisory Board and Shareholders’ Committee, please
refer to pages 184 to 186. Details of the compensation
of the Management Board, the Supervisory Board and
the Shareholders’ Committee can be found in the
remuneration report on pages 39 to 51.
Targets for the proportion of women on the
Management Board and in the first two management levels below the Management Board
In accordance with Sections 76 (4) and 111 (5) AktG,
targets must be set for the proportion of women on
the Management Board and in the first two management levels below the Management Board. If the proportion of women is below 30 percent at the time the
targets are set, the targets may not be below the proportion already achieved. Deadlines for achievement
of the targets must be established at the same time.
Each deadline must be within five years and the first
deadline can be no later than June 30, 2017.
Proportion of women on the Management Board
In September 2015, for the first time, the Supervisory
Board of Henkel Management AG established a target
for the proportion of women on the Management
Board of 17 percent in agreement with the recommendations of the Shareholders’ Committee and its Human
Resources Subcommittee. This target applied until
December 31, 2016.
The proportion of women on the Management Board
at December 31, 2016 was 17 percent; as such, the target was met.
The Supervisory Board of Henkel Management AG
has again established a target, as recommended by
the Shareholders’ Committee and its Human
Resources Subcommittee, for the proportion of
women on the Management Board of 17 percent,
taking into account the current composition and an
appropriate Management Board size for the corporation. This proportion will apply, and the target will
be met, in the period through to December 31, 2021.
Proportion of women in the management levels
below the Management Board
In September 2015, for the first time, the Management
Board established the following targets for the first
two levels of management below the Management
Board in consideration of the current personnel mix.
In accordance with the legal requirements, the point
of reference for the definition of the management
levels was based exclusively on Henkel AG & Co. KGaA
and not the Henkel Group – regardless of Henkel’s
globally aligned management organization. As a
result, the figures include only employees of
Henkel AG & Co. KGaA with management responsibility who report directly to the Management Board
(management level 1) and those who report to
management level 1 (management level 2).
Separately from the targets for the first two levels of
management below the Management Board of
Henkel AG & Co. KGaA – and mindful of our globally
aligned management organization – it is our goal to
increase our ratio of women at all levels of management at Henkel in the long term. In 2016, we were
again able to raise the proportion of women in management worldwide – to around 34 percent overall at
December 31, 2016.
The following targets were set for achievement by
December 31, 2016:
• First management level: Proportion of 17 percent
women
• Second management level: Proportion of 28 percent women
As of December 31, 2016, the target of 17 percent for
the first management level of Henkel AG & Co. KGaA
had been exceeded by around 5 percentage points
and the target of 28 percent for the second management level had been met.
Since our organization is globally structured, and we
promote career opportunities internationally, some
management executives were assigned from Henkel
AG & Co. KGaA to other Group companies, and vice
versa, during the reporting period. This may also
cause shifts in the proportion of women in the relevant management levels at Henkel AG & Co. KGaA.
Equally, the result is not dependent on whether the
proportion of women in management overall has
changed or, as explained above, even increased at the
global level.
Based on the current personnel mix, the Management Board has established new targets for the first
two levels of management below the Management
Board. These targets are expected to be achieved by
December 31, 2021:
• First management level: Proportion of 25 percent
women
• Second management level: Proportion of 30 percent women
36 Combined management report Henkel Annual Report 2016
In accordance with the legal requirements, the point
of reference for the definition of the management levels was based exclusively on Henkel AG & Co. KGaA
and not the Henkel Group. As a result, the figures
include only employees of Henkel AG & Co. KGaA
with management responsibility who report directly
to the Management Board (management level 1) and
those who report to management level 1 (management level 2).
Objectives regarding Supervisory Board
composition
Given Henkel’s position as a listed corporation
subject to the Codetermination Act, the Supervisory
Board of Henkel AG & Co. KGaA must consist of at
least 30 percent women and at least 30 percent men
(Section 96 (2) AktG).
In consideration of the specific situation of the
corporation, the Supervisory Board has, in addition
to the statutory requirements listed above, established the objectives described below with respect
to its composition in accordance with Item 5.4.1 of
the German Corporate Governance Code [DCGK].
These objectives will be taken into account by the
Supervisory Board when proposing election candidates to the Annual General Meeting for all re-electable and ad hoc replacement Supervisory Board
positions:
• The members of the Supervisory Board should,
generally speaking, offer the knowledge, skills and
relevant experience necessary in order to properly
perform their duties. In particular, experience
and expertise are required in one or several of the
fields of corporate management, accounting,
financial control/risk management, corporate governance/compliance, research and development,
production/engineering, and marketing/sales/
distribution, as is knowledge of the industrial or
consumer businesses and of the primary markets
in which Henkel is active. Members of the Supervisory Board should also have sufficient time at
their disposal in order to carry out their mandate.
• The international activities of the corporation
should be appropriately reflected in the composition of the Supervisory Board. Thus, it aims to
include several members with an international
background. The mix of candidates proposed for
election should also contain an appropriate number of women. Efforts will therefore be made for
upcoming new and ad hoc replacement elections
to achieve a proportion higher than the minimum
30 percent required by law.
• In addition, the Supervisory Board should have an
appropriate number of independent members.
Specifically, the Supervisory Board should contain
no more than two former members of the Management Board, no persons who perform board or
committee functions or act as consultants for
major competitors, and no persons whose business
or personal relationship with the corporation or
members of the Management Board could give rise
to material conflicts of interest that are not of a
merely temporary nature. Assuming that the exercise of their Supervisory Board mandate by the
employee representatives as such cannot be the
basis for doubt as to whether the independence
criteria as defined by Item 5.4.2 of the DCGK are
fulfilled, the Supervisory Board should include at
least 13 members who are independent as defined
by the DCGK. Consistent with the corporation’s tradition as an open family business, possession of a
controlling interest or attribution of a controlling
interest due to membership in the Henkel family
share-pooling agreement is not viewed as a circumstance that creates a conflict of interest in the
meaning above. However, irrespective of this, at
least three of the shareholder representatives on
the Supervisory Board should, as a rule, be neither
members of the Henkel family share-pooling
agreement nor members of the Shareholders’
Committee nor members of the Supervisory Board
of Henkel Management AG.
• No persons shall be proposed for election at the
Annual General Meeting who, at the time of the
election, have already reached their 70th birthday.
Also, as a rule, no persons should be proposed
who, at the time of the election, have already
served more than two full terms of office on the
Supervisory Board. However, to ensure continuity,
members may also serve on the Supervisory Board
for longer periods of time in individual cases.
Consistent with the tradition of Henkel AG & Co.
KGaA as an open family business, this applies
particularly to members of the Henkel family
share-pooling agreement.
Henkel Annual Report 2016 Combined management report 37
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
The statutory minimums listed above, or objectives
within the meaning of the DCGK, were achieved in
the year under review.
Among the 16 members of the Supervisory Board are
ten men and six women. Shareholder representatives
consist of six men and two women, while the
employee representatives consist of four men and
four women. This represents an overall ratio on the
Supervisory Board of around 62 percent men and
38 percent women. Throughout the entire year under
review, each gender was represented by at least
30 percent among both the shareholder representatives and the employee representatives.
Overall, the Supervisory Board has at its disposal the
knowledge, skills and technical abilities needed to
properly and effectively perform its duties. In addition, several members of the Supervisory Board offer
international business experience or other international expertise. No individual on the Supervisory
Board exceeds the specified maximum age.
None of the Supervisory Board members elected by
the Annual General Meeting is a former Management
Board member, or performs board or committee functions or acts as a consultant for major competitors,
and none are persons whose business or personal
relationship with the corporation or members of the
Management Board could give rise to material conflicts of interest that are not of a merely temporary
nature. Four of the eight shareholder representatives
are not members of the Henkel family share-pooling
agreement, and seven of the eight shareholder representatives are neither members of the Shareholders’
Committee nor members of the Supervisory Board of
Henkel Management AG.
Application of the German Corporate
Governance Code
Taking into account the special features arising from
our legal form and Articles of Association, Henkel AG
& Co. KGaA complies with the recommendations
(“shall” provisions) of the DCGK, latest edition, with
one exception: So as to protect the legitimate interests
and privacy of those members of the corporate management bodies who are also members of the Henkel
family, in deviation from Item 6.3 of the DCGK as
amended on May 5, 2015, the shareholdings of those
members exceeding one percent of the shares issued
by the corporation have not been and will not be disclosed unless required by law. The DCGK requires
disclosure of shareholdings upward of one percent.
In accordance with the Declaration of Compliance,
the following information is reported concerning
the aggregate shareholdings of all members of a
corporate body, taking the relevant provisions for attribution into account: The aggregate holdings of the
members of the Supervisory Board and of the members
of the Shareholders’ Committee exceed in each case
one percent of the shares issued by the corporation.
The members of the Management Board together hold
less than one percent of the shares issued by the
corporation.
Henkel also complies with all non-compulsory
suggestions (“may/should” provisions) of the DCGK,
in keeping with our legal form and the special statutory features anchored in our Articles of Association.
The corresponding declarations of compliance
together with the reasons for deviations from
recommendations can be found on our website at
www.henkel.com/ir
Managers’ transactions
In accordance with Article 19 (1) of the Market Abuse
Regulation, members of the Management Board, the
Supervisory Board and the Shareholders’ Committee,
and parties related to same, are obliged to disclose
notifiable transactions involving shares in Henkel AG
& Co. KGaA or their derivative financial instruments
where the value of such transactions by the member,
or a party related to the member, attains or exceeds
5,000 euros in a calendar year. The transactions
reported to the corporation in the past fiscal year were
properly disclosed and can be seen on the website
www.henkel.com/ir
Statutory and regulatory situation
As a globally active corporation, our business is subject to various national rules and regulations, including relevant trade regulations governing imports and
exports, customs provisions and price or currency
restrictions, as well as – within the European Union
(EU) – increasingly to harmonized laws applying
throughout the EU. Trade restrictions, such as export
controls, embargoes or economic sanctions, must
also be observed in some countries. In addition,
some of our activities are subject to rules and regulations derived from approvals, licenses, certificates or
permits.
Our manufacturing operations are bound by rules
and regulations with respect to the registration, evaluation, usage, storage, transportation and handling of
certain substances and also in relation to emissions,
wastewater, effluent and other waste. The construction and operation of production facilities and other
plant and equipment are governed by framework
Around
female membership on the Supervisory Board.
38 %
38 Combined management report Henkel Annual Report 2016
rules and regulations – including those relating to
legacy remediation.
Product-specific regulations of relevance to us relate
in particular to ingredients and input materials,
safety in manufacturing, the handling of products
and their contents, and the packaging and marketing
of these items. The control mechanisms include
statutory material-related regulations, usage prohibitions or restrictions, procedural requirements (test
and inspection, identification marking, provision of
warning labels, etc.), and product liability law.
Our internal standards are geared to ensuring compliance with statutory regulations and the safety of our
manufacturing facilities and products. The associated
requirements have been incorporated within, and
implemented throughout, our management systems,
and are subject to a regular audit and review regime.
This includes monitoring and evaluating relevant
statutory and regulatory requirements and changes
in a prompt and timely fashion.
Remuneration report
This remuneration report provides an outline of the
compensation system for the Management Board,
Henkel Management AG as the Personally Liable
Partner, the Supervisory Board and the Shareholders’ Committee of Henkel AG & Co. KGaA, and the
Supervisory Board of Henkel Management AG; it
also explains the level and structure of the remuneration paid.
The report takes into account the recommendations
of the German Corporate Governance Code [DCGK]
and contains all disclosures and explanations pursuant to the provisions of the German Commercial
Code [HGB] and the appropriate principles of German Accounting Standards [DRS], and as required
by International Financial Reporting Standards
(IFRS). The remuneration report forms part of the
combined management report for Henkel AG & Co.
KGaA and the Group; the associated information
has not therefore been additionally disclosed in the
notes to the consolidated financial statements.
1. Remuneration of members of the
Management Board
Regulation, structure and amounts
The compensation for members of the Management
Board of Henkel Management AG is set by the Supervisory Board of Henkel Management AG in consultation with the Human Resources Subcommittee of the
Shareholders’ Committee. The Supervisory Board of
Henkel Management AG is comprised of three members of the Shareholders’ Committee.
The structure and amounts of Management Board
remuneration are aligned to the size and international activities of the corporation, its economic and
financial position, its performance and future prospects, the normal levels of remuneration encountered in comparable companies, and also the general
compensation structure within the corporation. The
compensation package is further determined on the
basis of the functions, responsibilities and personal
performance of the individual executives, and the
performance of the Management Board as a whole.
The variable annual remuneration components have
been devised such that they take into account both
positive and negative developments. The overall
remuneration mix is designed to be internationally
competitive while also providing an incentive for
sustainable business development and a sustainable
increase in shareholder value in a dynamic
environment.
The Supervisory Board of Henkel Management AG
regularly reviews the compensation system as well
as the appropriateness of the compensation, based
on the aforementioned criteria. In doing so, Management Board remuneration is analyzed relative to the
compensation paid to senior management and the
staff as a whole, both overall and over time, whereby
the Supervisory Board of Henkel Management AG
determines the boundaries between senior management and relevant staff members.
Members of the Management Board receive remuneration consisting of non-performance-related
components and variable, performance-related
components. The non-performance-related compensation is made up of their fixed salary together with
various in-kind and other benefits (other emoluments). The performance-related compensation
has two parts. The first is a variable annual cash payment (short-term incentive or “STI”), 65 percent of
which is short-term variable cash remuneration and
35 percent of which is long-term variable cash remuneration in the form of an investment financed by
the recipient in Henkel preferred shares (share deferral). The second is a variable cash payment based on
the long-term performance of the business (longterm incentive or “LTI”). The remuneration targeting
long-term performance thus consists of the share
deferral and the LTI.
If all performance targets are met in full (“at target”),
around 21 percent of the remuneration (excluding
Henkel Annual Report 2016 Combined management report 39
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Remuneration structure
Fixed salary and other emoluments
Variable annual cash remuneration (STI)
Performance parameters: ROCE, EPS,
adjusted in each case; individual targets
Long-term incentive
Performance parameter: Increase in adjusted EPS
Short-term variable cash remuneration (65 % of STI)
Share deferral (35 % of STI)
10
Non-performancerelated components
Performance-related
components, long-term
Performance-related
components, short-term
Performance-related compensation
Variable annual cash remuneration
The performance criteria governing the variable
annual cash remuneration (STI) are return on capital
employed (ROCE) and earnings per preferred share
(EPS) in the relevant fiscal year (“year of payment”),
adjusted in each case for exceptional items, together
with separate targets for each individual member.
The ROCE targets are derived from a strategic target
yield. EPS performance is measured on the basis of
actual-to-actual comparison, i.e. the EPS in the year
of payment is compared to the EPS from the previous
year.
Thresholds have been defined for both key financials; payment is withheld if the minimum targets
are not met. If adjusted EPS in the year of payment is
more than 25 percent above or below the comparable
prior-year figure as a result of extraordinary events,
the Supervisory Board of Henkel Management AG
may, at its discretion and after due consideration,
decide to adjust the target within this corridor, or
may determine a new reference value for measuring
performance in the following year.
The STI is calculated on the basis of a 40-percent
weighting each of ROCE and EPS performance in the
year of payment, and a 20-percent weighting of individual targets. The following factors play a key role in
measuring individual performance: the Group results
and the results of the relevant business unit, the
quality of management demonstrated in those business units, and the individual contribution made by
the Management Board member concerned. The
other emoluments and pension benefits) is paid as
the fixed component, while the STI and share deferral account for around 56 percent, and the LTI for
around 23 percent.
Pension benefits also form part of the remuneration
package. In addition, the Supervisory Board of
Henkel Management AG may, at its discretion and
after due consideration, grant a special payment
in recognition of exceptional achievements.
The components in detail:
Non-performance-related compensation
Fixed salary
The fixed remuneration takes into account the
assigned function and responsibility and the market
conditions. It is paid out monthly as salary and
amounts to 1,200,000 euros per year for the Chairman of the Management Board and 750,000 euros
per year for the other Management Board members.
Other emoluments
The members of the Management Board also receive
other emoluments, primarily in the form of costs
associated with, or the cash value of, in-kind
benefits and other fringe benefits such as standard
commercial insurance policies, reimbursement of
accommodation/moving costs, provision of a company car or use of a car service, including any taxes
on same, and the costs of preventive medical examinations. All members of the Management Board are
entitled, in principle, to the same emoluments,
whereby the amounts vary depending on personal
situation.
40 Combined management report Henkel Annual Report 2016
application of these performance parameters ensures
that profitable growth is duly rewarded by Henkel.
In determining the STI, the Supervisory Board of
Henkel Management AG also takes into account the
apparent sustainability of the economic performance
delivered in the course of the year, and the performance levels of the Management Board members.
The total amount of the STI is subject to a cap of
150 percent of the target amount.
Short-term and long-term components of the
variable annual cash remuneration
The STI is paid annually in arrears in the full amount
in cash once the corporation’s annual financial statements have been approved by the Annual General
Meeting. The recipients can dispose of around 65 percent of this payment as they wish. This constitutes
their short-term variable cash remuneration. The
members of the Management Board invest the
remainder of the relevant payment amount, corresponding to around 35 percent, in Henkel preferred
shares. This constitutes their long-term variable cash
remuneration, known as the share deferral. These
shares are placed in a blocked custody account with a
drawing restriction. The company transfers the relevant investment amount of each individual directly
to the bank responsible for settling the investment
transactions and managing the blocked custody
account. On the first trading day of the month following payout, this bank invests the relevant investment amount on behalf and for the account of the
relevant member of the Management Board on the
stock exchange in Henkel preferred shares at the
price prevailing at the time of purchase, and credits
the acquired shares to the blocked custody account.
The lock-up period in each case expires on December 31 of the fourth year following the year of payment.
This share deferral ensures that the members of the
Management Board participate through a portion of
their compensation in the long-term performance of
the corporation.
Long-term incentive (LTI)
The long-term incentive is a variable cash payment
based on the long-term performance of the corporation, the amount payable being dependent on the
future increase registered in EPS over three consecutive years (the performance period).
On completion of the performance period, target
achievement is ascertained by the Supervisory
Board of Henkel Management AG on the basis of the
increase in EPS attained. The EPS of the fiscal year
preceding the year of payment is compared to the
EPS of the second fiscal year following the year of
payment. The figures used for the calculation of the
increase are, in each case, the earnings per preferred
share adjusted for exceptional items, as disclosed in
the certified and approved consolidated financial
statements of the relevant fiscal years.
The total amount of the LTI is subject to a cap of
150 percent of the target amount.
Special payments
In addition to the remuneration components described
above, the Supervisory Board of Henkel Management
AG may, at its discretion and after due consideration,
grant a special payment in recognition of exceptional
achievements. Such special payment is limited to an
amount equating to the respective Management
Board member’s fixed salary; the maximum compensation level – as determined by remuneration for a
fiscal year if the caps on STI and LTI are reached –
may not be exceeded as a result of such payment.
Caps on remuneration
Taking into account the above-mentioned caps for the
variable performance-related components of remuneration, the following minimum and maximum
remuneration amounts result for a full fiscal year
(excluding other emoluments and pension benefits).
Caps on remuneration* 11
| in euros | Fixed salary | Short-term variable cash remuneration |
Long-term variable cash remuneration (share deferral) |
Long-term incentive, conditional entitlement |
Total compensation minimum |
Total compensation maximum |
| Chairman of the Management Board |
1,200,000 | 0 to 3,315,000 | 0 to 1,785,000 | 0 to 2,100,000 | 1,200,000 | 8,400,000 |
| Ordinary member of the Management Board |
750,000 | 0 to 1,950,000 | 0 to 1,050,000 | 0 to 1,200,000 | 750,000 | 4,950,000 |
* At January 2017.
Henkel Annual Report 2016 Combined management report 41
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Pension benefits (retirement pensions and
survivors’ benefits)
The company has been operating a purely defined
contribution system since January 1, 2015. Accordingly, members of the Management Board now receive
a superannuation lump-sum payment comprised of
the total contributions to the plan during their time in
office. The annual contributions – based on a full fiscal year – are 750,000 euros for the Chairman and
450,000 euros each for the other members of the
Management Board.
An entitlement to pension benefits arises on retirement, on termination of the employment relationship
on or after attainment of the statutory retirement age,
in the event of death, or in the event of permanent
complete incapacity for work. If a member of the Management Board has received no pension benefits prior
to their death, the superannuation lump sum accumulated up to time of death is paid out to the surviving spouse or surviving children.
Provisions governing termination of position on
the Management Board
If an active member of the Management Board who
was first appointed prior to 2009 retires, or dies while
still in office, payment of their fixed remuneration
continues for a further six months, but not beyond
their 65th birthday. In the event of death in service,
the payments are made to the surviving spouse or
entitled dependent children.
In the event that a member’s position on the Management Board is terminated prematurely by mutual
agreement, the executive contract provides for a severance settlement amounting to the remuneration for
the remaining contractual term (fixed remuneration
plus variable annual remuneration) in the form of a
discounted lump-sum payment. These severance
payments are limited to a maximum of two years’
compensation (severance payment cap) and may not
extend over a period that exceeds the residual term of
the executive contract. Members are not entitled to
severance payment if an executive contract is terminated by mutual agreement at the request of the
member or because that member has been dismissed
by the corporation for good cause or reason. In the
event that the sphere of responsibility/executive
function is altered or restricted to such an extent
that it is no longer comparable to the position prior
to the change or restriction, the affected members of
the Management Board are entitled to resign from
office and request premature termination of their
contract. In such case, members are entitled to severance payments amounting to not more than two
years’ compensation.
Upon an executive’s departure from the Management
Board, the STI is paid on a time-proportion basis on
the ordinary payment date after the end of the fiscal
year in which the appointment ends. If not already
expired, lock-up periods for the share deferral end six
months after departure. This applies accordingly to
entitlements under the LTI. However, entitlements
from any tranche whose performance period has not
yet ended at the date of departure are forfeited without replacement if the departure is based on good
cause or reason that would have justified revocation
of the appointment or termination of the employment contract.
In addition, the executive contracts include a postcontractual non-competition clause with a term of
two years. Members of the Management Board are
entitled to a discretionary payment totaling 50 percent of the annual compensation after allowing for
any severance payments, which is payable in
24 monthly installments unless the Supervisory
Board of Henkel Management AG waives the
non-competition clause. Similarly, any earnings from
new extra-contractual activities during the non-competition period shall be offset against this discretionary payment to the extent that such earnings and discretionary payment together exceed the actual
compensation paid in the last fully ended fiscal year
by 10 percent or more. No entitlements exist in the
event of premature termination of executive duties
resulting from a change in control.
Other provisions
The corporation maintains directors and officers insurance (D&O insurance) for directors and officers of the
Henkel Group. For members of the Management Board
there is a deductible amounting to 10 percent per loss
event, subject to a maximum for a fiscal year of one and
a half times their annual fixed remuneration.
Remuneration of the members of the
Management Board for fiscal 2016
Excluding pension entitlements, the total compensation paid to members of the Management Board for
the performance of their duties for and on behalf of
Henkel AG & Co. KGaA and its subsidiaries during the
year under review amounted to 26,503,197 euros (previous year: 25,804,019 euros). Fixed salaries accounted
for 5,075,000 euros (previous year: 4,950,000 euros),
other emoluments for 422,137 euros (previous year:
360,477 euros), short-term variable cash remuneration for 10,143,939 euros (previous year: 9,810,801 euros),
long-term variable cash remuneration – share deferral
– for 5,462,121 euros (previous year: 5,282,741 euros),
and the long-term incentive for 5,400,000 euros
(previous year: 5,400,000 euros). In accordance with
42 Combined management report Henkel Annual Report 2016
legal regulations, the value of the long-term incentive granted for 2016, which is payable in 2019 contingent on the achievement of performance objectives, is recognized here based on the target amount
that would be paid assuming a 30-percent increase in
EPS within the performance period.
Compensation for the reporting period granted to
members of the Management Board serving in 2016,
Remuneration of Management Board members who served in 2016 12
| in euros | 1. Fixed salary 1 |
2. Other emoluments1 |
3. Short-term variable cash remuneration1 |
Single-year remuneration (Total of 1 to 3) |
4. Long-term variable cash remuneration (share deferral)1 |
5. Long-term incentive 2 |
Multi-year remuneration (Total of 4 and 5) |
Total remune ration (Total of 1 to 5) |
|
| Hans Van Bylen (Chairman) (since 5/1/2016) Member of the Management Board since 7/1/2005 |
2016 | 1,050,000 | 119,576 | 2,046,007 | 3,215,583 | 1,101,696 | 1,066,667 | 2,168,363 | 5,383,946 |
| 2015 | 750,000 | 43,786 | 1,494,121 | 2,287,907 | 804,527 | 800,000 | 1,604,527 | 3,892,434 | |
| Kasper Rorsted (Chairman) (until 4/30/2016) Member of the Management Board 4/1/2005 – 4/30/2016 |
2016 | 400,000 | 32,173 | 806,282 | 1,238,455 | 434,152 | 466,667 | 900,819 | 2,139,274 |
| 2015 | 1,200,000 | 79,206 | 2,418,846 | 3,698,052 | 1,302,456 | 1,400,000 | 2,702,456 | 6,400,508 | |
| Jan-Dirk Auris (Adhesive Technologies) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 45,208 | 1,511,755 | 2,306,963 | 814,022 | 800,000 | 1,614,022 | 3,920,985 |
| 2015 | 750,000 | 47,361 | 1,375,171 | 2,172,532 | 740,477 | 800,000 | 1,540,477 | 3,713,009 | |
| Pascal Houdayer (Beauty Care) Member of the Management Board since 3/1/2016 |
2016 | 625,000 | 90,504 | 1,192,629 | 1,908,134 | 642,185 | 666,667 | 1,308,852 | 3,216,985 |
| 2015 | – | – | – | – | – | – | – | – | |
| Carsten Knobel (Finance) Member of the Management Board since 7/1/2012 |
2016 | 750,000 | 53,903 | 1,563,755 | 2,367,658 | 842,022 | 800,000 | 1,642,022 | 4,009,680 |
| 2015 | 750,000 | 50,806 | 1,527,921 | 2,328,727 | 822,727 | 800,000 | 1,622,727 | 3,951,454 | |
| Kathrin Menges (Human Resources) Member of the Management Board since 10/1/2011 |
2016 | 750,000 | 36,151 | 1,459,755 | 2,245,906 | 786,022 | 800,000 | 1,586,022 | 3,831,928 |
| 2015 | 750,000 | 40,285 | 1,466,821 | 2,257,106 | 789,827 | 800,000 | 1,589,827 | 3,846,933 | |
| Bruno Piacenza (Laundry & Home Care) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 44,622 | 1,563,755 | 2,358,377 | 842,022 | 800,000 | 1,642,022 | 4,000,399 |
| 2015 | 750,000 | 99,033 | 1,527,921 | 2,376,954 | 822,727 | 800,000 | 1,622,727 | 3,999,681 | |
| Total | 2016 | 5,075,000 | 422,137 | 10,143,939 | 15,641,075 | 5,462,121 | 5,400,000 | 10,862,121 | 26,503,197 |
| 2015 | 4,950,000 | 360,477 | 9,810,801 | 15,121,278 | 5,282,741 | 5,400,000 | 10,682,741 | 25,804,019 |
1 The payout is reported pursuant to HGB/IFRS.
2 Target amount pursuant to HGB/IFRS, based on a 30-percent increase in adjusted earnings per preferred share within the performance period of three years.
LTI payout for 2016 occurs in 2019; LTI payout for 2015 occurs in 2018.
separated into the above-mentioned components,
is shown in the following table.
The amounts in this table and the tables that follow
have been rounded up or down to full euros. As a
result, the rounded figures in some of the rows in the
tables may not add up to the totals as indicated.
Henkel Annual Report 2016 Combined management report 43
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
As contractually agreed, Kasper Rorsted, who left the
company at his own request effective April 30, 2016,
was paid 1,240,434 euros gross in consideration of his
entitlements under the Short Term Incentive 2016 (pro
rata) and a further total amount of 2,266,167 euros
gross representing the target amounts of his vested
entitlements under the Long Term Incentive in 2014,
2015 and 2016 (pro rata). In addition, compensation
of 413,910 euros gross was paid to Kasper Rorsted for
the period from May 1, 2016, until July 31, 2016, under
the contractually agreed non-competition clause
(with a term of two years).
In the year under review, no member of the Management Board was granted non-standard benefits by
the company in connection with premature termination of their tenure, nor were any such entitlements
or arrangements modified. No member of the Management Board was pledged payments from third
parties in respect of their duties as executives of
the company, nor were any such payments granted
in the reporting period.
Structure of Management Board remuneration 13
| in euros | Components of single-year remuneration |
Components of multi-year remuneration |
|||||
| Fixed salary | Other emoluments |
Short-term variable cash remuneration |
Long-term variable cash remuneration (share deferral) |
Long-term incentive |
Total remuneration |
||
| Total | 2016 | 5,075,000 | 422,137 | 10,143,939 | 5,462,121 | 5,400,000 | 26,503,197 |
| 19.1 % | 1.6% | 38.3 % | 20.6% | 20.4% | 100 % | ||
| Total | 2015 | 4,950,000 | 360,477 | 9,810,801 | 5,282,741 | 5,400,000 | 25,804,019 |
| 19.2 % | 1.4 % | 38.0 % | 20.5 % | 20.9 % | 100 % |
44 Combined management report Henkel Annual Report 2016
Pension benefits
The figures calculated in accordance with the
German Commercial Code [HGB] and International
Accounting Standard (IAS) 19 for service cost for
entitlements acquired in the reporting year and the
present value of total pension benefits accruing to the
end of the fiscal year are shown in the following table:
For pension obligations to former members of the
Management Board and the former management
of Henkel KGaA, as well as the former management
of its legal predecessor and surviving dependents,
100,771,135 euros (previous year: 98,729,434 euros)
is deferred. Amounts paid to such recipients during
the year under review totaled 7,127,205 euros (previous year: 7,163,382 euros).
Disclosures in accordance with the German
Corporate Governance Code [DCGK]
In accordance with the recommendations of the
DCGK, the following tables show
a) the benefits granted for fiscal 2016, including
the maximum and minimum achievable
compensation for variable remuneration
components, and
b) the allocation for fiscal 2016.
Service cost / Present value of pension benefits 14
| HGB | IAS | in euros | |||
| Service cost for pension benefits in the reporting year |
Present value of pension benefits as of December 31 |
Service cost for pension benefits in the reporting year |
Present value of pension benefits as of December 31 |
||
| Hans Van Bylen | 2016 | 664,026 | 6,319,207 | 664,043 | 6,958,733 |
| 2015 | 460,637 | 5,506,250 | 460,637 | 5,937,632 | |
| Kasper Rorsted (until 4/30/2016) |
2016 | 302,133 | 7,138,814 | 306,093 | 7,295,824 |
| 2015 | 791,760 | 7,057,239 | 798,237 | 7,116,328 | |
| Jan-Dirk Auris | 2016 | 458,482 | 3,147,578 | 458,996 | 3,325,032 |
| 2015 | 456,041 | 2,628,382 | 456,927 | 2,746,697 | |
| Pascal Houdayer (since 3/1/2016) |
2016 | 379,457 | 623,140 | 379,457 | 623,496 |
| 2015 | – | – | – | – | |
| Carsten Knobel | 2016 | 457,974 | 2,492,714 | 459,243 | 2,658,267 |
| 2015 | 455,659 | 1,994,619 | 457,887 | 2,103,255 | |
| Kathrin Menges | 2016 | 457,067 | 2,557,853 | 457,533 | 2,652,810 |
| 2015 | 454,902 | 2,051,174 | 455,704 | 2,113,541 | |
| Bruno Piacenza | 2016 | 456,353 | 2,555,923 | 456,400 | 2,562,467 |
| 2015 | 454,174 | 2,045,361 | 454,174 | 2,049,561 | |
| Total | 2016 | 3,175,492 | 24,835,229 | 3,181,765 | 26,076,629 |
| 2015 | 3,073,173 | 21,283,025 | 3,083,566 | 22,067,014 |
Henkel Annual Report 2016 Combined management report 45
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Pursuant to DCGK, payments / benefits granted for the reporting year
to members of the Management Board serving in 2016 15
| in euros | 1. Fixed salary1 |
2. Other emolu ments 1 |
Total (1 and 2) |
3. Short term variable cash remu neration2 |
4. Long term vari able cash remunera tion (share deferral)2 |
5. Long term incentive3 |
Total (1 to 5) |
6. Service cost4 |
Total remu neration pursuant to DCGK (Total of 1 to 6) |
|
| Hans Van Bylen (Chairman) (since 5/1/2016) Member of the Management Board since 7/1/2005 |
2016 | 1,050,000 | 119,576 | 1,169,576 | 1,944,260 | 1,046,909 | 1,066,667 | 5,227,413 | 664,043 | 5,891,456 |
| 2016 (min) | 1,050,000 | 119,576 | 1,169,576 | 0 | 0 | 0 | 1,169,576 | 664,043 | 1,833,619 | |
| 2016 (max) | 1,050,000 | 119,576 | 1,169,576 | 2,600,000 | 1,400,000 | 1,600,000 | 6,769,576 | 664,043 | 7,433,619 | |
| 2015 | 750,000 | 43,786 | 793,786 | 1,461,449 | 786,934 | 800,000 | 3,842,169 | 460,637 | 4,302,806 | |
| Kasper Rorsted 5 (Chairman) (until 4/30/2016) Member of the Management Board from 4/1/2005 to 4/30/2016 |
2016 | 400,000 | 32,173 | 432,173 | 807,894 | 435,020 | 466,667 | 2,141,753 | 306,093 | 2,447,846 |
| 2016 (min) | 400,000 | 32,173 | 432,173 | 0 | 0 | 0 | 432,173 | 306,093 | 738,266 | |
| 2016 (max) | 400,000 | 32,173 | 432,173 | 1,105,000 | 595,000 | 700,000 | 2,832,173 | 306,093 | 3,138,266 | |
| 2015 | 1,200,000 | 79,206 | 1,279,206 | 2,484,464 | 1,337,788 | 1,400,000 | 6,501,458 | 798,237 | 7,299,695 | |
| Jan-Dirk Auris (Adhesive Technologies) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 45,208 | 795,208 | 1,425,695 | 767,682 | 800,000 | 3,788,585 | 458,996 | 4,247,581 |
| 2016 (min) | 750,000 | 45,208 | 795,208 | 0 | 0 | 0 | 795,208 | 458,996 | 1,254,204 | |
| 2016 (max) | 750,000 | 45,208 | 795,208 | 1,950,000 | 1,050,000 | 1,200,000 | 4,995,208 | 458,996 | 5,454,204 | |
| 2015 | 750,000 | 47,361 | 797,361 | 1,461,449 | 786,934 | 800,000 | 3,845,744 | 456,927 | 4,302,671 | |
| Pascal Houdayer (Beauty Care) Member of the Management Board since 3/1/2016 |
2016 | 625,000 | 90,504 | 715,504 | 1,188,079 | 639,735 | 666,667 | 3,209,985 | 379,457 | 3,589,442 |
| 2016 (min) | 625,000 | 90,504 | 715,504 | 0 | 0 | 0 | 715,504 | 379,457 | 1,094,961 | |
| 2016 (max) | 625,000 | 90,504 | 715,504 | 1,625,000 | 875,000 | 1,000,000 | 4,215,504 | 379,457 | 4,594,961 | |
| 2015 | – | – | – | – | – | – | – | – | – | |
| Carsten Knobel (Finance) Member of the Management Board since 7/1/2012 |
2016 | 750,000 | 53,903 | 803,903 | 1,425,695 | 767,682 | 800,000 | 3,797,280 | 459,243 | 4,256,523 |
| 2016 (min) | 750,000 | 53,903 | 803,903 | 0 | 0 | 0 | 803,903 | 459,243 | 1,263,146 | |
| 2016 (max) | 750,000 | 53,903 | 803,903 | 1,950,000 | 1,050,000 | 1,200,000 | 5,003,903 | 459,243 | 5,463,146 | |
| 2015 | 750,000 | 50,806 | 800,806 | 1,461,449 | 786,934 | 800,000 | 3,849,189 | 457,887 | 4,307,076 | |
| Kathrin Menges (Human Resources) Member of the Management Board since 10/1/2011 |
2016 | 750,000 | 36,151 | 786,151 | 1,425,695 | 767,682 | 800,000 | 3,779,528 | 457,533 | 4,237,061 |
| 2016 (min) | 750,000 | 36,151 | 786,151 | 0 | 0 | 0 | 786,151 | 457,533 | 1,243,684 | |
| 2016 (max) | 750,000 | 36,151 | 786,151 | 1,950,000 | 1,050,000 | 1,200,000 | 4,986,151 | 457,533 | 5,443,684 | |
| 2015 | 750,000 | 40,285 | 790,285 | 1,461,449 | 786,934 | 800,000 | 3,838,668 | 455,704 | 4,294,372 | |
| Bruno Piacenza (Laundry & Home Care) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 44,622 | 794,622 | 1,425,695 | 767,682 | 800,000 | 3,787,999 | 456,400 | 4,244,399 |
| 2016 (min) | 750,000 | 44,622 | 794,622 | 0 | 0 | 0 | 794,622 | 456,400 | 1,251,022 | |
| 2016 (max) | 750,000 | 44,622 | 794,622 | 1,950,000 | 1,050,000 | 1,200,000 | 4,994,622 | 456,400 | 5,451,022 | |
| 2015 | 750,000 | 99,033 | 849,033 | 1,461,449 | 786,934 | 800,000 | 3,897,416 | 454,174 | 4,351,590 |
1 Payment amount.
2 Pursuant to DCGK, expected amount based on an average probability scenario (not the actual amount paid out).
3 Target amount pursuant to DCGK, based on a 30-percent increase in adjusted earnings per preferred share within the performance period of three years.
LTI payout for 2016 occurs in 2019; LTI payout for 2015 occurs in 2018.
4 Pursuant to DCGK, service cost determined in accordance with IAS.
5 As contractually agreed, Kasper Rorsted, who left the company at his own request effective April 30, 2016, was paid 1,240,434 euros gross in consideration of his
entitlements under the Short Term Incentive 2016 (pro rata) and a further total amount of 2,266,167 euros gross representing the target amounts of his vested
entitlements under the Long Term Incentive in 2014, 2015 and 2016 (pro rata). In addition, compensation of 413,910 euros gross was paid to Kasper Rorsted for
the period from May 1, 2016, until July 31, 2016, under the contractually agreed non-competition clause (with a term of two years).
46 Combined management report Henkel Annual Report 2016
Pursuant to DCGK, payments / benefits made for the reporting year
to members of the Management Board serving in 2016 16
| 5. Long-term incentive3 | in euros 1. Fixed salary1 2. Other emolu ments 1 Total (1 and 2) 3. Short term variable cash remunera tion2 4. Long term vari able cash remunera tion (share deferral)2 |
Total (1 to 5) 6. Service cost4 Total remu neration pursuant to DCGK (Total of 1 to 6) |
||||||||
| 2014 tranche (term 1/1/2014 – 12/31/2016) |
2013 tranche (term 1/1/2013 – 12/31/2015) |
|||||||||
| Hans Van Bylen (Chairman) (since 5/1/2016) Member of the Management Board since 7/1/2005 |
2016 | 1,050,000 | 119,576 | 1,169,576 | 2,046,007 | 1,101,696 | 249,410 | 4,566,690 | 664,043 | 5,230,733 |
| 2015 | 750,000 | 43,786 | 793,786 | 1,494,121 | 804,527 | 251,081 | 3,343,515 | 460,637 | 3,804,152 | |
| Kasper Rorsted5 (Chairman) (until 4/30/2016) Member of the Management Board from 4/1/2005 to 4/30/2016 |
2016 | 400,000 | 32,173 | 432,173 | 806,282 | 434,152 | 399,500 | 2,072,107 | 306,093 | 2,378,200 |
| 2015 | 1,200,000 | 79,206 | 1,279,206 | 2,418,846 | 1,302,456 | 426,838 | 5,427,346 | 798,237 | 6,225,583 | |
| Jan-Dirk Auris (Adhesive Technologies) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 45,208 | 795,208 | 1,511,755 | 814,022 | 249,410 | 3,370,395 | 458,996 | 3,829,391 |
| 2015 | 750,000 | 47,361 | 797,361 | 1,375,171 | 740,477 | 251,081 | 3,164,090 | 456,927 | 3,621,017 | |
| Pascal Houdayer (Beauty Care) Member of the Management Board since 3/1/2016 |
2016 | 625,000 | 90,504 | 715,504 | 1,192,629 | 642,185 | – | 2,550,319 | 379,457 | 2,929,776 |
| 2015 | – | – | – | – | – | – | – | – | – | |
| Carsten Knobel (Finance) Member of the Management Board since 7/1/2012 |
2016 | 750,000 | 53,903 | 803,903 | 1,563,755 | 842,022 | 249,410 | 3,459,090 | 459,243 | 3,918,333 |
| 2015 | 750,000 | 50,806 | 800,806 | 1,527,921 | 822,727 | 251,081 | 3,402,535 | 457,887 | 3,860,422 | |
| Kathrin Menges (Human Resources) Member of the Management Board since 10/1/2011 |
2016 | 750,000 | 36,151 | 786,151 | 1,459,755 | 786,022 | 249,410 | 3,281,338 | 457,533 | 3,738,871 |
| 2015 | 750,000 | 40,285 | 790,285 | 1,466,821 | 789,827 | 251,081 | 3,298,014 | 455,704 | 3,753,718 | |
| Bruno Piacenza (Laundry & Home Care) Member of the Management Board since 1/1/2011 |
2016 | 750,000 | 44,622 | 794,622 | 1,563,755 | 842,022 | 249,410 | 3,449,809 | 456,400 | 3,906,209 |
| 2015 | 750,000 | 99,033 | 849,033 | 1,527,921 | 822,727 | 251,081 | 3,450,762 | 454,174 | 3,904,936 |
1 Payment amount.
2 Pursuant to DCGK, based on the payment amount of the remuneration components granted for the relevant fiscal year; actual allocation occurs in the following year.
3 Pursuant to DCGK, based on the payment amount of those tranches for which the plan term of three years ended in the relevant fiscal year; actual allocation occurs
in the following year.
4 Pursuant to DCGK, service cost determined in accordance with IAS.
5 As contractually agreed, Kasper Rorsted, who left the company at his own request effective April 30, 2016, was paid 1,240,434 euros gross in consideration of his
entitlements under the Short Term Incentive 2016 (pro rata) and a further total amount of 2,266,167 euros gross representing the target amounts of his vested
entitlements under the Long Term Incentive in 2014, 2015 and 2016 (pro rata). In addition, compensation of 413,910 euros gross was paid to Kasper Rorsted for
the period from May 1, 2016, until July 31, 2016, under the contractually agreed non-competition clause (with a term of two years).
Henkel Annual Report 2016 Combined management report 47
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
2. Remuneration of Henkel Management AG
for assumption of personal liability, and
reimbursement of expenses to same
For assumption of personal liability and management responsibility, Henkel Management AG in its
function as Personally Liable Partner receives an
annual payment of 50,000 euros (= 5 percent of its
capital stock) plus any value-added tax (VAT) due,
said fee being payable irrespective of any profit or
loss made.
Henkel Management AG may also claim reimbursement from or payment by the corporation of all
expenses incurred in connection with the management of the corporation’s business, including the
remuneration and pensions paid to its corporate
management bodies.
3. Remuneration of members of the Supervisory
Board and of the Shareholders’ Committee of
Henkel AG & Co. KGaA
Regulation, structure and amounts
The remuneration for the Supervisory Board and
the Shareholders’ Committee is determined by the
Annual General Meeting; the corresponding provisions are contained in Articles 17 and 33 of the Articles of Association.
Each member of the Supervisory Board and of the
Shareholders’ Committee receives a fixed fee of
70,000 euros and 100,000 euros per year respectively. The Chairs of the Supervisory Board and the
Shareholders’ Committee each receive double this
amount, and the Vice Chair in each case one and a
half times the aforementioned amount.
Members of the Shareholders’ Committee who are
also members of one or more subcommittees of the
Shareholders’ Committee each receive additional
remuneration of 100,000 euros; if they chair one or
more subcommittees, they receive 200,000 euros.
Members of the Supervisory Board who are also
members of one or more committees each receive
additional remuneration of 35,000 euros; if they
chair one or more committees, they receive
70,000 euros. Activity in the Nominations Committee is not remunerated separately.
The higher remuneration allocated to the members
of the Shareholders’ Committee as compared to the
Supervisory Board takes into account that, under the
Articles of Association, the Shareholders’ Committee
participates in the management of the corporation.
48 Combined management report Henkel Annual Report 2016
Other provisions
The members of the Supervisory Board or a committee
receive an attendance fee amounting to 1,000 euros
for each meeting in which they participate. If several
meetings take place on one day, the attendance fee
is only paid once. In addition, the members of the
Supervisory Board and of the Shareholders’ Committee are reimbursed expenses incurred in connection
with their positions. The members of the Supervisory
Board are also reimbursed the value-added tax (VAT)
payable on their total remunerations and reimbursed
expenses.
The corporation maintains directors and officers
insurance for directors and officers of the Henkel
Group. For members of the Supervisory Board and
Shareholders’ Committee there is a deductible
amounting to 10 percent per loss event, subject to
a maximum for the fiscal year of one and a half
times their annual fixed remuneration.
Remuneration of members of the Supervisory
Board and of the Shareholders’ Committee for
fiscal 2016
Total remuneration paid to the members of the
Supervisory Board for the year under review (fixed
fee, attendance fee, remuneration for committee
activity) amounted to 1,572,896 euros plus VAT
(previous year: 1,546,000 euros plus VAT). Of this
amount, fixed fees accounted for 1,222,896 euros,
attendance fees for 85,000 euros, and remuneration
for committee activity (including associated attendance fees) for 265,000 euros.
Total remuneration paid to the members of the
Shareholders’ Committee for the year under review
(fixed fee and remuneration for subcommittee
activity) amounted to 2,350,000 euros (previous
year: 2,350,000 euros). Of this amount, fixed fees
were 1,150,000 euros and remuneration for subcommittee activity 1,200,000 euros.
In the year under review, no compensation or benefits were paid or granted for personally performed
services, including in particular advisory or intermediation services.
The remuneration of the individual members of the
Supervisory Board and of the Shareholders’ Committee, broken down according to the above-mentioned
components, is presented in the tables on the following pages.
Henkel Annual Report 2016 Combined management report 49
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Supervisory Board remuneration 17
| Components of total remuneration | in euros | ||||
| Fixed fee | Attendance fee | Fee for commit tee activity1 |
Total remuneration2 |
||
| Dr. Simone Bagel-Trah 3, Chair |
2016 | 140,000 | 5,000 | 39,000 | 184,000 |
| 2015 | 140,000 | 4,000 | 38,000 | 182,000 | |
| Winfried Zander 3, Vice Chair |
2016 | 105,000 | 5,000 | 39,000 | 149,000 |
| 2015 | 105,000 | 4,000 | 38,000 | 147,000 | |
| Jutta Bernicke | 2016 | 70,000 | 5,000 | – | 75,000 |
| 2015 | 70,000 | 3,000 | – | 73,000 | |
| Dr. Kaspar von Braun | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Boris Canessa (until 4/11/2016) |
2016 | 19,508 | 2,000 | – | 21,508 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Johann-Christoph Frey (since 4/11/2016) |
2016 | 50,492 | 4,000 | – | 54,492 |
| 2015 | – | – | – | – | |
| Ferdinand Groos (until 4/11/2016) |
2016 | 19,508 | 2,000 | – | 21,508 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Béatrice Guillaume-Grabisch (until 3/31/2016) |
2016 | 17,404 | 0 | – | 17,404 |
| 2015 | 70,000 | 2,000 | – | 72,000 | |
| Peter Hausmann 3 | 2016 | 70,000 | 5,000 | 37,000 | 112,000 |
| 2015 | 70,000 | 3,000 | 37,000 | 110,000 | |
| Birgit Helten-Kindlein 3 | 2016 | 70,000 | 5,000 | 39,000 | 114,000 |
| 2015 | 70,000 | 4,000 | 38,000 | 112,000 | |
| Benedikt-Richard Freiherr von Herman (since 4/11/2016) |
2016 | 50,492 | 4,000 | – | 54,492 |
| 2015 | – | – | – | – | |
| Timotheus Höttges (since 4/11/2016) |
2016 | 50,492 | 3,000 | – | 53,492 |
| 2015 | – | – | – | – | |
| Prof. Dr. Michael Kaschke 3 | 2016 | 70,000 | 4,000 | 37,000 | 111,000 |
| 2015 | 70,000 | 3,000 | 38,000 | 111,000 | |
| Barbara Kux | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Mayc Nienhaus | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Andrea Pichottka | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Dr. Martina Seiler | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Prof. Dr. Theo Siegert 3 | 2016 | 70,000 | 5,000 | 74,000 | 149,000 |
| 2015 | 70,000 | 4,000 | 73,000 | 147,000 | |
| Edgar Topsch | 2016 | 70,000 | 6,000 | – | 76,000 |
| 2015 | 70,000 | 4,000 | – | 74,000 | |
| Total | 2016 | 1,222,896 | 85,000 | 265,000 | 1,572,896 |
| 2015 | 1,225,000 | 59,000 | 262,000 | 1,546,000 |
1 Remuneration for service on the Audit Committee, including attendance fee;
there is no separate remuneration payable for service on the Nominations Committee.
2 Figures do not include VAT.
3 Member of the Audit Committee. Audit Committee Chair: Prof. Dr. Theo Siegert.
50 Combined management report Henkel Annual Report 2016
Shareholders’ Committee remuneration 18
| Components of total remuneration | in euros | |||
| Fixed fee | Fee for subcommittee activity |
Total remuneration | ||
| Dr. Simone Bagel-Trah, Chair (Chair Human Resources Subcommittee) |
2016 | 200,000 | 200,000 | 400,000 |
| 2015 | 200,000 | 200,000 | 400,000 | |
| Dr. Christoph Henkel, Vice Chair (Chair Finance Subcommittee) |
2016 | 150,000 | 200,000 | 350,000 |
| 2015 | 150,000 | 200,000 | 350,000 | |
| Prof. Dr. Paul Achleitner (Member Finance Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Boris Canessa (Member HR Subcommittee) (since 4/11/2016) |
2016 | 72,131 | 72,131 | 144,262 |
| 2015 | – | – | – | |
| Johann-Christoph Frey (Member HR Subcommittee) (until 4/11/2016) |
2016 | 27,869 | 27,869 | 55,738 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Stefan Hamelmann (Vice Chair Finance Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Prof. Dr. Ulrich Lehner (Member Finance Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Dr. Dr. Norbert Reithofer (Member Finance Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Konstantin von Unger (Vice Chair HR Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Jean-François van Boxmeer (Member HR Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Werner Wenning (Member HR Subcommittee) |
2016 | 100,000 | 100,000 | 200,000 |
| 2015 | 100,000 | 100,000 | 200,000 | |
| Total | 2016 | 1,150,000 | 1,200,000 | 2,350,000 |
| 2015 | 1,150,000 | 1,200,000 | 2,350,000 |
4. Remuneration of the members of the Supervisory Board of Henkel Management AG
According to Article 14 of the Articles of Association
of Henkel Management AG, the members of the
Supervisory Board of Henkel Management AG are
each entitled to receive annual remuneration of
10,000 euros. However, those members of said
Supervisory Board who are also and simultaneously
members of the Supervisory Board or the Shareholders’ Committee of Henkel AG & Co. KGaA do
not receive this remuneration.
As the Supervisory Board of Henkel Management AG
is only comprised of members who also belong to
the Shareholders’ Committee, no remuneration was
paid in respect of this Supervisory Board in the year
under review.
Henkel Annual Report 2016 Combined management report 51
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Shares and bonds
Henkel shares posted a positive price performance in
2016. The price of Henkel preferred shares increased
by 9.7 percent to 113.25 euros. The gain recorded by
the ordinary shares was even greater. These closed at
98.98 euros, 11.7 percent higher year on year. Over the
course of the year, the DAX rose by 6.9 percent to
11,481 points. The EURO STOXX® Consumer Goods
Index closed at 633 points, down 0.1 percent. Henkel
shares therefore significantly outperformed the DAX
and other shares representing the consumer goods
sector.
Henkel shares largely tracked the overall market in
the course of the year, although their performance in
the third quarter and at the start of the fourth quarter
was much better than their benchmarks. Within this
environment, Henkel preferred shares reached an
all-time high on October 4, 2016, of 122.90 euros. On
the same day, the ordinary shares also recorded their
highest price ever, 105.45 euros. Prices of Henkel
shares initially decreased at the start of the fourth
quarter, as did other shares representing the consumer goods sector, while the DAX lost scarcely any
ground in this environment. Over the course of
December, prices of Henkel shares increased significantly again, as did their benchmarks. The preferred
shares traded at an average premium of 14.8 percent
over the ordinary shares in 2016.
Year on year, the trading volume (Xetra) of preferred
shares declined. Each trading day saw an average of
around 473,000 preferred shares changing hands
(2015: around 571,000). The average volume for our
ordinary shares also decreased to around 89,000
shares per trading day (2015: 104,000). Due to positive share price developments, the market capitalization of our ordinary and preferred shares increased
from 41.4 billion euros to 45.9 billion euros.
Henkel shares remain an attractive investment for
long-term investors. Shareholders who invested the
equivalent of 1,000 euros when Henkel preferred
shares were issued in 1985, and re-invested the dividends received (before tax deduction) in the stock,
had a portfolio value of 37,499 euros at the end of
2016. This represents an increase in value of
3,650 percent or an average yield of 12.3 percent per
year. Over the same period, the DAX provided an
annual yield of 7.7 percent. Over the last five and ten
years, the Henkel preferred share has shown an average yield of 20.5 percent and 11.8 percent per year
respectively, offering a significantly higher return
than the average DAX returns of 14.2 percent and
5.7 percent per year for the same periods.
Key data on Henkel shares 2012 to 2016 19
| in euros | 2012 | 2013 | 2014 | 2015 | 2016 |
| Earnings per share | 4.42 4.44 88.62 103.20 99.26 115.20 76.32 87.75 1.45 1.47 41.4 23.0 18.4 |
4.72 4.74 98.98 113.25 105.45 122.90 77.00 88.95 1.602 1.622 45.9 25.7 20.2 |
|||
| Ordinary share Preferred share Share price at year-end1 Ordinary share Preferred share High for the year 1 Ordinary share Preferred share Low for the year1 Ordinary share Preferred share Dividends Ordinary share Preferred share Market capitalization 1 in bn euros Ordinary shares in bn euros Preferred shares in bn euros |
3.40 | 3.65 | 3.74 | ||
| 3.42 | 3.67 | 3.76 | |||
| 51.93 | 75.64 | 80.44 | |||
| 62.20 | 84.31 | 89.42 | |||
| 52.78 | 75.81 | 80.44 | |||
| 64.61 | 84.48 | 90.45 | |||
| 37.25 | 50.28 | 67.00 | |||
| 44.31 | 59.82 | 72.64 | |||
| 0.93 | 1.20 | 1.29 | |||
| 0.95 | 1.22 | 1.31 | |||
| 24.6 | 34.7 | 36.8 | |||
| 13.5 | 19.7 | 20.9 | |||
| 11.1 | 15.0 | 15.9 |
1 Closing share prices, Xetra trading system.
2 Proposal to shareholders for the Annual General Meeting on April 6, 2017.
+ 9.7 %
+11.7%
increase in Henkel
preferred share
price.
increase in Henkel
ordinary share
price.
€45.9bn
market
capitalization.
52 Combined management report Henkel Annual Report 2016
120
130
80
100
90
110
100
120
140
0
20
40
60
80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Performance of Henkel shares versus market
January through December 2016 20
in euros
Performance of Henkel shares versus market
2007 through 2016 21
in euros
January February March April May June July August September October November December
Henkel preferred share
EURO STOXX® Consumer Goods Index (indexed)
Henkel ordinary share (indexed)
DAX (indexed)
Henkel preferred share
EURO STOXX® Consumer Goods Index (indexed)
Henkel ordinary share (indexed)
DAX (indexed)
Dec. 30, 2016:
113.25 euros
Dec. 30, 2015:
103.20 euros
Dec. 29, 2006:
37.16 euros
Dec. 30, 2016:
113.25 euros
Henkel Annual Report 2016 Combined management report 53
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Henkel represented in all major indices
Henkel shares are traded on the Frankfurt Stock
Exchange, predominantly on the Xetra electronic
trading platform. Henkel is also listed on all regional
stock exchanges in Germany. In the USA, investors
are able to invest in Henkel preferred and ordinary
shares by way of stock ownership certificates
obtained through the Sponsored Level I ADR (American Depositary Receipt) program. The number of
ADRs outstanding for ordinary and preferred shares
at the end of the year was approximately 1.5 million
(2015: 1.7 million).
The international importance of Henkel preferred
shares derives not least from their inclusion in many
leading indices that serve as important indicators for
capital markets, and the benchmarks for fund managers. Particularly noteworthy in this respect are the
MSCI World, STOXX® Europe 600, and FTSE World
Europe indices. Henkel’s inclusion in the Dow Jones
Titans 30 Personal & Household Goods Index makes
it one of the most important corporations in the personal and household goods sector worldwide. As a
DAX stock, Henkel is one of the 30 most significant
exchange-listed companies in Germany.
Share data 22
| Preferred shares | Ordinary shares | |
| Security code no. | 604843 | 604840 |
| ISIN code | DE0006048432 | DE0006048408 |
| Stock exch. symbol | HEN3.ETR | HEN.ETR |
| Number of shares | 178,162,875 | 259,795,875 |
ADR data 23
| Preferred shares | Ordinary shares | |
| CUSIP | 42550U208 | 42550U109 |
| ISIN code | US42550U2087 | US42550U1097 |
| ADR symbol | HENOY | HENKY |
Once again our advances and achievements in sustainable management earned recognition from external experts in 2016. Henkel’s standing was confirmed
in a variety of national and international sustainability ratings and indices. Henkel has been represented
in the ethics index FTSE4Good since 2001, and in the
STOXX® Global ESG Leaders index family since its
launch by Deutsche Börse in 2011. Our membership
in the Ethibel Pioneer Investment Register and the
sustainability indices Euronext Vigeo World 120,
Europe 120, and Eurozone 120 was also confirmed, as
was our membership in the MSCI Global Sustainability Index series. Henkel is also included in the Dow
Jones Sustainability Index World, and in the Global
Challenges Index as one of only 50 companies
worldwide.
At year-end 2016, the market capitalization of the preferred shares included in the DAX index was 20.2 billion euros. Henkel thus again ranked 18th, or 22nd in
terms of trading volume (2015: 23rd). Our DAX weighting increased to 2.10 percent (2015: 2.05 percent)
International shareholder structure
Our preferred shares are the significantly more liquid class of Henkel stock. Apart from the treasury
shares, they are entirely in free float. A large majority
are owned by institutional investors whose portfolios are usually broadly distributed internationally.
According to notices received by the company, members of the Henkel family share-pooling agreement
owned a majority of the ordinary shares amounting
to 61.02 percent as of December 17, 2015. We have
received no other notices indicating that a shareholder holds more than 3 percent of the voting rights
(notifiable ownership). As of December 31, 2016, treasury stock amounted to 3.7 million shares.
of voting rights are
held by members
of the Henkel family share-pooling
agreement.
61.02%
France 8 %
Germany 10 %
Shareholder structure:
Institutional investors holding Henkel shares 24
USA 31 %
At November 30, 2016
Source: Nasdaq.
Rest of
Europe 17 %
Rest of world 11 %
UK 23%
54 Combined management report Henkel Annual Report 2016
Employee share program
Since 2001, Henkel has offered an employee share
program (ESP). For each euro invested in 2016 by an
employee (limited to 4 percent of salary up to a maximum of 4,992 euros per year), Henkel added 33 eurocents. Around 11,500 employees in 53 countries purchased Henkel preferred shares under this program
in 2016. At year-end, some 14,800 employees held a
total of around 2.5 million shares, representing
approximately 1.4 percent of total preferred shares
outstanding. The lock-up period for newly acquired
ESP shares is three years.
Investing in Henkel shares through participation in
our share program has proven to be very beneficial
for our employees in the past. Employees who
invested 100 euros each month in Henkel shares
since the program was first launched, and waived
interim payouts, held portfolios valued at 92,866
euros at the end of 2016. This represents an increase
in value of around 416 percent or an average yield of
around 12.4 percent per year.
Henkel bonds
Henkel successfully issued four fixed-rate bonds in
three different currencies with a total volume of
2.2 billion euros in 2016. One of the bonds with a
volume of 500 million euros has a term of two years,
and a coupon rate of 0 percent per year with a negative yield of –0.05 percent. A second bond with a volume of 700 million euros has a term of five years.
Both its coupon rate and yield are 0 percent per year.
A further eurodollar bond with a volume of 750 million
US dollars was placed with a coupon rate of 1.5 percent
per year and a term of three years, together with a
300 million British pound bond issue with a term of
six years and a coupon rate of 0.875 percent per year.
The bonds are being used to refinance the short-term
bank loan for acquiring The Sun Products Corporation.
The bonds were oversubscribed to a considerable
extent and aroused great interest among international
investors.
Further information can be found on the website:
www.henkel.com/creditor-relations
Bond data 25
| Tranche 1 | Tranche 2 | Tranche 3 | Tranche 4 | |
| Currency | EUR | EUR | USD | GBP |
| Volume | 500 million | 700 million | 750 million | 300 million |
| Coupon | 0 % p. a. | 0 % p. a. | 1.5 % p. a. | 0.875 % p. a. |
| Maturity | 9/13/2018 | 9/13/2021 | 9/13/2019 | 9/13/2022 |
| Issue price | 100.10 % | 100 % | 99.85 % | 99.59 % |
| Issue yield | – 0.05 % p. a. | 0 % p. a. | 1.55 % | 0.95 % |
| Interest calculation | Act/Act (ISMA) | Act/Act (ISMA) | 30/360 (ISMA) | Act/Act (ISMA) |
| Denomination | 1,000 EUR | 1,000 EUR | 2,000 USD | 1,000 GBP |
| Sec. code no. | A2BPAW | A2BPAX | A2BPAY | A2BPAZ |
| ISIN | XS1488370740 | XS1488418960 | XS1488419695 | XS1488419935 |
| Listing | Regulated Market of the Luxembourg Stock Exchange |
Henkel Annual Report 2016 Combined management report 55
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Pro-active capital market communication
Henkel is covered by numerous financial analysts at
an international level. Around 25 equity and debt
analysts regularly publish reports and commentaries
on the current performance of the company.
Henkel places great importance on dialog with investors and analysts. At 21 capital market conferences
and roadshows held in Europe and North America,
institutional investors and financial analysts had an
opportunity to engage with the company and, in
many instances, directly with senior management.
We also conducted regular telephone conferences
and numerous one-on-one meetings.
One highlight was our Investor and Analyst Day for
the Adhesive Technologies business unit, held on
June 6 and 7, 2016. Under the theme “Lead to Outperform,” the business unit provided information about
its strategy and financial performance, and also spotlighted its engineering and commercial potential at
its facility in Heidelberg.
Retail investors can obtain all relevant information
on request or via the Investor Relations website at
www.henkel.com/ir. This also serves as the portal for
the live broadcast of telephone conferences and parts
of the Annual General Meeting (AGM). The AGM
offers all shareholders the opportunity to obtain
extensive information about the company directly.
The quality of our capital market communication
was again evaluated in 2016 by various independent
rankings. Once again, our Investor Relations team
gained leading positions compared to other European corporations in the Home & Personal Care sector and other DAX companies, including third place
in the Household Products & Personal Care sector in
the Extel 2016 Awards. In the Institutional Investor
ranking, Henkel was chosen by financial analysts as
having the best Investor Relations team in the European Household & Personal Care Products sector.
The quality of our communication and our performance with respect to non-financial indicators
(environmental, social and governance themes) was
reflected in regular positive assessments by various
rating agencies and further confirmed by our inclusion in major sustainability indices as described
above.
A financial calendar with all important dates is provided on the inside back cover of this Annual Report.
Sell 4 %
Analyst recommendations 26
At December 31, 2016
Basis: 27 equity analysts.
Buy 48 %
Hold 48 %
56 Combined management report Henkel Annual Report 2016
Fundamental principles
of the Group
Operational activities
Overview
Henkel was founded in 1876. Therefore, the year
under review marks the 140th in our corporate history. Today, Henkel employs around 51,350 people
worldwide, and we occupy globally leading market
positions in our consumer and industrial businesses.
Our purpose is to create sustainable value – for our
customers and consumers, for our people, for our
shareholders, as well as for the wider society and
communities in which we operate.
Organization and business units
Henkel AG & Co. KGaA is operationally active as well
as being the parent company of the Henkel Group. As
such it is responsible for defining and pursuing
Henkel’s corporate objectives and also for the management, control and monitoring of Group-wide
activities, including risk management and the allocation of resources. Henkel AG & Co. KGaA performs
its tasks within the legal scope afforded to it as part
of the Henkel Group, with the affiliated companies
otherwise operating as legally independent entities.
Operational management and control is the responsibility of the Management Board of Henkel Management AG in its function as sole Personally Liable
Partner. The Management Board is supported in this
by the corporate functions.
Henkel is organized into three business units: Adhesive
Technologies, Beauty Care and Laundry & Home Care.
The Adhesive Technologies business unit provides
customer-specific solutions worldwide with adhesives, sealants and functional coatings in two business areas: Industry, and Consumers, Craftsmen and
Building. The portfolio of the Beauty Care business
unit encompasses hair cosmetics, products for body,
skin and oral care, and products for the hair salon
business. Our product range in the Laundry & Home
Care business unit comprises primarily heavy-duty
and specialty detergents, and dishwashing and
cleaning products. We also offer air fresheners and
insect control products for household applications.
Henkel leads the global market in the field of Adhesive Technologies. In our consumer businesses, we
also hold top positions in numerous markets and
categories.
Adhesive Technologies, Beauty Care and Laundry &
Home Care are managed on the basis of globally
responsible strategic business units. These are supported by the corporate functions of Henkel AG & Co.
KGaA, our shared services, and our globally integrated supply chain organization in order to ensure
optimum utilization of corporate network synergies.
Implementation of the strategies at the country and
regional level is the responsibility of the national
affiliated companies whose operations are supported
and coordinated by regional centers. The executive
bodies of these national affiliates manage their businesses in line with the relevant statutory regulations,
supplemented by their own articles of association,
Year of foundation.
1876
Henkel around the world: Regional Centers 27
Scottsdale,
Arizona, USA
Regional Center
Rocky Hill,
Connecticut, USA
Regional Center
São Paulo, Brazil
Regional Center
Dubai, United
Arab Emirates
Regional Center
Shanghai, China
Regional Center
Vienna, Austria
Regional Center
Düsseldorf, Germany
Global Headquarters
Mexico City, Mexico
Regional Center
Henkel Annual Report 2016 Combined management report 57
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
internal procedural rules and the principles incorporated in our globally applicable management standards, codes and guidelines.
Strategy and financial targets 2016
The past four years have been very successful for
Henkel. This success was founded on our strategy
and financial targets for 2013 through 2016, which we
consistently advanced under challenging conditions.
Over the four-year strategy cycle from 2013 through
2016, Henkel continuously increased its organic
sales, growing by 3.3 percent on average. Emerging
markets contributed to this solid performance with
organic growth of 7.2 percent on average. Due to
negative foreign exchange effects, however, we did
not fully meet our absolute sales targets for 2016.
Over the course of the strategy cycle, adjusted earnings per preferred share developed very well, growing by an annual average (CAGR) of 9.7 percent.
Despite the difficult environment, we thus nearly
achieved our target of 10 percent.
Achievement of financial targets 2016 28
| Target | Achieve ment |
|
| Sales in bn euros | 20.0 | 18.7 |
| Sales in emerging markets in bn euros | 10.0 | 7.8 |
| Average annual growth in adjusted earnings per preferred share 1 |
10 % | 9.7 % |
1 Compound annual growth rate/CAGR 2012 – 2016.
The implementation of our four strategic priorities –
Outperform, Globalize, Simplify, Inspire – has enabled
us to successfully move the corporation forward and
to strengthen our position in the global competitive
and market environment.
Our “Outperform” priority focused on leveraging
the growth potential in our product categories even
further. One key objective in this respect was to
strengthen our 10 top brands, which we achieved by
increasing their share of sales from 44 percent in
2012 to 61 percent in 2016.
In pursuing our “Globalize” priority, we drove the
further globalization of the corporation and grasped
opportunities for growth in both emerging and
mature markets. Above-average organic sales growth
has enabled us to expand our position in emerging
markets. In addition, we have strengthened our
portfolio worldwide through attractive acquisitions
(for details of acquisitions in 2016, please refer to
table 29 below). Our most important acquisition was
The Sun Products Corporation, which elevated Henkel
to 2nd place in the North American laundry market.
As part of our priority “Simplify,” we significantly
improved our operational excellence, enabling us to
effectively respond to the increasing speed and persisting volatility of our markets. We have successfully expanded our shared service centers, with more
than 3,000 employees now working at seven sites.
We are also integrating our production, logistics and
purchasing activities across all business units in one
integrated Global Supply Chain organization.
We advanced the development of our global team
through our “Inspire” priority: by strengthening our
leadership team and encouraging high potentials,
and through our clear performance orientation and
greater diversity in all areas of the corporation.
Within our globally standardized system of annual
management assessment, we are increasingly aligning career plans to individual interests.
Acquisitions signed and closed in fiscal 2016 29
| Business | Key brands | Key countries |
Contract signed on |
Comple tion on |
Annual sales in million euros |
Purchase price1 in million euros |
For further information, see pages |
| 57.5 % of the shares in Expand Global Industries UK Ltd. (Detergents) |
Waw, Nittol | Nigeria | 5/31/2016 | 5/31/2016 | ~ 50 | 110 | 69, 80, 123 – 126 |
| Hair care business in Africa/Middle East & Eastern Europe |
Pert, Shamtu, Blendax |
Russia/ Saudi Ara bia/Turkey |
3/2/2016 | 6/1/2016 | ~ 75 | 212 | 69, 93, 123 – 126 |
| Tile adhesive business in Colombia |
Alfalisto, Pegalisto |
Colombia | 4/4/2016 | 6/30/2016 | ~ 10 | 17 | 69, 90, 91, 123 – 126 |
| Detergent business in Iran | Tage | Iran | 4/30/2016 | 8/21/2016 | ~ 70 | 1412 | 69, 80, 123 – 126 |
| The Sun Products Corporation | All, Sun, Snuggle | USA, Canada | 6/24/2016 | 9/1/2016 | ~ 1,450 | ~ 3,200 | 69, 80, 97, 123 – 126 |
1 Excluding contingent purchase price components.
2 Provisional purchase price.
+9.7%
average annual
growth in adjusted
earnings per preferred share (CAGR
2012–2016).
58 Combined management report Henkel Annual Report 2016
Henkel 2020+ – our ambition and strategic
priorities
Henkel has defined four strategic priorities to continue its sustainable profitable growth through to
2020 and beyond: drive growth, accelerate digitalization, increase agility and fund growth. Our balanced
and broadly diversified portfolio with strong brands,
innovative technologies and leading positions in
attractive markets and categories provides a strong
foundation. Our passionate global team is united in
a strong corporate culture with shared values.
Building on its strong foundation, Henkel intends
to continue its path of profitable growth. On November 17, 2016, we presented the ambition and strategic
priorities that will drive the company through to
2020 and beyond.
Our ambition
We have defined our ambition in a very volatile market environment characterized by increasing globalization, accelerating digitalization, rapidly changing
markets, and an increasing relevance of resource
scarcity and social responsibility.
We want to become more customer-focused and
make the company even more innovative, agile and
digital, in both our internal processes and our customer-facing activities. In addition, we are aiming
to further promote sustainability in all our business
activities.
Henkel has defined the following financial ambition
for the period until 2020:
• We are aiming to achieve organic sales growth of
2 to 4 percent on average over the next four years.
• For adjusted earnings per preferred share, we are
targeting a compound annual growth rate (CAGR)
of 7 to 9 percent. This ambition for EPS growth
includes the impact of currency developments,
and minor and mid-sized acquisitions. It excludes
major acquisitions as well as share buy-backs.
• We are aiming for continued improvement in
adjusted EBIT margin. In addition, we will maintain our focus on free cash flow expansion.
Financial ambition 2020 30
| Organic growth | 2 – 4 % (average 2017–2020) |
| Adjusted EPS growth | 7 – 9 % (CAGR1 2016–2020, per preferred share) |
| Adjusted EBIT margin | Continued improvement in adjusted EBIT margin |
| Free cash flow | Continued focus on free cash flow expansion |
1 Compound annual growth rate.
Drive
Growth
Accelerate
Digitalization
Increase
Agility
Fund
Growth
Henkel Annual Report 2016 Combined management report 59
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Alongside organic growth, acquisitions will continue
to be an integral part of our strategy. Our assessment
of potential acquisitions is based on whether the
targets are available, fit Henkel’s strategy, and are
financially attractive. The focus in the Adhesive
Technologies business unit is on expanding technology leadership, whereas in the Beauty Care and
Laundry & Home Care business units, we will be
striving to strengthen our categories.
Strategic priorities in summary
Drive growth
Driving growth in mature and emerging markets
will be a key strategic priority for Henkel. In order
to achieve this, we will focus on targeted initiatives
to create superior customer and consumer engagement, strengthen our leading brands and technologies, develop exciting innovations and services, and
capture new sources of growth.
Accelerate digitalization
Accelerating digitalization will help us to successfully
grow our business, strengthen the relationships with
our customers and consumers, optimize our processes
and transform the entire company. By 2020, we will
implement a range of initiatives to drive our digital
business, leverage Industry 4.0, and eTransform the
organization.
Increase agility
In a highly volatile and dynamic business environment,
increasing the agility of the organization will be a
critical success factor for Henkel in the future. This
will require energized and empowered teams, fastest
time-to-market as well as smart and simplified
processes.
Fund growth
In order to fund growth, we will implement new
approaches to optimize resource allocation, focus
on net revenue management, further increase efficiency in our structures, and continue to expand
our Global Supply Chain organization. Together, these
initiatives will contribute to further improving profitability and enable us to fund our growth ambitions
for 2020 and beyond.
Sustainability strategy
Sustainability as one of our corporate values
Our commitment to leadership in sustainability is
anchored in our corporate values. We want to create
more value – for our customers and consumers, for
the communities we operate in, and for our company
– while, at the same time, reducing our environmental footprint. We aim to pioneer new solutions for
sustainable development while continuing to shape
our business responsibly and increasing our economic success. Our sustainability strategy provides
a clear framework for this aim and reflects the high
expectations of our stakeholders.
Our focal areas
We are concentrating our activities on six focal areas
that reflect the key challenges of sustainable development as they relate to our operations. Three of
them describe how we want to deliver more value –
for our customers and consumers, our shareholders
and our company – for example, by enhancing occupational health and safety, and encouraging social
progress. The three other focal areas describe the
ways in which we want to reduce our environmental
footprint, for instance through reduced water and
energy use and less waste.
Key drivers for the coming years
We are convinced that our focus on sustainability is
more important than ever before, and that it supports our growth, improves our cost efficiency, and
reduces risks. We already have a strong foundation
on which to build, and can demonstrate a successful
track record. To reflect the growing importance of
sustainability for our stakeholders and our long-term
economic success, we defined three key drivers in
2016 that will help us to advance sustainability at
Henkel over the coming years.
Strengthen foundation
In order to reconcile people’s desire to live well with
the resource limits of the planet, and to allow us to
build on our economic success, we will have to significantly improve our efficiency. In light of the
global challenges of sustainable development,
Henkel has set itself a long-term goal: Taking 2010
as the base year, our aim by 2030 is to triple the value
we create through our business operations in relation to the environmental footprint of our products
and services. We call this goal “Factor 3.”
To reach this goal by 2030, we will have to improve
our efficiency by an average of 5 to 6 percent each
year. We managed to meet and even exceed some of
the interim targets for the first five years through to
60 Combined management report Henkel Annual Report 2016
F A C T O R
Social
Progress
Performance
Deliver more value
at a reduced
footprint
Safety and
Health
Energy and
Climate
Materials
and Waste
Water and
Wastewater
2015. On the road to our long-term goal of “Factor 3,”
we intend to improve our performance in these areas
still further over the coming years. To this end, we
have defined medium-term targets through to 2020
(see chart below). For the period up to 2020, we
intend to improve the relationship between the value
we create and our environmental footprint by 75 percent overall, taking 2010 as the base year.
At the same time, we are going to further improve
our reporting and measurement systems to enable
an integrated approach to assessing and managing
progress toward our 20-year target for 2030 across
our entire company and value chain. Our ongoing
dialog with stakeholders and experts, as well as performance benchmarking, are part of the underlying
basis of our work.
Boost engagement
When it comes to implementing our sustainability
strategy, our people play a key role – through their
dedication, skills and knowledge. They make their
own contributions to sustainable development, both
in their daily business lives and as members of society. They interface with our customers and drive
innovation – and give Henkel its unique identity.
This is why we have set ourselves the goal of engaging all of our employees as sustainability ambassadors. The program was launched in 2012 to encourage our employees to become even more involved in
the issue of sustainability. Since then, Henkel has
trained more than 10,000 sustainability ambassadors in 79 countries. At the same time, we want to
encourage our people to make a contribution as
ambassadors at our sites, as well as by engaging with
our customers, in schools and in our communities.
Maximize impact
We want to strengthen our contribution toward overcoming major global challenges, and to maximize
the impact we can achieve through our operations,
our brands, and our technologies.
In light of the Paris agreement on climate change
from December 2015 and the clear need to reduce
emissions, Henkel is striving to become a climatepositive company. As a first step, we are aiming – by
2030 – to reduce the CO2 footprint of our production
by 75 percent, and to help our customers and consumers save 50 million metric tons of CO2 by 2020.
Equally, Henkel is striving to encourage social progress and work with partners to create shared value
Achieved 20161 Targets 2020 1
+42 % +75 %
overall efficiency
more net sales per ton of product
+8 % +22 %
safer per million hours worked
+17 % +40 %
less water per ton of product
–23 % –30 %
less waste per ton of product
–26%2 –30%
less energy / CO2 emissions
per ton of product
–22 % –30 %
More details and background reading on the
subject of sustainability
can be found in our
Sustainability Report on
the internet.
www.henkel.com/
sustainabilityreport
Our focal areas and targets 31
1 Compared to 2010 as the base year.
2 Waste generated by our production sites, excluding construction and demolition waste.
Sustainability Report
2016
Henkel Annual Report 2016 Combined management report 61
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
along the entire value chain. This includes improving income opportunities, chances for development
for girls and women, and labor standards for the
workforce in our supply chains.
Our brands and technologies are used a million
times over, every day, in households and industrial
processes. For this reason, we want to expand their
contributions to sustainability by focusing more
strongly on pioneering innovations and engaging
our customers and consumers.
8.25%
Group WACC
before tax in fiscal
2016.
comparison of these plans with current developments and expected figures enables focused management of the company based on the described performance indicators.
Moreover, we report further key performance indicators, such as net working capital as a percentage of
sales, return on capital employed (ROCE) and free cash
flow, which we are aiming to further expand, as
described in our financial ambition for 2020.
Cost of capital
The cost of capital is calculated as a weighted average
of the cost of equity and debt capital (WACC).
We regularly review our cost of capital in order to
reflect changing market conditions. In addition, we
apply different WACC rates depending on the business unit involved. These are based on business
unit-specific beta factors determined from a peer
group benchmark.
The following two tables indicate the WACC rates
before and after tax for the Henkel Group and each
business unit.
WACC before tax by business unit 32
| 2016 | 2017 | |
| Adhesive Technologies | 10.75% | 10.25 % |
| Beauty Care | 9.00 % | 9.00 % |
| Laundry & Home Care | 9.00 % | 9.00 % |
| Henkel Group | 8.25% | 7.75 % |
WACC after tax by business unit 33
| 2016 | 2017 | |
| Adhesive Technologies | 7.50 % | 7.00 % |
| Beauty Care | 6.25 % | 6.25 % |
| Laundry & Home Care | 6.25 % | 6.25 % |
| Henkel Group | 5.75% | 5.50 % |
Management system and performance
indicators
Henkel plans to continue generating sustainable profitable growth to 2020 and beyond. To this end, we
have defined four strategic priorities: drive growth,
accelerate digitalization, increase agility and fund
growth. To enable efficient management of the
Group, we align our actions to these strategic priorities and have translated them into strategy plans for
our three business units Adhesive Technologies,
Beauty Care and Laundry & Home Care, and their
respective business areas.
Our management system and key performance indicators are derived from our ambition to continue
generating sustainable profitable growth. The key
performance indicators are organic sales growth,
adjusted return on sales development, and growth in
adjusted earnings per preferred share.
Over the coming four years, Henkel is aiming to
achieve organic sales growth of 2 to 4 percent on
average. For adjusted earnings per preferred share,
Henkel is targeting a compound annual growth rate
(CAGR) of 7 to 9 percent. We are also aiming for a continued improvement of the adjusted EBIT margin.
The key performance indicators are represented in
both the year and the medium-term plans. A regular
62 Combined management report Henkel Annual Report 2016
Inflation:
significant rise in global price levels
Global inflation was approximately 5 percent and
thus higher year on year. Consumer prices increased
by around 11 percent in the emerging markets, with
only a slight rise being registered in the mature
markets. The overall trend differed by region and
country. Inflation rose slightly in Western Europe –
including Germany – and in North America, but
decreased slightly in Japan. Prices rose moderately in
Asia, and significantly in Eastern Europe and Africa/
Middle East. In Latin America, inflation was well into
the double digits, due to developments in Venezuela.
Direct materials:
slightly below prior-year level
In 2016, prices for direct materials (raw materials,
packaging, and purchased goods and services) were
slightly below the level of the prior year. This development was driven by lower prices for relevant input
materials, particularly crude oil. In contrast, the price
of palm kernel oil increased significantly in 2016 versus prior year. In our expectations for 2016, we had
assumed that prices for direct materials would be more
or less on a par with the prior-year level.
Currencies:
devaluation in emerging markets
Currencies in the emerging markets of relevance to
Henkel trended downward on average for the year, as
expected. The US dollar remained relatively stable
over the first nine months of the year, before appreciating toward the end of the fourth quarter. It
closed at 1.05 US dollars to the euro at year-end. On
average for the year as a whole, the US dollar
remained stable against the euro, as expected.
Changes in the exchange rates of the currencies of relevance to Henkel are indicated in the following table:
Average rates of exchange versus the euro 34
| 2015 | 2016 | |
| Chinese yuan | 6.97 | 7.36 |
| Mexican peso | 17.61 | 20.67 |
| Polish zloty | 4.18 | 4.36 |
| Russian ruble | 68.05 | 74.07 |
| Turkish lira | 3.02 | 3.34 |
| US dollar | 1.11 | 1.11 |
Source: ECB daily foreign exchange reference rates.
Economic report
Macroeconomic and industry-related
conditions
The general economic conditions described here are
based on data published by IHS Global Insight.
Overview:
moderate growth under persistently difficult
underlying conditions
In 2016, the global economy achieved only moderate
growth. Gross domestic product expanded by
approximately 2.5 percent worldwide. The mature
markets grew by approximately 1.5 percent, while
the emerging markets achieved an increase of
approximately 4 percent.
Industry and consumption:
expansion at prior-year level
In 2016, private consumption increased by approximately 2.5 percent, while industrial production
expanded by around 2 percent. Growth was stronger
in export-dependent industries in particular and
more subdued in consumer-related sectors.
Regions:
emerging markets at prior-year level
Over the year as a whole, the North American economy
grew by 1.5 percent. Western Europe showed moderate
growth of around 2 percent, while the economy in
Japan exhibited weaker growth of approximately
1 percent. Economic growth in Asia (excluding Japan)
was approximately 5.5 percent, with China coming in
slightly higher. The Africa/Middle East region recorded
growth of approximately 2.5 percent. Growth in Eastern Europe was only moderate, at around 1 percent,
impacted by the persisting difficult conditions in
Russia. Economic performance in Latin America was
negative, declining by around 1 percent.
Unemployment:
global level unchanged year on year
Global unemployment was on a par with the prior
year at around 7 percent. The unemployment rates in
North America and Western Europe improved slightly
year on year, coming in at approximately 5 percent
and around 9 percent respectively. At approximately
6 percent, the unemployment rate in Germany was
slightly lower than in the previous year. In Latin
America, it rose to approximately 8.5 percent. The
unemployment rate in Eastern Europe, Africa/Middle
East and Asia (excluding Japan) declined slightly year
on year.
Henkel Annual Report 2016 Combined management report 63
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Development by sector:
moderate rise in global consumption
Private consumer spending grew moderately at a rate
of approximately 2.5 percent. Consumer spending in
mature markets increased by approximately 2 percent year on year. Consumers in North America
increased their spending by around 3 percent. In
Western Europe, consumer spending grew by
approximately 2 percent compared to the previous
year. Consumers in emerging markets spent around
3 percent more.
Industrial production increase at prior year level
Industrial production grew by around 2 percent in
2016 and was thus more or less on a par with the previous year.
A particularly important customer sector for Henkel,
the transport industry, saw production expand by
around 3 percent. Output in the electronics sector
rose by around 4 percent and in the metal industry
by around 2 percent. Growth was subdued in consumer-related sectors, such as the global packaging
industry which recorded an increase of around 1 percent. The construction industry grew by approximately 3 percent.
Developments in industrial production differed from
one region to the next. Manufacturing increased in
North America and Western Europe by approximately 1 percent. At approximately 4 percent, growth
in industrial production in the emerging markets
was slightly higher year on year. Industrial production increased by approximately 3 percent in Africa/
Middle East and by approximately 5 percent in Asia
(excluding Japan), while continuing to decline in
Latin America. Eastern Europe recorded an increase
of around 2 percent in industrial production.
showed strong organic growth, with sales increasing
by 6.8 percent. Organic sales growth in the mature
markets was positive.
We increased adjusted ¹ gross margin by 0.1 percentage points to 48.4 percent. Savings from cost reduction measures and efficiency improvements, selective price increases and slightly lower prices for
direct materials (raw materials, packaging, and purchased goods and services) more than offset the negative impact of foreign exchange rate movements
and acquisition effects.
As a result of our cost discipline and the adjustment
of our structures to our markets and customers,
we were able to further improve our profitability
once again year on year. Adjusted return on sales
increased by 0.7 percentage points in 2016, reaching
a new all-time high of 16.9 percent (2015: 16.2 percent).
Adjusted earnings per preferred share grew to
5.36 euros, a significant increase of 9.8 percent over
the 2015 figure of 4.88 euros.
We were able to improve net working capital as a
percentage of sales by 0.3 percentage points to
3.5 percent.
We generated free cash flow of 2,205 million euros.
We closed the year with a net financial position of
–2,301 million euros (2015: 335 million euros).
Results of operations
Sales and profits
Sales in fiscal 2016 increased year on year to 18,714 million euros. The development of currency movements had a negative effect on sales of 3.6 percent.
Adjusted for foreign exchange effects, sales grew by
7.1 percent. Acquisitions/divestments contributed to
this performance with a 4.0-percent increase in
sales, mainly as a result of our purchase of The Sun
Products Corporation.
With growth of 3.1 percent, organic sales, i.e. sales
adjusted for foreign exchange and acquisitions/
divestments, showed a solid increase. This was
mainly driven by volume.
+3.1%
organic sales
growth.
1 Adjusted for one-time charges/gains and restructuring expenses.
Review of overall business performance
In a challenging economic environment, Henkel
continued the success of the previous year with a
solid business performance and increased sales to
18,714 million euros.
Organically we achieved a sales increase of 3.1 percent. Our businesses in the emerging markets
64 Combined management report Henkel Annual Report 2016
| 2012 2013 2014 2015 2016 |
16,355 16,428 18,089 18,714 16,510 |
0 5,000 10,000 15,000 20,000
Sales 37
in million euros
Price and volume effects 38
| in percent | Organic sales growth |
of which price |
of which volume |
| Adhesive Technologies |
2.8 | ||
| 0.3 2.5 | |||
| Beauty Care | 2.1 | 0.4 | 1.7 |
| Laundry & Home Care |
4.7 | 0.0 | 4.7 |
| Henkel Group | 3.1 | 0.2 | 2.9 |
In a market environment that continues to be highly
competitive, sales in the Western Europe region, at
5,999 million euros, were slightly down year on year.
Organic sales were on a par with the previous year.
The positive performance in Southern Europe did not
entirely compensate for the decline in Germany and
France. The share of sales from the region decreased
to 32 percent.
We were able to increase sales in Eastern Europe by
0.7 percent to 2,713 million euros. Organically, sales
grew by 7.0 percent. This very strong organic sales
growth was primarily driven by the performance of
our businesses in Russia and Turkey. The share of
sales from the region remained unchanged at
15 percent.
Our sales in the Africa/Middle East region increased
nominally by 3.7 percent to 1,378 million euros.
Despite the political and social unrest in some countries, we were able to grow organic sales by 5.6 percent. The share of sales from the region remained
unchanged at 7 percent.
We achieved a solid increase in organic sales in each
of our business units. Organic sales grew by 2.8 percent in the Adhesive Technologies business unit, by
2.1 percent in Beauty Care, and by 4.7 percent in
Laundry & Home Care.
Key financials by region 1 35
| in million euros | Western Europe |
Eastern Europe |
Africa/ Middle East |
North America |
Latin America |
Asia Pacific |
Total Regions |
Corporate | Henkel Group |
| Sales 2 2016 | 5,999 | 2,713 | 1,378 | 4,202 | 1,055 | 3,246 | 18,593 | 121 | 18,714 |
| Sales 2 2015 | 6,045 | 2,695 | 1,329 | 3,648 | 1,110 | 3,134 | 17,961 | 128 | 18,089 |
| Change from previous year | – 0.8 % | 0.7 % | 3.7 % | 15.2 % | – 5.0 % | 3.6 % | 3.5% | – | 3.5% |
| Adjusted for foreign exchange | 0.1 % | 7.4 % | 12.2 % | 15.2 % | 15.9 % | 6.0 % | 7.2% | – | 7.1% |
| Organic | – 0.1 % | 7.0 % | 5.6 % | 1.7 % | 13.8 % | 3.2 % | 3.2% | – | 3.1% |
| Proportion of Group sales 2016 | 32 % | 15 % | 7% | 22% | 6% | 17% | 99 % | 1% | 100 % |
| Proportion of Group sales 2015 | 34 % | 15 % | 7 % | 20 % | 6 % | 17 % | 99% | 1 % | 100 % |
| Operating profit (EBIT) 2016 | 1,335 | 328 | 111 | 505 | 126 | 485 | 2,890 | –115 | 2,775 |
| Operating profit (EBIT) 2015 | 1,223 | 356 | 141 | 544 | 110 | 434 | 2,809 | – 164 | 2,645 |
| Change from previous year | 9.2 % | – 7.9 % | – 21.2 % | – 7.1 % | 14.2 % | 11.5 % | 2.9% | – | 4.9% |
| Adjusted for foreign exchange | 9.9 % | – 0.8 % | – 14.0 % | – 7.1 % | 66.9 % | 15.0 % | 7.1% | – | 8.2% |
| Return on sales (EBIT) 2016 | 22.3 % | 12.1 % | 8.1 % | 12.0 % | 11.9% | 14.9 % | 15.5% | – | 14.8% |
| Return on sales (EBIT) 2015 | 20.2 % | 13.2 % | 10.6 % | 14.9 % | 9.9 % | 13.9 % | 15.6% | – | 14.6% |
1 Calculated on the basis of units of 1,000 euros.
2 By location of company.
Sales development 1 36
| in percent | 2016 |
| Change versus previous year | 3.5 |
| Foreign exchange | –3.6 |
| Adjusted for foreign exchange | 7.1 |
| Acquisitions/divestments | 4.0 |
| Organic | 3.1 |
| of which price | 0.2 |
| of which volume | 2.9 |
1 Calculated on the basis of units of 1,000 euros.
Henkel Annual Report 2016 Combined management report 65
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
The following explanations relate to results adjusted
for one-time charges/gains and restructuring
expenses, in order to provide a more transparent presentation of operational performance.
Adjusted operating profit (EBIT) 39
| in million euros | 2015 | 2016 | +/– |
| EBIT (as reported) | 2,645 | 2,775 | 4.9% |
| One-time gains | – 15 | – 1 | |
| One-time charges | 100 | 121 | |
| Restructuring expenses |
193 | 277 | |
| Adjusted EBIT | 2,923 | 3,172 | 8.5% |
We were able to increase adjusted operating profit
(adjusted EBIT) to 3,172 million euros, a rise of
8.5 percent on the prior-year figure of 2,923 million
euros. All three business units contributed to this
positive development. We improved adjusted return
on sales (adjusted EBIT margin) for the Group by
0.7 percentage points to 16.9 percent.
Adjusted return on sales in the Adhesive Technologies business unit showed an increase of 1.1 percentage points, reaching a new all-time high of 18.2 percent for the year. The Beauty Care business unit was
also again able to increase its adjusted return on
sales, reaching 16.9 percent for the first time (2015:
15.9 percent). Adjusted return on sales of the Laundry
& Home Care business unit, excluding the acquisitions completed in 2016, showed a very strong
increase. Taking the acquisitions in 2016 into
account, adjusted return on sales showed a solid
increase, reaching a new all-time annual high of
17.3 percent (previous year: 17.1 percent).
In all business units, we benefited from our successful innovations together with ongoing measures to
reduce costs and improve efficiency. Slightly lower
prices for direct materials also had a positive impact.
Further explanations relating to our business performance can be found in the description of the business units starting on page 88.
Sales in the North America region increased substantially by 15.2 percent to 4,202 million euros. Organically, the region posted sales growth of 1.7 percent. In
addition, the acquisition of The Sun Products Corporation also contributed substantially to the increase
in nominal sales. The share of sales from the region
increased to 22 percent.
Year on year, sales in Latin America declined by
–5.0 percent to 1,055 million euros due to foreign
exchange effects. Organically, sales grew by 13.8 percent. Double-digit organic sales growth by our businesses in Mexico made an especially important contribution to this performance. The share of sales
from the region remained unchanged at 6 percent.
Sales in the Asia-Pacific region increased year on
year by 3.6 percent to 3,246 million euros. Organically, we were able to increase regional sales by
3.2 percent. The share of sales from the Asia-Pacific
region remained stable at 17 percent.
Sales in the emerging markets of Eastern Europe,
Africa/Middle East, Latin America and Asia (excluding Japan) were slightly higher year on year at
7,814 million euros. Organically, we increased sales
by 6.8 percent, driven by all business units. Thus the
emerging markets again made an above-average contribution to organic sales growth. The share of sales
from emerging markets was 42 percent, which was
slightly lower year on year due to foreign exchange
and acquisition effects.
In order to adapt our structures to our markets and
customers, we spent 277 million euros on restructuring (previous year: 193 million euros). A substantial
portion of this amount was used to reorganize our
business in North America following the acquisition
of The Sun Products Corporation. We also progressed
with the combination of our supply chain and sourcing activities into one integrated Global Supply Chain
organization, and continued to integrate newly
acquired entities and brands.
adjusted return on
sales, up 0.7 percentage points.
16.9%
66 Combined management report Henkel Annual Report 2016
Comparison between actual business
performance and guidance
We updated our guidance for fiscal 2016 in August 2016:
We expected Henkel Group to generate organic sales
growth of 2 to 4 percent. We also anticipated a slight
decrease in the share of sales from our emerging
markets due to foreign exchange effects. For adjusted
return on sales (EBIT), we forecasted an increase to
more than 16.5 percent for fiscal 2016 and anticipated
that the adjusted return on sales of each individual
business unit would be above the level of the previous year. We expected an increase in adjusted earnings per preferred share of between 8 and 11 percent.
With organic growth of 3.1 percent, we achieved our
sales growth forecast of 2 to 4 percent. Organic sales
growth in the Adhesive Technologies and Beauty Care
business units was within this range, as expected. The
Laundry & Home Care business unit achieved organic
sales growth of 4.7 percent, not least due to a solid
fourth quarter. This was somewhat stronger than
forecasted.
As anticipated, the share of sales from emerging
markets was slightly lower year on year at 42 percent,
due to both the effect of exchange rate movements
and the acquisition of The Sun Products Corporation.
Adjusted return on sales of the Henkel Group
increased by 0.7 percentage points to 16.9 percent.
This growth was in line with our updated guidance
of more than 16.5 percent.
The significant increase in adjusted earnings per
preferred share of 9.8 percent to 5.36 euros (2015:
4.88 euros) is consistent with our forecast of growth
expected in a range of 8 to 11 percent.
Our restructuring expenses totaled 277 million euros
and were thus within the expected bandwidth that
we revised to 250 million to 300 million euros in
November 2016. Capital expenditures on property,
plant and equipment and intangible assets totaled
543 million euros in fiscal 2016. In November 2016,
we had expected capital expenditures of between
550 million and 600 million euros.
Guidance versus performance 2016 40
| Guidance for 2016 | Updated guidance for 2016* | Performance in 2016 | |
| Organic sales growth | Henkel Group: 2–4 percent All business units within this range |
Henkel Group: 2–4 percent All business units within this range |
Henkel Group: 3.1 percent Adhesive Technologies: 2.8 percent Beauty Care: 2.1 percent Laundry & Home Care: 4.7 percent |
| Percentage of sales from emerging markets |
Slight increase compared to prior-year level |
Slight decrease compared to prior-year level |
Slight decrease compared to prior-year level |
| Adjusted return on sales (EBIT) |
Increase to around 16.5 percent | Increase to more than 16.5 percent | Increase to 16.9 percent |
| Adjusted earnings per preferred share |
Increase of 8–11 percent | Increase of 8–11 percent | Increase of 9.8 percent |
* Updated on August 11, 2016.
42%
of our sales generated in emerging
markets.
€5.36
adjusted earnings
per preferred
share.
Henkel Annual Report 2016 Combined management report 67
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Reconciliation from sales to adjusted operating profit 1 41
| in million euros | 2015 | % | 2016 | % | Change |
| Sales | 18,089 | 100.0 | 18,714 | 100.0 – 51.6 48.4 – 24.4 –2.5 –4.6 0.0 16.9 |
3.5 % 3.4 % 3.5% 0.5 % – 0.9 % – 1.1 % – 8.5% |
| Cost of sales Gross profit Marketing, selling and distribution expenses Research and development expenses Administrative expenses Other operating income/expenses Adjusted operating profit (EBIT) |
– 9,350 | – 51.7 | –9,665 | ||
| 8,739 | 48.3 | 9,049 | |||
| – 4,521 | – 25.0 | –4,543 | |||
| – 464 | – 2.6 | – 460 | |||
| – 878 | – 4.8 | – 868 | |||
| 47 | 0.3 | – 6 | |||
| 2,923 | 16.2 | 3,172 |
1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.
Expense items
The following explanations relate to our operating
expenses adjusted for one-time charges/gains and
restructuring expenses. The reconciliation statement
and the allocation of the restructuring expenses
between the various expense items of the consolidated
statement of income can be found on page 171.
The cost of sales increased by 3.4 percent to 9,665 million euros. Gross profit increased by 3.5 percent to
9,049 million euros. Savings from cost reduction
measures and efficiency improvements, selective
price increases and slightly lower prices for direct
materials (raw materials, packaging, and purchased
goods and services) more than offset the negative
impact of foreign exchange rate movements as well
as acquisition effects, and enabled us to improve
gross margin by 0.1 percentage points to 48.4 percent.
At 4,543 million euros, marketing, selling and distribution expenses slightly exceeded the prior-year
figure of 4,521 million euros. Compared to fiscal 2015,
the ratio to sales decreased to 24.4 percent. We spent
a total of 460 million euros for research and development. The ratio to sales, at 2.5 percent, was on a
par with the prior year. Administrative expenses
decreased to 868 million euros (2015: 878 million
euros). At 4.6 percent, administrative expenses as
a percentage of sales were slightly lower year on year.
Other operating income and expenses
At –6 million euros, the balance of adjusted other
operating income and expenses decreased year on
year (2015: 47 million euros), arising mainly from
lower gains on disposals of non-current assets.
Financial result
The financial result improved from –42 million
euros to –33 million euros. The financing costs relating to the acquisition of The Sun Products Corporation were more than offset by the positive effects
from redeeming the hybrid bond.
Net income and earnings per share (EPS)
Income before tax increased by 139 million euros to
2,742 million euros. Taxes on income amounted to
649 million euros. The tax rate of 23.7 percent was
slightly lower year on year (2015: 24.4 percent). The
adjusted tax rate decreased year on year by 0.3 percentage points to 24.7 percent. Net income increased
by 6.4 percent from 1,968 million euros to 2,093 million euros. After taking into account 40 million
euros attributable to non-controlling interests, net
income attributable to shareholders of Henkel AG &
Co. KGaA amounted to 2,053 million euros, 6.9 percent higher than the prior-year figure (2015: 1,921
million euros). Adjusted net income after deducting
non-controlling interests was 2,323 million euros
compared to 2,112 million euros in fiscal 2015. A condensed version of the annual financial statements of
the parent company of the Henkel Group – Henkel
AG & Co. KGaA – can be found on pages 100 to 103.
€2,093m
net income.
| 2012 2013 2014 2015 2016 |
1,625 1,662 1,968 2,093 1,526 |
0 500 1,000 1,500 2,000
Net income 42
in million euros
2,500
68 Combined management report Henkel Annual Report 2016
2012
2013
2014
2015
2016
0.0 1.5 3.0 4.5 6.0
4.07
4.38
4.88
5.36
Adjusted earnings per preferred share 43
in euros
3.63
Earnings per preferred share rose from 4.44 euros
to 4.74 euros. Earnings per ordinary share increased
from 4.42 euros to 4.72 euros. Adjusted earnings per
preferred share rose by 9.8 percent to 5.36 euros
(2015: 4.88 euros).
Return on capital employed (ROCE)
At 17.5 percent, return on capital employed (ROCE)
decreased year on year, mainly due to the capital
effect of acquisitions.
Economic Value Added (EVA®)
Economic Value Added (EVA®) increased to 1,463 million euros.
increase in
adjusted earnings
per preferred
share.
+9.8%
30.3%
proposed dividend
payout ratio.
2012
2013
2014
2015
1.22
1.31
1.47
Preferred share dividend 44
in euros
0.95
2016
0.0 0.5 1.0 1.5
1.62 1
1 Proposal to shareholders for the Annual General Meeting
on April 6, 2017.
2.0
Dividends
According to our dividend policy, dividend payouts
of Henkel AG & Co. KGaA shall, depending on the
company’s asset and profit positions as well as its
financial requirements, amount to 25 percent to
35 percent of net income after non-controlling interests and adjusted for exceptional items. We will propose to the Annual General Meeting an increased
dividend compared to the previous year: 1.62 euros
per preferred share and 1.60 euros per ordinary
share. The payout ratio would then be 30.3 percent.
Net assets and financial position
Acquisitions and divestments
Effective May 31, 2016, we acquired 57.5 percent of
the shares of Expand Global Industries UK Limited,
London, UK. Expand Global Industries UK Limited
holds nearly 100 percent of the shares of Expand
Global Industries Ltd. headquartered in Ibadan, Nigeria, which has a strong presence in the detergent
market in Nigeria. With this acquisition, the Laundry
& Home Care business unit has expanded its detergent business.
Effective June 1, 2016, we completed the acquisition
of a range of hair care brands and the associated hair
care business of Procter & Gamble in the Africa/Middle East and Eastern Europe regions.
Effective June 30, 2016, we acquired the tile adhesives business and the associated brands of the
Colombian company Alfagres S.A. With this, the
Adhesive Technologies business unit has expanded
its business in the segment Adhesives for Consumers, Craftsmen and Building.
Effective August 15, 2016, we completed the acquisition of all shares of Zhejiang Golden Roc Chemicals
JSC, China, expanding our superglue business in the
Adhesive Technologies business unit.
Effective August 21, 2016, we completed the acquisition of the detergent business and the associated
brands of Behdad Chemical Company PJSC in Iran.
Effective September 1, 2016, we completed the acquisition of all shares of The Sun Products Corporation,
a laundry and home care company based in Wilton,
Connecticut, USA.
Effective December 8, 2016, we completed the acquisition of all shares of Jeyes Group Limited, UK.
Additional disclosures relating to the acquisitions
and divestments can be found on pages 123 to 126 of
the notes to the consolidated financial statements.
Henkel Annual Report 2016 Combined management report 69
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Neither the acquisitions and divestments nor other
measures undertaken resulted in any material
changes in our business and organizational structure. For detailed information on our organization
and business activities, please refer to the disclosures on pages 57 and 58.
Our long-term ratings remain at “A flat” (Standard &
Poor’s) and “A2” (Moody’s). We intend to maintain a
solid “A” rating to ensure our continued unrestricted
access to the money and capital markets and to
favorable financing terms and conditions.
Financial structure 45
in million euros
Assets
of which in %
Equity and liabilities
of which in %
22,323 27,917 27,917 22,323
Non-current liabilities
thereof: Pension obligations
thereof: Borrowings
Current liabilities
thereof: Borrowings
Non-current assets
thereof: Intangible assets / property,
plant and equipment
10
4
28
62 Equity
40
21
2
25
54
4
12
69
64
Current assets
thereof: Cash and
cash equivalents
31
5
71
66
29
5
2015 2016 2016 2015
€ 543 m
investments in
property, plant and
equipment and
intangible assets.
Capital expenditures
In the reporting period, capital expenditures (excluding
acquisitions) amounted to 543 million euros. Investments in property, plant and equipment for existing
operations totaled 460 million euros, following
514 million euros in 2015. We invested 83 million euros
in intangible assets (2015: 111 million euros). Around
two-thirds of the expenditures were channeled into
expansion projects, innovations and streamlining measures, which included increasing our production capacity, introducing innovative product lines, and optimizing our production structure and business processes.
The major projects of 2016 were as follows:
• Consolidation of our production footprint and
expansion of production capacities in China
(Adhesive Technologies)
• Expansion of warehousing and logistics capacities
in Germany (Laundry & Home Care)
• Expansion of production capacity and optimization of the logistics structure in Russia (Laundry &
Home Care)
• Global optimization of our supply chain and consolidation and optimization of our IT system
architecture for managing business processes
In regional terms, capital expenditures focused primarily on Western Europe, Eastern Europe and North
America.
The acquisitions resulted in additions to intangible
assets and property, plant and equipment in the
amount of 3,866 million euros. Details of these additions can be found on pages 131 to 136 of the notes to
the consolidated financial statements.
70 Combined management report Henkel Annual Report 2016
Capital expenditures 2016 46
| in million euros | Existing operations |
Acquisitions | Total |
| Intangible assets | 83 | 3,589 | 3,672 |
| Property, plant and equipment |
460 | 277 | 737 |
| Total | 543 | 3,866 | 4,409 |
Compared to year-end 2015, equity including
non-controlling interests increased by 1.4 billion
euros to 15.2 billion euros. The individual components influencing equity development are shown in
the consolidated statement of changes in equity on
page 119. Equity rose with the addition of net income
amounting to 2,093 million euros. The dividend distribution in April 2016 and the adjustment of –138 million euros resulting from the remeasurement of the
net liability from defined benefit pension plans led
to a reduction in equity. Compared to year-end 2015,
the equity ratio decreased by 7.5 percentage points to
54.4 percent due to the debt-financed acquisition of
the shares of The Sun Products Corporation.
Non-current liabilities increased by 3.5 billion
euros to 5.7 billion euros, mainly as a result of higher
borrowings following the acquisition of the shares
of The Sun Products Corporation, and a rise in other
financial liabilities.
Current liabilities increased by 0.7 billion euros to
7.0 billion euros. The increase was substantially
attributable to higher trade accounts payable and
other provisions, partially offset by lower
borrowings.
Effective December 31, 2016, our net financial position ¹ amounted to –2,301 million euros (December
31, 2015: 335 million euros). The change compared to
the end of the previous year was primarily due to
payments for acquisitions.
Net financial position 48
| in million euros | |
| 2012 | – 85 |
| 2013 | 959 |
| 2014 | – 153 |
| 2015 | 335 |
| 2016 | –2,301 |
Corporate = sales and services not assignable to the individual
business units.
1 Existing operations.
Beauty Care 13 %
Corporate 1 %
Laundry &
Home Care 42 %
Adhesive
Technologies 44 %
Capital expenditures by business unit 1 47
1 Cash and cash equivalents plus readily monetizable financial
instruments classified as “available for sale” or using the “fair
value option,” less borrowings, plus positive and less negative
fair values of hedging transactions.
Net assets
Compared to year-end 2015, total assets rose by
5.6 billion euros to 27.9 billion euros.
Under non-current assets, intangible assets increased
by 3,861 million euros, and property, plant and
equipment by 226 million euros. The increase was
mainly due to acquisitions. Capital expenditures of
460 million euros on assets in property, plant and
equipment were partially offset by depreciation of
364 million euros.
Current assets increased from 6.9 billion euros to
8.2 billion euros. This was attributable in particular
to higher trade accounts receivable and an increase
in inventories. Cash and cash equivalents also
increased by 213 million euros in the reporting
period.
€–2,301m
net financial
position.
Henkel Annual Report 2016 Combined management report 71
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Financial position
At 2,850 million euros, cash flow from operating
activities in 2016 was significantly higher versus the
previous year (2,384 million euros). Apart from the
higher operating profit, this increase was due to
higher inflows from trade accounts payable and
other liabilities, and provisions compared to 2015.
Net working capital ¹ as a percentage of sales
improved by 0.3 percentage points to 3.5 percent year
on year, despite acquisitions.
The cash outflow in cash flow from investing
activities (–4,250 million euros) was substantially
higher compared to prior year (–893 million euros).
The increase is primarily attributable to acquisitions
resulting in higher investments in subsidiaries and
other business units compared to 2015.
The cash inflow in cash flow from financing activities of 1,678 million euros (2015: –1,555 million euros)
resulted mainly from the debt capital obtained to
fund acquisitions. Higher dividend payments and
allocation to pension funds reduced this figure.
Net financial position
in million euros
At Dec. 31, 2015 Free cash flow Dividends At Dec. 31, 2016
paid
Allocation to
pension funds
Payments
for acquisitions
Other
49
1 Including purchase of non-controlling interests with no change of existing control.
2 Primarily foreign exchange effects.
Cash and cash equivalents rose compared to
December 31, 2015 by 213 million euros to 1,389 million euros.
The increase in free cash flow to 2,205 million euros
in 2016 (2015: 1,690 million euros) resulted from
higher cash flow from operating activities.
Financing and capital management
Financing of the Group is centrally managed by
Henkel AG & Co. KGaA. Funds are, as a general rule,
obtained centrally and distributed within the Group.
Our financial management is based on the financial
ratios defined in our financial strategy (see table of
key financial ratios on page 73). We pursue a conservative and flexible investment and borrowings policy
with a balanced investment and financing portfolio.
The primary goals of our financial management are
to secure the liquidity and creditworthiness of the
Group, together with ensuring access at all times to
the capital market, and to generate a sustainable
increase in shareholder value. Measures deployed in
order to achieve these aims include optimization of
our capital structure, adoption of an appropriate dividend policy, equity management and debt reduction. Our capital needs and capital procurement
activities are coordinated to ensure that requirements with respect to earnings, liquidity, security
and independence are taken into account and properly balanced.
€2,205m
free cash flow.
1 Inventories plus payments on account, receivables from suppliers
and trade accounts receivable, less trade accounts payable, liabilities
to customers, and current sales provisions.
335 2,205 – 666 – 185 – 3,829 1 – 1612 –2,301
72 Combined management report Henkel Annual Report 2016
In fiscal 2016, Henkel paid a higher dividend for both
ordinary and preferred shares compared to 2015.
Cash flows not required for capital expenditures, dividends and interest payments were used for allocations to pension funds and to finance acquisitions.
We covered our short-term financing requirement
primarily through commercial paper. Our multicurrency commercial paper program is additionally
secured by a syndicated credit facility.
Our credit rating is regularly assessed by the rating
agencies Standard & Poor’s and Moody’s. As in the
previous year, our ratings remain within the “single
A” target corridor, at “A”/“A–1” (Standard & Poor’s) and
“A2”/“P1” (Moody’s). Even after the acquisition of The
Sun Products Corporation, both Standard & Poor’s
and Moody’s continue to rate Henkel as investment
grade, which is the best possible category.
Credit ratings 50
| Standard & Poor’s | Moody’s | |
| Long-term | A | A2 |
| Outlook | Stable | Stable |
| Short-term | A–1 | P1 |
At December 31, 2016
We financed the acquisition of The Sun Products
Corporation by taking out a three-year syndicated
bank loan of 1.1 billion US dollars and issuing four
fixed-rate bonds in September 2016 with a total volume of 2.2 billion euros.
As of December 31, 2016, our borrowings totaled
3,725 million euros and mainly comprised the bonds
we had issued, the syndicated bank loan and commercial paper.
Henkel’s financial risk management activities are
explained in the risks and opportunities report on
pages 104 to 111. Further detailed information on our
financial instruments can be found in the financial
instruments report on pages 153 to 165 of the notes to
the consolidated financial statements.
Key financial ratios
Our operating debt coverage in the reporting period
was above the minimum of 50 percent, as it was at
year-end 2015. The reduction in operating debt coverage is primarily due to the lower net financial position following the financing of the acquisitions
made in the current year. The interest coverage ratio
improved further in 2016.
Key financial ratios 51
| 2015 | 2016 | |
| Operating debt coverage (net income + amortization and depre ciation, impairment and write-ups + interest element of pension obliga tions) / net borrowings and pension obligations |
375.2 % | 80.8% |
| Interest coverage ratio EBITDA/interest result including interest element of pension obligations |
75.7 | 107.9 |
| Equity ratio equity / total assets |
61.9 % | 54.4% |
Henkel Annual Report 2016 Combined management report 73
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Employees
At the end of 2016, Henkel employed around
51,350 people worldwide (annual average: around
49,950). The headcount as of December 31, 2016, was
above the figure at year-end 2015 (around 49,450).
The increase was primarily due to the acquisitions in
our Laundry & Home Care business unit. Personnel
expenses amounted to 3,001 million euros.
The commitment, skills and experience of all of our
employees are the foundations on which we build our
international success. We focused on the following
areas to strengthen our global team in fiscal 2016:
• We further strengthened our performance culture.
One of the characteristics of our globally standardized management assessment system is a feedback
culture that is specifically tailored to the personal
development of each individual.
• We actively promote work-life flexibility. We
encourage our managers to set an example and
promote flexible work models.
• We support the digital transformation of our entire
organization and are strengthening digital forms
of learning and cooperation. We make it possible
for our employees to access various in-house and
external sources of knowledge on a flexible basis,
and support their ongoing personal development.
• The diversity of our team is a key driver of our
business success. We increased the share of
women in management versus the previous year
by more than 1 percentage point to around
34 percent.
• We have successfully expanded the channels of
communication we use to recruit new members of
staff. Increasingly, we actively approach potential
candidates through digital networks and on the
basis of staff recommendations.
• In 2016, as part of our social engagement activities,
we continued to provide comprehensive support
for the volunteering activities of our employees
and assistance to people facing challenging
circumstances.
Promoting and committing to our performance
culture
We hold regular assessment meetings and provide
open and fair feedback to specifically promote the
development of our people. Our Development Round
Table forms the basis for the annual assessment and
development meetings for about 11,000 managers
and around 1,300 selected non-managerial talents.
Left: HR management is supporting
the digital transformation process and
strengthening digital forms of learning
and cooperation.
Right: Internships
and shadowing
allow refugees to
learn more about
professions and
career opportunities
– here at Henkel’s
“Forscherwelt” young
researcher facility in
Düsseldorf.
Employees by region 52 Employees by organizational unit 53
Latin America 7 %
Functions 14%
Africa/
Middle East 10% Beauty Care 13%
North America 16%
Eastern Europe 19%
Laundry &
Home Care 21%
At December 31, 2016 At December 31, 2016
Western Europe 28 %
Asia-Pacific 20 %
Adhesive
Technologies 52 %
74 Combined management report Henkel Annual Report 2016
Apart from providing feedback on performance and
potential, our managers discuss development plans
and possible career opportunities with their staff. In
addition to this globally established assessment system, we also ensure we pay competitive wages and
salaries. We have established an internationally standardized incentive system for managers that takes
account of the personal performance of staff and
reflects our medium-term financial ambition. It
serves to highlight the personal contribution made
by each individual and offers incentives for outstanding performance.
In assessing performance, we avoid focusing on
employees having to be at a certain place at certain
times. For us, it is the result that counts. Supported
by digitalization, our employees can approach their
work flexibly. We encourage our managers to promote flexible work models and to actively help in
the reconciliation of career with a person’s private
sphere. This not only raises the satisfaction of our
existing team; it is also a decisive factor in the competition for future employees.
Digital working environment
We take full advantage of the opportunities offered
by digitalization. It starts with our approach to
potential job applicants and continues through the
company: how we communicate with our employees, how we actively engage them and network them
with one another, in the design of flexible work models, and in the automation of processes. Indeed, the
entire daily work routine is being increasingly
shaped by digital forms of cooperation. Modern communication and network technologies enable us to
give our workforce more independence to choose
where and when to work, which also makes it easier
to virtually manage international teams comprising
members from different sites.
Some 24,500 members of staff now use Yammer, our
digital network, to learn from and to work with one
another on a more efficient basis. There are more
than 850 topic-specific groups for staff to exchange
ideas, and this has now become part of the everyday
routine for many of them. Members of staff from
entirely different parts of the company who would
not necessarily have any dealings with one another
in their everyday work are able to use the network to
contact each other. Through this, we encourage an
interdisciplinary approach to problem-solving and
Employees by activity 54 Employees by age group 55
Research and
development 5 % 16–29 years 17%
Administration 14 %
50–65 years 22%
Marketing, selling
and distribution 27 % 40–49 years 28%
At December 31, 2016 At December 31, 2016
Production
and engineering 54% 30–39 years 33%
Employees 56
| (At December 31) | 2012 | % | 2013 | % | 2014 | % | 2015 | % | 2016 | % |
| Western Europe | 14,600 | 31.3 | 14,400 | 30.7 | 14,900 | 30.0 | 14,900 | 30.2 | 14,450 | 28.1 |
| Eastern Europe | 9,150 | 19.7 | 9,600 | 20.5 | 10,000 | 20.1 | 9,800 | 19.8 | 9,500 | 18.5 |
| Africa/Middle East | 5,100 | 11.0 | 4,800 | 10.2 | 4,850 | 9.7 | 4,700 | 9.4 | 5,250 | 10.2 |
| North America | 5,200 | 11.1 | 5,150 | 11.0 | 6,200 | 12.5 | 6,250 | 12.7 | 8,300 | 16.2 |
| Latin America | 3,650 | 7.8 | 3,750 | 8.0 | 3,650 | 7.3 | 3,500 | 7.1 | 3,550 | 6.9 |
| Asia-Pacific | 8,900 | 19.1 | 9,150 | 19.6 | 10,150 | 20.4 | 10,300 | 20.8 | 10,300 | 20.1 |
| Total | 46,600 | 100.0 | 46,850 | 100.0 | 49,750 | 100.0 | 49,450 | 100.0 | 51,350 | 100.0 |
Basis: permanent employees excluding apprentices. Figures rounded.
Henkel Annual Report 2016 Combined management report 75
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
to make better use of existing knowledge by promoting the exchange of ideas throughout the company.
Digital platforms give our employees fast and flexible access to general training content. We encourage
our workforce to integrate knowledge-building exercises into their everyday work routines. 2016 marked
the first year in which we offered managementrelated Massive Open Online Courses (MOOCs) and
webinars in collaboration with IESE Business School
for live attendance by our employees around the
globe. More than 200 people took advantage of this
service.
Developing employees and providing specific
training
Henkel offers 25 apprenticeship and dual-track
study programs in Germany. In 2016, we welcomed
159 new apprentices and students. Currently, close
to 500 apprentices and students are working toward
a professional qualification at Henkel in Germany.
We use different learning formats in providing
training opportunities around the world so as to
strengthen our global team. Based on their individual needs and development plans, employees can
choose general or function-specific seminars. One of
the new modules added this year focuses on career
orientation, training our staff to assess how they can
best leverage their potential. We enhance the Henkel
Global Academy with content from external providers to give us more flexibility in offering the training
content we need. One pilot project focuses primarily
on video-based training sessions covering current
digital issues such as digital marketing. Through this
approach, we are able to help our employees to
navigate the digital world efficiently and to grasp the
opportunities associated with it.
Valuing diversity
The success of our business is driven by the diversity
and individuality of our people. We are proud of our
strong global team. We place great value on encouraging diversity in an inclusive environment. The
approach we adopt is holistic, embracing individual
characteristics together with personal experience,
knowledge and skills.
Promoting women in management is key to strengthening the diversity within our company. In 2016, we
were able to increase the share of women in management by more than 1 percentage point versus the
previous year.
Women in management 57
| 2012 | 2013 | 2014 | 2015 | 2016 | |
| Henkel | 32.6 % | 32.9 % | 33.2 % | 33.6 % | 33.1 % |
| Managers | 30.5 % | 31.6 % | 32.5 % | 33.1 % | 34.3% |
| Top managers1 | 18.6 % | 19.8 % | 20.6 % | 21.1 % | 22.5 % |
1 Corporate Senior Vice Presidents, management circles I and IIa.
The inclusive attitude of our staff is key to our successful international and intercultural collaboration.
In their everyday dealings with colleagues from all
over the world, our employees learn to adapt to one
another. Hence Henkel also provides opportunities
for international experience along an individual’s
career path as a means of promoting new ways of
thinking and the acceptance and adoption of new
perspectives. It also enables us to nurture the performance capabilities of our people.
We place great importance on all employees behaving inclusively and making every personal effort to
promote an inclusive work environment. During our
global Diversity Weeks, we again organized numerous activities to highlight the diversity of our global
team.
Recruiting top talent for Henkel
We compete internationally for the most talented
professionals. The established channels of communication used to recruit new members of staff have
been successfully extended. We are making more use
of digital networks to actively approach potential
candidates. We are thus able to reach them directly
and inspire them to work for Henkel through fast,
personalized communication.
In many countries, we also make successful use of
staff recommendations of potential candidates. Our
staff know best which sort of people fit us and can
enhance the performance capabilities of our company.
We remain in contact with highly qualified students
and graduates whom we meet at our university
events or whom we get to know during internships.
We use our digital platforms to inform selected talents about career opportunities and the latest news
at our company. In 2016, our public social media
channels focusing on career topics had more than
750,000 fans and followers.
Around
of our managers
are women.
34%
76 Combined management report Henkel Annual Report 2016
Procurement
We use externally sourced materials (raw materials,
packaging and purchased goods) and services to
produce our finished products. These items all fall
under the general category of direct materials.
Examples include washing-active substances (surfactants), adhesive components, cardboard boxes
and external filling services.
Aside from supply and demand, the prices of direct
materials are mainly determined by the prices of the
input materials used to manufacture them. At the start
of 2016, prices for input materials were much lower by
year-on-year comparison, gradually rising as the year
progressed. As a result, prices overall were higher in
the fourth quarter than in the first quarter. The situation differed by both region and type of input material. Despite increasing over the course of the year,
the average price of crude oil – and with it the prices
of other petrochemicals such as ethylene – was lower
year on year. Prices for corrugated paper and cardboard also declined slightly. In contrast, the price of
palm kernel oil increased significantly in 2016 versus
the previous year. Overall, prices for direct materials
in 2016 were slightly below the level of the prior year.
Direct material expenditures amounted to 8.0 billion
euros and were therefore higher than 2015. Savings
from cost-reduction measures, improvements in
production and supply chain efficiency, and slightly
declining prices were offset by foreign exchange and
acquisition effects, among others.
Our five most important groups of raw materials
within the direct materials category are washingactive substances (surfactants), raw materials for use
in hotmelt adhesives, inorganic raw materials, waterand acrylic-based adhesive raw materials, and raw
materials for polyurethane-based adhesives. These
account for around 38 percent of our total direct
material expenditures. Our five largest suppliers
account for around 11 percent of purchasing volume
in direct materials.
Purchases made in the general category of indirect
materials and services are not directly used in the
production of our finished products. Examples
include maintenance materials, and logistics, marketing and IT services. We were able to more than
compensate for the marginal increases in gross
prices in these areas in 2016 through our global procurement strategy and structural cost-reduction
measures. At 4.7 billion euros, expenditure on indirect materials and services in 2016 was lower year
on year.
expenditures on
direct materials.
€8.0bn
Acting sustainably and responsibly
For Henkel, it is a matter of course that, beyond our
business operations, we accept our responsibility
toward society around the world. The volunteer work
of our employees and retirees in numerous social
projects also makes a substantial contribution in this
regard. We have been supporting these activities for
many years.
Overall, we donated around 8 million euros throughout the world in 2016 to sponsor more than 2,000 projects that reached more than 1.2 million people.
Educational initiatives are a key focus of our social
engagement. Education is an essential foundation
on which to build both the personal development of
each individual and a functioning society. We focus
primarily on projects and initiatives that allow the
involvement of our employees.
Throughout Europe, helping refugees was a key
area of focus in 2016. Henkel’s efforts to help in this
respect were concentrated on integration in the labor
market. We offered some 100 refugees who had fled
to Germany the opportunity to prepare for working
life in a range of projects which included workoriented language courses and internships.
We also depend on the commitment of our staff to
successfully implement our sustainability strategy.
Sustainability issues therefore form a large part of
our internal communications and are specifically
integrated into our current training and education
programs. In 2012, we launched our Sustainability
Ambassadors program to offer our people additional
qualifications and to give them opportunities for
social engagement. By the end of 2016, more than
10,000 employees had successfully taken part in the
program, including the entire Management Board.
As part of the program, these employees have meanwhile also passed on their knowledge to around
84,000 elementary school children in 47 countries.
Henkel Annual Report 2016 Combined management report 77
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
our strategic suppliers and rolled out new digital
applications to raise the transparency of our value
chain.
Given the uncertainties with respect to raw material
price changes and ensuring supply in the procurement markets, risk management is an important part
of our purchasing strategy. The emphasis here is on
reducing price and supply risks while maintaining
consistently high quality. As part of our active price
management approach, we employ strategies to safeguard prices over the longer term. These are implemented both by means of contracts and, where
appropriate and possible, through financial hedging
instruments. In order to minimize the risk of supplier default, we stipulate supplier default clauses
and perform detailed risk assessments of suppliers
to determine their financial stability. With the aid of
an external, independent financial services provider,
we continuously monitor important suppliers whose
financial situation is seen as critical. If a high risk of
supplier default is identified, we systematically prepare back-up plans in order to ensure uninterrupted
supply.
We expect our suppliers and contractual partners to
conduct themselves in a manner consistent with our
own corporate ethics and values. The basic requirements in this regard are set out in our purchasing
standards, valid across the Group, and our safety,
health and environmental standards, initially formulated in 1997, through which we have long acknowledged our responsibility for the entire supply chain.
Consequently, in selecting our suppliers and contractual partners, we take into account their performance in terms of sustainable development. We use
the cross-industry Code of Conduct published by the
German Federal Association of Materials Management, Purchasing and Logistics (BME) as a globally
applicable supplier code, and the basis for our multistage Responsible Supply Chain Process. The objecIn order to improve efficiency and secure material
supplies, we continuously optimize our value chain
while ensuring that we maintain our level of quality.
In addition to negotiating new, competitive contract
terms, our ongoing initiative to lower total procurement expenses is a major factor in the success of our
purchasing strategy. Together with the three business units, Purchasing works continuously on reducing product complexity, optimizing the raw materials mix and further standardizing packaging and raw
materials. We enter into long-term business relationships with selected suppliers to encourage the development of innovations, and to optimize manufacturing costs and logistics processes. At the same time,
we ensure the risk of supply shortages is minimized.
We also agree on individual targets with our strategic
suppliers to strengthen our negotiating position and
give us greater flexibility in consolidating our supplier base. In 2016, we succeeded in reducing the
number of suppliers by approximately 9 percent.
We were able to increase the efficiency of our purchasing activities by further standardizing, automating and centralizing our procurement processes. In
addition to again making greater use of eSourcing
tools to support our purchasing operations, we have
also pooled large portions of our purchasing administration activities such as order processing, price
data maintenance, and reporting activities within
our shared service centers. We are also integrating
our production, logistics and purchasing activities
across all business units in one integrated global
supply chain organization. This organization is managed from its head office in Amsterdam and from a
branch office in Singapore. Following successful
completion of the first implementation stage in
2015, we achieved on-schedule introduction in a
further 11 European countries in 2016. We also made
progress with the digitalization of our purchasing
activities. For example, we launched digital communication platforms to optimize collaboration with
Material expenditures by business unit 58 Material expenditures by type 59
Beauty Care 17%
Purchased goods
and services 18 %
Laundry &
Home Care 34%
Packaging 20 %
At December 31, 2016 At December 31, 2016
Adhesive
Technologies 49 % Raw materials 62%
78 Combined management report Henkel Annual Report 2016
Production
In 2016, Henkel manufactured products of a total
weight of 8.5 million metric tons at 171 sites in
57 countries. Our largest production facility is in
Düsseldorf, Germany. Here we manufacture not only
laundry detergents and household cleaners but also
adhesives for consumers and craftsmen, and products for our industrial customers.
Cooperation with toll manufacturers is an integral
component of our production strategy, enabling us
to optimize our production and logistics structures
when entering new markets or when volumes are
still small. We currently purchase around 10 percent
in additional production tonnage from toll manufacturers each year.
Number of production sites 60
| 2015 | 2016 | |
| Adhesive Technologies | 135 | 134 |
| Beauty Care | 7 | 7 |
| Laundry & Home Care | 28 | 30 |
| Total | 170 | 171 |
The global production network in the Adhesive
Technologies business unit spans 134 sites and is
strictly aligned to demand in its sales markets. Capital expenditures are used to expand capacities, predominantly in emerging markets. At the same time,
we invest in the implementation of customer-specific requirements and continuous production optimization in the mature markets. Other focus areas
include the leveraging of cutting-edge manufacturing technologies, exploiting cost and quality advantages in the manufacture of our products, and
improving our production and warehousing network
to suit our needs.
Our multi-technology sites play a particularly
important role as they combine various manufacturing technologies with a shared infrastructure to
exploit economies of scale. In addition to expansions
in China and the ongoing development of our plant
in India, we also further expanded our Eastern European multi-technology site in Hungary and laid the
foundation for a further plant in Turkey. These sites
help us provide the best possible service within a
growing and dynamic market environment. With the
opening of our plant in Georgia, we are also driving
growth in building material products in Eastern
Europe.
tive of this process is to ensure supplier compliance
with these standards and to improve the sustainability levels of our supply chain in tandem with
our strategic suppliers. A global training program
ensures that the requirements regarding the sustainability profile of our suppliers are understood and
properly applied by our employees in Purchasing.
The evaluation of our suppliers with respect to sustainability is based on a comprehensive assessment
and audit program which we developed as a common
standard in 2011 together with five other companies
in the chemical industry under the initiative
“Together for Sustainability.” The results of audits
and assessments are shared among the members of
the initiative, producing valuable synergies when
evaluating what are – in many cases – common
suppliers. The Together for Sustainability initiative
continued to grow in the past year and now includes
19 members. Global implementation of the assessment and audit program was continued through
various events including a supplier conference in
Mumbai, India, and a supplier training program in
Shanghai, China. The initiative again received recognition last year when Together for Sustainability and
EcoVadis, which is a partner to the initiative, were
awarded the Market Transformation Award 2016 by
the Sustainable Purchasing Leadership Council (SPLC).
production sites.
171
Henkel Annual Report 2016 Combined management report 79
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Our solid organic growth brought about another
increase in production volume. We are responding
to this by carefully expanding our manufacturing
capacities, with a particular eye on innovations and
emerging markets. In 2016, we also continually
enhanced the performance capabilities of our plants
by rolling out the Henkel Production System to more
countries as a means of further improving production organization and efficiency.
We successfully renewed the external certification of
Group headquarters and all our existing plants, confirming our compliance with international quality,
environmental, safety and energy management standards. Continuous improvements in sustainability
enabled us to make significant progress in our focal
areas of safety and resource conservation, aided in
particular by the further expansion of our centralized
real-time system for measuring and evaluating total
resource use around the world. The business unit is
also investing systematically in expanding the digital
infrastructure of its production and warehousing
systems.
As an important aspect in our promise of quality, our
optimization efforts in all three business units aim
to reduce the environmental footprint of our production activities. We focus in particular on cutting
energy use, thereby contributing to climate protection, on reducing material input and waste volume,
and on lowering water usage and wastewater pollution. New warehousing concepts and the production
of packaging materials directly on-site where filling
takes place reduce transport mileage and thus also
contribute to climate protection.
Overall, our global programs in 2016 resulted in
44 percent of our sites reducing their energy use,
53 percent lowering their water usage, and 54 percent
decreasing their waste footprint (excluding construction and demolition waste).
Keeping our “Factor 3” goal in mind for the year 2030,
we set concrete interim targets for our production
sites for the five years from 2011 through 2015, which
we managed to exceed. We are continuing our efforts
to further improve our performance in these areas
over the coming years, as we move toward our longterm goal of “Factor 3.” To this end, we have set medium-term targets for completion by 2020: Compared
to the base year 2010, we want to raise occupational
safety by 40 percent, and to reduce the direct and
indirect carbon dioxide emissions of our production
sites, the water we use and the waste we generate by
30 percent per ton of product in each case.
Optimized structures and workflows in our plants
and the production network are key elements in an
integrated and optimized supply chain. Our lean
teams have not only put numerous optimization
measures in place at our production sites; they have
also improved integration into the overall process.
Again in 2016, our focus in the Beauty Care business
unit was on further enhancing our agility and on
delivering excellent customer service. In order to
respond more quickly and flexibly to market changes,
we are also driving forward implementation of Industry 4.0. The integration of our production, logistics
and purchasing activities in our new Global Supply
Chain organization has boosted the optimization and
further development of our global processes. We have
achieved a substantial improvement in our service
level through increased integration of the planning
processes across the entire supply chain as far as the
interface with our customers. We have also focused on
complexity control to raise efficiency when managing
the product diversity that Beauty Care offers to meet
the various needs of its global customer base.
In addition to capital expenditures at European sites,
we also invested extensively in emerging markets to
support organic growth. In particular, Eastern Europe
saw further expansion of the factory in Russia and an
increase in production capacities enabling us to supply local markets with even greater speed and efficiency. Another focal point of our activity was the
strategic further development of our production network in order to ensure long-term growth in emerging
markets.
The motivation of our people, supported by the consistent implementation of our continuous improvement process HPS (Henkel Production System) has
led to enhancements in both quality and productivity.
Tailored to Henkel’s requirements, the “Lean Management Program” is serving to harmonize our crossbusiness systems with ever-increasing effect.
We further optimized the production network in
our Laundry & Home Care business unit over the
course of the year. This included the sale of our
plants at Nemours in France and Ain Temouchent in
Algeria. New sites were added through acquisitions
in both emerging markets (Qazvin, Iran, and Ibadan,
Nigeria) and in mature markets (Salt Lake City and
Bowling Green, both USA). As a result, the production network spanned 30 plants in total as of the end
of 2016.
80 Combined management report Henkel Annual Report 2016
Research and development
Expenditures by the Henkel Group for research and
development (R&D) in fiscal 2016 amounted to
463 million euros (adjusted for restructuring expenses:
460 million euros), following 478 million euros
(adjusted: 464 million euros) in 2015. As a percentage
of sales, we spent 2.5 percent (adjusted: 2.5 percent)
on research and development (2015: 2.6 percent,
adjusted: 2.6 percent).
In 2016, internal personnel expenses accounted for
around 60 percent of total R&D spending. Our
research and development costs were fully expensed;
no product- or technology-related development
costs were capitalized in accordance with International Financial Reporting Standards (IFRS).
R&D expenditures by business unit 63
Beauty Care 15 %
Laundry &
Home Care 23 %
Adhesive
Technologies 62 %
R&D expenditures
in percent of sales.
2.5%
2012
2013
2014
2015
2016
0 100 200 300 400 500
415
413
478
R&D expenditures 1
in million euros 62
408
463
1 Including restructuring expenses of 2 million euros (2012),
1 million euros (2013), 3 million euros (2014), 14 million euros
(2015), 3 million euros (2016).
Sustainability targets 2020 61
| Environmental indicators per ton of production volume |
Target | Status |
| Occupational safety 1 | + 40 % | + 17 % |
| Direct and indirect carbon dioxide emissions |
– 30 % | – 22 % |
| Water used | – 30 % | – 23 % |
| Waste generated 2 | – 30 % | – 26 % |
1 Fewer occupational accidents per million hours worked.
2 Waste from our production sites (excluding construction and
demolition waste). 4 percent increase in 2016 including construction and demolition waste due to extensive infrastructure
projects.
Base year 2010.
We have also defined other areas of program focus,
including more concerted efforts to save water in
regions where it is scarce, to reduce landfill waste, to
increase the use of renewable energies, and to lower
carbon dioxide emissions associated with the transportation of our products.
For further details on our sustainability targets,
please see pages 60 to 62 and our Sustainability
Report on the internet:
www.henkel.com/sustainabilityreport
Our standards for safety, health and the environment, and the Henkel Social Standards, apply to all
our sites worldwide. Using a clearly defined process
consisting of communication, training and audits,
we ensure compliance with these standards, especially at the production level.
We have the environmental management systems at
our sites externally certified wherever this is recognized by our partners in the respective markets. By
the end of 2016, around 90 percent of our production
volume came from sites certified to ISO 14001, the
internationally recognized standard for environmental management systems.
Henkel Annual Report 2016 Combined management report 81
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Strengthening research and development together
The research and development experts in the three
business units align their project portfolios to the
specific needs of their individual businesses. They
work together on fundamental processes, basic innovation, evaluating partners for innovation, and on
sustainability. The Research and Development Committee is responsible for Group-wide coordination.
One example of the joint approach is our technology
scouting and screening procedure for startups. The
research experts in the business units update one
another regularly about their search criteria, activities,
and any technology partners they have identified.
This further accelerates the continuous exchange of
knowledge and research activities, and increases the
likelihood of successful disruptive innovations. The
business units also continually update one another
on innovations in common areas of knowledge.
This is particularly relevant to all surface-modifying
technologies such as surfactants, multifunctional
polymers and silicones. In a joint initiative, documentation of advances in sustainability made within
the development projects is being standardized
throughout the Group.
Open Innovation
As our innovations come from both internal and
external sources, the concept of Open Innovation
continues to hold great significance for us. Accordingly, we have intensified our efforts to involve
external partners such as universities, research institutes and suppliers in many of our development
projects.
On an annual average, around 2,700 employees
worked in research and development (2015: around
2,800). This corresponds to around 5 percent of the
total workforce. Our teams are composed of natural
scientists – predominantly chemists – as well as
material scientists, engineers and technicians.
Our capital expenditures and the capabilities of our
highly qualified employees form the foundation on
which the success of our R&D activities is built.
Moreover, our Group-wide cooperation models,
successful project outsourcing as part of our Open
Innovation strategy, and the relocation of resources
in the direction of emerging markets all demonstrate
our ongoing focus on innovation and our concerted
efforts to continuously reduce our resource consumption while maintaining or improving performance.
Key R&D figures 65
| 2012 | 2013 | 2014 | 2015 | 2016 | |
| R&D expenditures1 (in million euros) |
406 | 414 | 410 | 464 | 460 |
| R&D expenditures1 (in % of sales) |
2.6 | 2.6 | 2.5 | 2.6 | 2.5 |
| Employees 2 (annual average) |
2,650 | 2,600 | 2,650 | 2,800 | 2,700 |
1 Adjusted for restructuring expenses.
2 Figures rounded.
Selected research and development sites 64
Düsseldorf, Germany
Hamburg, Germany
Heidelberg, Germany
Dubai, United
Arab Emirates
Shanghai, China
Seoul, South Korea
Tokyo, Japan
Madison Heights, USA
Bridgewater, USA
Trumbull, USA
Rocky Hill, USA
Johannesburg,
South Africa
Pune, India
Dublin,
Ireland
Irvine, USA
Scottsdale, USA
Toluca, Mexico
Moscow,
Russia
Bogotá, Colombia São Paulo,
Brazil
Barcelona,
Spain
Sydney, Australia
82 Combined management report Henkel Annual Report 2016
access to external resources. These basic technologies
are applied in the regional research and development
sites to customer- and market-specific innovations.
At the same time, the research and development staff
in the regional sites obtain information about specific
problems for the next generation of innovations,
working in close contact with markets and customers.
The new basic technologies needed for the relevant
solutions are again developed centrally.
The following examples illustrate the contribution
made by our regional research and development
laboratories:
• The Adhesive Technologies business unit offers its
customers cutting-edge technology development
and comprehensive design and application support. A global network of regional research and
development centers combined with local development and technology laboratories enables customers to access innovations in a wide range of
applications. Building on a broad portfolio of technologies, products are quickly adapted to specific
customer applications. Strategic global innovation
programs effectively drive future growth.
• The increasing importance of the emerging markets is also reflected in the R&D strategy of the
Beauty Care business unit. In the regional testing
and development centers in Shanghai, China, in
Johannesburg, South Africa, and in Bogotá, Colombia, individual products are developed that take
account of local distinctions and specific customer
needs. Air pollution caused by particulate matter
is a huge problem, especially in emerging mega
cities. A range of hair care products under the Extra
Care brand was developed specifically for the
Asian market to reduce particulate deposits on
hair and protect affected hair from damage.
• The Innovation Center of the Laundry & Home
Care business unit in Dubai has succeeded in
developing, for the first time, innovative liquid
detergents with particularly effective, thermally
stable enzymes for the Africa/Middle East region.
Transport and storage in extreme temperatures
cause classic enzymes to lose some of their performance capability, making them less effective at
removing stains. The patent-pending, unique
high-performance formulas contain tailored
enzymes that remain stable, even at the higher
temperatures that are common in the region. Our
consumers thus benefit from superior effectiveness and optimum stain removal.
The following examples demonstrate the success
achieved with our Open Innovation concept:
• The Adhesive Technologies business unit presented its Supplier Innovation Award 2016 to US
company NuSil, which specializes in innovative
silicone technologies. NuSil has been a partner for
many years, supplying customized polymers for
numerous new customer solutions to various strategic business units. These solutions range from
thermally-conductive adhesives and gap fillers
with a low volatile organic compound content, to
transparent liquid adhesives for use in the automotive and electronics sectors and in medical
technology.
• The Beauty Care business unit presented its Best
Innovation Contributor Award 2016 to Innospec, a
partner of many years, for its successful collaboration in the field of innovative shampoos that avoid
the use of the standard surfactant, ether sulfate.
Optimized combinations of surfactants have made
it possible to formulate shampoos with very caring
and, at the same time, good foaming properties.
This technology was first used in some of our US
salon brands before being adapted in 2016 for
global use in hair-cleaning products marketed
under the Bonacure brand in our Hair Salon business, and the Gliss Kur brand in our Branded Consumer Goods business.
• For the first time ever in 2016, the Laundry &
Home Care business unit presented its Best Innovation Contributor Award and its Sustainability
Award to one and the same development partner:
BASF received both accolades in recognition of its
special contribution to substituting phosphates in
Somat, Henkel’s global brand of automatic dishwashing products. Up to 40 percent of the formulas containing phosphates have been intelligently
revised. The innovative formulas combine standard ingredients with new phosphate substitutes
and high-performance polymers. The latter have
been tailored to specific needs in collaboration
with Henkel’s research experts and guarantee
superior performance in all respects: 100 percent
performance and zero percent phosphate.
Research and development worldwide
In addition to its central research laboratories,
Henkel maintains regional research and development sites in all regions around the world as hubs
for innovative problem-solving. Worldwide research
and development activity is managed globally by the
business units. Research-intensive basic technologies are developed at a central location with optimal
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material, the technology accelerates production
processes and reduces waste. Our portfolio of
sprayable sound deadeners also includes materials
based on renewable oils, and has been extended to
include a water-based acrylate system that is currently being developed through to series production on a pilot system operated by BMW Group for
the new BMW 3 series.
• In 1987, the first hairspray to be manufactured
without chlorofluorocarbons (CFCs) was introduced on the German market under the Drei
Wetter Taft brand. Since then, we have been striving continuously to further improve the sustainability profile of such products. The tinplate used
to make our Taft aerosol spray cans is derived from
steel. A new method of manufacturing the cans,
which we developed in partnership with our supplier Ardagh, now enables the manufacture of a
stiffer type of tinplate which has made it possible
to reduce the wall thickness and thus the weight of
the cans by 18 percent. The new tin cans are thus
bringing us considerably closer to our sustainability targets: They allow us to save up to 3,500 metric
tons of CO2 and to use around 900,000 cubic
meters less water each year. We plan to successively translate the resulting reduction in material
and water usage during the production phase to
other formats in the future. Ardagh was nominated
for the Sustainability Award 2016 for this contribution to sustainability.
• The use of renewable raw materials is a key aspect
of sustainable laundry detergents and household
cleaners. In an exclusive cooperation project
between Henkel and Aachen University – the
Henkel Innovation Campus for Advanced Sustainable Technologies, or HICAST for short –, we were
able to make promising progress in the field of
sustainable base raw materials. This work builds
on cellulose, which is the most common organic
compound on Earth. Intermediate products made
from biomass serve as basic modules from which
to develop innovative and sustainable ingredients
for laundry detergents and household cleaners. We
have managed to convert these intermediate products into innovative surfactants with property profiles that can be put to good commercial use. We
have already applied for patent protection of several substances. This constitutes a key contribution toward ensuring that the laundry detergents
and household cleaners of the future use less
resources and are properly sustainable.
Contributing to sustainability
Worldwide, growth and quality of life need to be
decoupled from resource use and emissions. Our
contribution here lies in the development of innovative products and processes that consume less
resources while offering the same or better performance. It is therefore both our duty and our desire to
ensure that all new products contribute to sustainable development in at least one of our six defined
focal areas. These are systematically integrated
within our innovation process. Early on, our researchers must demonstrate the specific advantages of their
project in regard to product performance, added
value for our customers, resource efficiency, and
social progress. We thus aim to combine product
performance and quality with social and environmental responsibility. Our focus in this respect is on
two goals. The first is to continuously improve the
sustainability profile of the raw materials we use, in
collaboration with our suppliers. The second is to
help our customers and consumers reduce energy
use and carbon dioxide emissions through our
innovations.
Life cycle analyses, profiles of potential raw materials and packaging options, and our many years of
experience in sustainable development help us to
identify and evaluate improvement opportunities
right from the start of the product development process. A key tool in this respect is our Henkel Sustainability#Master®. This evaluation system centers
around a matrix based on the individual steps in our
value chain and on our six focal areas. It shows
which areas are most relevant from a sustainability
perspective, and allows a transparent and quantifiable comparison to be made between two products
or processes.
Our scientists again made valuable contributions to
the company’s success through their innovations in
2016. A selection of particularly outstanding research
projects is provided in the examples below:
• For Adhesive Technologies, a leading role in sustainability constitutes a strategic competitive
advantage: Groundbreaking product innovations
and high-impact solutions offer our customers
added value. Automotive manufacturers, for example, use our sprayable sound deadeners. The liquid material is sprayed onto the floor, doors or
roof of a car body and weighs as much as 20 percent less than the bitumen mats otherwise used to
dampen noise and vibrations. As robotic automation allows pinpoint precision when applying the
84 Combined management report Henkel Annual Report 2016
was first used in the Bonacure Color Freeze salon
range before being successfully launched onto the
retail market in the Gliss Kur Ultimate Color range.
Users benefit from outstanding hair care combined
with long-lasting glossy color.
• Persil ProClean has successfully established the
Persil brand in the North American market. A special cold wash formula was developed to cater to
the American preference for short cycles and low
temperatures. The product is built around an innovative and unique blend of enzymes and surfactants that guarantees superior stain removal, even
in these special conditions. Together with its specific scent, the overall formula – which has also
been tailored to American preferences – guarantees fiber-deep clean, brilliantly white and noticeably fresh laundry. Persil’s superior performance
has also been confirmed by external sources: On
the first-time inclusion of the top variant, Persil
ProClean Liquid 2in1, in annual assessments
conducted by a leading US test journal – which
was in 2015 following the product’s launch – it was
ranked the best laundry detergent ever trialed in
the USA.
We hold nearly 8,100 patents to protect our technologies around the world. Approximately 5,400 patents
are currently pending. And we have registered just
over 1,450 design patents to protect our intellectual
property.
Further information on our research and development activities can be found on our website
www.henkel.com/brands-and-businesses
Fritz Henkel Award for Innovation
Each year we select a number of outstanding developments for our Fritz Henkel Award for Innovation.
In 2016, the innovation award went to three international, interdisciplinary project teams for the
realization and successful commercialization of
the following concepts:
• The trend toward lightweight construction in the
automobile industry is leading to increasing usage
of light metals. Aluminum, particularly, offers
manufacturers and suppliers new scope for
functionality and design, as well as saving weight.
Adhesive Technologies has developed a new
generation of coatings for aluminum applications
under its Bonderite brand. Pre-treating aluminum
wheels – which are increasingly becoming standard
even in smaller vehicle classes – is hugely important to ensuring optimum corrosion protection.
Bonderite M-NT 4595 is a tailored chrome-free
hybrid coating offering optimum adhesion to the
light metal. With improved process characteristics,
it also reduces the overall process cost and the
quantity of waste products. Bonderite M-NT 4595
thus enables the development of new aluminum
wheels with improved properties and less weight,
and is used by the world’s leading manufacturers.
• Many years of researching the structure of the hair
matrix and hair keratins provided the basis for
developing our patent-pending pH4.5 technology
combining dual metal ions with specific organic
acids to strengthen the keratin in the hair matrix.
As a result, color pigments are locked inside the
hair, giving users particularly long-lasting coloration. In our Hair Care business, this technology
www.glisskur.de www.persilproclean.com
www.schwarzkopf-professional.de
www.henkel-adhesives.com/
aluminum-wheels
Fritz Henkel Award for Innovation 2016
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In addition to digital communications, we strive to
optimize our approach to consumers and craftsmen
through the continued use of conventional advertising coupled with measures to attract our target
groups at the point of sale. Leveraging our close customer relationships and our comprehensive technical expertise, we continue to offer tailored solutions
and innovative branded products that provide sustainable added value for our customers.
Within the Beauty Care business unit, our focused
portfolio of brands with unique, distinct brand equities forms the basis for leading, consumer-relevant
innovations in our Branded Consumer Goods and
Hair Salon business. We develop new products and
launch strategies with as much global synergy as is
possible, while implementing them as locally as is
necessary. Through our customer and consumer
proximity, we are able to identify global trends at an
early stage and quickly respond to these on an individual basis with innovative products. In consumer
marketing, advancing digitalization alongside classic
advertising and point of sale activities enables a significant increase in media efficiency. With personalized 1:1 experiences, we target the right consumer
group with the right message in the right environment and also accelerate efficient re-targeting.
We not only specifically choose which consumers
we communicate with and by what means, but also
which sales channels are of strategic relevance for
us. We leverage our category leadership positions
both in brick and mortar retail and in the field of
eCommerce, also adding value for our online customers through our shopper knowledge and our
expertise.
Having hosted more than 200 customer visits in our
“Beauty Care Lighthouse,” which opened in Düsseldorf in 2012, we have been able to consistently
intensify our customer focus. The Lighthouse was
thoroughly revamped in 2016 and now offers our
customers from around the world an interactive
experience of all our beauty competences with
stronger focus on digitalization.
We are also committed in our Hair Salon business to
close partnership and cooperation with our customers. With our globally established Schwarzkopf Academies, we offer value-adding services in the form of
state-of-the-art seminars and ongoing further trainMarketing and distribution
We put our customers and consumers at the center
of what we do. We offer them maximum benefit,
quality and service, together with attractive innovations, brands and technologies to create sustainable
value.
As a market leader, Adhesive Technologies creates
high-impact solutions worldwide through groundbreaking innovations and close partnerships with its
customers. The portfolio is aligned to the globally
specialized markets for adhesives, sealants and functional coatings.
We develop the marketing strategies for our strong
brands and leading technologies at both the global
and regional level. The measures derived from our
planning are then implemented locally. Within our
branding strategy, we consistently leverage our five
global technology cluster brands in the industrial
markets and our four brand platforms in the consumer business.
Our relationships with around 130,000 direct industry and retail customers are managed primarily by
our own sales teams, while our retail customers
service the needs of private users, craftsmen and
smaller industrial customers.
We foster long-term relationships with our customers through our team of around 6,500 technical
experts. We therefore have an in-depth understanding of the various applications. In light of the significant complexity of many of our solutions and technologies, technical customer service and thorough
user training are of key importance. Our global presence enables us to provide technical services to customers worldwide as well as in-depth product training on site.
As part of our worldwide digitalization strategy, we
have rolled out a global process for further improving
the efficiency of our digital customer relationship
management. This lead management system enables
us to reach existing and potential customers very
quickly to provide them with relevant technical and
commercial information. In addition, we already offer
our industrial customers a successful eCommerce
platform in the shape of our Henkel POD. In future, we
plan to further develop this approach, based on an
integrated concept that focuses on our customers.
specialists serving
our Adhesive
Technologies
customers.
direct industry and
retail customers.
6,500
130,000
Around
Around
86 Combined management report Henkel Annual Report 2016
domain. Moreover, the credible implementation of
our sustainability strategy strengthens both our
brands and the reputation of our company in the
marketplace.
With decades of experience in aligning our activities
to sustainable development, we are able to position
ourselves as a leader in the field and as a partner able
to offer our customers future-capable solutions.
And we cooperate closely with our customers in
trade and industry in the development and implementation of viable concepts.
In order to convey to our customers and consumers
the added value of our innovations – best possible
performance combined with responsibility toward
people and the environment – we use direct product
communication supported by more detailed information provided in new media such as electronic
newspapers and online platforms, as well as events
and campaigns implemented together with our
partners.
We have combined these approaches in a joint program for our three business units: “Say yes! to the
future” provides sales training for our employees and
strengthens our cooperation with our trade
customers.
We intend to increase our involvement in the development of appropriate measurement and assessment
methods in order to facilitate effective, credible communication of our contributions to sustainability.
To this end, we have developed a variety of tools,
which are integrated within our Henkel Sustainability#Master®. We have launched various projects in
collaboration with selected partners to improve and
standardize measurement and assessment methods.
For further information on the products and brands
of our three business units, please go to our website
www.henkel.com/brands-and-businesses
ing opportunities, with the focus on the professional
hairdresser’s role as an entrepreneur.
In the Laundry & Home Care business unit, we
develop our marketing strategies and product innovations for our strong brands on a global scale, adapting them to regional consumer needs and market
conditions, and implementing them at the local
level. We thus ensure central, efficient management
of our brands and an innovation process that enables
us to both recognize global consumer trends early on
and implement new products quickly while at the
same time remaining closely attuned to local needs.
We are steadily increasing the use of digital media
communication – particularly social media – to
develop our media strategies and engage our consumers in the most effective way possible.
More than 150 customers have already visited our
Global Experience Center, which opened in 2015,
keen to learn more about the latest Laundry & Home
Care concepts. Offering a basis for future partnerships, the innovative platform brings together customers from a wide range of global and local spheres.
Customized solutions are developed to match specific partner requirements and to identify opportunities to create value together. Offering various experience stations, this customer center showcases the
business unit’s expertise and innovative concepts –
from new product offerings and digitalization to
sustainability and shopper marketing. Each station
is designed to be interactive, allowing visitors to
explore the world of laundry and home care with all
of their senses. The business unit uses its 360 Degree
Customer Collaboration concept to ensure each customer relationship develops in as many areas as
possible.
We have continued to expand our expertise in the
areas of shopper intelligence and shopper marketing
as a key strength in both traditional sales and
eCommerce.
The importance of sustainability in our relationships
with customers and consumers continues to grow in
all three business units. Our customers expect
their suppliers to ensure compliance with global
environmental, safety, and social standards. Our
standards and management systems, our many years
of experience in sustainability reporting, and excellent appraisals by external rating agencies all help us
to convince our audience of our credentials in this
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Adhesive Technologies
1 Adjusted for one-time charges/gains and restructuring expenses.
Automotive electronics
Our broad portfolio of products
under the Loctite brand supports a
wide range of digital innovations in
automotive construction. Manufacturers and suppliers around the
world rely on our high-performance
solutions to overcome their network,
eMobility and autonomous driving
challenges – whether in sensors for
assistance systems, camera modules,
digital instruments, battery technologies or printed electronics.
Metal packaging
Our new lubricants and cooling
agents in the Bonderite L-FM series
enable our Metal Packaging customers to raise both their productivity
and sustainability. With an improved
biostable formulation, the products
increase machine capacities to as
many as 3,000 cans per minute. At
the same time, their use reduces
scrap rates, which means less waste.
www.henkel-adhesives.com/
metal-packaging-solutions
Pattex Re-New
Pattex Re-New makes bathroom
joints look as good as new – without any need to replace the old sealant. The innovative special silicone
comes in a practical tube with an
integrated smoothing tool for quick
and easy single-step application on
top of the old joints. It also stops
mildew spreading.
www.pattex.de
Sales growth
Adjusted 1
operating profit
Adjusted 1
return on sales
organic sales
growth
adjusted 1 operating profit (EBIT):
up 6.2 percent
adjusted 1 return on sales (EBIT):
up 1.1 percentage points
Key financials * 66
| in million euros | 2015 | 2016 | +/– |
| Sales | 8,992 | 8,961 | – 0.3 % |
| Proportion of Henkel sales | 50 % | 48% | – |
| Operating profit (EBIT) | 1,462 | 1,561 | 6.8 % |
| Adjusted operating profit (EBIT) | 1,534 | 1,629 | 6.2 % |
| Return on sales (EBIT) | 16.3 % | 17.4% | 1.1 pp |
| Adjusted return on sales (EBIT) | 17.1 % | 18.2% | 1.1 pp |
| Return on capital employed (ROCE) |
18.4 % | 19.9% | 1.5 pp |
| Economic Value Added (EVA®) | 626 | 719 | 15.0 % |
pp = percentage points
* Calculated on the basis of units of 1,000 euros;
figures commercially rounded.
Sales development * 67
| in percent | 2016 |
| Change versus previous year | –0.3 |
| Foreign exchange | –3.5 |
| Adjusted for foreign exchange | 3.2 |
| Acquisitions/divestments | 0.4 |
| Organic | 2.8 |
| of which price | 0.3 |
| of which volume | 2.5 |
* Calculated on the basis of units of 1,000 euros.
Highlights
+2.8 % €1,629 m 18.2 %
88 Combined management report Henkel Annual Report 2016
Economic environment
The economic environment for the Adhesive Technologies business unit was characterized by subdued
growth in the relevant markets, with expansion in
the key industrial sectors lower than initially forecasted due to continuing political and economic
uncertainties. Although growth in emerging markets
was only moderate, it continued to drive global economic development.
Despite this difficult market environment, the Adhesive Technologies business unit continued to grow,
with overall sales outperforming market expansion,
supported by its globally leading positions, active
portfolio management and innovative product
solutions.
Business activity and strategy
As a market leader, the Adhesive Technologies business unit creates high-impact solutions worldwide
through groundbreaking innovations and close partnerships with its customers. With our leading technologies, strong brands and the competence of our
global expert teams, we supply tailor-made products
that create competitive advantages and sustainable
value for our customers.
Our market leadership and global presence enable us
to offer solutions and systems across all business
areas and regions for adhesives, sealants and functional coatings. Our products are an essential part of
industrial products and consumer goods, and make
them better, safer and more sustainable. The acquisition of leading technologies that complement our
portfolio and offer synergy potential represents an
additional attractive option for further profitable
business expansion. Our acquisitions to date demonstrate our ability to consistently integrate newly
acquired businesses quickly and successfully on the
basis of our standardized business processes.
In the Packaging and Consumer Goods Adhesives
business area, we work with major brand manufacturers and international customers to develop innovative and sustainable solutions for food packaging
and consumer goods. Our technical customer service
makes comprehensive applications expertise globally available. Strategically cooperating with partners
along the value chain also makes a significant contribution to creating more value and helping our customers to both satisfy the manifold needs of consumers and comply with regulations.
In the Transport and Metal business area, we provide
our customers in the automotive, aircraft and aerospace, and metal processing industries with outstanding system solutions, a comprehensive technology portfolio, and specialized technical services.
We work closely with major international manufacturers and their suppliers. Through our early involvement in design and development processes, we are
able to create innovative, customized solutions to
new challenges – for example, in lightweight construction or eMobility.
In the General Industry business area, we offer our
customers a comprehensive portfolio of products for
the manufacture and maintenance of durable goods.
Our customers range from household appliance
manufacturers through to operators of large-scale
industrial plants, and service specialists operating in
all branches of industry. In addition to providing
direct support for our customers from industry, we
can also tap into a global network of trained distribution partners. We raise the value added for our customers while securing competitive advantages and
growth by working with industrial clients on the
development of high-impact adhesive solutions, and
by regularly and systematically training users.
Our Electronics business area offers customers from
the electronics industry a specialized portfolio of
innovative high-technology adhesives and materials
for the manufacture of microchips, electronic assemblies and thermal management systems. We combine our expertise with targeted investments in our
technology portfolio to develop new solutions for
the growing challenges encountered in the fields of
digital networking and the Internet of Things. Our
global presence enables us to collaborate closely
with development centers of major electronics firms
and provide support for their production processes.
Our Adhesives for Consumers, Craftsmen and Building business area markets an extensive range of
brand-name products for private, trade and construction users. We offer innovative products and specific
system solutions based on our globally strong
brands, and secure competitive advantages by
quickly and efficiently translating the latest technological developments from our industrial business
Top brands
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into corresponding products for consumers, craftsmen and the building industry. Our distribution networks are aligned to the different target groups.
Active portfolio management plays a central role in
continuing our profitable and sustainable growth. We
manage our businesses guided by specific business
plans to take the best possible advantage of market
opportunities, and we invest our resources with a
targeted, differentiated approach. We aim primarily
to strengthen organic growth and therefore invest in
attractive growth markets and advancing our technology expertise.
The ongoing expansion of our innovation leadership
is a further key component of our growth strategy. In
2016, the proportion of sales from products successfully launched onto the market in the last five years
was around 30 percent. This is achieved through
consistent implementation of our innovation strategy that uses especially developed programs, innovation processes and employee initiatives to drive our
profitable growth. We focus our research and development activities on top innovation programs, and
on tailor-made high-impact customer solutions in
attractive markets. We further focus on strategic
innovations by systematically searching for profitable new technologies and business opportunities in
promising adjacent markets. To further develop new
business ideas, we cooperate with innovative startups and invest in venture capital funds with specific
expertise in material sciences and digitalization.
Collaborating with strategic suppliers and focusing
strictly on sustainability are further key drivers of
innovation and growth.
We invest continually in expanding and strengthening our top brands. In 2016, we generated more than
80 percent of all sales with our five technology cluster brands in the industrial business, and four strong
brand platforms in the consumer business. We are
focusing on expanding the leading position of Loctite
as the world’s largest adhesive brand through a regular flow of innovations and high-performance solutions for both industrial customers and consumers.
In line with our acquisition strategy, we strengthened our portfolio in 2016 with the acquisition of
the tile adhesives business and associated brands of
Colombian company Alfagres S.A. We also completed
the acquisition of all shares in Zhejiang Golden Roc
Chemicals JSC, thus expanding our portfolio of
superglues in China.
Sales and profits
In 2016, the Adhesive Technologies business unit
recorded solid organic growth while raising adjusted
return on sales to 18.2 percent.
Organically (i.e. adjusted for foreign exchange and
acquisitions/divestments), sales grew by 2.8 percent,
thus outperforming the market. Growth was driven
primarily by increased volumes.
In the following, we comment on our organic sales
performance in the regions.
Year on year, sales growth was strong in the emerging
markets, with double-digit increases in the Latin
America region and strong growth in the Eastern
Europe region. The Asia (excluding Japan) region
recorded a solid increase in sales. Sales performance
in the Africa/Middle East region was positive, despite
the difficult ongoing political situation and subsequent deterioration in the economic conditions
prevailing in parts of the region.
Our sales in the mature markets were on a par with
the previous year. Sales performance in North America was positive, while sales in the Western Europe
region reached the prior-year level. The mature markets in the Asia-Pacific region recorded lower sales
growth year on year.
Adjusted operating profit increased to 1,629 million
euros, its highest level ever. Adjusted return on sales,
at 18.2 percent, was higher year on year. The Adhesive Technologies business unit was again able to
increase gross margin and offset negative transactional currency effects through ongoing measures to
optimize organizational and administrative strucorganic sales
growth.
+2.8%
innovation rate 1.
Around 30%
1 Percentage share of sales generated with new products launched
onto the market within the last five years.
2012
2013
2014
2015
2016
0 2,500 5,000 7,500 10,000
8,117
8,127
8,992
8,961
Sales Adhesive Technologies
in million euros 68
8,256
90 Combined management report Henkel Annual Report 2016
tures and by enhancing production and supply chain
efficiency. Lower prices for direct materials also had
a positive impact.
At 11.0 percent, net working capital as a percentage
of sales was below the already low level of the prior
year. Return on capital employed (ROCE) increased
year on year to 19.9 percent. Economic Value Added
(EVA®) increased by 93 million euros versus the previous year, to 719 million euros.
Business areas
In the following, we comment on the organic sales
performance of our business areas.
Industrial Adhesives
Sales in the Packaging and Consumer Goods Adhesives business area showed positive performance
versus the previous year. Packaging adhesives for use
in the food and beverage industries, and especially
our leading food safety products, were an important
contributor to this growth. We work closely in this
field with international customers, globally active
brand manufacturers, institutes and the authorities
to enhance consumer safety around the globe. Our
innovations are always tailored to growing consumer
needs – for more convenience, for example – thereby
strengthening the products and brands of our customers. New applications for our structural adhesives for furniture and building components enabled
us to tap further growth potential.
We posted a strong increase in sales in our Transport
and Metal business area. Our growth in this business
area was driven primarily by our business with automotive manufacturers and their suppliers. Our broad
product and technology portfolio enables us to provide customized solutions for assemblies such as
drive trains. In doing so, we enable our customers to
develop lightweight construction, downsizing and
eMobility innovations for both conventional and
electric drive trains.
The General Industry business area posted a positive
sales performance, again mainly due to activities
involving customers in various industrial markets
and the vehicle repair and maintenance sector.
Working closely with our key accounts, we develop
customized integrated solutions to reduce noise and
improve thermal performance – in household appliances and consumer goods, for example. In addition
to the improved performance capabilities of their
products, our customers also benefit from greater
automation, process efficiency and sustainability.
Sales development in the Electronics business area
was positive year on year, driven mainly by our business with consumer electronics manufacturers and
by thermal management products for the electronics
industry. We are stimulating new growth with our
high-impact solutions for the rapidly expanding
automotive electronics market, to which we can supply a broad portfolio of products that manufacturers
and components suppliers are increasingly using in
sensors, assistance systems, displays, and battery
technology, enabling the development of new digital
networks and driverless vehicle systems.
Adhesives for Consumers, Craftsmen and Building
Sales performance in the Adhesives for Consumers,
Craftsmen and Building business area was positive.
The increase was based in part on our construction
industry business. Here we further strengthened our
portfolio with the acquisition of the tile adhesives
business and associated brands of Alfagres S.A. in
Colombia. We also strengthened our position with
respect to DIY products by strategically cooperating
with one of our key European retail customers.
This is enabling us to tap new local growth potential,
especially in Eastern Europe.
Capital expenditures
Investment in property, plant and equipment totaled
187 million euros in 2016 (2015: 227 million euros),
with the focus on expanding production capacity,
mainly in the emerging markets, and building manufacturing facilities aligned to specific customer
requirements.
investments in
property, plant
and equipment.
€187m
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Taft Fullness
The first Taft range for up to four
times fuller hair: Taft Fullness with
Biotin & Boost Complex for tangibly
fuller hair and visible texture –
developed specifically for women
with fine or thinning hair. The innovative formula increases the distance between the individual hair
fibers, while guaranteeing longlasting 48-hour hold.
www.taft.de
Fa Dry Protect
New Fa Dry Protect has been specifically developed for reliable protection to give increased confidence
in the face of everyday challenges.
Its innovative Micro-Absorber Technology absorbs perspiration for
48 hours of wetness protection. For
an immediately fresh feeling accompanied by a delicate, powdery-fresh
scent of Cotton Mist or Linen Touch.
www.int.fa.com
Gliss Kur Magnificent Strength
Innovation from the Hair Repair
Expert: Gliss Kur Magnificent
Strength for weak, depleted hair.
The range featuring powerful
Tri-Protein Complex gives the hair
an effective protein kick, strengthening hair and protecting the hair
cuticle – for beautiful hair that
is up to 20 times stronger.
www.gliss.com
Beauty Care
Highlights
Sales growth
+2.1 %
Adjusted 1
operating profit
€647 m
Adjusted 1
return on sales
16.9 %
organic sales
growth
adjusted 1 operating profit (EBIT):
up 6.1 percent
adjusted 1 return on sales (EBIT):
up 1.0 percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
Key financials * 69
| in million euros | 2015 | 2016 | +/– |
| Sales | 3,833 | 3,838 | 0.1 % |
| Proportion of Henkel sales | 21 % | 20% | – |
| Operating profit (EBIT) | 561 | 526 | –6.2% |
| Adjusted operating profit (EBIT) | 610 | 647 | 6.1% |
| Return on sales (EBIT) | 14.6 % | 13.7% | –0.9pp |
| Adjusted return on sales (EBIT) | 15.9 % | 16.9% | 1.0pp |
| Return on capital employed (ROCE) |
20.4 % | 18.2% | –2.2pp |
| Economic Value Added (EVA®) | 328 | 266 | –18.7% |
pp = percentage points
* Calculated on the basis of units of 1,000 euros;
figures commercially rounded.
Sales development * 70
| in percent | 2016 |
| Change versus previous year | 0.1 |
| Foreign exchange | – 3.4 |
| Adjusted for foreign exchange | 3.5 |
| Acquisitions / divestments | 1.4 |
| Organic | 2.1 |
| of which price | 0.4 |
| of which volume | 1.7 |
* Calculated on the basis of units of 1,000 euros.
92 Combined management report Henkel Annual Report 2016
Economic environment
In 2016, growth in the world cosmetics sector continued to slow down in markets of key relevance, with
developments in some major markets recessionary.
Despite a difficult and highly competitive environment, the Beauty Care business unit was able to outpace market growth.
In our Branded Consumer Goods business, the
mature markets in particular showed weak development. In Western Europe especially, the environment was characterized by a further intensification
of promotional activities, with rising price pressure
and declining average prices. However, the markets
in the North America region posted positive growth.
Within the emerging markets, the Africa/Middle East
region exhibited continuing growth, although the
rate was once again lower year on year. Business
growth in Asia (excluding Japan) also slowed due
to weaker developments in relevant markets in
China. The markets in Latin America showed a positive development. The markets of the Eastern Europe
region exhibited moderate growth under persistently
difficult trading conditions.
The professional hairdressing market remained
under pressure in 2016 as customers continued to
exhibit restraint. Despite this difficult market environment overall, we were again able to exceed the sales
level of the previous year and to further extend our
position as the world number 3 in the hair salon field.
Business activity and strategy
Worldwide, the Beauty Care business unit is successfully active in the Branded Consumer Goods business
area with Hair Cosmetics, Body Care, Skin Care and
Oral Care, as well as in the professional Hair Salon
business.
To further drive the growth of our Beauty Care business, we place the customer and the consumer at the
center of everything we do. At the focus of our growth
strategy are specific choices regarding customers
and channels, category prioritization and the
central management of our global brands portfolio.
This enables us to pursue targeted investments in
segments offering above-average growth and
profitability.
We strengthen our brand investments on a global
scale through strict cost management, an improved
portfolio structure, complexity reduction and
premiumization.
At the center of our strategy is our drive for organic
growth, supported in particular by innovations and
our strong brands. Our innovation approach focuses
on fewer but bigger, better and more margin-accretive innovations, with early recognition and identification of relevant consumer trends, a conscious
commitment to game-changing offerings and rapid
international rollouts all key contributors to success. Again in 2016, we achieved an innovation rate
of more than 45 percent.
By continuously strengthening our top brands, we
were able to further boost the sales generated by our
top 10 brands, with disproportionate growth in those
segments of most importance to us. In 2016, our top
10 brands again contributed over 90 percent of our
sales revenues. In addition to strengthening our
brands, we focus particularly on the growth potential
available in our key accounts.
We also intend to further leverage the potential of
digitalization. With determined acceleration of the
digital transformation process across all areas, we
can better interact with consumers, transfer our
shopper knowledge and category captaincies to
digital channels, and organize manufacturing and
logistics more efficiently.
We supplement organic growth with carefully
selected acquisitions. In line with our strategy, we
have expanded our portfolio in attractive categories
through the acquisition of a range of leading hair care
brands in Africa/Middle East and Eastern Europe.
1 Percentage share of sales generated with new products launched
onto the market within the last three years.
Top brands
innovation rate 1.
Over 45%
Henkel Annual Report 2016 Combined management report 93
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Sales and profits measures to reduce costs and enhance production
and supply chain efficiency enabled us to extensively offset the effects on gross margin exerted by
negative foreign exchange movements and sustained
promotional intensity.
Compared to the already low level of the previous
year, net working capital as a percentage of sales
improved further to 0.6 percent. At 18.2 percent,
return on capital employed (ROCE) was lower compared to the 2015 figure. Economic Value Added
(EVA®) decreased by 62 million euros to 266 million
euros.
Business areas
In the following, we comment on the organic sales
performance of our two business areas.
Branded Consumer Goods
Our Branded Consumer Goods business posted
another solid increase in sales in 2016. Growth was
driven, in particular, by successful innovations
under the brands Schwarzkopf, Syoss and Dial, and
by the introduction of our Schwarzkopf brand
throughout North America. The Hair Cosmetics
business performed especially well, with aboveaverage sales growth and success in generating
market momentum.
We introduced a number of compelling innovations
in the strategically important Hair Colorants business. Syoss Gloss Sensation, the first ammonia-free
intensive tint under the Syoss brand, offers a gentle
alternative to classic coloring. Schwarzkopf Palette
Intensive Color Creme with its intensive, caring
hair mask with Keratin Complex provides long-lasting color intensity and healthy looking hair. New
Schwarzkopf Brillance contains a highly effective
technology for the prevention of colorant fade,
ensuring particularly long-lasting color intensity.
The formulation with Diamond Gloss Serum also
gives the hair up to three times more color gloss
compared to untreated hair.
We strengthened our Hair Care business with the
launch of new Gliss Kur Magnificent Strength with
Tri-Protein Complex. The range with its Express
Repair Conditioner provides for beautiful hair that is
up to 20 times stronger. Positive momentum was
also generated by the Syoss line Ceramide Complex
formulated especially for weak and brittle hair. The
innovative Ceramide Keratin Complex gives hair up
to ten times more strength. With Schauma 7 Blossom
Oil, we have launched a new line offering a formula
Sales Beauty Care
in million euros 71
2012
2013
2014
2015
2016
0 1,000 2,000 3,000 4,000
3,510
3,547
3,833
3,838
3,542
organic sales
growth.
+2.1%
The Beauty Care business unit achieved solid organic
sales growth and an excellent increase in adjusted
return on sales in the reporting period, thus continuing to build on the profitable growth of previous years.
Organically (i.e. adjusted for foreign exchange and
acquisitions/divestments), sales increased by 2.1 percent. Organic growth was again higher than the rate
of expansion in our relevant markets, with sales
being driven by both price and volume.
In the following, we comment on our organic sales
performance in the regions.
From a regional perspective, business performance
was very strong in the emerging markets. The Latin
America region posted double-digit sales growth. Sales
development in the region of Asia (excluding Japan)
was positive. In the Africa/Middle East region the
business unit matched its success of previous years,
recording a positive growth. Driven by business
development in Russia, we achieved double-digit
growth in the Eastern Europe region.
The mature markets continue to be impacted by
fierce crowding-out competition and intense price
and promotional pressures. In this challenging market environment, sales declined slightly year on
year. While in the Western Europe region and in the
mature markets of the Asia-Pacific region, sales were
lower year on year, we were able to increase revenues
in the North America region, achieving solid growth
there versus the previous year.
Adjusted operating profit increased in the reporting
period to 647 million euros. Adjusted return on
sales rose by 1.0 percentage points to a new high of
16.9 percent. Our innovation initiatives and ongoing
94 Combined management report Henkel Annual Report 2016
that penetrates deep into the hair structure and
repairs the hair at every layer. The Hair Care business
was additionally boosted by the innovation Schwarzkopf Men ZincPT, an anti-dandruff treatment for the
male market. Used regularly, this offers men’s hair
a reduction in visible dandruff of up to 100 percent
combined with an immediate freshness kick.
Within the Hair Styling business, the Taft brand was
able to further expand its leading market position.
The new line, Taft Fullness, leaves hair noticeably
fuller with visible texture and good manageability.
The new Taft Power Electro series offers the strongest
Taft hold ever. And within our trendsetting brand
Got2b, we developed a new line of products under
the name Glam Force, which offers 48 hours of ultrastrong, glamorous hold with protection against
flyaways.
In Body Care, we profited from the success of the
new Fa shower gels Coconut Water and Coconut Milk
with coconut extract for a perfect combination of
care and a refreshed feeling for the skin. The innovative antiperspirant Fa Dry Protect continued to show
positive development. The formula based on MicroAbsorber technology offers an immediate feeling of
dryness and 48 hours of protection from underarm
wetness. North America saw the launch of the body
care series Dial Soothing Care. The body wash with
collagen is pH-neutral on the skin and imparts a
soothing effect. Also launched onto the market was
the deodorant stick Right Guard Xtreme Odor Combat, which successfully combats body odor for up to
96 hours.
The Skin Care business was expanded through the
introduction of Diadermine Lift+ Super Corrector,
our first anti-aging innovation capable of combating
both existing and future pigmentation spots. We also
offer a series especially formulated for mature dry skin
in the form of the innovation Diadermine Nutrition
Expert 3D.
Within the Oral Care business we have strengthened
the freshness variants of the Theramed 2in1 line with
improved formulations. The new technology creates
a three times fresher feel while also ensuring a thorough antibacterial clean. We continue to set new
standards for our Denivit brand: After just 10 days,
the innovation Pro-Laser White removes up to
90 percent of stains discoloring the teeth.
Hair Salon business
The professional hairdressing market remained
under pressure in 2016 as customers continued to
exhibit restraint. Nevertheless, our sales figures
experienced positive development, with major contributions coming from, in particular, Schwarzkopf
Professional and the brands Sexy Hair, Alterna and
Kenra that we acquired in North America in 2014.
Within the Hair Care category, Schwarzkopf Professional generated strong momentum with the BC
Bonacure brand. New Schwarzkopf Professional BC
Bonacure Repair Rescue with patented Reversilane
technology durably restores hair fibers while sealing
the hair surface with a protective shield. In the Colorants category, Schwarzkopf Professional launched
new Igora Royal Highlifts with Fibre Bond technology onto the market. These products minimize hair
breakage while producing the coolest blond tones
from Igora of all time. In the Styling category, the
brand Osis+ with its slogan “Made to Create” offers a
complete product range for the creation of uniquely
individual hair styles whenever required.
Capital expenditures
Investments focused on efficiency improvements
and optimization in our production and distribution
processes and the further expansion of our manufacturing capacities, especially the scheduled expansion
of our plant in Russia. Further capital expenditures
went into the environmental sphere with the refurbishment of the wastewater treatment facilities
located at our factories in Slovenia and the USA. In
all, we invested 54 million euros in property, plant
and equipment compared to 61 million euros in the
previous year.
investments in
property, plant
and equipment.
€54 m
Henkel Annual Report 2016 Combined management report 95
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Somat Phosphate-free
Henkel’s first automatic dishwashing
product that is free of phosphates
yet offers 100-percent performance.
Somat Phosphate-free has a new,
patented formula that delivers the
ideal combination of environmental
compatibility and gleaming clean
results. Innovative Somat Phosphate-free has been introduced in
Germany and in more than 20 countries in Western and Eastern Europe.
www.somat.de
Perwoll Renew 3D
New and unique fine fabric detergent formula with color renewal
effect: Perwoll Renew 3D rejuvenates
fabric colors in three dimensions –
intensity, color accuracy and brightness. The innovative formula has
been introduced in more than 25 countries in Eastern and Western Europe
and Latin America, and reinforces
Perwoll’s global leadership in our
active markets. www.perwoll.de
Bref Power Aktiv
Bref Power Aktiv is the global number one in the WC rim block segment
of our active markets. Its tried and
trusted combination of four active
agents is coupled with a longer-lasting fragrance. The formula has been
enriched with a “power core.” New
Bref Power Aktiv with “fragrance
boost” has been launched in more
than 60 countries across the world.
www.breftoiletcare.com.au
Laundry & Home Care
Highlights
Sales growth
+4.7%
Adjusted 1
operating profit
€1,000 m
Adjusted 1
return on sales
17.3 %
organic sales
growth
adjusted 1 operating profit (EBIT):
up 13.7 percent
adjusted 1 return on sales (EBIT):
up 0.2 percentage points
1 Adjusted for one-time charges/gains and restructuring expenses.
Key financials * 72
| in million euros | 2015 | 2016 | +/– |
| Sales | 5,137 | 5,795 | 12.8 % |
| Proportion of Henkel sales | 28 % | 31% | – |
| Operating profit (EBIT) | 786 | 803 | 2.2% |
| Adjusted operating profit (EBIT) | 879 | 1,000 | 13.7% |
| Return on sales (EBIT) | 15.3 % | 13.9 % | – 1.4 pp |
| Adjusted return on sales (EBIT) | 17.1 % | 17.3 % | 0.2 pp |
| Return on capital employed (ROCE) |
21.1 % | 15.7 % | – 5.4 pp |
| Economic Value Added (EVA®) | 469 | 344 | –26.8% |
pp = percentage points
* Calculated on the basis of units of 1,000 euros;
figures commercially rounded.
Sales development * 73
| in percent | 2016 |
| Change versus previous year | 12.8 |
| Foreign exchange | – 4.0 |
| Adjusted for foreign exchange | 16.8 |
| Acquisitions/divestments | 12.1 |
| Organic | 4.7 |
| of which price | 0.0 |
| of which volume | 4.7 |
* Calculated on the basis of units of 1,000 euros.
96 Combined management report Henkel Annual Report 2016
Economic environment
In 2016, the relevant world market for laundry and
home care showed moderate growth. Despite
renewed fierce price and promotional competition
in our relevant markets, our growth again significantly outpaced the relevant global market in 2016.
Both the sustained success of our strong brands and
the successful global introduction of our innovations
contributed to this solid performance.
Market performance in the mature markets was
slightly positive. In Western Europe, the relevant
market for laundry and home care products remained
flat, while growth in North America was moderate.
Developments in the emerging markets varied. Our
relevant markets in the Africa/Middle East region
declined as a result of the challenging market environment. The market in Eastern Europe recorded
solid growth. In Latin America, performance in the
relevant market for laundry and home care products
was also solid.
Business activity and strategy
The Laundry & Home Care business unit sells laundry detergents and household cleaners around the
globe. The Laundry Care business includes not only
heavy-duty and specialty detergents but also, in
particular, fabric softeners, laundry additives, and
other fabric care products. The product portfolio of
our Home Care business encompasses hand and
automatic dishwashing products, household cleaners for the bathroom and WC, and surface, glass and
specialty cleaners. We also offer air fresheners and
insect control products for household applications.
Our aim is to continue generating profitable growth
in the future through ongoing expansion of our current business and targeted acquisitions.
Our strategy of profitable growth is supported particularly by our leading brands and technologies, and
builds on winning innovations that offer added value
for consumers. Key elements of our strategy also
include our strategic partnerships with customers
and the expansion of our digital business activities.
Prioritizing categories and centrally steering our
global brand portfolio helps us to direct our investments specifically toward those segments that offer
growth and profitability, enabling us to generate
above-average sales increases with our top brands
and in our most important market segments. Investments in our brands are also strengthened by further
optimizing our use of resources.
In 2016, we generated more than 80 percent of our
sales with our top 10 brand clusters. A brand cluster
comprises individual global and local brands that
share a common brand positioning internationally.
By adopting this approach, we generate synergies in
our marketing mix.
Our efficient marketing and distribution processes
enable us to identify consumer trends at an early
stage and bring a number of relevant innovations to
market. Accordingly, successful product launches
again contributed substantially to our positive financial performance in the year under review. Our innovation rate in 2016 was 43 percent. Looking ahead,
we plan to further strengthen our differentiation and
increase our agility in a fiercely competitive
environment.
Our global strategy builds on both organic growth
and acquisitions. Our aim is to invest in attractive
category positions so as to accelerate our growth in
profitable segments. In 2016, we strengthened our
business through attractive acquisitions in both
emerging and mature markets, most importantly
through that of The Sun Products Corporation, as
a result of which we now rank number 2 in the
North American laundry and home care market.
Integration of our acquired businesses is proceeding
successfully and according to plan.
innovation rate 1.
43%
Top brands
1 Percentage share of sales generated with new products launched
onto the market within the last three years.
Henkel Annual Report 2016 Combined management report 97
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
annual high of 17.3 percent (previous year: 17.1 percent). Gross margin was lower year on year due to
acquisitions.
Excluding the acquisitions in 2016, we were able
to significantly improve net working capital as a
percentage of sales. Taking the acquisitions into
account, net working capital as a percentage of sales
was above the previous year’s level, but still low at
–5.4 percent. Return on capital employed (ROCE) was
15.7 percent. As a result of acquisitions, Economic
Value Added (EVA®) decreased by 125 million euros to
344 million euros.
Business areas
In the following, we comment on the organic sales
performance of our two business areas.
Laundry Care
The Laundry Care business area posted a strong sales
performance, driven mainly by the continued expansion of our leading positions in heavy-duty detergents, especially with our core brand Persil, and by
the introduction of successful innovations.
In the premium detergent category, we further
strengthened Persil ProClean in North America by
expanding distribution. We also enhanced our range
by adding a liquid detergent variant with “Fresh
Linen” scent. In the Africa/Middle East region, we
launched an improved formula for all Persil liquid
detergents. The innovative formulation features
thermostable enzymes that ensure top performance
even in warm conditions and after lengthy product
storage. We also launched Persil Black Abaya in further countries in the Africa/Middle East region; this
contains a UV-absorbing formula that protects black
garments from fading under sunlight. We extended
Persil’s leadership in the liquid detergents market in
South Korea by launching a new variant: Persil
Hygiene Gel with the power of eucalyptus removes
not only the most stubborn stains but also dust mite
residue, which has been known to cause allergies.
We also launched an improved formula of Persil
Sensitive around the globe.
In the category of value-for-money detergents, we
launched the Aromatherapy series in Australia and
New Zealand. This new range under the Fab brand
features intense, sensual fragrances.
In the fine fabric detergent category, we further
strengthened the market leadership position of the
Perwoll brand and launched an improved formulation:
2012
2013
2014
2015
2016
0 1,500 3,000 4,500 6,000
4,580
4,626
5,137
5,795
Sales Laundry & Home Care 74
in million euros
4,556
Sales and profits
organic sales
growth.
+4.7%
The Laundry & Home Care business unit achieved
sales of 5,795 million euros in the year under review,
while also recording solid organic growth. Adjusted
operating profit showed double-digit growth.
Excluding acquisitions in 2016, adjusted return on
sales increased very strongly. Taking account of the
acquisitions, the figure showed a solid increase. The
business unit therefore continued its path of profitable growth again in 2016.
Organically (i.e. adjusted for foreign exchange and
acquisitions/divestments), sales increased by 4.7 percent. This was significantly above the growth rate of
the relevant markets. Sales performance was driven
by volume.
In the following, we comment on our organic sales
performance in the regions.
The emerging markets registered a very strong
increase in sales and were once again the biggest
driver of organic growth in Laundry & Home Care.
The Asia (excluding Japan) region recorded double-digit growth, and the Africa/Middle East region
contributed very strong sales growth. Sales in the
Eastern Europe and Latin America regions showed a
strong increase.
Performance in the mature markets was solid, with
solid sales growth in the North America region. Our
sales performance in Western Europe was positive.
Adjusted operating profit (EBIT) rose by 13.7 percent
from 879 million euros to 1,000 million euros.
Excluding acquisitions in 2016, adjusted return on
sales increased very strongly. Taking account of the
acquisitions in 2016, adjusted return on sales
recorded solid growth, reaching a new all-time
98 Combined management report Henkel Annual Report 2016
investments in
property, plant
and equipment.
€210m
Perwoll Renew 3D. The new formula rejuvenates
colors in three dimensions: intensity, color accuracy
and brightness. New Perwoll Renew 3D has been
introduced in more than 30 countries throughout
Europe and Latin America.
In the fabric softeners category, we improved the formulations of the variants available under the Vernel
and Silan brands. As a result, the concentrates now
keep laundry fresh and fragrant for up to ten weeks.
The formula and fragrant appeal of the successful
Soft & Oils range were further improved. We also
added a new variant – Inspiring Orange Oil featuring
a seductive fragrance – to the Soft & Oils range.
The pre-wash category provided further growth stimulus. For example, we started marketing Dylon – our
internationally leading brand for fabric dyes – in
additional countries. We also introduced our Colour
Catcher sheets with their new 6 Protect formula in
various European countries. Colour Catcher sheets
have a water-soluble layer containing active stain
removers to enhance washing performance even at
30 degrees Celsius.
Home Care
Sales in the Home Care business area were solid in
2016, driven mainly by the sustained success of our
WC products. Hand dishwashing products also made
an important contribution.
In WC products, we optimized the formula of our
products sold under the Bref Power Aktiv brand. Bref
Power Aktiv is number one in the WC rim block
segment of our active markets. The products in the
range are now available with an innovative “power
core” loaded with 40 percent more perfume than the
outer layer – for a longer-lasting, fresh fragrance
boost. The new formula has been introduced in more
than 60 countries worldwide. We also launched a
new Power Aktiv variant in Eastern and Western
Europe, and in South Korea, with Odor Stop technology. This special technology minimizes unpleasant
odors to ensure a fresh, fragrant smell.
Nine months before a corresponding EU Regulation
became applicable at the start of 2017, we introduced
new Somat Phosphate-free in the automatic dishwashing category throughout Europe – with no phosphates but with the usual top Somat performance.
The new, patented formula is remarkable for its optimal combination of environmental compatibility
and powerful cleaning performance.
We also introduced a new Somat dishwasher cleaner,
the first and only one of its kind in the marketplace
that can be used during a dishwashing cycle. This
innovation saves both water and energy, thus contributing to sustainability.
In the hand dishwashing category, we launched an
improved formula under the Pril brand in Europe.
For the first time, new Pril Double Decruster features
two enzymes and impressively removes even the
most stubborn residue. The product is also fitted
with an innovative flip-top cap that can be opened
and closed with just one hand.
In the household cleaners category, we launched
our successful spray surface cleaners in the countries
around the Persian Gulf and in South Korea. Their
innovative formulas act immediately on even stubborn stains, removing them effortlessly without leaving any residue. The products also have a pleasantly
fresh smell.
In the insect control category, we launched two products under the licensed Vape brand in Italy which are
formulated with up to 90-percent natural ingredients: one plug-in and one insect control lotion.
In our air fresheners category, we introduced a new
range of sensitive fragrances featuring three different
variants and types of product under the Renuzit
brand in the USA.
Capital expenditures
In 2016, our capital expenditures for property, plant
and equipment amounted to 210 million euros following 217 million euros in 2015. Investments
focused on expanding production capacity, enhancing plant safety and quality systems, on innovations,
and on optimizing our production processes. The
biggest single investment was at our site in Düsseldorf where Henkel expanded its largest automatic
high bay warehouse.
Henkel Annual Report 2016 Combined management report 99
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])*
The annual financial statements of Henkel AG & Co.
KGaA have been prepared in accordance with the rules
and regulations of the German Commercial Code
[HGB] and the German Stock Corporation Act [AktG].
The provisions of the German Accounting Directive
Implementation Act [BilRUG] were applied for the
first time in 2016. Deviations from the International
Financial Reporting Standards (IFRS) applicable to the
Group arise particularly with respect to the methods
of recognition and measurement of intangible assets,
financial instruments and provisions.
Operational activities
Henkel AG & Co. KGaA is operationally active in the
three business units Adhesive Technologies, Beauty
Care and Laundry & Home Care, as well as being the
parent company of the Henkel Group. As such it is
responsible for defining and pursuing Henkel’s
corporate objectives and also for the management,
control and monitoring of Group-wide activities,
including risk management and the allocation of
resources. As of year-end 2016, some 8,000 people
were employed at Henkel AG & Co. KGaA.
The operating business of Henkel AG & Co. KGaA
represents only a portion of the business activity of
the entire Henkel Group and is managed across the
Group by the business units, particularly on the basis
of the performance indicators organic sales growth,
adjusted return on sales (EBIT) and adjusted earnings
per preferred share. Only the Group approach can
provide complete insight into these key financials
(see the discussion of the management system and
performance indicators applicable to the Henkel
Group on page 62).
The net assets, financial position and results of operations of Henkel AG & Co. KGaA are influenced both
by its own operating activity and by the operating
activity of its subsidiaries on the basis of their dividend distributions. Thus the financial situation of
Henkel AG & Co. KGaA generally corresponds to that
of the Group as a whole, which is discussed in the
section “Review of overall business performance”
on page 64.
Results of operations
Sales and profits
Business performance at Henkel AG & Co. KGaA was
solid in fiscal 2016, characterized by the reorganization of our supply chain activities within one globally active corporation, and by a high level of competitive intensity.
At 3,676 million euros, sales of Henkel AG & Co. KGaA
in 2016 were 8.0 percent lower year on year. As indicated in our guidance, the reorganization of our supply chain activities into one globally active company
resulted in a strong decline in sales with Group companies. In addition the sales figure for 2015 included
258 million euros from the sale of inventories to the
global supply chain company that was not repeated
in 2016. The negative effects on sales were, however,
partly offset by application of the BilRUG regulations, which resulted in licensing income of 456 million euros being reclassified from other operating
income to sales in 2016. In terms of financial result
and unappropriated profit, we exceeded our forecast
for 2016 of merely flat development. This improvement was mainly due to the lower interest expense for
pension obligations and higher income from the
financial assets held in the plan assets.
In fiscal 2016, the Adhesive Technologies business
unit generated sales of 1,032 million euros, below the
figure of the previous year. This decline in sales was
driven in particular by the decrease in sales to affiliated companies following the reorganization of the
supply chain activities. In addition, the sales figure
for 2015 includes a one-time gain of 114 million
euros from the sale of inventories to the global
supply chain company. The merger with Novamelt
GmbH at the start of 2016 resulted in positive external sales growth.
The Beauty Care business unit achieved sales of
540 million euros in 2016, representing a decrease
versus 2015. The main driver of this decline in sales
was the relocation of export business with affiliated
companies to the global supply chain company. In
addition, the sale of inventories to the global supply
chain company accounted for 75 million euros of
sales in 2015, while there were no such transactions
in fiscal 2016.
The Laundry & Home Care business unit generated
sales of 928 million euros in 2016, which is below the
figure for 2015. Positive domestic sales performance
only partially offset the decline in sales relating to the
* The full financial statements of Henkel AG & Co. KGaA with the
auditor’s unqualified opinion are filed with the commercial register and accessible on the internet at www.henkel.com/reports.
100 Combined management report Henkel Annual Report 2016
reorganization of the supply chain activities. In addition, the figure for 2015 includes 69 million euros for
the sale of inventories to the global supply chain
company, while there were no such transactions in
fiscal 2016.
Sales in the Corporate segment increased from
685 million euros in 2015 to 1,176 million euros in
2016. This figure includes licensing income that has
been recognized under sales for the first time following application of the BilRUG regulations. In
2015, the item was included under other operating
income.
The operating profit of Henkel AG & Co. KGaA
improved by 34 million euros to 163 million euros,
mainly due to additional costs charged on to affiliated companies.
Expense items
Cost of sales decreased compared to 2015 by 326 million euros to 2,444 million euros, primarily as a
result of reorganizing our supply chain activities into
one globally active company. Gross margin increased
by 2.8 percentage points to 33.5 percent. Following
application of the BilRUG regulations, licensing fees
of 206 million euros were recognized under cost of
sales for the first time in 2016. In 2015, these fees
were included in an amount of 156 million euros
under other operating expenses.
At 678 million euros, marketing, selling and distribution expenses were below the prior-year figure of
842 million euros. The ratio to sales was 18.4 percent,
which is slightly below the level of 2015.
The expenses attributable to the administrative
functions decreased compared to 2015 by 46 million euros to 233 million euros, which mainly
reflected lower overheads and payroll costs. Their
ratio to sales declined by 0.7 percentage points to
6.3 percent.
Expenditures for research and development in the
reporting period decreased by 15 million euros to
312 million euros. At 8.5 percent, the ratio to sales
was higher than the figure of 8.2 percent in 2015.
Restructuring expenses of 33 million euros, included
in the expense items mentioned, were lower compared to 2015 (44 million euros).
Other operating income / expenses
Other operating result decreased in 2016, by 199 million euros compared to the previous year.
Year on year, other operating income declined in
2016 by 372 million euros to 247 million euros. This
was primarily attributable to the reclassification of
licensing fees to sales, while higher costs charged on
to affiliated companies had a countervailing effect.
At 93 million euros, other operating expenses in 2016
were significantly lower than the prior-year figure of
266 million euros, mainly as a result of changes in
recognition of some of the licensing fees following
application of the BilRUG.
Condensed income statement in accordance with the German Commercial Code [HGB] 75
| in million euros | 2015 | 2016 |
| Sales | 3,994 | 3,676 |
| Cost of sales | – 2,770 | –2,444 |
| Gross profit | 1,224 | 1,232 |
| Marketing, selling, distribution and administrative expenses | – 1,121 | – 911 |
| Research and development expenses | – 327 | –312 |
| Other operating income / expenses | 353 | 154 |
| Operating profit | 129 | 163 |
| Financial result | 578 | 911 |
| Income before tax | 707 | 1,074 |
| Taxes on income | – 91 | – 179 |
| Net income | 616 | 895 |
| Profit brought forward | 150 | 133 |
| Unappropriated profit | 766 | 1,028 |
Henkel Annual Report 2016 Combined management report 101
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Financial result
The financial result improved from 578 million euros
in 2015 to 911 million euros in 2016.
The increase is mainly attributable to higher unit
prices and the resulting higher earnings generated by
the financial assets held in the pension fund. The
interest expense was, moreover, lower as a result of
changes to the discount rate for pension obligations.
Pursuant to the legislation implementing the Mortgage Credit Directive and amending commercial
regulations, the underlying discount rate increased
in 2016.
Condensed balance sheet in accordance with the German Commercial Code [HGB] 76
| in million euros | December 31, 2015 | December 31, 2016 |
| Intangible assets and property, plant and equipment | 884 | 1,045 |
| Financial assets | 9,171 | 11,032 |
| Non-current assets | 10,055 | 12,077 |
| Inventories | 14 | 13 |
| Receivables and miscellaneous assets | 2,043 | 3,335 |
| Marketable securities | 4 | 4 |
| Liquid funds | 289 | 485 |
| Current assets | 2,350 | 3,837 |
| Deferred income | 22 | 19 |
| Assets arising from the overfunding of pension obligations | 187 | 392 |
| Total assets | 12,614 | 16,325 |
| Equity | 6,144 | 6,406 |
| Special accounts with reserve element | 104 | 94 |
| Provisions | 694 | 781 |
| Liabilities /deferred charges | 5,672 | 9,044 |
| Total equity and liabilities | 12,614 | 16,325 |
Taxes on income
In 2016, taxes on income amounted to –179 million
euros following –91 million euros in 2015.
Result for the year
Net income amounted to 895 million euros and was
therefore above the result for 2015 of 616 million
euros. The increase was mainly attributable to the
improved financial result in 2016.
102 Combined management report Henkel Annual Report 2016
Net assets and financial position
As of December 31, 2016, the total assets of Henkel AG
& Co. KGaA increased compared to year-end 2015 by
3,711 million euros to 16,325 million euros.
Non-current assets increased by 2,022 million
euros compared to 2015, to 12,077 million euros. The
increase in financial assets is primarily due to our
acquisitions and various capital measures involving
affiliated companies. In addition, a loan was issued
to a US subsidiary in 2016.
Current assets increased in 2016 from 2,350 million
euros to 3,837 million euros, primarily as a result of
higher receivables from affiliated companies.
At 392 million euros, overfunding from offsetting the
plan assets against the pension obligations was significantly higher year on year.
Equity increased from 6,144 million euros to
6,406 million euros. Provisions increased by 87 million euros to 781 million euros. The balance of pension obligations and plan assets is reported in assets
due to overfunding.
For details of issued capital and treasury stock,
please refer to the disclosures in the notes to the consolidated financial statements of Henkel AG & Co.
KGaA.
Liabilities and deferred charges rose overall in
2016 by 3,372 million euros compared to 2015,
mainly due to increased borrowings used to fund
our acquisitions.
For an overview of the financing and capital management of Henkel AG & Co. KGaA, please refer to
the information about the Henkel Group on pages
72 and 73.
Risks and opportunities
The business performance of Henkel AG & Co. KGaA
is essentially subject to the same risks and opportunities as that of the Henkel Group. With respect to
the risks of its subsidiaries, Henkel AG & Co. KGaA is
generally exposed in proportion to its shareholding
in each case.
Due to the different discount rates for pension obligations under the German Commercial Code [HGB]
and IFRS, the conclusion drawn from the risk assessment for the separate financial statements of Henkel
AG & Co. KGaA differs from that of the Group. We
assess the potential financial impact of this risk for
Henkel AG & Co. KGaA as “major.”
Additional information regarding risks and opportunities and the risk management system can be found
on the following pages 104 to 111.
Forecast
The performance of Henkel AG & Co. KGaA in its
function as an operating holding company is influenced primarily by the development and dividend
distributions of the companies in which it has
shareholdings. We expect sales in 2017 to be on a par
with the figure for 2016. The positive performance
reported for the Group also impacts Henkel AG &
Co. KGaA through dividend payments from subsidiaries. Assuming continued positive development of
the financial result, we expect the unappropriated
profit generated in 2017 by Henkel AG & Co. KGaA to
be flat or to increase slightly. This will enable our
shareholders to participate to a reasonable extent in
the Group’s net income, with retained earnings also
available for utilization if necessary.
The forecast for the Henkel Group can be found on
pages 112 and 113.
Henkel Annual Report 2016 Combined management report 103
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Risks and opportunities report
Risks and opportunities
In the pursuit of our business activities, Henkel is
exposed to multiple risks inherent in the global market economy. We deploy an array of effective monitoring and control systems aligned to identifying
risks at an early stage, evaluating the exposure, and
introducing effective countermeasures. We have
incorporated these instruments within a risk management system as described below.
Entrepreneurial activity also involves identifying
and exploiting opportunities as means of securing
and extending the corporation’s competitiveness.
The reporting aspect of our risk management system,
however, does not encompass entrepreneurial
opportunities. Early and regular identification, analysis and exploitation of opportunities are performed
at the Group level and within the individual business
units. This is a fundamental component of our strategy. We perform in-depth analysis of the markets and
our competitors, and study the relevant cost variables and key success factors.
Risk management system
The risk management system at Henkel is integrated
into the comprehensive planning, controlling, and
reporting systems used in the subsidiaries, in the
business units, and at Group level. Our early warning
system and Internal Audit function are also important components of our risk management system.
Within the corporate governance framework, our
internal control and compliance management systems support our risk management capability. The
risk reporting system encompasses the systematic
identification, evaluation, documentation and communication of risks. We have defined the principles,
processes and responsibilities relating to risk management in a corporate standard that is binding on
the Henkel Group. With the continuous development
of our corporate standards and systems, we take into
account updated findings.
Within our risk strategy framework, the assumption
of calculated risk is an intrinsic part of our business.
However, risks that endanger the existence of the
company must be avoided. When it is not possible to
avoid these critical risks, they must be reduced or
transferred, for example through insurance. Risks are
controlled and monitored at the level of the subsidiaries, the business units, and the Group. Risk management is thus performed with a holistic, integrative approach to the systematic handling of risks.
We understand risks as potential future developments or events that could lead to negative deviations from our guidance. Risks with a probability of
occurrence of over 50 percent are taken into account
in our guidance and short-term planning. As a rule,
we estimate risks for the one-year forecast period.
The annual risk reporting process begins with identifying material risks using checklists based on
defined operating (for example procurement and
production) and functional (for example information
technology and human resources) risk categories.
We evaluate the risks in a two-stage process according to the probability of occurrence and potential
loss. Included in the risk report are risks with a loss
potential of at least 1 million euros or 10 percent of
the net external sales of a country, where the probability of occurrence is considered greater than zero.
The first step entails determining gross risk to the
extent that this is possible. We then calculate the net
risk, taking countermeasures into account. Initially,
risks are compiled on a decentralized, per-country
basis, with the assistance of regional coordinators.
The locally collated risks are then analyzed by
experts in the business units and corporate functions. In particular areas such as Corporate Treasury,
risks are determined with the support of sensitivity
analyses including value-at-risk computations. Risk
analyses are then prepared for the respective executive committees of the business units and corporate
functions, and finally assigned to an area-specific
risk inventory. The risk situation is subsequently
reported to our Compliance & Risk Committee, the
Management Board and the various supervising
boards. Material unforeseen changes are reported
immediately to the CFO and the Compliance & Risk
Committee. Corporate Accounting is responsible for
coordinating the overall process and analyzing the
inventoried exposures.
The risk reporting process is supported by an
intranet-based database which ensures transparent
communication throughout the entire Group. Our
Internal Audit function regularly reviews the quality
and function of our risk management system.
Within the framework of the 2016 audit of our
annual financial statements, our external auditor
examined the structure and function of our risk early
104 Combined management report Henkel Annual Report 2016
warning system in accordance with Section 317 (4) of
the German Commercial Code [HGB] and confirmed
its compliance.
The following describes the main features of the
internal control and risk management system in
relation to our accounting processes, in accordance
with Section 315 (2) no. 5 HGB. Corresponding with
the definition of our risk management system, the
objective of our accounting processes lies in the
identification, evaluation and management of all
risks that jeopardize the regulatory preparation of
our annual and consolidated financial statements.
Accordingly, the internal control system’s function is
to implement relevant principles, procedures and
controls so as to ensure the financial statement closing process is regulatory compliant. Within the organization of the internal control system, the Management Board assumes overriding responsibility at
Group level. The duly coordinated subsystems of the
internal control system lie within the responsibility
of the Corporate Accounting, Controlling, Corporate
Treasury, Compliance and Regional Finance functions. Within these functions, there are a number of
integrated monitoring and control levels. These are
assessed by regular and comprehensive effectiveness
tests performed by our Internal Audit function. Of
the multifaceted control processes incorporated into
the accounting process, several are important to
highlight.
The basis for all our accounting processes is provided by our corporate standard “Accounting,” which
contains detailed accounting and reporting instructions covering all material circumstances, including
clear procedures for inventory valuation or how
transfer prices applicable for intra-group transactions should be determined. This corporate standard
is binding on the entire Group and is regularly
updated and approved by the CFO. The local Presidents and Heads of Finance of all consolidated subsidiaries must confirm their compliance with this
corporate standard on an annual basis.
Further globally binding procedural instructions
affecting our accounting practice are contained in
our corporate standards “Treasury” and “Investments.” Through appropriate organizational measures in conjunction with restrictive access to our
information systems, we ensure segregation of
duties in our accounting systems between transaction entry on the one hand, and checking and
approval on the other. Documentation relating to
the operational accounting and closing processes
ensures that important tasks – such as the reconciliation of receivables and payables on the basis of
account balance confirmations – are clearly assigned.
Additionally, binding authorization regulations exist
governing the approval of contracts, credit notes and
the like, with strict adherence to the principle of dual
control as a mandatory requirement. This is also
stipulated in our Group-wide corporate standards.
The significant risks for Henkel and the corresponding controls with respect to the regulatory preparation of our annual and consolidated financial statements are collated in a central documentation pack.
This documentation is reviewed and updated annually by the respective process owners. The established systems are regularly reviewed with regard to
their improvement and optimization potential. We
consider these systems to be appropriate and
effective.
The accounting activities for subsidiaries included in
the consolidated financial statements are performed
either locally by the subsidiary or through a shared
service center, taking the corporate standards into
account. The individual subsidiaries’ financial statements are transferred to our central consolidation
system and checked at corporate level for correctness. After all consolidation steps have been completed, the consolidated financial statements are
prepared by Corporate Accounting in consultation
with the specialist departments. Preparation of the
combined management report is coordinated by
Investor Relations in cooperation with each business
unit and corporate function. The Management Board
then compiles the consolidated financial statements
and annual financial statements of Henkel AG & Co.
KGaA, and the combined management report for the
Group, and subsequently presents these documents
to the Supervisory Board for approval.
Henkel Annual Report 2016 Combined management report 105
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Overview of major risk categories 77
| Risk category | Probability | Potential financial impact |
| Operating risks | ||
| Procurement market risks | Low | Major |
| Production risks | Moderate | Major |
| Macroeconomic and sector-specific risks | High | Major |
| Functional risks | ||
| Financial risks | ||
| Credit risk | Low | Major |
| Liquidity risk | Low | Minor |
| Currency risk | Moderate | Major |
| Interest rate risk | Moderate | Minor |
| Risks from pension obligations | High | Minor |
| Legal risks | Low | Major |
| IT risks | Low | Major |
| Personnel risks | High | Minor |
| Risks in connection with brand image or reputation of the company |
Low | Major |
| Environmental and safety risks | Low | Major |
| Business strategy risks | Moderate | Moderate |
Classification of risks in ascending order 78
Probability
| Low | 1 – 9 % |
| Moderate | 10 – 24 % |
| High | ≥ 25 % |
Potential financial impact
| Minor | 1 – 49 million euros |
| Moderate | 50 – 99 million euros |
| Major | ≥ 100 million euros |
Major risk categories
Risks are presented from a net perspective, i.e. where
their respective mitigation measures are taken into
account.
Operating risks
Procurement market risks
Description of risk: We expect prices for direct
materials in our procurement markets to increase
moderately overall in 2017 compared to 2016. This
increase will be driven primarily by higher anticipated prices for input materials, and especially crude
oil and petrochemicals. However, due to geopolitical,
global economic, and climatic uncertainties, we
expect prices to fluctuate in the course of the year.
As a result of this uncertainty as it relates to the
development of raw material prices that cannot
always be passed on in full, we see risks arising
beyond the forecasted moderate increase in relation
to important raw materials and packaging materials.
The segments in the industrial goods sector are
affected to a greater extent by these price risks than
the individual segments in the consumer goods sector. Additional price and supply risks exist due to
possible demand- or production-related shortages in
the procurement markets. Furthermore, continued
major volatility can be expected from global economic, geopolitical and climate risks, which could
lead to rising material prices and supply shortages.
Measures: The measures taken include active supplier portfolio management through our globally
engaged, cross-divisional sourcing capability,
together with strategies aimed at securing price and
volume both through contracts and, where appropriate and possible, through financial hedging instruments. Furthermore, we work in interdisciplinary
106 Combined management report Henkel Annual Report 2016
teams within Research and Development, Supply
Chain Management and Purchasing on devising
alternative formulations and packaging forms so as
to be able to respond flexibly to unforeseen fluctuations in raw material prices. We also avoid becoming
dependent on individual suppliers to better secure
the constant supply of the goods and services that we
require. Finally, close collaboration with our strategic suppliers plays an exceptionally important role in
our risk management. Further details regarding the
assessment of supplier financial stability can be
found in the section on “Procurement” on pages 77 to
79. The basis for our risk management approach is a
comprehensive procurement information system
aimed at ensuring permanent transparency with
respect to our purchasing volumes.
Impact: Low probability rating, possible major
impact on our earnings guidance.
Production risks
Description of risk: Henkel faces production risks
in the event of low capacity utilization due to volume decreases and unplanned operational interruptions, especially at our single-source sites.
Measures: We can offset the negative effects of possible production outages through flexible production
control and, where economically viable, insurance
policies. Such production risks are minimized by
ensuring high employee qualification, clearly
defined safety standards, and regular plant and
equipment maintenance. Capital expenditure decisions on property, plant and equipment are made in
accordance with defined, differentiated responsibility procedures and approval processes. They incorporate all relevant specialist functions and are regulated in an internal corporate standard. Investments
are analyzed in advance on the basis of detailed risk
aspects. Further audits accompanying projects provide the foundation for project management and risk
reduction.
Impact: Moderate probability rating, possible major
impact on our earnings guidance.
Macroeconomic and sector-specific risks
Description of risk: We remain exposed to macroeconomic risks emanating from the uncertainties of
the current geopolitical and economic environment.
We currently see geopolitical risk arising in connection with the increased number of conflict zones. A
decline in the macroeconomic environment poses a
risk to the industrial sector in particular. A downturn
in consumer spending is relevant for the consumer
goods segments. A further significant risk is posed
by an increasingly competitive environment, as this
could result in stronger price and promotional pressures in the consumer goods sector. As consolidation
in the retail sector continues and private labels
occupy a growing share of the market, crowding-out
competition in the consumer goods sector could
intensify. The risk of product substitution inherent
in this could, in principle, affect all business units.
Technological change associated with digitalization
may involve risks for the success of our products and
processes.
Measures: We focus on continuously strengthening
our brands (see separate risk description on page 110)
and consistently developing further innovations. We
consider innovative products and processes to be a
significant success factor for our company, enabling
us to differentiate ourselves from the competition.
We also pursue specific sales and marketing initiatives, for example advertising and promotional activities. In addition, we have the capability to react
quickly to potential sales declines through flexible
production control.
Impact: High probability rating, possible major
impact on our sales and earnings guidance.
Functional risks
Financial risks
Description of risk: Henkel is exposed to financial
risk in the form of credit risks, liquidity risks, currency risks, interest rate risks, and risks arising from
pension obligations.
Henkel Annual Report 2016 Combined management report 107
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
For the description of credit risks, liquidity risks,
currency risks and interest rate risks, please refer to
the notes to the consolidated financial statements on
pages 160 to 165. For the risks arising from our pension obligations, please see pages 147 to 149.
Measures: Risk-mitigating measures and the management of these risks are also described in the notes
to the consolidated financial statements on the
pages mentioned.
Impact: We classify financial risks as follows:
• Credit risk with a low probability of a major impact
on our earnings guidance
• Liquidity risk with a low probability of a minor
impact on our earnings guidance
• Currency risk with a moderate probability of a
major impact on our earnings guidance
• Interest rate risk with a moderate probability of a
minor impact on our earnings guidance
• Risks arising from our pension obligations with a
high probability of a minor impact on our earnings
guidance, and with a moderate probability of a
major impact on our equity
Legal and regulatory risks
Description of risk: As a globally active corporation
we are exposed, in the course of our ordinary business activities, to a range of risks relating to litigations and other actions, including government
agency proceedings in which we are currently
involved or may become involved in the future.
These risks arise, in particular, in the fields of product liability, product deficiency, competition and
cartel law, infringement of proprietary rights, patent
law, tax law, environmental protection and legacy
remediation. We cannot rule out the likelihood of
negative rulings on current litigations and further
litigations being initiated in the future. Legal uncertainty in some regions could also limit our ability to
assert our rights.
Our business is subject to various national rules and
regulations and – within the European Union (EU)
– increasingly to harmonized laws applicable
throughout the EU. In addition, some of our operations are subject to rules and regulations derived
from approvals, licenses, certificates or permits. Our
manufacturing operations are bound by rules and
regulations with respect to the registration, evaluation, usage, storage, transportation and handling of
certain substances and also in relation to emissions,
wastewater, effluent and other waste. The construction and operation of production facilities and other
plant and equipment are governed by framework
rules and regulations, including those relating to legacy remediation. Violation of such regulations may
lead to legal proceedings or compromise our future
business activities.
Changes to the regulatory environment in our relevant markets could influence our business activities,
and thus adversely affect our assets, financial position and results of operations. Such changes might
involve import and export controls, customs or other
trade regulations, or pricing and foreign exchange
restrictions.
Equally, as a globally active company, we maintain
business relations with customers in countries that
are subject to export control legislation, embargoes,
economic sanctions or other forms of trade restriction. Changes to these regulations, new or extended
sanctions, or corresponding initiatives by institutional investors or non-governmental organizations
may result in restrictions being imposed on our business activities in these countries or, indirectly, in
other countries, or may prevent us from acquiring or
keeping customers and suppliers.
Measures: Our internal standards, guidelines, codes
of conduct, and training measures are geared to
ensuring compliance with the aforementioned statutory requirements and, for example, safeguarding
our manufacturing facilities and products. These
requirements have also been incorporated into our
management systems and are regularly audited.
Ensuring compliance with laws and regulations is an
integral component of our business processes. This
includes the early monitoring and evaluation of relevant statutory and regulatory requirements and
changes. Henkel has further established a Groupwide compliance organization with locally and
regionally responsible compliance officers led by a
globally responsible General Counsel & Chief Compliance Officer (details can be found in the corporate
governance report on pages 29 to 38). In addition, our
corporate legal department maintains constant contact with local counsel. Current proceedings and
potential risks are recorded in a separate reporting
system. For certain legal risks, we have concluded
insurance policies that are standard for the industry
and that we consider to be appropriate. However, the
outcome of proceedings is inherently difficult to
foresee, especially in cases in which the claimant is
seeking substantial or unspecified damages. In view
of this, we are unable to predict what obligations
may arise from such litigations. Consequently, major
losses may result from litigations and proceedings
that are not covered by our insurance policies or provisions. Potential damage to our reputation is not
covered by insurance, nor is there any guarantee that
108 Combined management report Henkel Annual Report 2016
Henkel will acquire adequate insurance cover at reasonable terms and conditions in future.
Impact: Low probability rating, possible major
impact on our earnings guidance.
Information technology risks
Description of risk: Information technology has
strategic significance for Henkel. Our business processes rely to a great extent on internal and external
IT services, applications, networks, and infrastructure systems. The failure or disruption of critical IT
services and the manipulation or loss of data constitute material risks for Henkel. The failure of computer networks or disruption of important IT applications can impair critical business processes. The
loss of confidential data, for example formulations,
customer data or price lists, could benefit our competition. Henkel’s reputation could also be damaged
by such loss.
Measures: The technical and organizational safeguards for protecting information at Henkel are
based on the international standards ISO 27001 and
27002. Major components include the classification
of information, business processes, IT applications,
and IT infrastructure safeguards with respect to confidentiality, availability, integrity, and data protection requirements, as well as measures for avoiding
risk. In addition, Henkel has put technical and organizational measures in place to prevent, discover and
defeat cyber attacks. As a member of Cyber Security
Sharing and Analytics (CSSA) e.V., Henkel also maintains regular contact with other major corporations
to enable the early detection of threats and implementation of effective countermeasures.
Our critical business processes operate through
redundantly configured systems designed for high
availability. Our data backup procedures reflect stateof-the-art technology and practice. We regularly
review our restore and disaster recovery processes.
We develop our systems using proven project management and program modification procedures.
Access to buildings and areas containing IT systems,
access to computer networks and applications, as
well as user authorizations for our information systems, are strictly limited to the minimum level necessary. For critical business processes, the required
segregation of duties is enforced by technological
means.
Our networks are protected against unauthorized
external access where economically viable. Operating systems and anti-virus software are automatically updated to their latest version on a continual
basis.
We inform and instruct our employees in the proper
and secure use of information systems as part of
their regular duties.
The implementation of our security measures is continually reviewed by our Internal Audit function,
other internal departments, and independent third
parties.
Impact: Low probability rating, possible major
impact on our earnings guidance.
Personnel risks
Description of risk: The motivation and the qualification of our employees are key drivers of Henkel’s
business success. Therefore, it is strategically
important to attract highly qualified professionals
and executives and ensure they stay with the company. In selecting and employing talent, we compete
globally for qualified professionals and executives.
In many of our markets, we see clear signs of increasingly tough competition for the most talented professionals and the impacts of demographic change.
These developments expose us to the risk of losing
valuable employees or of being unable to recruit relevant qualified professionals and executives.
Measures: We combat the risk of losing valuable
employees through specifically devised personnel
development programs and incentive systems. Supporting this is an established, thorough annual
review process from which we derive individually
tailored and future-viable qualification programs as
well as performance-related remuneration systems.
Further areas of our HR management focus include a
global health management system and support for
flexible work models to ensure better work-life
flexibility.
We reduce the risk of not being able to recruit qualified professionals and executives by expanding our
employer branding initiatives and through targeted
cooperation with colleges and universities in all
regions where we conduct business. Our attractiveness as an employer is reinforced by our focus on
promoting talent and specialized development
programs.
Further information relating to our employees can
be found on pages 74 to 77.
Impact: High probability rating, possible minor
impact on our earnings guidance.
Henkel Annual Report 2016 Combined management report 109
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Risks in connection with brand image or
reputation of the company
Description of risk: As a globally active corporation,
Henkel is exposed to potential damage to its image
in the event of negative reports in the media –
including social media – regarding Henkel’s corporate brand or individual product brands, particularly
in the consumer goods sector. These could lead to a
negative impact on sales.
Measures: We minimize these risks through the
measures described under legal and regulatory risks
(see pages 108 and 109). These are designed to ensure
that our production facilities and products are safe.
We also pursue a policy of pro-active public relations
management that serves to reinforce the reputation
of our corporate brand and individual product
brands. These measures are supported by a global
communication network, and international and
local crisis management systems with regular training sessions and crisis response planning.
Impact: Low probability rating, possible major
impact on our sales and earnings guidance.
Environmental and safety risks
Description of risk: Henkel is a global manufacturing corporation and is therefore exposed to risks pertaining to the environment, safety, health, and social
standards, manifesting in the form of personal
injury, physical damage to goods, and reputational
damage. Soil contamination and the associated
remediation expense, as well as leakage or other
technical failures, could give rise to direct costs for
the corporation. Furthermore, indirect costs such as
fines, claims for compensation or reputational damage may also be incurred.
Measures: We minimize these risks through the
measures described under legal and regulatory risks
(see pages 108 and 109), and through our auditing,
advisory and training activities. We update these preventive measures continuously in order to properly
safeguard our facilities, assets and reputation. We
ensure compliance with high technical standards,
rules of conduct, and relevant statutory requirements as a further means of preserving our assets,
and that our corporate values – one of which is sustainability – are put into practice.
Impact: Low probability rating, possible major
impact on our earnings guidance.
Business strategy risks
Description of risk: Business strategy risks can arise
from our expectations for internal projects, acquisitions and strategic alliances failing to materialize.
The associated capital expenditures may not generate the originally anticipated value added due to
internal or external influences. Individual projects
could also be delayed or even halted by unforeseen
events.
Measures: We combat these risks through comprehensive project management. We limit exposure
through financial viability assessments in the review,
decision, and implementation phases. These assessments are performed by specialist departments,
assisted by external consultants where appropriate.
Project transparency and control are supported by our
management systems.
Impact: Moderate probability rating, possible moderate impact on our earnings guidance.
Major opportunity categories
Entrepreneurial opportunities are identified and
evaluated at Group level and in the individual business units, and duly incorporated into the strategy
and planning processes. We understand the opportunities presented in the following as potential future
developments or events that could lead to a positive
deviation from our guidance. We also assess the
probabilities of price-related procurement market
and financial opportunities.
Procurement market opportunities
Description of opportunities: Countervailing the
procurement market risks listed on pages 106 and
107, opportunities may also arise in which the influencing factors described in this section develop in a
direction that is advantageous to Henkel.
Impact: Low probability rating, possible major
impact on our earnings guidance.
Macroeconomic and sector-specific opportunities
Description of opportunities: Additional business
opportunities would arise if the uncertain geopolitical and macroeconomic situation in some regions,
or the economic conditions in individual sectors,
develop substantially better than expected.
110 Combined management report Henkel Annual Report 2016
Impact: The opportunities described could have a
major impact on our sales and earnings guidance.
Financial opportunities
Description of opportunities: Countervailing the
currency and interest rate risks indicated under
financial risks, and the risks arising from pension
obligations as described on pages 107 and 108,
opportunities may also arise in which the influencing factors described in this section develop in a
direction that is advantageous to Henkel.
Impact: We classify financial opportunities as
follows:
• Currency opportunities with a high probability of a
major impact on our earnings guidance
• Interest rate opportunities with a moderate probability of a minor impact on our earnings guidance
• Opportunities arising from our pension obligations with a low probability of a minor impact on
our earnings guidance, and with a moderate probability of a major impact on our equity
Acquisition opportunities
Description of opportunities: Acquisitions are a
key component of our strategy.
Impact: Large acquisitions could have a major
impact on our earnings guidance.
Research and development opportunities
Description of opportunities: Opportunities arising from our largely continuous innovation process
are a key component of our strategy and are already
accounted for in our guidance. There are additional
opportunities in the event of product introductions
that exceed our expectations of market acceptance,
and in the development of exceptional innovations
that have not yet been taken into account.
Impact: Innovations arising from future research
and development could have a major impact on our
sales and earnings guidance.
Risks and opportunities in summary
At the time this report was prepared, there were no
identifiable risks related to future developments that
could endanger the existence either of Henkel AG &
Co. KGaA, or a material subsidiary included in the
consolidation, or the Group, as a going concern. As
we have no special-purpose vehicles, there is no risk
that might originate from such a source.
Compared to the previous year, our expectation of
the likelihood and/or of the possible financial
impact of individual risk and opportunity categories
has changed slightly. Overall, however, the risk and
opportunities situation has not altered to any significant degree.
The system of risk categorization adopted by Henkel
continues to indicate that the most significant exposure currently relates to the impact of macroeconomic and sector uncertainty together with financial
risks, to which we are responding with the countermeasures described above. The Management Board
remains confident that the earning power of the
Group forms a solid foundation for future business
development and provides the necessary resources
to leverage our opportunities.
Henkel Annual Report 2016 Combined management report 111
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
Forecast
Macroeconomic development
Our assessment of future world economic development is based on data provided by IHS Global
Insight.
Overview: moderate gross domestic product
growth of approximately 3 percent
Global economic growth is expected to remain no
more than moderate in 2017. IHS expects gross
domestic product to rise by approximately 3 percent.
The mature markets should grow by approximately
2 percent. The North American economy is expected
to grow by approximately 2 percent, while Japan’s
economy is forecasted to expand by approximately
1 percent. For Western Europe, IHS anticipates
growth of approximately 1.5 percent.
The emerging markets are forecasted to achieve
robust economic growth of approximately 4.5 percent in 2017, but developments are expected to vary
widely between individual regions and countries.
Economic output should increase by approximately
5.5 percent in Asia (excluding Japan), and by around
3 percent in the Africa/Middle East region. IHS expects
positive performance of approximately 1 percent in
Latin America in 2017. An increase of approximately
2 percent is forecasted for the Eastern Europe region.
Inflation: rise in global price levels
Global inflation of approximately 3.5 percent is
predicted in 2017. While IHS expects a high degree
of price stability for mature markets with a rise
of approximately 2 percent, the inflation rate in
emerging markets is forecasted to average around
5 percent.
Direct materials: increase in price levels
We expect prices for raw materials, packaging and
purchased goods and services to increase moderately
compared to the previous year.
Currencies: continued high volatility
We expect continued high volatility in the currency
markets. We anticipate a slightly stronger average US
dollar rate for 2017 compared to 2016. Conversely,
major currencies in emerging markets could weaken.
Sector development
Consumption and the retail sector: growth of
around 3 percent
IHS predicts that global private consumption will
increase by around 3 percent in 2017. Consumers in
mature markets are likely to spend approximately
2 percent more than in the previous year. The emerging markets should again demonstrate a somewhat
higher propensity to spend, with a rise of approximately 3.5 percent in 2017.
Industrial production index: growth of
approximately 2.5 percent
Starting in fiscal 2017, we will be using the industrial
production index (IPX) as a reference for describing
the market environment in which our Adhesive
Technologies business unit operates. The index covers the manufacturing, mining, utilities and construction sectors and is therefore an appropriate
indicator for the market environment in which our
industrial business operates.
Year on year, the industrial production index is
expected to gain approximately 2.5 percent worldwide, with growth slightly below that of the world
economy as a whole. Industrial production is forecasted to expand by approximately 1.5 percent in the
mature markets, and by approximately 4 percent in
emerging markets.
112 Combined management report Henkel Annual Report 2016
Furthermore, we have the following expectations for
2017:
• Restructuring expenses of 200 to 250 million euros
• Investments in property, plant and equipment and
intangible assets of between 750 and 850 million
euros
Dividends
In accordance with our dividend policy and depending on the company’s asset and profit positions as
well as its financial requirements, we expect a dividend payout by Henkel AG & Co. KGaA in the range of
25 percent to 35 percent of net income after non-controlling interests, and adjusted for exceptional items.
Capital expenditures
In fiscal 2017, we plan to increase our investments in
property, plant and equipment and intangible assets
to approximately 750 to 850 million euros. We intend
to allocate our budget to expanding our businesses
in emerging markets and mature markets in approximately equal proportions. In line with our strategic
priorities, considerable investments are planned in
strengthening our innovation capabilities, and in
expanding and further streamlining our production.
Specific investments in IT infrastructure will drive
the digitalization of our processes.
Outlook for the Henkel Group in 2017
We expect the Henkel Group to generate organic
sales growth of 2 to 4 percent in fiscal 2017. Our
expectation is that each business unit will generate
organic sales growth within this range.
The starting point for our forecasted organic sales
growth is our strong competitive position. We have
consolidated and further developed this in recent
years through our innovative strength, strong brands
and leading market positions, as well as the quality
of our portfolio.
We expect the contribution to the nominal sales
growth of the Henkel Group from our acquisitions in
2016 to be in the mid-single-digit percentage range.
The translation of sales in foreign currencies is
expected to have a neutral or slightly negative effect.
In recent years we have introduced a number of measures that have had a positive effect on our cost
structure. Again this year, we intend to continue
adapting our structures to constantly changing market conditions, and to maintain our strict cost discipline. Through optimization and standardization of
processes, we can further improve our efficiency
while simultaneously enhancing the quality of our
customer service. Moreover, the optimization of our
production and logistics networks will contribute to
improving our cost structures.
These factors, together with the expected increase in
sales, will have a positive effect on our earnings performance. For adjusted return on sales (EBIT), we
anticipate an increase year on year to more than
17.0 percent. All three business units are expected to
contribute to this positive development. We anticipate an increase in adjusted earnings per preferred
share of between 7 and 9 percent.
Henkel Annual Report 2016 Combined management report 113
29 Corporate governance
52 Shares and bonds
57 Fundamental principles
of the Group
63 Economic report
100 Henkel AG & Co. KGaA
(condensed version according
to the German Commercial
Code [HGB])
104 Risks and opportunities report
112 Forecast
116 Consolidated statement of
financial position
118 Consolidated statement of income
118 Consolidated statement of
comprehensive income
119 Consolidated statement of
changes in equity
120 Consolidated statement of cash flows
121 Notes to the consolidated financial
statements – Group segment report by
business unit
122 Notes to the consolidated financial
statements – Key financials by region
123 Notes to the consolidated financial
statements – Accounting principles
and methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated financial
statements – Notes to the consolidated
statement of financial position
131 Intangible assets
135 Property, plant and equipment
137 Other financial assets
137 Other assets
138 Deferred taxes
138 Inventories
138 Trade accounts receivable
139 Cash and cash equivalents
139 Assets and liabilities held for sale
139 Issued capital
140 Capital reserve
140 Retained earnings
140 Other components of equity
140 Non-controlling interests
141 Provisions for pensions and similar obligations
149 Income tax provisions and other provisions
151 Borrowings
152 Other financial liabilities
152 Other liabilities
152 Trade accounts payable
153 Financial instruments report
Consolidated financial statements
114 Consolidated financial statements Henkel Annual Report 2016
166 Notes to the consolidated financial
statements – Notes to the consolidated
statement of income
166 Sales and principles of income recognition
166 Cost of sales
166 Marketing, selling and distribution expenses
166 Research and development expenses
166 Administrative expenses
167 Other operating income
167 Other operating expenses
167 Financial result
168 Taxes on income
170 Non-controlling interests
171 Notes to the consolidated financial
statements – Other disclosures
171 Reconciliation of adjusted net income
171 Payroll cost and employee structure
172 Share-based payment plans
172 Group segment report
175 Earnings per share
176 Consolidated statement of cash flows
176 Contingent liabilities
176 Lease and other unrecognized financial
commitments
177 Voting rights / Related party disclosures
177 Exercise of exemption options
178 Remuneration of the corporate
management bodies
178 Declaration of compliance with the Corporate
Governance Code [DCGK]
178 Subsidiaries and other investments
178 Auditor’s fees and services
179 Notes to the consolidated financial
statements – Subsequent events
180 Independent Auditor’s Report
182 Recommendation for the approval of
the annual financial statements and
the appropriation of the profit of
Henkel AG & Co. KGaA
183 Responsibility statement by the
Personally Liable Partner
184 Corporate management bodies of
Henkel AG & Co. KGaA
Henkel Annual Report 2016 Consolidated financial statements 115
Consolidated financial statements
Consolidated statement of financial position
Assets 79
| in million euros | Note | 2015 | % | 2016 | % |
| Intangible assets | 1 | 11,682 | 52.3 | 15,543 2,887 95 7 155 1,017 19,704 1,938 3,349 734 274 434 1,389 95 8,213 27,917 |
55.7 10.3 0.3 – 0.7 3.6 70.6 6.9 12.0 2.6 1.0 1.6 5.0 0.3 29.4 100.0 |
| Property, plant and equipment Other financial assets Income tax refund claims Other assets Deferred tax assets Non-current assets Inventories Trade accounts receivable Other financial assets Income tax refund claims Other assets Cash and cash equivalents Assets held for sale Current assets Total assets |
2 | 2,661 | 11.9 | ||
| 3 | 63 | 0.3 | |||
| 7 | – | ||||
| 4 | 177 | 0.8 | |||
| 5 | 816 | 3.7 | |||
| 15,406 | 69.0 | ||||
| 6 | 1,721 | 7.7 | |||
| 7 | 2,944 | 13.2 | |||
| 3 | 540 | 2.4 | |||
| 196 | 0.9 | ||||
| 4 | 330 | 1.5 | |||
| 8 | 1,176 | 5.3 | |||
| 9 | 10 | – | |||
| 6,917 | 31.0 | ||||
| 22,323 | 100.0 |
116 Consolidated financial statements Henkel Annual Report 2016
Equity and liabilities 80
| in million euros | Note | 2015 | % | 2016 | % |
| Issued capital | 10 | 438 | 2.0 | 438 652 –91 14,234 –188 15,045 138 15,183 1,007 106 347 3,300 114 25 833 5,732 358 1,966 425 3,665 164 395 16 13 7,002 27,917 |
1.6 2.3 –0.3 51.0 –0.7 53.9 0.5 54.4 3.6 0.4 1.2 11.8 0.4 0.1 3.0 20.5 1.3 7.0 1.5 13.1 0.6 1.5 0.1 – 25.1 100.0 |
| Capital reserve Treasury shares Retained earnings Other components of equity Equity attributable to shareholders of Henkel AG & Co. KGaA Non-controlling interests Equity Provisions for pensions and similar obligations Income tax provisions Other provisions Borrowings Other financial liabilities Other liabilities Deferred tax liabilities Non-current liabilities Income tax provisions Other provisions Borrowings Trade accounts payable Other financial liabilities Other liabilities Income tax liabilities Liabilities held for sale Current liabilities Total equity and liabilities |
11 | 652 | 2.9 | ||
| – 91 | – 0.4 | ||||
| 12 | 12,984 | 58.1 | |||
| 13 | – 322 | – 1.4 | |||
| 13,661 | 61.2 | ||||
| 14 | 150 | 0.7 | |||
| 13,811 | 61.9 | ||||
| 15 | 988 | 4.4 | |||
| 16 | 89 | 0.4 | |||
| 16 | 396 | 1.8 | |||
| 17 | 4 | – | |||
| 18 | 1 | – | |||
| 19 | 16 | 0.1 | |||
| 5 | 670 | 3.0 | |||
| 2,164 | 9.7 | ||||
| 16 | 263 | 1.2 | |||
| 16 | 1,564 | 7.0 | |||
| 17 | 880 | 3.9 | |||
| 20 | 3,176 | 14.2 | |||
| 18 | 109 | 0.5 | |||
| 19 | 351 | 1.6 | |||
| 5 | – | ||||
| 9 | – | – | |||
| 6,348 | 28.4 | ||||
| 22,323 | 100.0 |
Henkel Annual Report 2016 Consolidated financial statements 117
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Consolidated statement of income
81
| in million euros | Note | 2015 | % | 2016 | % | +/– |
| Sales | 22 | 18,089 | 100.0 | 18,714 | 100.0 | 3.5% |
| Cost of sales | 23 | – 9,368 | – 51.8 | –9,742 | –52.1 | 4.0 % |
| Gross profit | 8,721 | 48.2 | 8,972 | 47.9 | 2.9 % | |
| Marketing, selling and distribution expenses | 24 | – 4,608 | – 25.5 | –4,635 | –24.7 | 0.6 % |
| Research and development expenses | 25 | – 478 | – 2.6 | – 463 | –2.5 | – 3.1 % |
| Administrative expenses | 26 | – 1,012 | – 5.6 | – 1,062 | –5.7 | 4.9 % |
| Other operating income | 27 | 127 | 0.7 | 109 | 0.6 | – 14.2 % |
| Other operating expenses | 28 | – 105 | – 0.6 | – 146 | –0.8 | 39.0 % |
| Operating profit (EBIT) | 2,645 | 14.6 | 2,775 | 14.8 | 4.9% | |
| Interest income | 28 | 0.2 | 20 | 0.1 | – 28.6 % | |
| Interest expense | – 45 | – 0.2 | –25 | – 0.1 | – 44.4 % | |
| Other financial result | – 24 | – 0.2 | –26 | –0.2 | 8.3 % | |
| Investment result | – 1 | – | –2 | – | – | |
| Financial result | 29 | –42 | – 0.2 | – 33 | –0.2 | –21.4% |
| Income before tax | 2,603 | 14.4 | 2,742 | 14.6 | 5.3% | |
| Taxes on income | 30 | – 635 | – 3.5 | –649 | –3.4 | 2.2 % |
| Tax rate in % | 24.4 | 23.7 | ||||
| Net income | 1,968 | 10.9 | 2,093 | 11.2 | 6.4% | |
| Attributable to non-controlling interests | 31 | 47 | 0.3 | 40 | 0.2 | – 14.9 % |
| Attributable to shareholders of Henkel AG & Co. KGaA | 1,921 | 10.6 | 2,053 | 11.0 | 6.9 % | |
| Earnings per ordinary share – basic and diluted in euros | 4.42 | 4.72 | 6.8 % | |||
| Earnings per preferred share – basic and diluted in euros | 4.44 | 4.74 | 6.8 % |
Consolidated statement of comprehensive income
See Notes 15 and 21 for further explanatory information
82
| in million euros | 2015 | 2016 |
| Net income | 1,968 | 2,093 |
| Components to be reclassified to income: | ||
| Exchange differences on translation of foreign operations | 593 | 141 |
| Gains/losses from derivative financial instruments (Hedge reserve per IAS 39) | – 17 | – |
| Gains/losses from financial instruments in the available-for-sale category (Available-for-sale reserve) | – | – |
| Components not to be reclassified to income: | ||
| Remeasurement of net liability from defined benefit pension plans (net of taxes) | 265 | – 138 |
| Other comprehensive income (net of taxes) | 841 | 3 |
| Total comprehensive income for the period | 2,809 | 2,096 |
| Attributable to non-controlling interests | 58 | 47 |
| Attributable to shareholders of Henkel AG & Co. KGaA | 2,751 | 2,049 |
118 Consolidated financial statements Henkel Annual Report 2016
Consolidated statement of changes in equity
See Notes 10 to 14 for further explanatory information
83
| in million euros | Issued capital | Other components of equity | Capital reserve |
Treasury shares |
Retained earnings |
Share holders of Henkel AG & Co. KGaA |
Non-con trolling interests |
Total | |||
| Ordinary shares |
Preferred shares |
Currency transla tion |
Hedge reserve per IAS 39 |
Available for sale |
|||||||
| At January 1, 2015 | 260 | 178 | 652 | –91 | 11,396 | – 723 | –167 | 3 | 11,508 | 136 | 11,644 |
| Net income | – | – | – | – | 1,921 | – | – | – | 1,921 | 47 | 1,968 |
| Other comprehensive income | – | – | – | – | 265 | 582 | – 17 | – | 830 | 11 | 841 |
| Total comprehensive income for the period |
– | – | – | – | 2,186 | 582 | –17 | 0 | 2,751 | 58 | 2,809 |
| Dividends | – | – | – | – | – 564 | – | – | – | – 564 | – 33 | –597 |
| Sale of treasury shares | – | – | – | – | – | – | – | – | – | – | – |
| Changes in ownership interest with no change in control |
– | – | – | – | – 34 | – | – | – | – 34 | – 11 | –45 |
| Other changes in equity | – | – | – | – | – | – | – | – | – | – | – |
| At Dec. 31, 2015/Jan. 1, 2016 | 260 | 178 | 652 | – 91 | 12,984 | –141 | –184 | 3 | 13,661 | 150 | 13,811 |
| Net income | – | – | – | – | 2,053 | – | – | – | 2,053 | 40 | 2,093 |
| Other comprehensive income | – | – | – | – | – 138 | 134 | – | – | – 4 | 7 | 3 |
| Total comprehensive income for the period |
– | – | – | – | 1,915 | 134 | – | – | 2,049 | 47 | 2,096 |
| Dividends | – | – | – | – | – 633 | – | – | – | – 633 | – 33 | –666 |
| Sale of treasury shares | – | – | – | – | – | – | – | – | – | – | – |
| Changes in ownership interest with no change in control |
– | – | – | – | – 70 | – | – | – | – 70 | – 26 | –96 |
| Other changes in equity | – | – | – | – | 38 | – | – | – | 38 | – | 38 |
| At December 31, 2016 | 260 | 178 | 652 | –91 | 14,234 | – 7 | –184 | 3 | 15,045 | 138 | 15,183 |
Henkel Annual Report 2016 Consolidated financial statements 119
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Consolidated statement of cash flows
See Note 37 for further explanatory information
84
| in million euros | 2015 | 2016 |
| Operating profit (EBIT) | 2,645 | 2,775 |
| Income taxes paid | – 715 | – 769 |
| Amortization/depreciation/impairment/write-ups of intangible assets and property, plant and equipment 1 | 460 | 570 |
| Net gains/losses on disposal of intangible assets and property, plant and equipment, and from divestments | – 26 | –7 |
| Change in inventories | – 25 | 10 |
| Change in trade accounts receivable | – 140 | – 240 |
| Change in other assets | – 79 | –108 |
| Change in trade accounts payable | 77 | 341 |
| Change in other liabilities and provisions | 187 | 278 |
| Cash flow from operating activities | 2,384 | 2,850 |
| Purchase of intangible assets and property, plant and equipment, including payments on account | – 625 | – 557 |
| Acquisition of subsidiaries and other business units | – 322 | –3,727 |
| Purchase of associated companies and joint ventures held at equity | – 6 | – |
| Proceeds on disposal of subsidiaries and other business units | 25 | – |
| Proceeds on disposal of intangible assets and property, plant and equipment | 35 | 34 |
| Cash flow from investing activities | –893 | –4,250 |
| Dividends paid to shareholders of Henkel AG & Co. KGaA | – 564 | – 633 |
| Dividends paid to non-controlling shareholders | – 33 | –33 |
| Interest received | 130 | 20 |
| Interest paid | – 155 | –26 |
| Dividends and interest paid and received | – 622 | – 672 |
| Repayment / Issuance of bonds | – 1,300 | 2,221 |
| Other changes in borrowings | 275 | 519 |
| Allocation to pension funds | – 60 | –185 |
| Other changes in pension obligations | – 79 | –116 |
| Purchase of non-controlling interests with no change of control | – 52 | –102 |
| Other financing transactions 2 | 283 | 13 |
| Cash flow from financing activities | –1,555 | 1,678 |
| Net change in cash and cash equivalents | – 64 | 278 |
| Effect of exchange rates on cash and cash equivalents | 12 | –65 |
| Change in cash and cash equivalents | – 52 | 213 |
| Cash and cash equivalents at January 1 | 1,228 | 1,176 |
| Cash and cash equivalents at December 31 | 1,176 | 1,389 |
1 Of which: Impairment in fiscal 2016: 68 million euros (fiscal 2015: 16 million euros).
2 Other financing transactions in fiscal 2016 include payments of –34 million euros for the purchase of short-term
securities and time deposits as well as for the provision of financial collateral (fiscal 2015: –472 million euros).
Additional voluntary information
Reconciliation to free cash flow 85
| in million euros | 2015 | 2016 |
| Cash flow from operating activities | 2,384 | 2,850 |
| Purchase of intangible assets and property, plant and equipment, including payments on account | – 625 | –557 |
| Proceeds on disposal of intangible assets and property, plant and equipment | 35 | 34 |
| Net interest paid | – 25 | –6 |
| Other changes in pension obligations | – 79 | –116 |
| Free cash flow | 1,690 | 2,205 |
120 Consolidated financial statements Henkel Annual Report 2016
Group segment report by business unit 1
86
| in million euros | Adhesives for Con sumers, Craftsmen and Building |
Industrial Adhesives |
Total Adhesive Techno logies |
Beauty Care |
Laundry & Home Care |
Operating business units total |
Corporate | Henkel Group |
| Sales 2016 | 1,822 | 7,139 | 8,961 | 3,838 | 5,795 | 18,593 | 121 | 18,714 |
| Proportion of Henkel sales | 10 % | 38 % | 48 % | 20 % | 31 % | 99% | 1 % | 100% |
| Sales 2015 | 1,869 | 7,123 | 8,992 | 3,833 | 5,137 | 17,961 | 128 | 18,089 |
| Change from previous year | – 2.5 % | 0.2 % | – 0.3 % | 0.1 % | 12.8 % | 3.5% | – 6.1 % | 3.5% |
| Adjusted for foreign exchange | 2.0 % | 3.5 % | 3.2 % | 3.5 % | 16.8 % | 7.2% | – | 7.1% |
| Organic | 1.7 % | 3.1 % | 2.8 % | 2.1 % | 4.7 % | 3.2% | – | 3.1% |
| EBIT 2016 | 278 | 1,284 | 1,561 | 526 | 803 | 2,890 | –115 | 2,775 |
| EBIT 2015 | 283 | 1,179 | 1,462 | 561 | 786 | 2,809 | – 164 | 2,645 |
| Change from previous year | – 2.1 % | 8.9 % | 6.8 % | – 6.2 % | 2.2 % | 2.9% | – | 4.9 % |
| Return on sales (EBIT) 2016 | 15.2% | 18.0 % | 17.4% | 13.7% | 13.9% | 15.5% | – | 14.8% |
| Return on sales (EBIT) 2015 | 15.2 % | 16.5 % | 16.3 % | 14.6 % | 15.3 % | 15.6% | – | 14.6% |
| Adjusted EBIT 2016 | 293 | 1,336 | 1,629 | 647 | 1,000 | 3,276 | –104 | 3,172 |
| Adjusted EBIT 2015 | 278 | 1,256 | 1,534 | 610 | 879 | 3,023 | – 100 | 2,923 |
| Change from previous year | 5.6 % | 6.3 % | 6.2 % | 6.1 % | 13.7 % | 8.4 % | – | 8.5% |
| Adjusted return on sales (EBIT) 2016 | 16.1 % | 18.7% | 18.2 % | 16.9% | 17.3% | 17.6% | – | 16.9% |
| Adjusted return on sales (EBIT) 2015 | 14.9 % | 17.6 % | 17.1 % | 15.9 % | 17.1 % | 16.8% | – | 16.2% |
| Capital employed 20162 | 779 | 7,054 | 7,833 | 2,882 | 5,104 | 15,819 | 77 | 15,895 |
| Capital employed 2015 2 | 898 | 7,068 | 7,967 | 2,743 | 3,726 | 14,436 | 75 | 14,511 |
| Change from previous year | – 13.3 % | – 0.2 % | – 1.7 % | 5.1 % | 37.0 % | 9.6% | – | 9.5% |
| Return on capital employed (ROCE) 2016 | 35.7 % | 18.2% | 19.9 % | 18.2% | 15.7% | 18.3% | – | 17.5% |
| Return on capital employed (ROCE) 2015 | 31.6 % | 16.7 % | 18.4 % | 20.4 % | 21.1 % | 19.5 % | – | 18.2% |
| Amortization/depreciation/impairment/write-ups of intangible assets and property, plant and equipment 2016 |
43 | 223 | 266 | 97 | 194 | 557 | 13 | 570 |
| of which impairment losses 2016 | 1 | 7 | 8 | 23 | 37 | 68 | – | 68 |
| of which write-ups 2016 | – | – | – | – | – | – | – | – |
| Amortization / depreciation / impairment / write-ups of intangible assets and property, plant and equipment 2015 |
43 | 207 | 250 | 73 | 126 | 449 | 11 | 460 |
| of which impairment losses 2015 | – | 2 | 2 | – | 14 | 16 | – | 16 |
| of which write-ups 2015 | – | 6 | 6 | – | – | 6 | – | 6 |
| Capital expenditures (excl. financial assets) 2016 | 89 | 191 | 280 | 274 | 3,846 | 4,400 | 9 | 4,409 |
| Capital expenditures (excl. financial assets) 2015 | 83 | 294 | 377 | 142 | 450 | 969 | 10 | 979 |
| Operating assets 2016 3 | 1,399 | 8,698 | 10,096 | 4,233 | 7,752 | 22,082 | 459 | 22,540 |
| Operating liabilities 2016 | 660 | 2,145 | 2,805 | 1,537 | 2,380 | 6,722 | 382 | 7,104 |
| Net operating assets 2016 3 | 739 | 6,553 | 7,291 | 2,696 | 5,372 | 15,359 | 77 | 15,436 |
| Operating assets 2015 3 | 1,441 | 8,535 | 9,976 | 4,041 | 5,928 | 19,945 | 456 | 20,401 |
| Operating liabilities 2015 | 585 | 1,982 | 2,566 | 1,484 | 2,005 | 6,055 | 381 | 6,435 |
| Net operating assets 2015 3 | 856 | 6,553 | 7,410 | 2,557 | 3,923 | 13,890 | 75 | 13,965 |
1 Calculated on the basis of units of 1,000 euros.
2 Including goodwill at cost prior to any accumulated impairment in accordance with IFRS 3.79 (b).
3 Including goodwill at net book value.
Henkel Annual Report 2016 Notes to the consolidated financial statements 121
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Key financials by region 1
87
| in million euros | Western Europe |
Eastern Europe |
Africa/ Middle East |
North America |
Latin America |
Asia Pacific |
Total Regions |
Corporate | Henkel Group |
| Sales 2 2016 | 5,999 | 2,713 | 1,378 | 4,202 | 1,055 | 3,246 | 18,593 | 121 | 18,714 |
| Sales 2 2015 | 6,045 | 2,695 | 1,329 | 3,648 | 1,110 | 3,134 | 17,961 | 128 | 18,089 |
| Change from previous year | – 0.8 % | 0.7 % | 3.7 % | 15.2 % | – 5.0 % | 3.6 % | 3.5% | – | 3.5% |
| Adjusted for foreign exchange | 0.1 % | 7.4 % | 12.2 % | 15.2 % | 15.9 % | 6.0 % | 7.2% | – | 7.1% |
| Organic | – 0.1 % | 7.0 % | 5.6 % | 1.7 % | 13.8 % | 3.2 % | 3.2% | – | 3.1% |
| Proportion of Group sales 2016 | 32 % | 15 % | 7 % | 22% | 6% | 17% | 99 % | 1% | 100 % |
| Proportion of Group sales 2015 | 34 % | 15 % | 7 % | 20 % | 6 % | 17 % | 99% | 1 % | 100 % |
| Operating profit (EBIT) 2016 | 1,335 | 328 | 111 | 505 | 126 | 485 | 2,890 | –115 | 2,775 |
| Operating profit (EBIT) 2015 | 1,223 | 356 | 141 | 544 | 110 | 434 | 2,809 | – 164 | 2,645 |
| Change from previous year | 9.2 % | – 7.9 % | – 21.2 % | – 7.1 % | 14.2 % | 11.5 % | 2.9% | – | 4.9% |
| Adjusted for foreign exchange | 9.9 % | – 0.8 % | – 14.0 % | – 7.1 % | 66.9 % | 15.0 % | 7.1% | – | 8.2% |
| Return on sales (EBIT) 2016 | 22.3 % | 12.1% | 8.1 % | 12.0% | 11.9% | 14.9 % | 15.5% | – | 14.8% |
| Return on sales (EBIT) 2015 | 20.2 % | 13.2 % | 10.6 % | 14.9 % | 9.9 % | 13.9 % | 15.6% | – | 14.6% |
1 Calculated on the basis of units of 1,000 euros.
2 By location of company.
In 2016, the affiliated companies domiciled in Germany,
including Henkel AG & Co. KGaA, generated sales of 2,339 million euros (previous year: 2,345 million euros). Sales realized
by the affiliated companies domiciled in the USA amounted to
3,943 million euros in 2016 (previous year: 3,422 million
euros). In fiscal 2015 and 2016, no individual customer
accounted for more than 10 percent of total sales.
Of the total non-current assets disclosed for the Henkel Group
at December 31, 2016 (excluding financial instruments and
deferred tax assets) amounting to 18,599 million euros (previous year: 14,539 million euros), 1,964 million euros (previous
year: 1,842 million euros) was attributable to the affiliated
companies domiciled in Germany, including Henkel AG & Co.
KGaA. The non-current assets (excluding financial instruments and deferred tax assets) recognized in respect of the
affiliated companies domiciled in the USA amounted to
10,735 million euros at December 31, 2016 (previous year:
7,308 million euros).
122 Consolidated financial statements Henkel Annual Report 2016
General information
The consolidated financial statements of Henkel AG & Co.
KGaA (Düsseldorf Regional Court, HRB 4724), Düsseldorf, as
of December 31, 2016, have been prepared in accordance with
International Financial Reporting Standards (IFRS) and the relevant interpretations of the International Financial Reporting
Interpretations Committee (IFRIC), as adopted per Regulation
number 1606/2002 of the European Parliament and the Council, on the application of international accounting standards,
in the European Union, and in compliance with Section 315a of
the German Commercial Code [HGB]. The consolidated financial statements are published in the electronic federal gazette.
The individual financial statements of the companies included
in the consolidation are drawn up on the same accounting date,
December 31, 2016, as that of Henkel AG & Co. KGaA.
Members of the KPMG organization or other independent
firms of auditors instructed accordingly have audited the
financial statements of the material companies included in
the consolidation. The Management Board of Henkel Management AG – which is the Personally Liable Partner of Henkel AG
& Co. KGaA – compiled the consolidated financial statements
on January 30, 2017, and approved them for forwarding to the
Supervisory Board and for publication.
The consolidated financial statements are based on the principle of historical cost with the exception that certain financial
instruments are accounted for at their fair values, and pension
obligations are measured using the projected unit credit
method. The functional currency of Henkel AG & Co. KGaA and
the reporting currency of the Group is the euro. Unless otherwise indicated, all amounts are shown in million euros. In order
to improve the clarity and informative value of the consolidated
financial statements, certain items are combined in the consolidated statement of financial position, the consolidated statement of income and the consolidated statement of comprehensive income, and then shown separately in the notes.
Scope of consolidation
In addition to Henkel AG & Co. KGaA as the ultimate parent
company, the consolidated financial statements at December
31, 2016, include eight German and 199 non-German companies in which Henkel AG & Co. KGaA has a dominating influence over financial and operating policies, based on the concept of control. The Group has a dominating influence on a
company when it is exposed, or has rights, to variable returns
Accounting principles and methods applied in preparation of the
consolidated financial statements
from its involvement with the company and has the ability to
affect those returns through its power over the company. Companies in which the stake held represents less than half of the
voting rights are fully consolidated if Henkel AG & Co. KGaA
controls them, as defined in IFRS 10, through contractual
agreements or the right to appoint corporate bodies.
Henkel AG & Co. KGaA prepares the consolidated financial
statements for the largest and the smallest groups of companies to which Henkel AG & Co. KGaA and its subsidiaries
belong.
The following table shows the changes to the scope of consolidation in fiscal 2016:
Scope of consolidation 88
| At January 1, 2016 | 202 |
| Additions | 17 |
| Mergers | – 8 |
| Disposals | – 3 |
| At December 31, 2016 | 208 |
Further details can be found in the section “Acquisitions and
divestments” below.
Subsidiaries which are of secondary importance to the Group
and to the presentation of a true and fair view of our net
assets, financial position and results of operations due to their
inactivity or low level of activity are generally not included in
the consolidated financial statements. The total assets of these
companies represent less than 1 percent of the Group’s total
assets; their total sales and income (net of taxes) are also less
than 1 percent of the Group totals.
Acquisitions and divestments
Acquisitions
Effective May 31, 2016, we acquired 57.5 percent of the shares
of Expand Global Industries UK Limited, London, UK. Expand
Global Industries UK Limited holds nearly 100 percent of
the shares of Expand Global Industries Ltd. headquartered in
Ibadan, Nigeria, which has a strong presence in the detergent
market in Nigeria. With this acquisition, the Laundry & Home
Care business unit has expanded its detergent business. The
acquisition is part of our strategy to further strengthen our
presence in emerging markets. The purchase price was
110 million euros, settled in cash. With regard to the remainHenkel Annual Report 2016 Notes to the consolidated financial statements 123
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
ing 42.5 percent of shares, put and call contracts have been
entered into between Henkel and the seller. Henkel has
decided to apply the anticipated acquisition method to
account for the acquisition in the financial statements.
Accordingly, acquisition of the outstanding non-controlling
shares is already included as part of the first-time consolidation in the form of a contingent purchase price liability of
113 million euros. The purchase price of the outstanding
non-controlling interests is based on the market value of the
shares less net financial debt. Please refer to the details on
pages 156 and 157 for Henkel’s estimated bandwidth of potential fluctuations arising from changes in valuation parameters.
A maximum payment was not agreed. Because the acquisition
is recognized using the anticipated acquisition method,
non-controlling interests from the acquired business are not
disclosed in the statement of comprehensive income. Effects
from foreign exchange and measurement of the contingent
purchase price liability are recognized directly in equity and
disclosed as other changes in the statement of changes in
equity. Provisional goodwill was recognized in the amount of
199 million euros. Because the acquisition was completed in
the course of the year, the allocation of the purchase price to
the acquired assets and liabilities in accordance with IFRS 3
“Business combinations” is provisional. Tax-deductible goodwill is not expected.
Effective June 1, 2016, we completed the acquisition of a range
of hair care brands and the associated hair care business of
Procter & Gamble in the Africa/Middle East and Eastern
Europe regions. The acquisition is part of our strategy to further strengthen our presence in emerging markets. The purchase price was 212 million euros, settled in cash. Provisional
goodwill was recognized in the amount of 160 million euros.
Because the acquisition was completed in the course of the
year, the allocation of the purchase price to the acquired assets
and liabilities in accordance with IFRS 3 “Business combinations” is provisional. Goodwill of 54 million euros was recognized for tax purposes.
Effective June 30, 2016, we acquired the tile adhesives business
and the associated brands of the Colombian company Alfagres
S.A. With this, the Adhesive Technologies business unit has
expanded its business in the segment Adhesives for Consumers, Craftsmen and Building. The acquisition is part of our
strategy to further strengthen our presence in emerging markets. We do not expect any material impact from this acquisition on the net assets, financial position and results of operations of Henkel.
Effective August 15, 2016, we completed the acquisition of all
shares of Zhejiang Golden Roc Chemicals JSC, China, expanding our superglue business in the Adhesive Technologies business unit. The acquisition is part of our strategy to further
strengthen our presence in emerging markets. We do not
expect any material impact from this acquisition on the net
assets, financial position and results of operations of Henkel.
Effective August 21, 2016, we completed the acquisition of
the detergent business and the associated brands of Behdad
Chemical Company PJSC in Iran. The acquisition is part of our
strategy to further strengthen our presence in emerging markets. The provisional purchase price of 5,436 billion Iranian
rials (around 141 million euros) was settled in cash. Provisional goodwill was recognized in the amount of 100 million
euros. Because the acquisition was recently completed, the
allocation of the purchase price to the acquired assets and liabilities in accordance with IFRS 3 “Business combinations” is
provisional. We do not expect any material impact from this
acquisition on the net assets, financial position and results of
operations of Henkel.
Effective September 1, 2016, we completed the acquisition of
all shares of The Sun Products Corporation, a laundry and
home care company based in Wilton, Connecticut, USA. The
transaction had a purchase price of around 3.6 billion US dollars including debt redeemed at closing of 1.7 billion US dollars, and is fully debt-financed. In fiscal 2015, the company
generated sales of around 1.6 billion US dollars in the USA and
Canada. Acquisition-related costs amounted to 17 million
euros. This acquisition is part of our strategy to invest in
attractive country category positions in mature markets. Provisional goodwill was recognized in the amount of 2.1 billion
euros. This goodwill represents the offensive and defensive
synergies that Henkel expects to gain by integrating The Sun
Products Corporation into its organization, and reflects the
growth potential of the acquired business. Because the acquisition was recently completed, the allocation of the purchase
price to the acquired assets and liabilities in accordance with
IFRS 3 “Business combinations” is provisional. If the acquired
company had been included from January 1, 2016, sales for the
Henkel Group for the reporting period January 1 to December 31,
2016, would be higher by 1,457 million euros and income (net
of taxes) would be lower by 98 million euros, taking restructuring and integration costs into account. The actual contributions of the company were 475 million euros to sales and
–77 million euros to income (net of taxes). Tax-deductible
goodwill is not expected.
Effective December 8, 2016, we completed the acquisition of
all shares of Jeyes Group Limited, UK, thus expanding our
business with WC products and household detergents in the
Laundry & Home Care business unit. As specified in IFRS 10
“Consolidated financial statements,” the acquired business
has not yet been consolidated as control has not yet passed to
Henkel. First-time consolidation is expected for the second
quarter of 2017. We do not expect any material impact from
this acquisition on the net assets, financial position and
results of operations of Henkel.
124 Consolidated financial statements Henkel Annual Report 2016
Acquisitions 89
| Detergent business in Nigeria, effective May 31, 2016 |
Hair care business in Africa/Middle East and Eastern Europe, effective June 1, 2016 |
The Sun Products Corporation, effective September 1, 2016 |
in million euros | Total |
| Fair value | Fair value | Fair value | ||
| Intangible assets | 213 | 205 | 3,016 | 3,434 |
| Property, plant and equipment | 13 | 1 | 245 | 259 |
| Other non-current assets | – | 11 | 127 | 138 |
| Non-current assets | 226 | 217 | 3,388 | 3,831 |
| Inventories | 9 | 3 | 185 | 197 |
| Trade accounts receivable | 1 | – | 134 | 135 |
| Liquid funds | 2 | – | 11 | 13 |
| Other current assets | 2 | – | 14 | 16 |
| Current assets | 14 | 3 | 344 | 361 |
| Total assets | 240 | 220 | 3,732 | 4,192 |
| Net assets | 223 | 219 | 3,200 | 3,642 |
| Non-current liabilities | 6 | 1 | 308 | 315 |
| Other current provisions / liabilities | 5 | – | 90 | 95 |
| Trade accounts payable | 6 | – | 134 | 140 |
| Current liabilities | 11 | – | 224 | 235 |
| Total equity and liabilities | 240 | 220 | 3,732 | 4,192 |
In 2016, we spent around 62 million euros for the acquisition
of the outstanding non-controlling shares in Henkel Pakvash
PJSC based in Tehran, Iran, increasing our ownership interest
to 97.98 percent.
In the third quarter of 2016, we spent around 10 million euros
for the acquisition of the outstanding non-controlling shares
in Henkel Industrie AG based in Tehran, Iran, increasing our
ownership interest to 100 percent.
In the fourth quarter of 2016, we spent around 22 million
euros for the acquisition of the outstanding non-controlling
shares in Henkel (Siam) Adhesive Technologies Ltd. based in
Samut Prakan, Thailand, increasing our ownership interest to
100 percent.
The carrying amounts of the acquired assets and liabilities are
determined by the contracts and our opening balances on each
respective acquisition date. The recognition and measurement
principles adopted by the Henkel Group were applied. If the
acquisition of the shares of Expand Global Industries UK Limited and of the range of hair care brands and the associated
hair care business of Procter & Gamble – and thus their business activities – had been included from January 1, 2016, sales
for the Henkel Group for the reporting period January 1 to
December 31, 2016, would be higher by 126 million euros and
income (net of taxes) would be higher by 2 million euros, taking acquisition-related costs into account. The actual contributions of the companies were 61 million euros to sales and
–2 million euros to income (net of taxes).
Henkel Annual Report 2016 Notes to the consolidated financial statements 125
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Reconciliation of the purchase price to provisional goodwill 90
| in million euros | 2016 |
| Detergent business in Nigeria, effective May 31, 2016 | |
| Purchase price | 110 |
| Contingent purchase price | 113 |
| Fair value of the acquired assets and liabilities | 24 |
| Provisional goodwill | 199 |
| Hair care business in Africa/Middle East and Eastern Europe, effective June 1, 2016 | |
| Purchase price | 212 |
| Contingent purchase price | 7 |
| Fair value of the acquired assets and liabilities | 59 |
| Provisional goodwill | 160 |
| The Sun Products Corporation, effective September 1, 2016 | |
| Purchase price | 3,197 |
| Adjustment based on purchase agreement | 3 |
| Fair value of the acquired assets and liabilities | 1,137 |
| Provisional goodwill | 2,063 |
Entities acquired are included in the consolidation for the first
time as subsidiaries by offsetting the carrying amount of the
respective parent company’s investment in them against their
assets and liabilities. Contingent consideration is recognized
at fair value as of the date of first-time consolidation. Subsequent changes in value do not result in an adjustment to the
valuation at the time of acquisition. Acquisition-related costs
are not included in the purchase price. Instead, they are recognized through profit or loss in the period in which they occur.
In the recognition of acquisitions of less than 100 percent,
non-controlling interests are measured at the fair value of the
share of net assets that they represent. Contingent futures
contracts on non-controlling interests are recognized using
the anticipated acquisition method. Accordingly, the acquisition of the outstanding non-controlling interests is already
included as part of the first-time consolidation in the form of
a contingent purchase price liability.
In subsequent years, the carrying amount of the Henkel AG &
Co. KGaA investment is eliminated against the current (share
of) equity in the subsidiary entities concerned.
Changes in the shareholdings of subsidiary companies resulting in a decrease or an increase in the participating interests of
the Group without loss of control are recognized within equity
as changes in ownership without loss of control.
Divestments
We did not conclude the sale of any businesses in fiscal 2016.
Consolidation methods
The financial statements of Henkel AG & Co. KGaA and of the
subsidiaries included in the consolidated financial statements
were prepared on the basis of uniformly valid principles of
recognition and measurement, applying the standardized
year-end date adopted by the Group. Such entities are included
in the consolidated financial statements as of the date on
which the Group acquired control.
All receivables and liabilities, sales, income and expenses, as
well as intra-group profits on transfers of non-current assets
or inventories, are eliminated on consolidation.
The purchase method is used for capital consolidation. With
business combinations, therefore, all hidden reserves and hidden charges in the entity acquired are revalued at the time of
acquisition, and all identifiable intangible assets are separately disclosed if they are clearly separable or if their recognition arises from a contractual or other legal right. Any difference arising between the acquisition cost and the (share of)
net assets after purchase price allocation is recognized as
goodwill. The goodwill of subsidiaries is measured in the
functional currency of the subsidiary.
126 Consolidated financial statements Henkel Annual Report 2016
As soon as the control of a subsidiary is relinquished, all the
assets and liabilities and the non-controlling interests, and
also the accumulated currency translation gains or losses, are
derecognized. In the event that Henkel continues to own
non-controlling interests in the non-consolidated entity, these
are measured at fair value. The result of deconsolidation is
recognized under other operating income or expenses.
Companies recognized by the equity method
Associated companies and joint ventures are recognized by
the equity method.
An associated company is a company over which the Group
can exercise material influence on the financial and operating
policies without controlling it. Material influence is generally
assumed when the Group holds 20 percent or more of the voting rights. Where a Group company conducts transactions
with an associated company or a joint venture, the resulting
profits or losses are eliminated in accordance with the share of
the Group in that company.
The Group consolidates Dekel Investment Holdings Ltd. and
Vitriflex, Inc. using the equity method. The carrying amount
of the shareholdings recognized using the equity method as of
December 31, 2016, was 7 million euros (previous year: 12 million euros).
Associated companies that are less relevant for the Group and
for the presentation of a fair view of its net assets, financial position and results of operation, are never recognized using the
equity method. They are always recognized at amortized cost.
Currency translation
The annual financial statements of the consolidated companies, including the hidden reserves and hidden charges of
Group companies recognized by the purchase method, goodwill arising on consolidation, and the consolidated statement
of cash flows, are translated into euros using the functional
currency method outlined in International Accounting Standard (IAS) 21 “The Effects of Changes in Foreign Exchange
Rates.” The functional currency is the currency in which a
foreign company predominantly generates funds and makes
payments. As the functional currency for all the companies
included in the consolidation is generally the local currency of
the company concerned, assets and liabilities are translated at
closing rates, while income and expenses are translated at the
average rates for the year as an approximation of the actual
rates at the date of the transaction. Equity items are recognized
at historical exchange rates. The differences arising from using
average rather than closing rates are taken to equity and shown
as other components of equity or non-controlling interests,
and remain neutral in respect of net income until the shares
are divested.
In the subsidiaries’ annual financial statements, transactions
in foreign currencies are converted at the rates prevailing at
the time of the transaction. Financial assets and liabilities in
foreign currencies are measured at closing rates through profit
or loss. For the main currencies in the Group, the following
exchange rates have been used based on 1 euro:
Currencies 91
| ISO code | Average exchange rate | Exchange rate on December 31 | |||
| 2015 | 2016 | 2015 | 2016 | ||
| Chinese yuan | CNY | 6.97 | 7.36 | 7.06 | 7.32 |
| Mexican peso | MXN | 17.61 | 20.67 | 18.91 | 21.77 |
| Polish zloty | PLN | 4.18 | 4.36 | 4.26 | 4.41 |
| Russian ruble | RUB | 68.05 | 74.07 | 80.67 | 64.30 |
| Turkish lira | TRY | 3.02 | 3.34 | 3.18 | 3.71 |
| US dollar | USD | 1.11 | 1.11 | 1.09 | 1.05 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 127
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Recognition and measurement methods
Summary of selected measurement methods 92
| Financial statement figures | Measurement method |
| Assets | |
| Goodwill | Lower of carrying amount and recoverable amount (“impairment only” method) |
| Other intangible assets | |
| with indefinite useful lives | Lower of carrying amount and recoverable amount (“impairment only” method) |
| with definite useful lives | (Amortized) cost less any impairment losses |
| Property, plant and equipment | (Depreciated) cost less any impairment losses |
| Financial assets (categories per IAS 39) | |
| “Loans and receivables” | (Amortized) cost using the effective interest method |
| “Available for sale” | Fair value with gains or losses recognized directly in equity 1 |
| “Held for trading” | Fair value through profit or loss |
| “Fair value option” | Fair value through profit or loss |
| Other assets | (Amortized) cost |
| Inventories | Lower of cost and fair value less costs to sell |
| Assets held for sale | Lower of cost and fair value less costs to sell |
1 Apart from permanent impairment losses and effects arising from measurement in a foreign currency.
| Liabilities | |
| Provisions for pensions and similar obligations | Present value of future obligations (projected unit credit method) |
| Other provisions | Settlement amount |
| Financial liabilities (categories per IAS 39) | |
| “Measured at amortized cost” | (Amortized) cost using the effective interest method |
| “Held for trading” | Fair value through profit or loss |
| Other liabilities | Settlement amount |
The methods of recognition and measurement, which are
basically unchanged from the previous year, are described in
detail in the notes relating to the individual items of the statement of financial position on these pages. Also provided as
part of the report on our financial instruments (Note 21 on
pages 153 to 165) are the disclosures relevant to International
Financial Reporting Standard (IFRS) 7 showing the breakdown
of our financial instruments by category, our methods for fair
value measurement, and the derivative financial instruments
that we use.
Changes in the methods of recognition and measurement
arising from revised and new standards are applied retrospectively, provided that the effect is material and there are no
alternative regulations that supersede the standard concerned.
The consolidated statement of income from the previous year
and the opening balance of the consolidated statement of
financial position for this comparative period are adjusted as
if the new methods of recognition and measurement had
always been applied.
128 Consolidated financial statements Henkel Annual Report 2016
Accounting estimates, assumptions
and discretionary judgments
Preparation of the consolidated financial statements is based on
a number of accounting estimates and assumptions. These have
an impact on the reported amounts of assets, liabilities and
contingent liabilities at the reporting date and the disclosure
of income and expenses for the reporting period. The actual
amounts may differ from these estimates.
The accounting estimates and their underlying assumptions are
based on past experience and are continually reviewed. Changes
in accounting estimates are recognized in the period in which
the change takes place where such change exclusively affects
that period. A change is recognized in the period in which it
occurs and in later periods where such change affects both the
reporting period and subsequent periods. The judgments of the
Management Board regarding the application of those IFRSs
which have a significant impact on the consolidated financial
statements are presented in particular in the explanatory notes
on taxes on income (Note 30 on pages 168 to 170), intangible
assets (Note 1 on pages 131 to 134), provisions for pensions and
similar obligations (Note 15 on pages 141 to 149), income tax provisions and other provisions (Note 16 on pages 149 and 150),
financial instruments (Note 21 on pages 153 to 165) and sharebased payment plans (Note 34 on page 172).
Material discretionary judgments are made in respect of the
demarcation of the cash-generating units as explained in Note 1
on pages 131 to 134 and the segment reporting as explained in
Note 35 on pages 172 to 174. Contingent forward contracts for
acquired minority interests are recognized using the anticipated
acquisition method.
New international accounting regulations according
to International Financial Reporting Standards (IFRSs)
Accounting methods applied for the first
time in the year under review 93
| Mandatory for fiscal years beginning on or after |
|
| IFRS 11 (Amendment) “Acquisition of an Interest in a Joint Operation” |
January 1, 2016 |
| IAS 1 (Amendment) “Notes” | January 1, 2016 |
| IAS 16 and IAS 38 (Amendment) “Clarification of Acceptable Methods of Depreciation and Amortisation” |
January 1, 2016 |
| IAS 19 (Amendment) “Defined Benefit Plans: Employee Contributions” |
February 1, 2015 |
| General standard “Improvements to IFRS 2010 – 2012” | February 1, 2015 |
| General standard “Improvements to IFRS 2012 – 2014” | January 1, 2016 |
| IFRS 10, IFRS 12 and IAS 28 (Amendment) “Investment Entities: Applying the Consolidation Exception” |
January 1, 2016 |
• IFRS 11 governs the procedure for recognizing joint ventures
and joint operations in both the statement of financial position and in profit or loss. Joint ventures must be recognized
using the equity method, whereas the treatment of joint
operations is comparable to proportionate consolidation,
pursuant to IFRS 11. With its amendment of IFRS 11, the
International Accounting Standards Board (IASB) has regulated the accounting procedure for acquisitions of interests
in joint operations in which the activity constitutes a business, as defined in IFRS 3 “Business Combinations.” In the
case of such operations, the acquirer is required to apply the
principles of business combinations accounting in IFRS 3.
The disclosure requirements specified in IFRS 3 also apply
in such instances.
• The amendments relating to IAS 1 affect various reporting
issues. The standard now clarifies that disclosures in the
notes are only necessary if their content is not immaterial,
which is explicitly the case if an IFRS specifies a list of minimum disclosures. Explanations on the procedure for aggregating and disaggregating items on the statements of financial position and comprehensive income have also been
included. The standard further requires contributions to
other comprehensive income by companies that are recognized using the equity method to be reported in the statement of comprehensive income.
• In its amendments of IAS 16 and IAS 38, the IASB has provided further guidance for determining acceptable methods
of depreciation and amortization.
• The amendments to IAS 19 clarify the requirements governing the allocation of contributions by employees or third
parties to periods of service if the contributions are linked to
the period of service. In addition, it permits a practical expedient if the amount of the contributions is independent of
the number of years of service.
Henkel Annual Report 2016 Notes to the consolidated financial statements 129
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
• As part of the annual improvement project “Improvements
to IFRS 2010 – 2012,” amendments were made to seven standards. Adjustments to the wording of individual IFRSs are
intended to clarify existing regulations. Amendments affecting disclosures in the notes have also been implemented.
The following standards are affected: IFRS 2, IFRS 3, IFRS 8,
IFRS 13, IAS 16, IAS 24 and IAS 38.
• As part of the annual improvement project “Improvements
to IFRS 2012 – 2014,” amendments were made to four standards. Adjustments to the wording of individual IFRSs/IASs
are intended to clarify existing regulations. The following
standards are affected: IFRS 5, IFRS 7, IAS 19 and IAS 34.
• The amendments to IFRS 10, IFRS 12 and IAS 28 serve to
clarify various issues relating to the application of the consolidation exception under IFRS 10 if the parent company
complies with the definition of an “investment entity.”
The first-time application of the amended standards had no
material impact on the presentation of our consolidated
financial statements.
Accounting regulations not applied in advance of their
effective date
The following standards and amendments to existing standards of possible relevance to Henkel, which have been
adopted into EU law (endorsement mechanism) but are not
yet mandatory, have not been applied early:
Accounting regulations not applied
in advance of their effective date 94
| Mandatory for fiscal years beginning on or after |
|
| IFRS 9 “Financial Instruments” | January 1, 2018 |
| IFRS 15 “Revenue from Contracts with Customers” | January 1, 2018 |
These standards and amendments to existing standards will
be applied by Henkel starting in fiscal 2018. We are currently
examining what impact IFRS 15 “Revenue from Contracts with
Customers” will have on the consolidated financial statements.
Given the current situation, we expect a minor impact on sales
and on cost of sales in the year of implementation due to the
recognition of rights of return in the financial statements.
A conclusive assessment of the effects is not possible at present.
We are also currently examining what impact IFRS 9 “Financial
Instruments” will have on the consolidated financial statements. A conclusive assessment of the effects is not possible.
Accounting regulations not yet adopted into EU law
In fiscal 2016, the IASB issued the following standards and
amendments to existing standards of relevance to Henkel,
which still have to be adopted into EU law (endorsement
mechanism) before they become applicable:
Accounting regulations not yet adopted into EU law 95
| Mandatory for fiscal years beginning on or after |
|
| IFRS 16 “Leases” | January 1, 2019 |
| IFRS 2 (Amendment) “Classification and Measurement of Share-Based Payment Transactions” |
January 1, 2018 |
| IFRS 10 and IAS 28 (Amendment) “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” |
outstanding |
| IFRS 15 (Amendment) “Clarifications to IFRS 15” | January 1, 2018 |
| IAS 7 (Amendment) “Disclosure Initiative” | January 1, 2017 |
| IAS 12 (Amendment) “Recognition of Deferred Tax Assets for Unrealised Losses” |
January 1, 2017 |
| IAS 40 (Amendment) “Transfers of Investment Property” | January 1, 2018 |
| IFRIC 22 “Foreign Currency Transactions and Advance Consideration” |
January 1, 2018 |
| Improvements to IFRS 2014 – 2016 “Amendments to IFRS 12” |
January 1, 2017 |
| Improvements to IFRS 2014 – 2016 “Amendments to IFRS 1 and IAS 28” |
January 1, 2018 |
These new standards and amendments to existing standards
will be applied by Henkel starting in fiscal 2017 or later. A conclusive assessment of the effects is not possible.
130 Consolidated financial statements Henkel Annual Report 2016
Notes to the consolidated statement of financial position
The measurement and recognition policies for financial statement items are described in the relevant note.
Non-current assets
All non-current assets with definite useful lives are depreciated or amortized exclusively using the straight-line method
on the basis of estimated useful lives. The useful life estimates
are reviewed annually. If facts or circumstances indicate the
need for impairment, the recoverable amount is determined.
It is measured as the higher of the fair value less costs to sell
(net realizable value) and the value in use. Impairment losses
are recognized if the recoverable amounts of the assets are
lower than their carrying amounts. They are charged to the
relevant functions.
The following unchanged, standardized useful lives are
applied:
Useful life 96
in years
| Intangible assets with definite useful lives | 3 to 20 |
| Residential buildings | 50 |
| Office buildings | 40 |
| Research and factory buildings, workshops, stores and staff buildings |
25 to 33 |
| Plant facilities | 10 to 25 |
| Machinery | 7 to 10 |
| Office equipment | 10 |
| Vehicles | 5 to 20 |
| Factory and research equipment | 2 to 5 |
1 Intangible assets
Cost 97
| in million euros | Trademarks and other rights | Internally generated intangible assets with definite useful lives |
Intangible assets in development |
Goodwill | Total | |
| Assets with indefinite useful lives |
Assets with definite useful lives |
|||||
| At January 1, 2015 | 1,820 | 1,506 | 220 | 64 | 8,085 | 11,695 |
| Acquisitions | 101 | 18 | – | – | 224 | 343 |
| Divestments | – 1 | – | – | – | – 1 | –2 |
| Additions | – | 12 | 35 | 64 | – | 111 |
| Disposals | – | – 9 | – | – | – | –9 |
| Reclassifications to assets held for sale | – | – | – | – | – | – |
| Reclassifications | – | – | 11 | – 11 | – | – |
| Translation differences | 159 | 71 | 4 | – | 553 | 787 |
| At December 31, 2015/January 1, 2016 | 2,079 | 1,598 | 270 | 117 | 8,861 | 12,925 |
| Acquisitions | 1,012 | 26 | 12 | – | 2,539 | 3,589 |
| Divestments | – | – | – | – | – | – |
| Additions | – | 6 | 8 | 69 | – | 83 |
| Disposals | – | – 30 | – 8 | – | – | –38 |
| Reclassifications to assets held for sale | – | – 8 | – | – | – 3 | –11 |
| Reclassifications | – 101 | 101 | 105 | – 105 | – | – |
| Translation differences | 77 | 29 | 4 | – | 240 | 350 |
| At December 31, 2016 | 3,067 | 1,722 | 391 | 81 | 11,637 | 16,898 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 131
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Accumulated amortization / impairment 98
| Trademarks and other rights | in million euros | Internally generated intangible assets with definite useful lives |
Intangible assets in development |
Goodwill | Total | |
| Assets with indefinite useful lives |
Assets with definite useful lives |
|||||
| At January 1, 2015 | 16 | 921 | 157 | – | 11 | 1,105 |
| Divestments | – | – | – | – | – | – |
| Write-ups | – 5 | – | – | – | – | –5 |
| Scheduled amortization | – | 91 | 19 | – | – | 110 |
| Impairment losses | – | – | – | – | – | – |
| Disposals | – | – 7 | – | – | – | –7 |
| Reclassifications to assets held for sale | – | – | – | – | – | – |
| Reclassifications | 1 | – 1 | – | – | – | – |
| Translation differences | – | 35 | 5 | – | – | 40 |
| At December 31, 2015/January 1, 2016 | 12 | 1,039 | 181 | – | 11 | 1,243 |
| Divestments | – | – | – | – | – | – |
| Write-ups | – | – | – | – | – | – |
| Scheduled amortization | – | 104 | 34 | – | – | 138 |
| Impairment losses | – | – | 1 | – | – | 1 |
| Disposals | – | – 28 | – 8 | – | – | –36 |
| Reclassifications to assets held for sale | – | – 5 | – | – | – | –5 |
| Reclassifications | – | – | – | – | – | – |
| Translation differences | – 4 | 16 | 2 | – | – | 14 |
| At December 31, 2016 | 8 | 1,126 | 210 | – | 11 | 1,355 |
Net book values 99
| Trademarks and other rights | in million euros | Internally generated intangible assets with definite useful lives |
Intangible assets in development |
Goodwill | Total | |
| Assets with indefinite useful lives |
Assets with definite useful lives |
|||||
| At December 31, 2016 | 3,059 | 596 | 181 | 81 | 11,626 | 15,543 |
| At December 31, 2015 | 2,067 | 559 | 89 | 117 | 8,850 | 11,682 |
Goodwill represents the future economic benefit of assets that
are acquired through business combinations and not individually identifiable and separately recognized, as well as expected
synergies, and is recognized at cost. Trademarks and other
rights acquired for valuable consideration are stated at purchase cost, while internally generated software is stated at
development cost.
Additions to internally generated intangible assets mostly
reflect investments in consolidating and optimizing our IT
system architecture for managing business processes.
The change in goodwill resulting from acquisitions and divestments made in the fiscal year is presented in the section
“Acquisitions and divestments” on pages 123 to 126.
Goodwill as well as trademarks and other rights with indefinite useful lives are subjected to an impairment test at least
once a year and also when indicators of impairment are present (“impairment only” approach).
Amortization and impairment of trademarks and other rights
are recognized as selling expenses. Amortization and impairment of other intangible assets are allocated to the relevant
functions in the consolidated statement of income.
132 Consolidated financial statements Henkel Annual Report 2016
In the course of our annual impairment test, we reviewed the
carrying amounts of goodwill. The following table shows the
cash-generating units together with the associated goodwill
Book values – Goodwill 100
| Cash-generating units in million euros |
At December 31, 2015 | At December 31, 2016 | ||||
| Goodwill | Terminal growth rate |
Weighted average cost of capital |
Goodwill | Terminal growth rate |
Weighted average cost of capital |
|
| Packaging and Consumer Goods Adhesives |
2,005 | 1.50 % | 7.50 % | 2,012 | 1.50 % | 7.00% |
| Transport and Metal | 462 | 1.50 % | 7.50 % | 476 | 1.50 % | 7.00% |
| General Industry | 385 | 1.00 % | 7.50 % | 416 | 1.00 % | 7.00% |
| Electronics | 1,473 | 1.50 % | 7.50 % | 1,513 | 1.50 % | 7.00% |
| Adhesives for Consumers, Craftsmen and Building |
373 | 1.00 % | 7.50 % | 404 | 1.00 % | 7.00% |
| Total Adhesive Technologies | 4,698 | 4,821 | ||||
| Branded Consumer Goods | 1,294 | 1.00 % | 6.25 % | 1,461 | 1.00 % | 6.25 % |
| Hair Salon Business | 305 | 1.00 % | 6.25 % | 314 | 1.00% | 6.25 % |
| Total Beauty Care | 1,599 | 1,775 | ||||
| Laundry Care | 1,286 | 1.00 % | 6.25 % | 3,727 | 1.00 % | 6.25 % |
| Home Care | 1,267 | 1.00 % | 6.25 % | 1,303 | 1.00 % | 6.25% |
| Total Laundry & Home Care | 2,553 | 5,030 |
We assess goodwill impairment according to the fair-valueless-costs-to-sell approach on the basis of future estimated
cash flows which are obtained from the business budgets
approved by the appropriate corporate management bodies.
The determination of fair value (before deduction of costs to
sell) is allocated to valuation level 3 of the fair value hierarchy
(see Note 21 on pages 153 to 165). The assumptions upon which
the essential planning parameters are based reflect experience
gained in the past, aligned to current information provided by
external sources. Budgets are prepared on the basis of a financial planning horizon of four years. For the period after that,
a growth rate in a range between 1 and 2 percent in the cash
flows is assumed for the purpose of impairment testing.
The euro to US dollar exchange rate applied is 1.08. Taking into
account specific tax effects, the cash flows of the various
cash-generating units are discounted at different rates reflecting the weighted average cost of capital (WACC) in each business unit: 6.25 percent after tax for both Laundry & Home Care
and Beauty Care, and 7 percent after tax for Adhesive
Technologies.
In the Laundry & Home Care business unit, we have assumed
an increase in sales during the four-year detailed forecasting
horizon of 4 percent per year, with a slight increase in market
share. Sales growth in the Beauty Care business unit over the
four-year forecasting horizon is budgeted at between 2 and
4 percent per annum. Here, too, we expect a slight increase in
market share. Sales in the Adhesive Technologies business
unit are expected to grow by between 3 and 5.5 percent per
annum on average over the detailed four-year forecasting
horizon, thus exceeding the market average.
In all the business units, we assume that a future increase in
the cost of raw materials can be extensively offset by cost
reduction measures in purchasing and by passing the increase
on to our customers, as well as through the implementation
of efficiency improvement measures. Given our continued
pro-active management of the portfolio, we anticipate achieving at least stable gross margins in all our business units.
The impairment tests revealed sufficient impairment buffers
so that, as in the previous year, no impairment of goodwill was
required.
at book value at the reporting date. The description of the
cash-generating units can be found in the notes to the consolidated financial statements, Note 35 on page 172 and in the
combined management report on pages 88 to 99.
Henkel Annual Report 2016 Notes to the consolidated financial statements 133
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Trademarks and other rights with indefinite useful lives are
presented in the following table.
Book values – Trademarks and other rights 101
| Cash-generating units (summarized) in million euros |
At December 31, 2015 | At December 31, 2016 | ||||
| Trademarks and other rights with indefinite useful lives |
Terminal growth rate |
Weighted average cost of capital |
Trademarks and other rights with indefinite useful lives |
Terminal growth rate |
Weighted average cost of capital |
|
| Packaging and Consumer Goods Adhesives |
51 | 1.50 % | 7.50 % | 51 | 1.50 % | 7.00% |
| Transport and Metal | 14 | 1.50 % | 7.50 % | 18 | 1.50 % | 7.00% |
| General Industry | 0 | 1.00 % | 7.50 % | – | 1.00 % | 7.00% |
| Electronics | 90 | 1.50 % | 7.50 % | 90 | 1.50 % | 7.00% |
| Adhesives for Consumers, Craftsmen and Building |
68 | 1.00 % | 7.50 % | 67 | 1.00 % | 7.00% |
| Total Adhesive Technologies | 223 | 226 | ||||
| Branded Consumer Goods | 572 | 0.20 – 1.80 % | 6.25 – 9.50 % | 603 | 0.20 –1.80% | 6.25–9.00 % |
| Hair Salon Business | 121 | 0.20 – 1.80 % | 6.25 – 9.80 % | 124 | 0.20 –1.80% | 6.25– 7.80 % |
| Total Beauty Care | 693 | 727 | ||||
| Laundry Care | 779 | 1.00 – 1.80 % | 6.25 – 12.30 % | 1,745 | 1.00– 2.00% | 6.25–14.40 % |
| Home Care | 372 | 1.00 – 1.80 % | 6.25 – 11.50 % | 361 | 1.00 –2.00% | 6.25 –14.30% |
| Total Laundry & Home Care | 1,151 | 2,106 |
We assess impairment of trademarks and other rights with
indefinite useful lives according to the fair-value-less-coststo-sell approach at the level of the cash-generating unit, which
consists of either global business units (Adhesive Technologies) or regional strategic business units. We base the
approach on future estimated cash flows which are obtained
from business budgets. The determination of fair value (before
deduction of costs to sell) is allocated to valuation level 3 of
the fair value hierarchy (see Note 21 on pages 153 to 165). The
assumptions upon which the essential planning parameters
are based reflect experience gained in the past, aligned to current information provided by external sources. Budgets are
prepared on the basis of a financial planning horizon of
four years. For the period after that, a growth rate in a range
between 0.2 and 2 percent in the cash flows is assumed for the
purpose of impairment testing. The euro to US dollar exchange
rate applied is 1.08. Taking into account specific tax effects,
the cash flows of the various cash-generating units are discounted at different rates, with a range between 6.25 and
14.40 percent applied as the applicable weighted average cost
of capital (WACC) to each cash-generating unit. The impairment tests revealed sufficient impairment buffers so that – as
in the previous year – no impairment of trademarks and other
rights with indefinite useful lives was required.
The trademarks and other rights with indefinite useful lives
with a net book value of 3,059 million euros (previous year:
2,067 million euros) are established in their markets and will
continue to be intensively promoted. Moreover, there are no
other statutory, regulatory or competition-related factors that
limit our usage of our brand names.
Our annual impairment tests on trademarks and other rights
with indefinite useful lives required impairment losses of
0 million euros (previous year: 0 million euros). Following the
acquisition of The Sun Products Corporation and the associated integration and restructuring measures, trademark book
values with indefinite useful lives were reclassified to trademarks with finite useful lives in an amount of 101 million
euros. The scheduled amortization ends in December 2017. In
2016, amortization of around 14 million euros was recognized.
The company also intends to continue using the brands
disclosed as having definite useful lives. No impairment
losses were registered with respect to trademarks and other
rights with definite useful lives in 2016.
134 Consolidated financial statements Henkel Annual Report 2016
2 Property, plant and equipment
Cost 102
| in million euros | Land, land rights and buildings |
Plant and machinery |
Factory and office equipment |
Assets in the course of construction |
Total |
| At January 1, 2015 | 2,088 | 2,872 | 973 | 310 – – 256 – – – 282 18 302 21 – 222 – – – 271 – 10 264 |
6,243 11 – 514 –185 4 –2 117 6,702 277 – 476 –261 –165 – 23 7,052 |
| Acquisitions Divestments Additions Disposals Reclassifications to assets held for sale Reclassifications Translation differences At December 31, 2015/January 1, 2016 Acquisitions Divestments Additions Disposals Reclassifications to assets held for sale Reclassifications Translation differences At December 31, 2016 |
3 | 6 | 2 | ||
| – | – | – | |||
| 45 | 136 | 77 | |||
| – 16 | – 94 | – 75 | |||
| – | 1 | 3 | |||
| 62 | 153 | 65 | |||
| 46 | 51 | 2 | |||
| 2,228 | 3,125 | 1,047 | |||
| 85 | 160 | 11 | |||
| – | – | – | |||
| 44 | 142 | 68 | |||
| – 41 | – 137 | – 83 | |||
| – 155 | – 10 | – | |||
| 41 | 179 | 51 | |||
| 12 | 20 | 1 | |||
| 2,214 | 3,479 | 1,095 |
Accumulated depreciation / impairment 103
| in million euros | Land, land rights and buildings |
Plant and machinery |
Factory and office equipment |
Assets in the course of construction |
Total |
| At January 1, 2015 | 1,008 | 2,042 | 733 | –1 – – – – – – – – 2 –3 – – – – – – 3 – – |
3,782 – –1 340 16 –169 2 – 1 72 4,041 – – 364 67 –237 –84 – 14 4,165 |
| Divestments Write-ups Scheduled depreciation Impairment losses Disposals Reclassifications to assets held for sale Reclassifications Translation differences At December 31, 2015/January 1, 2016 Divestments Write-ups Scheduled depreciation Impairment losses Disposals Reclassifications to assets held for sale Reclassifications Translation differences At December 31, 2016 |
– | – | – | ||
| – | – 1 | – | |||
| 62 | 182 | 96 | |||
| 2 | 12 | 2 | |||
| – 10 | – 86 | – 73 | |||
| 1 | – 1 | 2 | |||
| – 1 | – 3 | 3 | |||
| 19 | 36 | 19 | |||
| 1,081 | 2,181 | 782 | |||
| – | – | – | |||
| – | – | – | |||
| 65 | 192 | 107 | |||
| 50 | 13 | 4 | |||
| – 27 | – 129 | – 81 | |||
| – 75 | – 9 | – | |||
| – 4 | 4 | – 3 | |||
| 4 | 8 | 2 | |||
| 1,094 | 2,260 | 811 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 135
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Net book values 104
| in million euros | Land, land rights and buildings |
Plant and machinery |
Factory and office equipment |
Assets in the course of construction |
Total |
| At December 31, 2016 | 1,120 | 1,219 | 284 | 264 | 2,887 |
| At December 31, 2015 | 1,147 | 944 | 265 | 305 | 2,661 |
Additions are stated at purchase or manufacturing cost. The
latter includes direct costs and appropriate proportions of
necessary overheads. Interest charges on borrowings are not
included, as Henkel does not currently hold any qualifying
assets in accordance with International Accounting Standard
(IAS) 23 “Borrowing Costs.” Cost figures are shown net of
investment grants and allowances. Acquisition-related costs
incurred in order to make the asset ready for the intended use
are capitalized. An overview of the primary investment projects undertaken during the fiscal year can be found on page 70
in the combined management report.
At December 31, 2016, property, plant and equipment with a
carrying amount of 0 million euros had been pledged as collateral for existing liabilities. The periods over which the assets
are depreciated are based on their estimated useful lives as
set out on page 131. Scheduled depreciation and impairment
losses recognized are allocated to the relevant functions in
the consolidated statement of income.
Of the impairment losses amounting to 67 million euros,
46 million euros are attributable to the site in Scottsdale,
Arizona, USA, due to the merger of administrative functions
as part of the process of integrating The Sun Products
Corporation.
136 Consolidated financial statements Henkel Annual Report 2016
3 Other financial assets
Analysis 105
| in million euros | At December 31, 2015 | At December 31, 2016 | ||||
| Non-current | Current | Total | Non-current | Current | Total | |
| Receivables from associated companies | – | 1 | 1 | 4 | 1 | 5 |
| Financial receivables from third parties | 15 | 24 | 39 | 13 | 25 | 38 |
| Derivative financial instruments | – | 72 | 72 | – | 103 | 103 |
| Investments accounted for using the equity method |
12 | – | 12 | 7 | – | 7 |
| Other investments | 21 | – | 21 | 56 | – | 56 |
| Receivable from Henkel Trust e.V. | – | 349 | 349 | – | 501 | 501 |
| Securities and time deposits | – | 5 | 5 | – | 2 | 2 |
| Financial collateral provided | – | 10 | 10 | – | 7 | 7 |
| Sundry financial assets | 15 | 79 | 94 | 15 | 95 | 110 |
| Total | 63 | 540 | 603 | 95 | 734 | 829 |
With the exception of investments, derivatives, securities
and time deposits, other financial assets are measured at
amortized cost.
The receivable from Henkel Trust e.V. relates to pension payments made by Henkel AG & Co. KGaA to retirees, for which
reimbursement can be claimed from Henkel Trust e.V.
Included under securities and time deposits are monies
deposited as part of our short-term financial management
arrangements. The monies involved are primarily time
deposits.
Sundry non-current financial assets include, among others,
receivables from employees. The sundry current financial
assets include the following:
• Receivables from sureties and guarantee deposits amounting to 37 million euros (previous year: 32 million euros)
• Receivables from suppliers amounting to 21 million euros
(previous year: 14 million euros)
• Receivables from employees amounting to 14 million euros
(previous year: 15 million euros).
4 Other assets
Analysis 106
| in million euros | At December 31, 2015 | At December 31, 2016 | ||||
| Non-current | Current | Total | Non-current | Current | Total | |
| Tax receivables | – | 202 | 202 | – | 242 | 242 |
| Payments on account | – | 28 | 28 | – | 55 | 55 |
| Overfunding of pension obligations | 58 | – | 58 | 24 | – | 24 |
| Reimbursement rights related to employee benefits |
100 | 11 | 111 | 102 | 13 | 115 |
| Accruals | 18 | 72 | 90 | 21 | 88 | 109 |
| Sundry other assets | 1 | 17 | 18 | 8 | 36 | 44 |
| Total | 177 | 330 | 507 | 155 | 434 | 589 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 137
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
5 Deferred taxes
Deferred taxes are recognized for temporary differences between
the valuation of an asset or a liability in the financial statements
and its tax base, for tax losses carried forward, and for unused tax
credits. This also applies to temporary differences in valuation
arising through acquisitions, with the exception of goodwill.
Deferred tax liabilities on taxable temporary differences related
to shares in subsidiaries are recognized to the extent that a
reversal of this difference is expected in the foreseeable future.
Changes in the deferred taxes in the statement of financial
position result in deferred tax expenses or income unless the
underlying item is directly recognized in other comprehensive
income. For items recognized directly in other comprehensive
income, the associated deferred taxes are also recognized in
other comprehensive income.
The valuation, recognition and breakdown of deferred taxes
in respect of the various items in the statement of financial
position are disclosed under Note 30 (“Taxes on income”) on
pages 168 to 170.
6 Inventories
In accordance with IAS 2, reported under inventories are those
assets that are intended to be sold in the ordinary course of
business (finished products and merchandise), those in the
process of production for such sale (work in progress) and
those to be utilized or consumed in the course of manufacture
or the rendering of services (raw materials and supplies). Payments on account made for the purpose of purchasing inventories are likewise disclosed under the inventories heading.
Inventories are measured at the lower of cost and net realizable value.
Inventories are measured using either the “first in, first
out” (FIFO) or the average cost method. Manufacturing
cost includes not only the direct costs but also appropriate
portions of necessary overheads (for example goods inward
department, raw material storage, filling, costs incurred
through to the finished goods warehouse), productionrelated administrative expenses, the costs of the pensions
of people who are employed in the production process, and
production-related amortization /depreciation. The overhead
add-ons are calculated on the basis of average capacity
utilization. Not included, however, are interest expenses
incurred during the manufacturing period.
The net realizable value is determined as an estimated selling
price less costs yet to be incurred through to completion, and
necessary selling and distribution costs. Write-downs to the
net realizable value are made if, at year-end, the carrying
amounts of the inventories are above their realizable fair values. The resultant valuation allowance amounted to 142 million euros (previous year: 120 million euros). The carrying
amount of inventories recognized at fair value less costs to
sell amounted to 359 million euros. The carrying amount of
inventories pledged as security for liabilities amounted to
0 million euros.
Analysis of inventories 107
| in million euros | December 31, 2015 December 31, 2016 |
|
| Raw materials and supplies | 483 | 544 |
| Work in progress | 69 | 95 |
| Finished products and merchandise | 1,157 | 1,290 |
| Payments on account for merchandise | 12 | 9 |
| Total | 1,721 | 1,938 |
7 Trade accounts receivable
Trade accounts receivable amounted to 3,349 million euros
(previous year: 2,944 million euros). They are all due within
one year. Valuation allowances have been recognized in
respect of specific risks as appropriate. Overall, we recognized
total valuation allowances of 25 million euros (previous year:
21 million euros).
Trade accounts receivable 108
| in million euros | December 31, 2015 December 31, 2016 |
|
| Trade accounts receivable, gross | 3,056 | 3,467 |
| less: cumulative valuation allowances on trade accounts receivable |
112 | 118 |
| Trade accounts receivable, net | 2,944 | 3,349 |
Development of valuation allowances on trade
accounts receivable 109
| in million euros | 2015 | 2016 |
| Valuation allowances at January 1 | 108 | 112 |
| Additions | 15 | 22 |
| Derecognition of receivables | – 12 | – 15 |
| Currency translation effects | 1 | – 1 |
| Valuation allowances at December 31 | 112 | 118 |
138 Consolidated financial statements Henkel Annual Report 2016
8 Cash and cash equivalents
Recognized under cash and cash equivalents are liquid funds,
sight deposits and other financial assets with an original term
of not more than three months. In accordance with IAS 7, also
recognized under cash equivalents are shares in money market funds which, due to their first-class credit rating and
investment in extremely short-term money market securities,
undergo only minor value fluctuations and can be readily converted within one day into known amounts of cash. Utilized
bank overdrafts are recognized in the statement of financial
position as liabilities to banks.
The volume of cash and cash equivalents increased compared
to the previous year from 1,176 million euros to 1,389 million
euros. Of this figure, 1,259 million euros (previous year: 950 million euros) relates to cash and 130 million euros (previous
year: 226 million euros) to cash equivalents. The change is
shown in the consolidated statement of cash flows.
All shares are fully paid in. The ordinary and preferred shares
are bearer shares of no par value, each of which represents a
nominal proportion of the capital stock amounting to 1 euro.
The liquidation proceeds are the same for all shares. The number of ordinary shares issued remained unchanged year on
year. The number of preferred shares in circulation was also
unchanged year on year, at 174,482,323 as at December 31, 2016.
According to Art. 6 (5) of the Articles of Association, there is
an authorized capital. Under Authorized Capital 2015, the Personally Liable Partner is authorized, with the approval of the
Shareholders’ Committee and of the Supervisory Board, to
increase the capital of the corporation at any time until April 12,
2020, by up to a nominal amount of 43,795,875 euros in total by
issuing up to 43,795,875 new non-voting preferred shares for
cash and/or in-kind consideration. The authorization may be
utilized to the full extent allowed or once or several times in
installments. The proportion of capital stock represented
by shares issued against payment in kind on the basis of this
authorization must not exceed a total of 10 percent of the capital stock existing at the time the authorization takes effect.
9 Assets and liabilities held for sale
Assets held for sale are assets that can be sold in their current
condition and whose sale is very probable. Disposal must be
expected within one year from the time of reclassification as
held for sale. Such assets may be individual assets, groups of
assets (disposal groups) or business operations (discontinued
operations). Assets held for sale are no longer subject to scheduled depreciation and amortization and are instead recognized at the lower of carrying amount and fair value less costs
to sell (level 3), which is determined by current price negotiations with potential buyers.
Compared to December 31, 2015, assets held for sale increased
by 85 million euros to 95 million euros. This increase is primarily due to the merger of administrative functions as part of
the process of integrating The Sun Products Corporation. As a
result, the office in Scottsdale, Arizona, USA, will probably be
sold in the first half of 2017. The impairment of 41 million
euros resulting from measurement of the assets at the lower of
fair value and carrying amount has been recognized as a loss in
administrative expenses. Liabilities held for sale also exist in
an amount of 13 million euros (December 31, 2015: 0 million
euros), mainly due to the signed agreement governing the sale
of Henkel’s Western European flooring, tiling and waterproofing business.
Assets and liabilities held for sale 110
| in million euros | At December 31, 2015 |
At December 31, 2016 |
| Intangible assets and property, plant and equipment |
6 | 92 |
| Inventories and trade accounts receivable | 3 | 2 |
| Cash and cash equivalents | – | – |
| Other assets | 1 | 1 |
| Provisions | – | 13 |
| Borrowings | – | – |
| Other liabilities | – | – |
| Net assets | 10 | 82 |
10 Issued capital
Issued capital 111
| in million euros | At December 31, 2015 |
At December 31, 2016 |
| Ordinary bearer shares | 260 | 260 |
| Preferred bearer shares | 178 | 178 |
| Capital stock | 438 | 438 |
Comprising:
259,795,875 ordinary shares, 178,162,875 non-voting preferred shares.
Henkel Annual Report 2016 Notes to the consolidated financial statements 139
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
11 Capital reserve
The capital reserve comprises the amounts received in previous years in excess of the nominal value of preferred shares
and convertible warrant bonds issued by Henkel AG & Co. KGaA.
12 Retained earnings
Recognized in retained earnings are the following:
• Amounts allocated in the financial statements of Henkel AG
& Co. KGaA in previous years
• Amounts allocated from consolidated net income less those
amounts attributable to non-controlling interests
• Buy-back of treasury shares by Henkel AG & Co. KGaA at cost
and the proceeds from their disposal
• Actuarial gains and losses recognized in equity
• The acquisition or disposal of ownership interests in
subsidiaries with no change in control
• Valuation effects following application of the anticipated
acquisition method
For details on the acquisition of ownership interests in subsidiaries with no change in control in fiscal 2016, please see the
section “Acquisitions and divestments” on pages 123 to 126.
13 Other components of equity
Reported under this heading are differences reported in equity
arising from the currency translation of annual financial statements of foreign subsidiaries and also the effects arising from
the valuation in total comprehensive income of financial assets
in the “Available for sale” category and of derivative financial
instruments for which hedge accounting is used. The latter are
derivatives used in connection with cash flow hedges or hedges
of a net investment in a foreign entity. Due in particular to the
appreciation of the US dollar versus the euro, the negative difference attributable to shareholders of Henkel AG & Co. KGaA arising from currency translation decreased compared to the figure
at December 31, 2015, by 134 million euros to –7 million euros.
14 Non-controlling interests
Recognized under non-controlling interests are equity shares
held by third parties measured on the basis of the proportion
of net assets.
The Personally Liable Partner is authorized, with the approval
of the Shareholders’ Committee and of the Supervisory Board,
to set aside the pre-emptive rights of shareholders in the case
of a capital increase against payment in kind, particularly for
the purpose of business combinations or the (direct or indirect) acquisition of entities, operations, parts of businesses,
equity interests or other assets, including claims against the
corporation or companies dependent upon it within the meaning of Section 17 of the German Stock Corporation Act [AktG].
If capital is increased against payment in cash, all shareholders are essentially assigned pre-emptive rights. However, these
may be set aside where necessary, subject to the approval of
the Shareholders’ Committee and of the Supervisory Board, in
order to dispose of fractional amounts or to grant to holders of
bonds with warrants or conversion rights issued by the corporation, or one of the companies dependent upon it, pre-emptive rights corresponding to those that would accrue to such
bondholders following the exercise of their warrant or conversion rights or on fulfillment of their conversion obligations, or
if the issue price of the new shares is not significantly below
the quoted market price at the time of issue price fixing.
In addition, the Personally Liable Partner is authorized to purchase ordinary and/or preferred shares of the corporation at
any time until April 12, 2020, up to a maximum nominal proportion of the capital stock of 10 percent. This authorization
can be exercised for any legal purpose. To the exclusion of the
pre-emptive rights of existing shareholders, treasury shares
may, in particular, be transferred to third parties for the purpose of acquiring entities or participating interests of entities.
Treasury shares may also be sold to third parties against payment in cash, provided that the selling price is not significantly below the quoted market price at the time of share disposal. The shares may likewise be used to satisfy warrants or
conversion rights granted by the corporation. The Personally
Liable Partner has also been authorized, with the approval of
the Shareholders’ Committee and of the Supervisory Board, to
cancel treasury shares without the need for further resolution
by the Annual General Meeting.
Insofar as shares are issued or used to the exclusion of preemptive rights, the proportion of capital stock represented by
such shares shall not exceed 10 percent.
Treasury shares held by the corporation at December 31, 2016
amounted to 3,680,552 preferred shares (December 31, 2015:
3,680,552). This represents 0.84 percent of the capital stock
and a proportional nominal value of 3.7 million euros.
See also the explanatory notes on pages 31 and 32 of the combined management report.
140 Consolidated financial statements Henkel Annual Report 2016
15 Provisions for pensions and similar obligations
Description of the pension plans
Employees in companies included in the consolidated financial statements have entitlements under company pension
plans which are either defined contribution or defined benefit
plans. These take different forms depending on the legal,
financial and tax regimes of each country. The level of benefits
provided is based, as a rule, on the length of service and on the
income of the person entitled. Details of pension benefits for
members of the Management Board are provided in the
remuneration report on pages 39 to 51.
In defined benefit plans, the liability for pensions and other
post-employment benefits is calculated at the present value
of the future obligations (projected unit credit method). This
actuarial method of calculation takes future trends in wages,
salaries and retirement benefits into account.
The majority of the recipients of pension benefits are located
in Germany and the USA. The pension obligations are primarily financed via various external trust assets that are legally
independent of Henkel.
Active employees of Henkel in Germany participate in a defined
contribution system, “Altersversorgung 2004 (AV 2004),”
which was newly formed in 2004. AV 2004 is an employerfinanced pension plan that reflects the personal income development of employees during their career at Henkel and thus
provides a performance-related pension. Henkel guarantees a
minimum return on the company’s contributions. The benefit
essentially consists of an annuity payable upon attainment
of the retirement age plus a lump-sum payment if the annuity
threshold is exceeded in the employee’s service period. In
addition to age and disability pensions, the plan benefits include
surviving spouse and surviving child benefits.
Employees who started at Henkel after April 1, 2011, participate in the pension plan “Altersversorgung 2011 (AV 2011).”
AV 2011 is an employer-financed, fund-linked retirement plan
funded by contributions based on the income development of
the employee. Henkel ensures its employees that a lump-sum
amount is available upon retirement which is at least equivalent to the level of principal contributions made by Henkel.
Henkel makes the pension contribution to an investment fund
established for the purpose of the company pension plan.
Upon attaining retirement age, the employee can choose
between an annuity through transfer of the superannuation
lump-sum to a pension fund, or a one-time payment.
To provide protection under civil law of the pension entitlements of future and current pensioners of Henkel AG & Co.
KGaA against insolvency, we have transferred the proceeds of
the bond issued in 2005 and certain other assets to Henkel
Trust e.V. The trustee invests the cash with which it has been
entrusted in the capital market in accordance with investment
policies laid down in the trust agreement. In addition, we also
subsidize medical benefits for retired employees resident
mainly in the USA. Under these programs, retirees are reimbursed for a certain percentage of their medical expenses.
We build provisions during the employees’ service period
and pay the promised benefits when they are claimed.
The defined contribution plans are structured in such a way
that the corporation pays contributions to public or private sector institutions on the basis of statutory or contractual terms or
on a voluntary basis and has no further obligations regarding
the payment of benefits to employees. The contributions for
defined contribution plans, excluding multi-employer plans,
for the reporting period amounted to 103 million euros (previous year: 82 million euros). In 2016, we paid 47 million euros
to public sector institutions (previous year: 46 million euros)
and 56 million euros to private sector institutions (previous
year: 36 million euros).
No extraordinary events occurred in the reporting period.
Henkel Annual Report 2016 Notes to the consolidated financial statements 141
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Multi-employer plans
Henkel provides defined pension benefits that are financed by
more than one employer. The ensuing multi-employer plans
are treated as defined contribution plans because, due to the
limited share of the contribution volume in the plans, the
information available for each of the financing companies is
insufficient for defined benefit accounting. In the Henkel
Group, benefits from multi-employer plans are provided for
employees primarily in the USA and Japan. Withdrawal from
our multi-employer plans at the present time would incur a
one-time expense of around 29 million euros (previous year:
around 30 million euros). Payments into multi-employer
plans in fiscal 2016 amounted to 2 million euros (previous
year: 2 million euros). We expect contributions of around
2 million euros in fiscal 2017.
Assumptions
Group-wide, the obligations from our pension plans are
valued by an independent external actuary at the end of the
fiscal year. The calculations at the end of the fiscal year are
based on the actuarial assumptions below. These are given as
the weighted average. The mortality rates used are based on
published statistics and experience relating to each country. In
Germany, the assumptions are based on the “Heubeck 2005G”
mortality table. In the USA, the assumptions are based on the
modified “RP 2014” mortality table. The valuation of pension
obligations in Germany was based essentially on the assumption of a 1.9 percent increase in retirement benefits (previous
year: 2 percent).
The discount rate is based on yields in the market for highranking corporate bonds on the respective date. The currency
and term of the underlying bonds are aligned with the currency and expected maturities of the post-employment pension obligation.
Actuarial assumptions 112
| in percent | Germany | USA | Other countries1 | |||
| 2015 2016 | 2015 2016 | 2015 2016 | ||||
| Discount rate | 2.20 | 1.60 | 4.30 | 4.10 | 2.85 | 2.10 |
| Income trend | 3.25 | 3.25 | 2.85 | 3.00 | 2.50 | 2.85 |
| Expected increases in costs for medical benefits | – | – | 7.10 | 6.80 | 3.80 | 3.60 |
| in years | ||||||
| Life expectancy at age 65 as of the valuation date for a person currently | ||||||
| 65 years old | 21.0 | 21.2 | 22.0 | 22.0 | 24.0 | 24.0 |
| 40 years old | 24.2 | 24.4 23.0 | 23.0 26.0 | 26.0 |
1 Weighted average.
142 Consolidated financial statements Henkel Annual Report 2016
Development of defined benefit obligation at December 31, 2015 113
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2015 | 3,254 | 1,174 | 1,137 | 5,565 |
| Changes in the Group | 5 | – | – | 5 |
| Translation differences | – | 124 | 34 | 158 |
| Actuarial gains (–)/losses (+) | – 251 | – 68 | – 89 | –408 |
| of which: from changes in demographic assumptions | – | – 36 | 2 | –34 |
| of which: from changes in financial assumptions | – 246 | – 27 | – 74 | –347 |
| of which: from experience adjustments | – 5 | – 5 | – 17 | – 27 |
| Current service cost | 46 | 18 | 26 | 90 |
| Employee contributions | 11 | – | 1 | 12 |
| Gains (–)/losses (+) arising from the termination and curtailment of plans | – 1 | – 5 | – 2 | –8 |
| Interest expense | 54 | 50 | 28 | 132 |
| Retirement benefits paid out of plan assets | – 144 | – 69 | – 35 | –248 |
| Employer’s payments for pension obligations | – 8 | – 26 | – 9 | –43 |
| Other changes | – | – | – | – |
| At December 31, 2015 | 2,966 | 1,198 | 1,091 | 5,255 |
| of which: obligations not covered by plan assets | 87 | 298 | 94 | 479 |
| of which: obligations covered by plan assets | 2,879 | 789 | 997 | 4,665 |
| of which: obligations covered by reimbursement rights | – | 111 | – | 111 |
Development of plan assets at December 31, 2015 114
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2015 | 2,646 | 815 | 867 | 4,328 |
| Changes in the Group | 3 | – | – | 3 |
| Translation differences | – | 93 | 29 | 122 |
| Employer contributions | 25 | – | 35 | 60 |
| Employee contributions | 11 | – | 1 | 12 |
| Retirement benefits paid out of plan assets | – 144 | – 69 | – 35 | – 248 |
| Planned income on plan assets | 49 | 34 | 22 | 105 |
| Remeasurements in equity | – 13 | – 39 | 2 | –50 |
| Other changes | – | – | – | – |
| At December 31, 2015 | 2,577 | 834 | 921 | 4,332 |
Development of asset ceiling at December 31, 2015 115
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2015 | – | – | 1 | 1 |
| Interest cost for asset ceiling | – | – | – | – |
| Remeasurements in equity | – | – | 6 | 6 |
| At December 31, 2015 | – | – | 7 | 7 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 143
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Development of the net obligation at December 31, 2015 116
| in million euros | Germany | USA | Other countries | Total |
| Net obligation at January 1, 2015 | 608 | 359 | 270 | 1,237 |
| Recognized through profit or loss | ||||
| Current service cost | 46 | 18 | 26 | 90 |
| Gains (–)/losses (+) arising from the termination and curtailment of plans | – 1 | – 5 | – 2 | –8 |
| Interest expense | 5 | 16 | 6 | 27 |
| Recognized in equity in other comprehensive income | ||||
| Actuarial gains (–)/losses (+) | – 251 | – 68 | – 89 | –408 |
| Remeasurements in equity | 13 | 39 | – 2 | 50 |
| Change in the effect of the asset ceiling | – | – | 6 | 6 |
| Other items recognized in equity | ||||
| Employer’s payments | – 33 | – 26 | – 43 | –102 |
| Changes in the Group | 2 | – | – | 2 |
| Translation differences | – | 31 | 5 | 36 |
| Net obligation at December 31, 2015 | 389 | 364 | 177 | 930 |
| Overfunding of pension obligations | – | 23 | 35 | 58 |
| Recognized provision at December 31, 2015 | 389 | 387 | 212 | 988 |
Development of defined benefit obligation at December 31, 2016 117
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2016 | 2,966 | 1,198 | 1,091 | 5,255 |
| Changes in the Group | – 7 | 1 | – | –6 |
| Translation differences | – | 46 | – 63 | –17 |
| Actuarial gains (–)/losses (+) | 224 | 30 | 177 | 431 |
| of which: from changes in demographic assumptions | – | – | – 4 | –4 |
| of which: from changes in financial assumptions | 233 | 26 | 164 | 423 |
| of which: from experience adjustments | – 9 | 4 | 17 | 12 |
| Current service cost | 43 | 16 | 26 | 85 |
| Employee contributions | 16 | – | 1 | 17 |
| Gains (–)/losses (+) arising from the termination and curtailment of plans | – 9 | – | – 4 | –13 |
| Interest expense | 64 | 48 | 25 | 137 |
| Retirement benefits paid out of plan assets | – 173 | – 69 | – 38 | –280 |
| Employer’s payments for pension obligations | – 6 | – 33 | – 10 | –49 |
| Other changes | 2 | – | – 1 | 1 |
| At December 31, 2016 | 3,120 | 1,237 | 1,204 | 5,561 |
| of which: obligations not covered by plan assets | 98 | 182 | 115 | 395 |
| of which: obligations covered by plan assets | 3,022 | 940 | 1,089 | 5,051 |
| of which: obligations covered by reimbursement rights | – | 115 | – | 115 |
144 Consolidated financial statements Henkel Annual Report 2016
Development of plan assets at December 31, 2016 118
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2016 | 2,577 | 834 | 921 | 4,332 |
| Changes in the Group | – | – | – | – |
| Translation differences | – | 28 | – 62 | – 34 |
| Employer contributions | 98 | 27 | 60 | 185 |
| Employee contributions | 16 | – | 1 | 17 |
| Retirement benefits paid out of plan assets | – 173 | – 69 | – 38 | –280 |
| Planned income on plan assets | 66 | 34 | 21 | 121 |
| Remeasurements in equity | 132 | 17 | 95 | 244 |
| Other changes | 2 | – | – 1 | 1 |
| At December 31, 2016 | 2,718 | 871 | 997 | 4,586 |
Development of asset ceiling at December 31, 2016 119
| in million euros | Germany | USA | Other countries | Total |
| At January 1, 2016 | – | – | 7 | 7 |
| Interest cost for asset ceiling | – | – | – | – |
| Changes directly recognized in equity | – | – | 1 | 1 |
| At December 31, 2016 | – | – | 8 | 8 |
Development of the net obligation at December 31, 2016 120
| in million euros | Germany | USA | Other countries | Total |
| Net obligation at January 1, 2016 | 389 | 364 | 177 | 930 |
| Recognized through profit or loss | ||||
| Current service cost | 43 | 16 | 26 | 85 |
| Gains (–)/losses (+) arising from the termination and curtailment of plans | – 9 | – | – 4 | –13 |
| Interest expense | – 2 | 14 | 4 | 16 |
| Recognized in equity in other comprehensive income | ||||
| Actuarial gains (–)/losses (+) | 224 | 30 | 177 | 431 |
| Remeasurements in equity | – 132 | – 17 | – 95 | –244 |
| Change in the effect of the asset ceiling | – | – | 1 | 1 |
| Other items recognized in equity | ||||
| Employer’s payments | – 104 | – 60 | – 70 | –234 |
| Changes in the Group | – 7 | 1 | – | –6 |
| Translation differences | – | 18 | – 1 | 17 |
| Net obligation at December 31, 2016 | 402 | 366 | 215 | 983 |
| Overfunding of pension obligations | – | 18 | 6 | 24 |
| Recognized provision at December 31, 2016 | 402 | 384 | 221 | 1,007 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 145
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Analysis of plan assets 122
| in million euros | December 31, 2015 | December 31, 2016 | ||||
| Quotation on active markets |
No quotation on active markets |
Total | Quotation on active markets |
No quotation on active markets |
Total | |
| Shares Europe |
1,274 | – | 1,274 | 1,407 | – | 1,407 |
| 555 | – | 555 | 646 | – | 646 | |
| USA | 223 | – | 223 | 229 | – | 229 |
| Others | 496 | – | 496 | 532 | – | 532 |
| Bonds and hedging instruments | 2,891 | 11 | 2,902 | 3,086 | 5 | 3,091 |
| Government bonds | 994 | – | 994 | 1,048 | – | 1,048 |
| Corporate bonds | 1,897 | – | 1,897 | 2,038 | – | 2,038 |
| Derivatives | – | 11 | 11 | – | 5 | 5 |
| Alternative investments | – | 214 | 214 | – | 275 | 275 |
| Cash | – | 78 | 78 | – | 104 | 104 |
| Liabilities1 | – | –349 | –349 | – | –501 | –501 |
| Other assets | – | 213 | 213 | – | 210 | 210 |
| Total | 4,165 | 167 | 4,332 | 4,493 | 93 | 4,586 |
1 Liability to Henkel AG & Co. KGaA from the assumption of pension payments for Henkel Trust e.V.
Analysis of reimbursement rights 121
| in million euros | 2015 | 2016 |
| At January 1 | 105 | 111 |
| Changes in the Group | – | – |
| Translation differences | 10 | 5 |
| Employer contributions | 3 | 3 |
| Employee contributions | – | – |
| Retirement benefits paid | – 7 | – 8 |
| Interest income | 5 | 5 |
| Remeasurements in equity | – 5 | – 1 |
| At December 31 | 111 | 115 |
The total present value (defined benefit obligation – DBO)
is comprised of:
• 1,960 million euros for active employees,
• 930 million euros for former employees with
vested benefits, and
• 2,671 million euros for retirees.
The average weighted duration of pension obligations is
16 years for Germany, 9 years for the USA and 20 years for other
countries.
In determining net liability, we take into account amounts
that are not recognized due to asset ceiling restrictions. If the
fair value of the plan asset item exceeds the obligations arising
from the pension benefits, an asset is recognized only if the
reporting entity can also derive economic benefit from these
assets, for example in the form of return flows or a future
reduction in contributions (“Asset Ceiling” per IAS 19.58 ff.).
In the reporting period, we recorded an amount of 8 million
euros as an asset ceiling (previous year: 7 million euros).
Within our consolidated statement of income, current service
costs are allocated on the basis of cost of sales to the respective function. Only the net of interest expense for the present
value of obligations and interest income from plan assets is
reported in the interest result. All gains/losses from the termination and curtailment of plans have been recognized in other
operating income/expenses. The employer’s contributions in
respect of state pension provisions are included as “Social
security contributions and staff welfare costs” under Note 33,
page 171. In 2016, allocations to the pension fund amounted to
185 million euros (previous year: 60 million euros).
The reimbursement rights covering a portion of the pension
obligations in the USA are assets that do not fulfill the definition of plan assets as stated in IAS 19.
The reimbursement rights indicated are available to the
Group in order to cover the expenditures required to fulfill
the respective pension obligations. Reimbursement rights and
the associated pension obligations must, according to IAS 19,
be shown unnetted in the statement of financial position.
Payments into pension funds in fiscal 2017 are expected to
total 52 million euros.
146 Consolidated financial statements Henkel Annual Report 2016
Plan assets by country 2016 123 Classification of bonds by rating 2016 124
USA 19 % Germany 59 %
Other countries 22 %
Non-Investment Grade 4 % Investment Grade 96 %
The objective of the investment strategy for the global plan
assets is the long-term security of pension payments. This is
ensured by comprehensive risk management that takes into
account the asset and liability portfolios of the defined benefit
pension plans. Henkel pursues a liability-driven investment
(LDI) approach in order to achieve the investment objective.
This approach takes into account the structure of the pension
obligations and manages the cover ratio of the pension plans.
In order to improve the funding ratio, Henkel invests plan
assets in a diversified portfolio for which the expected longterm yield is above the interest costs of the pension obligations.
In order to cover the risks arising from trends in wages, salaries and life expectancies, and to close the potential deficit
between plan assets and pension obligations over the long
term, additional investments are made in a return-enhancing
portfolio as an add-on instrument that contains assets such as
equities, private equity and real estate. The target portfolio
structure of the plan assets is essentially determined in
asset-liability studies. These studies are conducted regularly
with the help of external advisors who assist Henkel in the
investment of plan assets. They examine the actual portfolio
structure, taking into account current capital market conditions, investment principles and the obligation structure, and
can suggest adjustments be made to the portfolio.
The expected long-term yield for individual plan assets is
derived from the target portfolio structure and the expected
long-term yields for the individual asset classes.
Major plan assets are administered by external fund managers
in Germany and the USA. These countries pursue the above
investment strategies and are monitored centrally. At December 31, 2016, other assets making up the plan assets included
the present value of a non-current receivable of 64 million
euros (previous year: 60 million euros) relating to claims pertaining to a hereditary building lease assigned by Henkel AG &
Co. KGaA to Henkel Trust e.V. Also shown here is a claim of
115 million euros (previous year: 123 million euros) against
BASF Personal Care & Nutrition GmbH (formerly Cognis
GmbH) for indemnification of pension obligations. This claim
represents the nominal value, which is equivalent to the market price. In the reporting year, as in the previous year, we held
no direct investments and no treasury shares in respect of
plan assets in the portfolio.
Risks associated with pension obligations
Our internal pension risk management monitors the risks of
all pension plans Group-wide in compliance with local legal
regulations. As part of the monitoring process, guidelines on
the control and management of risks are adopted and continuously developed; these guidelines mainly govern external
funding, portfolio structure and actuarial assumptions. The
objective of the financing strategy within the Group is to
ensure that plan assets cover 90 to 100 percent of the present
value of the funded pension obligations. The contributions
and investment strategies are intended to ensure nearly complete coverage of the plans for the duration of the pension
obligations.
Henkel’s pension obligations are exposed to various market
risks. These risks are counteracted by the degree of external
funding and the structure of pension benefits. The risks relate
primarily to changes in market interest rates, inflation, and life
expectancy, as well as general market fluctuations. Pension
obligations based on contractual provisions in Germany generally entail lifelong benefits payable in the event of death or
disability or when the employee reaches retirement age.
In order to reduce the risks arising from the payment of lifelong
benefits as well as inflation, pension benefits have been gradually converted since 2004 to what are known as modular benefits with a pension option in which the benefit is initially
divided into an annuity and lump-sum benefit portion. Newly
hired employees since 2011 receive a commitment based primarily on the lump-sum benefit. Generally, lump-sum benefits
may also be paid out as an annuity through a pension fund. All
benefits in Germany are financed through a provident fund
Henkel Annual Report 2016 Notes to the consolidated financial statements 147
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
(Vorsorgefonds) established for the purpose of the occupational
pension plan. Benefits for new employees since 2011 as well as a
portion of the entitlements vested since 2004 are linked to the
performance of this provident fund, resulting in a reduction in
overall risk to the Group. The described adjustments within the
pension structure reduce the financial risk arising from pension
commitments in Germany. By linking the benefit to the capital
investment, the net risk is also largely eliminated. An increase
in the long-term inflation assumption would mainly affect the
expected increase in pensions and the expected trend in pension-eligible salaries.
The pension obligations in the USA are based primarily on
three retirement plans that are all closed to new employees.
New employees receive pension benefits based on a defined
contribution plan. The pension benefits generally have a
lump-sum option which is usually exercised. When a pension
becomes payable, the amount of the annuity granted is determined on the basis of current market interest rates. As a result,
the impact of a change to the interest rate used in the calculation is low compared to pension commitments entailing lifelong benefits. Additionally, in the USA, pensions paid once are
not adjusted by amount, thus there are no direct risks during
the pension payment period arising from pending annuity
adjustments. Inflation risks therefore result mainly from the
salary adjustments awarded.
In addition to the pension obligation risks already presented,
there are specific risks associated with multi-employer plans.
In the Henkel Group, these essentially relate to the USA. The
contributions to these plans are raised mainly through an allocation process based on the pension-eligible income of active
employees. Restructuring contributions may also be made in
order to close gaps in coverage. The risks of such plans arise
largely from higher future contributions to close coverage gaps
or through discontinuation by other companies obligated to
make contributions.
The impact of changes to assumptions in medical benefits for
employees and retirees in the USA is shown in the sensitivities
analysis.
The analysis of our Group-wide pension obligations revealed
no extraordinary risks.
Cash flows and sensitivities
In the next five financial years, the following payments from
pension plans are expected:
Future payments for pension benefits 125
| in million euros |
Germany | USA | Other countries |
Total |
| 2017 | 137 | 125 | 36 | 298 |
| 2018 | 127 | 102 | 33 | 262 |
| 2019 | 127 | 102 | 34 | 263 |
| 2020 | 128 | 100 | 37 | 265 |
| 2021 | 133 | 100 | 37 | 270 |
The future level of the funded status and thus of the pension
obligations depends on the development of the discount rate,
among other factors. Companies based in Germany and the
USA account for 78 percent of our pension obligations. The
medical costs for employees of our subsidiaries in the USA
which are incurred after retirement are also recognized in
the pension obligations for defined benefit plans. A rate of
increase of 6.8 percent (previous year: 7.1 percent) was assumed
for the medical costs. We expect this rate of increase to fall
gradually to 4.5 percent by 2037 (previous year: 4.5 percent by
2037). The effects of a change in material actuarial assumptions
for the present value of pension obligations are as follows:
148 Consolidated financial statements Henkel Annual Report 2016
Sensitivities – Present value of pension obligations at December 31, 2016 126
| in million euros | Germany | USA | Other countries | Total |
| Present value of obligations | 3,120 | 1,237 | 1,204 | 5,561 |
| in the event of | ||||
| Increase in the discount rate by 0.5 pp | 2,903 | 1,187 | 1,091 | 5,181 |
| Reduction of the discount rate by 0.5 pp | 3,364 | 1,293 | 1,338 | 5,995 |
| Rise in future income increases by 0.5 pp | 3,119 | 1,242 | 1,232 | 5,593 |
| Reduction of future income increases by 0.5 pp | 3,118 | 1,230 | 1,180 | 5,528 |
| Rise in retirement benefits increases by 0.5 pp | 3,280 | 1,235 | 1,287 | 5,802 |
| Reduction of retirement benefits increases by 0.5 pp | 2,970 | 1,235 | 1,140 | 5,345 |
| Rise in medical costs by 0.5 pp | 3,118 | 1,238 | 1,205 | 5,561 |
| Reduction of medical costs by 0.5pp | 3,118 | 1,232 | 1,205 | 5,555 |
pp = percentage points
The extension of life expectancy in Germany by one year
would increase the present value of pension obligations by
4 percent. This would have a more limited effect in the USA
because a significant share of the pension plans is based on
lump-sum benefits.
It should be noted with respect to the sensitivities presented
that, due to mathematical effects, the percentage change is not
and does not need to be linear. Thus the percentage increases
and decreases do not vary with the same absolute amount.
Each sensitivity is independently calculated and is not subject
to scenario analysis.
at a pre-tax interest rate. For obligations in Germany, we have
applied interest rates of between –0.1 and 2.3 percent.
The income tax provisions comprise accrued tax liabilities and
amounts set aside for the outcome of external tax audits.
Other provisions include identifiable obligations toward third
parties. They are measured at total cost.
16 Income tax provisions and other provisions
Development in 2016 127
| in million euros | Initial balance January 1, 2016 |
Acquisitions | Utilized | Released | Added | Other changes |
End balance December 31, 2016 |
| Income tax provisions | 352 | 2 | –137 | –20 | 285 | – 18 | 464 |
| of which: non-current | 89 | 2 | – 1 | 0 | 24 | – 8 | 106 |
| of which: current | 263 | 0 | – 136 | – 20 | 261 | – 10 | 358 |
| Restructuring provisions | 225 | 1 | – 126 | –12 | 172 | 5 | 265 |
| of which: non-current | 72 | 0 | – 15 | – 2 | 19 | – 16 | 58 |
| of which: current | 153 | 1 | – 111 | – 10 | 153 | 21 | 207 |
| Sundry provisions | 1,735 | 62 | –1,172 | –93 | 1,502 | 14 | 2,048 |
| of which: non-current | 324 | 1 | – 32 | – 4 | 53 | – 53 | 289 |
| of which: current | 1,411 | 61 | – 1,140 | – 89 | 1,449 | 67 | 1,759 |
| Total | 2,312 | 65 | – 1,435 | – 125 | 1,959 | 1 | 2,777 |
| of which: non-current | 485 | 3 | – 48 | – 6 | 96 | – 77 | 453 |
| of which: current | 1,827 | 62 | – 1,387 | – 119 | 1,863 | 78 | 2,324 |
Provisions are recognized for obligations toward third parties
where the outflow of resources is probable and the expected
obligation can be reliably estimated. Provisions are measured
to the best estimate of the expenditures required in order to
meet the current obligation as of the reporting date. Price
increases expected to take place prior to the time of performance are included in the calculation. Provisions in which the
interest effect is material are discounted to the reporting date
Henkel Annual Report 2016 Notes to the consolidated financial statements 149
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Other changes in provisions include changes in the scope of
consolidation, movements in exchange rates, compounding
effects, and adjustments to reflect changes in maturity as time
passes.
Provisions are recognized in respect of restructuring measures, provided that work has begun on the implementation of
a detailed, formal plan or such a plan has already been communicated. Additions to the restructuring provisions are
related to the closure of the administrative office in Scottsdale,
Arizona, USA, as part of the integration of The Sun Products
Corporation in North America, and to the further optimization
of production and process structures in all business units.
The provisions for obligations arising from our sales activities
cover expected burdens in the form of subsequent reductions
in already generated revenues, and risks arising from pending
transactions.
Provisions for payroll obligations essentially cover expenditures likely to be incurred by the Group for variable, performance-related remuneration components.
Provisions for obligations in the production and engineering
sphere relate primarily to provisions for warranties.
Analysis of sundry provisions by function 128
| in million euros | At December 31, 2015 |
At December 31, 2016 |
| Sales | 817 | 977 |
| of which: non-current | 14 | 10 |
| of which: current | 803 | 967 |
| Payroll | 638 | 691 |
| of which: non-current | 228 | 199 |
| of which: current | 410 | 492 |
| Production and engineering | 37 | 45 |
| of which: non-current | 20 | 20 |
| of which: current | 17 | 25 |
| Various sundry obligations | 243 | 335 |
| of which: non-current | 62 | 60 |
| of which: current | 181 | 275 |
| Total | 1,735 | 2,048 |
| of which: non-current | 324 | 289 |
| of which: current | 1,411 | 1,759 |
Risks arising from legal disputes and proceedings
Provisions have been made for individual risks arising from
civil disputes in the amount of probable claims plus associated procedural costs. The amount accrued for claims arising
from product liability actions in the USA was adjusted to
reflect the latest information. Overall, the total amount in
euros is in the double-digit millions. In accordance with IAS
37.92, further disclosures with respect to the proceedings and
their related risks to Henkel have not been made in order to
refrain from interference with their outcome.
On December 18, 2014, in an action relating to infringements
between 2003 and 2006, the French antitrust authorities
imposed fines amounting to around 951 million euros in total
against various international companies in the cosmetic and
detergent industries. Henkel received a fine of 109 million
euros, which was paid provisionally on May 15, 2015. A final
decision on the appeal filed by Henkel with regard to the
amount of the fine is still pending.
Henkel and its Group companies are also defendants in or
parties to other judicial, arbitrational, and official proceedings. The course and outcomes of legal disputes are inherently
uncertain and unpredictable. Based on the knowledge currently available, no negative future impact, material or otherwise, on the net assets, financial position and results of operations of the corporation is expected.
150 Consolidated financial statements Henkel Annual Report 2016
17 Borrowings
Borrowings 129
| in million euros | At December 31, 2015 | At December 31, 2016 | ||||
| Non-current | Current | Total | Non-current | Current | Total | |
| Bonds | – | – | – | 2,254 | 4 | 2,258 |
| Commercial paper 1 | – | 811 | 811 | – | 381 | 381 |
| Liabilities to banks 2 | – | 69 | 69 | 1,042 | 40 | 1,082 |
| Other borrowings | 4 | – | 4 | 4 | – | 4 |
| Total | 4 | 880 | 884 | 3,300 | 425 | 3,725 |
1 From the euro and US dollar commercial paper program (total volume 2 billion US dollars and 1 billion euros).
2 Obligations with floating rates of interest or interest rates pegged for less than one year.
Bonds 130
| Issuer in million euros |
Type | Nominal value | Carrying amounts excluding accrued interest |
Market values excluding accrued interest1 |
Market values including accrued interest1 |
Interest rate | Maturity | ||||
| 2015 2016 | 2015 2016 | 2015 2016 | 2015 2016 | ||||||||
| Henkel AG & Co. KGaA | Bond | 500 million euros | – | 499 | – | 501 | – | 501 | – | 0 % p.a. | September 13, 2018 |
| Henkel AG & Co. KGaA | Bond | 700 million euros | – | 698 | – | 699 | – | 699 | – | 0 % p.a. | September 13, 2021 |
| Henkel AG & Co. KGaA | Bond | 750 million US dollars | – | 709 | – | 707 | – | 710 | – | 1.5% p.a. | September 13, 2019 |
| Henkel AG & Co. KGaA | Bond | 300 million GB pounds2 | – | 348 | – | 344 | – | 345 | – | 0.875 % p.a. | September 13, 2022 |
| Total bonds | – | 2,254 | – | 2,251 | – | 2,255 |
1 Market value of the bonds derived from the stock market price at December 31.
2 A cross-currency swap is in place to convert the interest and principal payments on the bond denominated in British pounds into euro payments.
Henkel issued four fixed-rate bonds with a volume of 2.2 billion euros in September 2016 to finance the acquisition of The
Sun Products Corporation. Additionally, Henkel took out a
three-year floating-rate syndicated bank loan of 1.1 billion US
dollars (based on the interest rate for 1M US dollar LIBOR plus
0.55 percent spread), which is recognized under liabilities to
banks.
Henkel Annual Report 2016 Notes to the consolidated financial statements 151
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
18 Other financial liabilities
Analysis 131
| in million euros | At December 31, 2015 | At December 31, 2016 | ||||
| Non-current | Current | Total | Non-current | Current | Total | |
| Liabilities to non-consolidated affiliated companies and associated companies |
– | 8 | 8 | – | 7 | 7 |
| Liabilities to customers | – | 42 | 42 | – | 58 | 58 |
| Derivative financial instruments | – | 44 | 44 | 13 | 64 | 77 |
| Sundry financial liabilities | 1 | 15 | 16 | 101 | 35 | 136 |
| Total | 1 | 109 | 110 | 114 | 164 | 278 |
Of the liabilities to non-consolidated affiliated companies
and associated companies, 7 million euros is attributable to
non-consolidated affiliated companies. Included in the sundry financial liabilities are the contingent purchase price liability relating to our acquisition in Nigeria (75 million euros)
and liabilities from finance leases (17 million euros).
19 Other liabilities
Analysis 132
| in million euros | At December 31, 2015 | At December 31, 2016 | ||||
| Non-current | Current | Total | Non-current | Current | Total | |
| Other tax liabilities | – | 174 | 174 | – | 211 | 211 |
| Liabilities to employees | – | 28 | 28 | 6 | 41 | 47 |
| Liabilities relating to employee deductions | – | 70 | 70 | – | 62 | 62 |
| Liabilities in respect of social security | 1 | 22 | 23 | – | 23 | 23 |
| Sundry other liabilities | 15 | 57 | 72 | 19 | 58 | 77 |
| Total | 16 | 351 | 367 | 25 | 395 | 420 |
The sundry other liabilities primarily comprise various
income deferrals for other accounting periods amounting to
29 million euros (previous year: 14 million euros) and payments on account received in the amount of 10 million euros
(previous year: 3 million euros).
20 Trade accounts payable
Trade accounts payable increased from 3,176 million euros to
3,665 million euros. In addition to purchase invoices, they also
relate to accruals for invoices outstanding in respect of goods
and services received. They are all due within one year.
152 Consolidated financial statements Henkel Annual Report 2016
Categories used by Henkel
| Financial in | struments |
| Financial assets Financial liabilities Amortized cost Held for trading |
Equity
Fair value Fair value Cost
Other comprehensive income
Loans and Available for sale
receivables Held to maturity
Amortized cost
Fair value option Held for trading
Statement of income Fair value option Financial instruments explained by category
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Within the Henkel Group, financial instruments are reported
under trade accounts receivable, trade accounts payable, borrowings, other financial assets, other financial liabilities, and
cash and cash equivalents within the statement of financial
position.
Financial instruments are recognized once Henkel becomes a
party to the contractual provisions of the financial instrument. The recognition of financial assets takes place at the settlement date, with the exception of derivative financial instruments, which are recognized on the transaction date. All
financial instruments are initially reported at their fair value.
Transaction costs are only capitalized if the financial instruments are not subsequently remeasured to fair value through
profit or loss. For subsequent remeasurement, financial
instruments are divided into the following classes in accordance with IAS 39:
• Financial instruments measured at amortized cost
• Financial instruments measured at fair value
Different valuation categories are allocated to these two
classes. Financial instruments assigned to the valuation categories “Available for sale” and “Held for trading” are generally
measured at fair value. Other securities and time deposits as
well as other investments which are not measured using the
equity method, both part of other financial assets in the statement of financial position, are categorized as “Available for
sale.” Only the derivative financial instruments held by the
Henkel Group which are not included in hedge accounting are
designated as “Held for trading.” We recognize all other financial instruments including the financial assets categorized as
“Loans and receivables” at amortized cost using the effective
interest method. The measurement categories “Held to maturity” and “Fair value option” are not currently used within the
Henkel Group.
21 Financial instruments report 133
Henkel Annual Report 2016 Notes to the consolidated financial statements 153
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
The financial instruments in the measurement category
“Loans and receivables” are non-derivative financial instruments. They are characterized by fixed or determinable payments and are not traded in an active market. Within the
Henkel Group, this category is mainly comprised of trade
accounts receivable, cash and cash equivalents, and other
financial assets with the exception of investments, derivatives, securities and time deposits. The carrying amounts of
the financial instruments categorized as “Loans and receivables” closely approximate their fair value due to their predominantly short-term nature. If there are doubts as to the
realizability of these financial instruments, they are recognized at amortized cost less appropriate valuation allowances.
Financial instruments in the category “Available for sale” are
non-derivative financial assets and are recognized at fair
value, provided that this is reliably determinable. If the fair
value cannot be reliably determined, they are recognized at
cost. Value changes between the reporting dates are essentially
recognized in equity through comprehensive income (available-for-sale reserve) without affecting profit or loss, unless
the cause lies in permanent impairment. Impairment losses
are recognized through profit or loss. When the asset is
derecognized, the amounts recognized in the revaluation
reserve are released through profit or loss. In the Henkel
Group, the securities and time deposits recognized under
other financial assets are categorized together with other
investments as “Available for sale.” The fair values of the securities and time deposits are based on quoted market prices, or
derived from market data. As the fair values of other investments cannot be reliably determined, they are measured at
amortized cost. Henkel is currently not planning to sell any of
the financial instruments recognized under other investments.
The derivative financial instruments that are not included in
a designated hedging relationship are categorized as “Held
for trading” and recognized at their fair value. All fair value
changes are recognized through profit or loss. Hedge accounting is applied in individual cases – where possible and economically sensible – in order to avoid profit and loss variations arising from fair value changes in derivative financial
instruments. Fair value and cash flow hedges are designated
within the Group depending on the type of underlying and the
risk being hedged. Details relating to the hedging contracts
transacted within the Group and how the fair values of the
derivatives are determined are provided on pages 157 to 159.
All financial liabilities – with the exception of derivative
financial instruments and the contingent purchase price liability relating to our acquisition in Nigeria – are essentially
recognized at amortized cost using the effective interest
method.
Borrowings for which a hedging transaction has been concluded that meets the requirements of IAS 39 with respect to a
designated hedging relationship are recognized according to
hedge accounting rules.
154 Notes to the consolidated financial statements Henkel Annual Report 2016
Carrying amounts and fair values of financial instruments 134
| At December 31, 2015 in million euros Carrying amount December 31 |
Valuation according to IAS 39 | Fair value December 31 |
|||
| Amortized cost |
Fair value, through other comprehen sive income |
Fair value, through profit or loss |
|||
| Assets | |||||
| Loans and receivables | 4,603 | 4,603 | – | – | 4,603 |
| Trade accounts receivable | 2,944 | 2,944 | – | – | 2,944 |
| Other financial assets | 483 | 483 | – | – | 483 |
| Receivables from associated companies | 1 | 1 | – | – | 1 |
| Financial receivables from third parties | 39 | 39 | – | – | 39 |
| Receivables from Henkel Trust e.V. | 349 | 349 | – | – | 349 |
| Sundry financial assets | 94 | 94 | – | – | 94 |
| Cash and cash equivalents | 1,176 | 1,176 | – | – | 1,176 |
| Financial assets available for sale | 36 | 21 | 15 | – | 36 |
| Other financial assets | 36 | 21 | 15 | – | 36 |
| Other investments | 21 | 21 | – | – | 21 |
| Floating-interest securities and time deposits (level 1) | 3 | – | 3 | – | 3 |
| Floating-interest securities (level 2) | 2 | – | 2 | – | 2 |
| Fixed-interest securities (level 1) | – | – | – | – | – |
| Financial collateral provided (level 1) | 10 | – | 10 | – | 10 |
| Financial assets held for trading (level 2) | 60 | – | – | 60 60 – |
60 60 12 |
| Derivative financial instruments not included in a designated hedging relationship Derivative financial instruments included in a designated hedging relationship (level 2) Total |
60 | – | – | ||
| 12 | – | 12 | |||
| 4,711 | 4,624 | 27 | 60 | 4,711 | |
| Liabilities | |||||
| Amortized cost | 4,126 | 4,126 | – | – | 4,126 |
| Trade accounts payable | 3,176 | 3,176 | – | – | 3,176 |
| Borrowings not included in a designated hedging relationship | 884 | 884 | – | – | 884 |
| Borrowings included in a designated hedging relationship | – | – | – | – | – |
| Other financial liabilities | 66 | 66 | – | – | 66 |
| Financial liabilities held for trading (level 2) | 34 | – | – | 34 34 – |
34 34 10 |
| Derivative financial instruments not included in a designated hedging relationship Derivative financial instruments included in a designated hedging relationship (level 2) Other financial liabilities (level 3) |
34 | – | – | ||
| 10 | – | 10 | |||
| – | – | – | – | – | |
| Sundry financial liabilities | – | – | – | – | – |
| Total | 4,170 | 4,126 | 10 | 34 | 4,170 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 155
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Carrying amounts and fair values of financial instruments 135
| At December 31, 2016 in million euros |
Valuation according to IAS 39 | Carrying amount December 31 |
Fair value December 31 |
||
| Amortized cost |
Fair value, through other comprehen sive income |
Fair value, through profit or loss |
|||
| Assets | |||||
| Loans and receivables | 5,392 | 5,392 | – | – | 5,392 |
| Trade accounts receivable | 3,349 | 3,349 | – | – | 3,349 |
| Other financial assets | 654 | 654 | – | – | 654 |
| Receivables from associated companies | 5 | 5 | – | – | 5 |
| Financial receivables from third parties | 38 | 38 | – | – | 38 |
| Receivables from Henkel Trust e.V. | 501 | 501 | – | – | 501 |
| Sundry financial assets | 110 | 110 | – | – | 110 |
| Cash and cash equivalents | 1,389 | 1,389 | – | – | 1,389 |
| Financial assets available for sale | 65 | 56 | 9 | – | 65 |
| Other financial assets | 65 | 56 | 9 | – | 65 |
| Other investments | 56 | 56 | – | – | 56 |
| Floating-interest securities (level 2) | 2 | – | 2 | – | 2 |
| Financial collateral provided (level 1) | 7 | – | 7 | – | 7 |
| Financial assets held for trading (level 2) | 72 | – | – | 72 72 – 72 |
72 72 31 5,560 |
| Derivative financial instruments not included in a designated hedging relationship Derivative financial instruments included in a designated hedging relationship (level 2) Total |
72 | – | – | ||
| 31 | – | 31 | |||
| 5,560 | 5,448 | 40 | |||
| Liabilities | |||||
| Amortized cost | 7,516 | 7,516 | – | – | 7,513 |
| Trade accounts payable | 3,665 | 3,665 | – | – | 3,665 |
| Borrowings not included in a designated hedging relationship | 3,725 | 3,725 | – | – | 3,722 |
| Other financial liabilities | 126 | 126 | – | – | 126 |
| Financial liabilities held for trading (level 2) | 68 | – | – | 68 68 – |
68 68 9 |
| Derivative financial instruments not included in a designated hedging relationship Derivative financial instruments included in a designated hedging relationship (level 2) Other financial liabilities (level 3) |
68 | – | – | ||
| 9 | – | 9 | |||
| 75 | – | 75 | – | 75 | |
| Sundry financial liabilities | 75 | – | 75 | – | 75 |
| Total | 7,668 | 7,516 | 84 | 68 | 7,665 |
The following hierarchy is applied in order to determine and
disclose the fair value of financial instruments:
• Level 1: Fair values which are determined on the basis of
quoted, unadjusted prices in active markets.
• Level 2: Fair values which are determined on the basis of
parameters for which either directly or indirectly derived
market prices are available.
• Level 3: Fair values which are determined on the basis of
parameters for which the input factors are not derived from
observable market data.
The fair value of securities and time deposits classified as
level 1 is based on the quoted market prices on the reporting
date. Observable market data are used to measure the fair value
of level 2 securities. If bid and ask prices are available, the mid
price is used to determine the fair value.
The fair value of the contingent purchase price liability
reported under other financial liabilities that resulted from
our acquisition in Nigeria is classified as level 3. The fair value
of the contingent purchase price liability on the date of the
acquisition was 113 million euros. As a result of remeasurement as of December 31, 2016, this figure was adjusted to
75 million euros.
156 Notes to the consolidated financial statements Henkel Annual Report 2016
The measurement effects were recognized directly in equity
and reported in the statement of changes in equity as other
changes in equity. The fair value was determined using the
discounted cash flow method, taking into account the key
financial figures of the acquired company based on a detailed
planning horizon up to 2025. A discount rate was applied as
derived from the capital costs in euros. A further material valuation parameter – in addition to the long-term growth rate
reflected in the perpetual annuity of 1.5 percent and the
weighted average cost of capital (WACC) of 6.2 percent that was
used as the discount rate – is the exchange rate of the Nigerian
naira. A rise in interest rates or a depreciation of the naira
would result in a lower negative fair value of the liability. An
interest rate reduction or an appreciation of the naira would
result in a higher negative fair value.
We did not perform any reclassifications between the valuation categories or transfers within the fair value hierarchy
either in fiscal 2016 or in the previous year.
Net gains and losses from financial instruments by
category
The net gains and losses from financial instruments can be
allocated to the following categories:
Net results of the measurement categories and
reconciliation to financial result 136
| in million euros | 2015 | 2016 |
| Loans and receivables | 57 | 19 |
| Financial assets available for sale | 2 | 0 |
| Financial assets and liabilities held for trading including derivatives in a designated hedging relationship |
64 | 65 |
| Financial liabilities measured at amortized cost |
– 77 | – 29 |
| Total net results | 46 | 55 |
| Foreign exchange effects | – 60 | – 74 |
| Interest expense of pension provisions less interest income from plan assets and reimbursement rights |
– 22 | – 11 |
| Other financial result (not related to financial instruments) |
– 6 | – 3 |
| Financial result | – 42 | –33 |
The net result of “Loans and receivables” is attributable in full
to interest income. Net expenses arising from additions and
releases of valuation allowances amounting to –25 million
euros (previous year: –21 million euros) and income from
payments on financial instruments already written off and
derecognized amounting to 1 million euros (previous year:
1 million euros) were recognized in operating profit.
The net result from securities and time deposits classified as
“Available for sale” amounts to 0 million euros (previous year:
1 million euros) for interest income, 0 million euros (previous
year: 1 million euros) for income from sales and 0 million
euros (previous year: 0 million euros) for income from other
investments. As was also the case in 2015, the measurement of
these financial instruments at fair value did not result in recognition of a gain or loss in equity.
The net result from “Held for trading” financial instruments
and derivatives in a designated hedging relationship includes,
in addition to the outcome of measurement of these derivatives at fair value amounting to 66 million euros (previous
year: 17 million euros), an expense of –2 million euros arising
from additions to the valuation allowance made for counterparty credit risk (previous year: 0 million euros). Moreover,
1 million euros of interest income and expenses from interest
rate and currency derivatives and amounts recycled from cash
flow hedges recognized in equity are also included under this
heading (previous year: 47 million euros).
The net result from “Financial liabilities measured at amortized cost” is essentially derived from the interest expense for
borrowings amounting to –25 million euros (previous year:
–116 million euros). Fees amounting to –4 million euros for
procuring money and loans were also recognized under this
heading (previous year: –4 million euros).
The realization and valuation of financial assets and liabilities
in foreign currencies (without derivative financial instruments) resulted in an expense of –74 million euros (previous
year: –60 million euros).
Derivative financial instruments
Derivative financial instruments are measured at their fair
value at the reporting date. Recognition of the gains and losses
arising from fair value changes of derivative financial instruments is dependent upon whether the requirements of IAS 39
are fulfilled with respect to hedge accounting.
Hedge accounting is not applied to the large majority of derivative financial instruments. We recognize through profit or
loss the fair value changes in these derivatives which, in economic terms, represent effective hedges within the framework
of Group strategy. These are largely compensated by fair value
changes in the hedged items. In hedge accounting, derivative
financial instruments are qualified as instruments for hedging
the fair value of a recognized underlying (“fair value hedge”),
as instruments for hedging future cash flows (“cash flow
hedge”) or as instruments for hedging a net investment in a
foreign entity (“hedge of a net investment in a foreign entity”).
Henkel Annual Report 2016 Notes to the consolidated financial statements 157
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
The following table provides an overview of the derivative
financial instruments utilized and recognized within the
Group, and their fair values:
We determine the fair value of forward exchange contracts and
cross-currency swaps on the basis of the reference rates issued
by the European Central Bank for the reporting date, taking
into account forward premiums/forward discounts for the
remaining term of the respective contract versus the contracted foreign exchange rate. Foreign exchange options are
measured using price quotations or recognized models for the
determination of option prices. The fair value of equity forward contracts is measured on the basis of the closing price
of Henkel preferred shares on the reporting date, taking into
account forward premiums/forward discounts for the remaining term of the respective contract versus the contracted forward share price. Interest rate hedges are measured on the
basis of discounted cash flows expected in the future, taking
into account market interest rates applicable for the remaining term of the contracts. These are indicated for the two most
important currencies in the following table. It shows the
interest rates quoted on the interbank market in each case
on December 31.
Derivative financial instruments 137
| At December 31 in million euros |
Nominal value | Positive fair value 2 | Negative fair value 2 | |||
| 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |
| Forward exchange contracts 1 | 5,879 | 4,000 | 72 | 80 | – 44 | –64 |
| (of which: for hedging loans within the Group) | (4,277) | (2,433) | (51) | (53) | (– 29) | (–44) |
| (of which: designated as cash flow hedge) | (696) | (657) | (12) | (11) | (– 10) | (–9) |
| Foreign exchange options | 5 | 1 | – | – | – | – |
| Cross-currency swaps | – | 359 | – | – | – | –13 |
| Equity forward contracts | – | 167 | – | 23 | – | – |
| (of which: designated as cash flow hedge) | (–) | 147 | (–) | 20 | (–) | – |
| Total derivative financial instruments | 5,884 | 4,527 | 72 | 103 | – 44 | – 77 |
1 Maturity less than 1 year.
2 Fair values including accrued interest and excluding valuation allowance for counterparty credit risk of 2 million euros (previous year: 0 million euros).
Interest rates in percent p.a. 138
| At December 31 Term |
Euro | US dollar | ||
| 2015 | 2016 | 2015 | 2016 | |
| 1 month | – 0.21 | – 0.37 | 0.43 | 0.77 |
| 3 months | – 0.13 | –0.32 | 0.61 | 1.00 |
| 6 months | – 0.04 | –0.22 | 0.85 | 1.32 |
| 1 year | 0.06 | – 0.08 | 1.18 | 1.69 |
| 2 years | – 0.03 | – 0.16 | 1.18 | 1.46 |
| 5 years | 0.33 | 0.08 | 1.74 | 1.96 |
| 10 years | 1.00 | 0.66 | 2.19 | 2.32 |
In measuring derivative financial instruments, counterparty
credit risk is taken into account with an adjustment to the fair
values concerned, determined on the basis of credit risk premiums. The adjustment relating to fiscal 2016 amounts to
2 million euros (previous year: 0 million euros). The addition
is recognized in profit or loss under financial result.
Depending on their fair value and their maturity on the reporting date, derivative financial instruments are included in
financial assets (positive fair value) or in financial liabilities
(negative fair value).
Most of the forward exchange contracts serve to hedge risks
arising from trade accounts receivable and payable, and those
pertaining to Group financing.
Fair value hedges: A fair value hedge hedges the fair value of recognized assets and liabilities. The change in the fair value of
the derivatives and the change in the fair value of the underlying relating to the hedged risk are simultaneously recognized
in profit or loss.
The Henkel Group did not use any fair value hedges in fiscal
2016. In 2015, receiver interest rate swaps used to hedge the
fair value risk of the hybrid bond issued by Henkel AG & Co.
KGaA were designated as fair value hedges. They expired when
the hybrid bond was redeemed in November 2015.
158 Notes to the consolidated financial statements Henkel Annual Report 2016
The following table provides an overview of the gains and
losses arising from fair value hedges (valuation allowance
made for the counterparty credit risk not included):
Gains and losses from fair value hedges 139
| in million euros | 2015 | 2016 |
| Gains (+)/losses (–) from hedged items | 43 | – |
| Gains (+)/losses (–) from hedging instruments | – 45 | – |
| Net | –2 | – |
Cash flow hedges: A cash flow hedge hedges fluctuations in
future cash flows from recognized assets and liabilities, and
also transactions that are either planned or highly probable, or
firmly contracted unrecognized financial commitments, from
which an interest-rate, currency, or share price risk arises.
The effective portion of a cash flow hedge is recognized in the
hedge reserve in equity. The ineffective portion arising from
the change in value of the hedging instrument is recognized
through profit or loss in the financial result or operating
profit, depending on the item hedged. The gains and losses
recorded in equity are subsequently recognized through profit
or loss in the period in which the results are affected by the
hedged transaction.
Cash flow hedges (after tax) 140
| in million euros |
Initial balance |
Addition (recognized in equity) |
Disposal (recognized through profit or loss) |
End balance |
| 2016 | –215 | 31 | –31 | –215 |
| 2015 | – 202 | 1 | – 14 | –215 |
The initial value of the cash flow hedges recognized in equity
reflects the fair values of the payer interest swaps that were
used in previous years to hedge the cash flow risks of the floating-interest US dollar liabilities at Henkel of America, Inc.,
and of currency hedges for acquisitions.
An addition of 11 million euros after tax relates to currency
hedges of planned inventory purchases against fluctuations in
spot rates. Of the gains recognized in equity, 11 million euros
was reclassified to operating profit in the reporting period.
The positive and negative fair values of the derivatives contracted as a currency hedge of planned inventory purchases
amounted to 11 million and –9 million euros respectively. The
cash flows from the currency derivatives and the cash flows
from the hedged inventory purchases are expected to occur
and affect profit or loss in the next fiscal year.
An addition of 20 million euros resulted from the hedges to
protect planned payments relating to our long-term incentive
(LTI) scheme – some of which were effected in the course of
the fiscal year just ended – against fluctuations in Henkel
share prices. All of the gains recognized in equity were reclassified to operating profit in the reporting period. The positive
fair values of the equity forward contracts totaled 20 million
euros. The cash flows relating to these derivatives will occur
during the next fiscal year, as will the cash flows from the
hedged LTI payments. The ineffective portions recognized in
operating profit amounted to 1 million euros.
Hedges of a net investment in a foreign entity: The accounting
treatment of hedges of a net investment in a foreign entity
against translation risk is similar to that applied to cash flow
hedges. The gain or loss arising from the effective portion of
the hedging instrument is recognized in equity through other
comprehensive income; the gain or loss of the ineffective portion is recognized directly through profit or loss. The gains
or losses recognized directly in equity remain there until disposal or partial disposal of the net investment.
The items recognized in equity relate essentially to translation
risks arising from net investments in Swiss francs and US dollars for which the associated hedges were entered into and
settled in previous years. Henkel did not hedge any net investments in foreign entities in fiscal 2016.
Hedges of a net investment
in a foreign entity (after tax) 141
| in million euros | Initial balance |
Addition (recognized in equity) |
Disposal (recognized through profit or loss) |
End balance |
| 2016 | 31 | – | – | 31 |
| 2015 | 35 | – 4 | – | 31 |
Risks arising from financial instruments, and risk
management
As a globally active corporation, Henkel is exposed in the
course of its ordinary business operations to credit risks,
liquidity risks and market risks (currency translation, interest
rate and commodity price risks). The purpose of financial risk
management is to restrict the exposure arising from operating
activities through the use of selective derivative and non-derivative hedges. Henkel uses derivative financial instruments
exclusively for the purposes of risk management. Without
these instruments, Henkel would be exposed to higher financial risks. Changes in exchange rates, interest rates or commodity prices can lead to significant fluctuations in the fair
Henkel Annual Report 2016 Notes to the consolidated financial statements 159
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
values of the derivatives used. These variations in fair value
should not be regarded in isolation from the hedged items, as
derivatives and the underlying constitute a unit in terms of
countervailing fluctuations.
Management of currency, interest rate and liquidity risks is
based on the treasury guidelines introduced by the Management Board, which are binding on the entire corporation. They
define the targets, principles and competences of the Corporate
Treasury organizational unit. These guidelines describe the
fields of responsibility and establish the distribution of these
responsibilities between Corporate Treasury and Henkel’s subsidiaries. The Management Board is regularly and comprehensively informed of all major risks and of all relevant hedging
transactions and arrangements. A description of the objectives
and fundamental principles adopted in capital management
can be found in the combined management report on pages 72
and 73. There were no major risk clusters in the reporting
period.
Credit risk
In the course of its business activities with third parties, the
Henkel Group is exposed to global credit risk arising from both
its operating business and its financial investments. This risk
derives from the possibility of a contractual party not fulfilling
its obligations.
The maximum credit risk is represented by the carrying value
of the financial assets recognized in the statement of financial
position (excluding financial investments recognized using
the equity method), as indicated in the following table:
Maximum risk position 142
| in million euros | 2015 | 2016 |
| Trade accounts receivable | 2,944 | 3,349 |
| Derivative financial instruments not included in a designated hedging relationship |
60 | 72 |
| Derivative financial instruments included in a designated hedging relationship |
12 | 31 |
| Other financial assets | 519 | 719 |
| Cash and cash equivalents | 1,176 | 1,389 |
| Total carrying values | 4,711 | 5,560 |
In its operating business, Henkel is confronted by progressive
concentration and consolidation on the customer side, as
reflected in the receivables from individual customers.
A credit risk management system operating on the basis of a
globally applied credit policy ensures that credit risks are constantly monitored and bad debts minimized. This policy,
which applies to both new and existing customers, governs
the allocation of credit limits and compliance with those limits, individual analyses of customers’ creditworthiness based
on both internal and external financial information, risk classification, and continuous monitoring of the risk of bad debts
at the local level. We also monitor our key customer relationships at the regional and global level. In addition, safeguarding measures are implemented on a selective basis for particular countries and customers inside and outside the eurozone.
Collateral received and other safeguards include countryspecific and customer-specific protection afforded by credit
insurance, confirmed and unconfirmed letters of credit in the
export business, and guarantees, warranties, and cover notes.
We make valuation allowances with respect to financial assets
so that the assets are recognized at their fair value at the
reporting date. In the case of impairment losses that have
already occurred but have not yet been identified, we make
global valuation allowances on the basis of empirical evidence, taking into account the overdue structure of the trade
accounts receivable. As a rule, the impairment test on loans
and receivables that are more than 180 days overdue results in a
valuation allowance of 100 percent.
The decision as to whether a credit risk is accounted for
through a valuation allowance account or by derecognition
of the impaired receivable depends upon the probability of
incurring a loss. For accounts receivable classified as irrecoverable, we report the credit risk directly through derecognition
of the impaired item or entry of the relevant amount in the
valuation allowance account. If the basis for the original
impairment is eliminated, we recognize a reversal through
profit or loss.
In all, we recognized valuation allowances on loans and
receivables in 2016 in the amount of 25 million euros (previous year: 21 million euros).
The carrying amount of loans and receivables, the term of
which was renegotiated because they would have otherwise
fallen overdue or been impaired, was 0 million euros (previous year: 0 million euros).
Based on our experience, we do not expect the necessity for
any further valuation allowances, other than those described
above, on non-overdue, non-impaired financial assets.
160 Notes to the consolidated financial statements Henkel Annual Report 2016
Age analysis of non-impaired overdue loans and receivables 143
Analysis
| in million euros | Less than 30 days | 30 to 60 days | 61 to 90 days | More than 91 days | Total |
| At December 31, 2016 | 235 | 73 | 35 | 7 | 350 |
| At December 31, 2015 | 194 | 67 | 32 | 6 | 299 |
offset bilateral receivables and obligations with counterparties. We additionally enter into collateral agreements with relevant banks, on the basis of which reciprocal sureties are
established twice a month to secure the fair values of contracted derivatives and other claims and obligations. The netting arrangements only provide for a contingent right to offset
transactions conducted with a contractual party. Accordingly,
associated amounts can be offset only under certain circumstances, such as the insolvency of one of the contractual parties. Thus, the netting arrangements do not meet the offsetting
criteria under IAS 32 “Financial Instruments: Presentation.”
The following table provides an overview of financial assets
and financial liabilities from derivatives that are subject to
netting, collateral, or similar arrangements:
Financial assets and financial liabilities from derivatives subject to netting,
collateral, or similar arrangements 144
| At December 31 in million euros |
Gross amount recog nized in the statement of financial position1 |
Amount eligible for offsetting |
Financial collateral received / provided |
Net amount | ||||
| 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |
| Financial assets | 72 | 103 | 35 | 76 | 35 | 21 | 2 | 6 |
| Financial liabilities | 44 | 77 | 35 | 76 | 10 | 7 | – 1 | –6 |
1 Fair values excluding valuation allowance of 2 million euros made for counterparty credit risk (previous year: 0 million euros).
In addition to netting and collateral arrangements, investment
limits are set, based on the ratings of the counterparties, in
order to minimize credit risk. These limits are monitored and
adjusted regularly. When determining the limits, we also apply
certain other indicators, such as the pricing of credit default
swaps (CDS) by banks. A valuation allowance of 2 million
euros exists to cover the remaining credit risk from the positive fair values of derivatives (previous year: 0 million euros).
Credit risks also arise from financial investments such as cash
at banks, securities and the positive fair value of derivatives.
Such exposure is limited by our Corporate Treasury specialists
through the selection of counterparties with strong credit ratings, and limitations on the amounts allocated to individual
investments. In financial investments and derivatives trading
with German and international banks, we only enter into
transactions with counterparties of high financial standing.
We invest exclusively in securities from issuers with an investment grade rating. Our cash deposits can be liquidated at short
notice. Our financial investments are broadly diversified
across various counterparties and various financial assets. To
minimize the credit risk, we agree netting arrangements to
Henkel Annual Report 2016 Notes to the consolidated financial statements 161
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Liquidity risk
Liquidity risk is defined as the risk of an entity failing to meet
its financial obligations at any given time.
We minimize this risk by deploying financing instruments in
the form of issued bonds and commercial paper. With the help
of our existing debt issuance program in the amount of 6 billion euros, this is also possible on a short-term and flexible
basis. In order to ensure the financial flexibility of Henkel at
any time, the liquidity within the Group is largely centralized
and managed through the use of cash pools. We predominantly invest cash in financial assets traded in a liquid market
in order to ensure that they can be sold at any time to procure
liquid funds. In addition, the Henkel Group has at its disposal
Cash flows from financial liabilities 145
| Remaining term | in million euros | December 31, 2015 Carrying amounts |
December 31, 2015 Total cash flow |
||
| Up to 1 year |
Between 1 and 5 years |
More than 5 years |
|||
| Bonds | – | – | – | – | – |
| Commercial paper 1 | 811 | 811 | – | – | 811 |
| Liabilities to banks | 69 | 70 | – | – | 70 |
| Trade accounts payable | 3,176 | 3,176 | – | – | 3,176 |
| Sundry financial instruments 2 | 70 | 65 | 1 | 4 | 70 |
| Original financial instruments | 4,126 | 4,122 | 1 | 4 | 4,127 |
| Derivative financial instruments | 44 | 44 | – | – | 44 |
| Total | 4,170 | 4,166 | 1 | 4 | 4,171 |
1 From the euro and US dollar commercial paper program (total volume 2 billion US dollars and 1 billion euros).
2 Sundry financial instruments include amounts due to customers, and finance bills.
Cash flows from financial liabilities 146
| Remaining term | in million euros | December 31, 2016 Carrying amounts |
December 31, 2016 Total cash flow |
||
| Up to 1 year |
Between 1 and 5 years |
More than 5 years |
|||
| Bonds | 2,258 | 14 | 1,946 | 353 | 2,312 |
| Commercial paper 1 | 381 | 385 | – | – | 385 |
| Liabilities to banks | 1,082 | 53 | 1,071 | – | 1,124 |
| Trade accounts payable | 3,665 | 3,665 | – | – | 3,665 |
| Sundry financial instruments 2 | 205 | 100 | 96 | 11 | 207 |
| Original financial instruments | 7,591 | 4,217 | 3,113 | 364 | 7,693 |
| Derivative financial instruments | 77 | 64 | – | 13 | 77 |
| Total | 7,668 | 4,281 | 3,113 | 377 | 7,770 |
1 From the euro and US dollar commercial paper program (total volume 2 billion US dollars and 1 billion euros).
2 Sundry financial instruments include amounts due to customers, and finance bills.
confirmed credit lines of 1.5 billion euros. These credit lines
have terms until 2019. The individual subsidiaries additionally
have at their disposal committed bilateral loans of 0.1 billion
euros with a revolving term of up to one year. Our credit rating
is regularly assessed by the rating agencies Standard & Poor’s
and Moody’s.
Our liquidity risk can therefore be regarded as very low.
The maturity structure of the original and derivative financial
liabilities within the scope of International Financial Reporting Standard (IFRS) 7 based on cash flows is shown in the following table.
162 Notes to the consolidated financial statements Henkel Annual Report 2016
Market risk
Market risk exists where the fair value or future cash flows of a
financial instrument may fluctuate due to changes in market
prices. Market risks primarily take the form of currency risk,
interest rate risk and various price risks (particularly the commodity price risk, and the share price risk arising from our
long-term incentive [LTI]). Henkel uses equity forward contracts to hedge against the share price risk.
The Corporate Treasury department manages currency exposure and interest rates centrally for the Group and is therefore
responsible for all transactions with financial derivatives and
other financial instruments. Trading, Treasury Controlling and
Settlement (front, middle and back offices) are separated both
physically and in terms of organization. The parties to the contracts are German and international banks which Henkel monitors regularly, in accordance with Corporate Treasury guidelines, for creditworthiness and the quality of their quotations.
Financial derivatives are used to manage currency exposure
and interest rate risks in connection with operating activities
and the resultant financing requirements, again in accordance
with the Corporate Treasury guidelines. Financial derivatives
are entered into solely for hedging purposes.
The currency and interest rate risk management of the Group
is supported by an integrated treasury system which is used to
identify, measure and analyze the Group’s currency exposure
and interest rate risks. In this context, “integrated” means that
the entire process from the conclusion of financial transactions to their entry in the accounts is covered. Much of the
currency trading takes place on internet-based, multibank
dealing platforms. These foreign currency transactions are
automatically transferred into the treasury system. The currency exposure and interest rate risks reported by all subsidiaries under standardized reporting procedures are integrated
into the treasury system by data transfer. As a result, it is possible to retrieve and measure at any time all currency and
interest rate risks across the Group and all derivatives entered
into to hedge the exposure to these risks. The treasury system
supports the use of various risk concepts.
Market risk is monitored on the basis of sensitivity analyses
and value-at-risk computations. Sensitivity analyses enable
estimation of potential losses, future gains, fair values or cash
flows of instruments susceptible to market risks arising from
one or several selected hypothetical changes in foreign
exchange rates, interest rates, commodity prices or other
relevant market rates or prices over a specific period. We use
sensitivity analyses in the Henkel Group because they enable
reasonable risk assessments to be made on the basis of direct
assumptions (e.g. an increase in interest rates). Value-at-risk
computations reveal the maximum potential future loss of
a certain portfolio over a given period based on a specified
probability level.
Currency risk
The global nature of our business activities results in a huge
number of cash flows in different currencies. The resultant
currency exposure breaks down into two categories, namely
transaction and translation risks.
Transaction risks arise from possible exchange rate fluctuations causing changes in the value of future foreign currency
cash flows. The hedging of the resultant exchange rate risks
forms a major part of our central risk management activity.
Transaction risks arising from our operating business are
partially avoided by the fact that we largely manufacture our
products in those countries in which they are sold. Residual
transaction risks on the operating side are proactively managed by Corporate Treasury. This includes the ongoing assessment of the specific currency risk and the development of
appropriate hedging strategies. The objective of our currency
hedging is to fix prices based on hedging rates so that we are
protected from future adverse fluctuations in exchange rates.
Because we limit our potential losses, any negative impact on
profits is restricted. The transaction risk arising from major
financial payables and receivables is, for the most part, hedged.
In order to manage these risks, we primarily utilize forward
exchange contracts and currency swaps. The derivatives are
designated as cash flow hedges or “Held for trading” and measured accordingly. The currency risk that exists within the
Group in the form of transaction risk initially affects equity in
the case of cash flow hedges, while all changes in the value of
derivatives designated as “Held for trading“ are recognized
directly in income.
The value-at-risk pertaining to the transaction risk of the
Henkel Group as of December 31, 2016 amounted to 99 million
euros after hedging (previous year: 102 million euros). The value-at-risk shows the maximum expected risk of loss in a year
as a result of currency fluctuations. Starting in fiscal 2013, our
value-at-risk analysis has been extended to one year in our
internal risk reports as it provides a more comprehensive representation of the risk associated with a fiscal year. The risk
arises from imports and exports by Henkel AG & Co. KGaA and
its foreign subsidiaries. Due to the international nature of its
activities, the Henkel Group has a portfolio with more than
50 different currencies. The following table shows the valueat-risk for Henkel’s major currencies.
Henkel Annual Report 2016 Notes to the consolidated financial statements 163
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Currency exposure 1 147
| in million euros | 2015 | 2016 |
| Russian ruble | 23 | 19 |
| Egyptian pound | 8 | 17 |
| Iranian rial | 3 | 11 |
| Chinese yuan | 12 | 9 |
| US dollar | – 4 | –14 |
| Others | 60 | 57 |
| 102 | 99 |
1 Transaction risk.
The value-at-risk analysis assumes a time horizon of one year
and a unilateral confidence interval of 95 percent. We adopt
the variance-covariance approach as our basis for calculation.
Volatilities and correlations are determined using historical
data. The value-at-risk analysis is based on the operating book
positions and budgeted positions in foreign currency, normally with a forecasting horizon of nine months.
Translation risks emanate from changes caused by foreign
exchange fluctuations to items on the statement of financial
position and the income statement of a subsidiary, and the
effect these changes have on the translation of individual
company financial statements into Group currency. However,
unlike transaction risk, translation risk does not necessarily
impact future cash flows. The Group’s equity reflects the
changes in carrying values resulting from foreign exchange
influences. The risks arising from the translation of the earnings results of subsidiaries in foreign currencies and from net
investments in foreign entities are only hedged in exceptional
cases.
Interest rate risk
Interest rate risk encompasses those potentially negative
influences on profits, equity or cash flow in current or future
reporting periods arising from changes in interest rates. In the
case of fixed-interest financial instruments, changing capital
market interest rates result in a fair value risk, as the attributable fair values fluctuate depending on those capital market
interest rates. In the case of floating-interest financial instruments, a cash flow risk exists because the interest payments
may be subject to future fluctuations.
The Henkel Group obtains and invests the majority of the cash
it requires from and in the international money and capital
markets. The resulting financial liabilities and our cash deposits may be exposed to the risk of changes in interest rates. The
aim of our centralized interest rate management system is to
manage this risk through our choice of interest commitments
and the use of derivative financial instruments. Only those
derivative financial instruments that can be modeled, monitored and assessed in the risk management system may be
used to hedge the interest rate risk.
Henkel’s interest management strategy is essentially aligned
to optimizing the net interest result for the Group. The decisions made in interest management relate to the bonds and
commercial paper issued to secure Group liquidity, the securities and time deposits used for cash investments, and the
other financial instruments. The financial instruments
exposed to interest rate risk are primarily denominated in
euros and US dollars.
Depending on forecasts with respect to interest rate developments, Henkel enters into derivative financial instruments,
primarily interest rate swaps, in order to optimize the interest
rate lock-down structure. In the event of an expected rise in
interest rate levels, Henkel protects its positions by transacting additional interest rate derivatives as an effective means of
hedging against interest rates rising over the short term. In
addition to the two fixed-rate euro-denominated bonds, Henkel
entered into a cross-currency swap to convert the bond denominated in British pounds into a fixed-rate euro obligation.
A fixed-rate bond denominated in US dollars was also issued.
The interest on all other financial instruments is floating. Our
exposure (after hedging) to interest rate risk at the reporting
dates was as follows:
Interest rate exposure 148
| in million euros | Carrying amounts | |
| 2015 | 2016 | |
| Fixed-interest financial instruments | ||
| Euro | – | –1,546 |
| US dollar | – | –712 |
| Others | – | – |
| – | – 2,258 | |
| Floating-interest financial instruments | ||
| Euro | 254 | 357 |
| US dollar | – 1,036 | –1,797 |
| Chinese yuan | 474 | 511 |
| Russian ruble | 16 | 26 |
| Others | 627 | 860 |
| 335 | –43 |
164 Notes to the consolidated financial statements Henkel Annual Report 2016
The calculation of the interest rate risk is based on sensitivity
analyses. The analysis of cash flow risk examines all the main
floating-interest financial instruments as of the reporting
date. Net financial position is defined as cash and cash equivalents plus readily monetizable financial instruments classified
as “Available for sale” or according to the “Fair value option,”
less borrowings, and plus positive and less negative fair values
of hedging transactions. The interest rate risk figures shown in
the table are based on this calculation at the relevant reporting
date. When analyzing fair value risk, we assume a parallel shift
in the interest curve of 100 basis points and calculate the
hypothetical loss or gain of the relevant interest rate derivatives at the reporting date.
The risk of interest rate fluctuations with respect to the earnings of the Henkel Group is shown in the basis point value
(BPV) analysis in the following table.
Interest rate risk 149
| in million euros | 2015 | 2016 |
| Based on an interest rate change of 100 basis points |
– 3 | – |
| of which: | ||
| Cash flow through profit and loss | – 3 | – |
| Fair value recognized in equity through comprehensive income |
– | – |
Other price risks (commodity price risk)
Uncertainty with respect to commodity price development
impacts the Group. Purchase prices for raw materials can
affect the net assets, financial position and results of operations of Henkel. The risk management strategy put in place by
the Group management for safeguarding against procurement
market risk is described in more detail in the risk and opportunities report on pages 106 and 107.
As a small part of the risk management strategy, cash-settled
commodity futures may be entered into on the basis of forecasted purchasing requirements in order to hedge future
uncertainties with respect to commodity prices. Cash-settled
commodity derivatives are only used at Henkel where there is
a direct relationship between the hedging derivative and the
physical underlying. Henkel does not practice hedge accounting and can therefore be exposed to temporary price risks
when holding commodity derivatives. Such price risks arise
due to the fact that the commodity derivatives are measured at
fair value whereas the purchasing requirement, as a pending
transaction, is not measured or recognized. This can lead to
losses being recognized in profit or loss and equity. Developments in fair values and the resultant risks are continuously
monitored.
Henkel Annual Report 2016 Notes to the consolidated financial statements 165
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
22 Sales and principles of income recognition
Sales increased year on year to 18,714 million euros. Revenues
and their development by business unit and region are summarized in the Group segment report and in the key financials
by region on pages 121 and 122. A detailed explanation of the
development of major income and expense items can be found
in the combined management report on pages 64 to 69.
Sales comprise sales of goods and services less direct sales
deductions such as customer-related rebates, credits and other
benefits paid or granted. Sales are recognized once the goods
have been delivered or the service has been performed. In the
case of goods, this coincides with the physical delivery and
so-called transfer of risks and rewards. Henkel uses different
terms of delivery that contractually determine the transfer of
risks and rewards. It must also be probable that the economic
benefits associated with the transaction will flow to the Group,
and the costs incurred with respect to the transaction must be
reliably measurable.
Services are generally provided in conjunction with the sale of
goods, and recorded once the service has been performed. No
sale is recognized if there are significant risks relating to the
receipt of the consideration or it is likely that the goods will be
returned.
Interest income is recognized on a time-proportion basis that
takes into account the effective yield on the asset and the interest rate in force. Dividend income from investments is recognized when the shareholders’ right to receive payment is legally
established.
23 Cost of sales
The cost of sales increased from 9,368 million euros to
9,742 million euros.
Cost of sales comprises the cost of products and services sold
and the purchase cost of merchandise sold. It consists of the
directly attributable cost of materials and primary production
cost, as well as indirect production overheads including the
production-related amortization/depreciation and impairment of intangible assets and property, plant and equipment.
24 Marketing, selling and distribution expenses
Marketing, selling and distribution expenses amounted to
4,635 million euros (previous year: 4,608 million euros).
In addition to marketing organization and distribution
expenses, this item comprises, in particular, advertising, sales
promotion and market research expenses. Also included here
are the expenses of technical advisory services for customers,
valuation allowances on trade accounts receivable and valuation allowances and impairment losses on trademarks and
other rights.
25 Research and development expenses
Research and development expenses decreased year on year
to 463 million euros (previous year: 478 million euros). Expenditures directly attributable to research and development
activities amounted to 460 million euros (previous year:
464 million euros).
The capitalization of research expenses is not permitted.
Development expenditures are recognized as an asset if all
the criteria for recognition are met, the research phase can be
clearly distinguished from the development phase, and the
expenditures can be attributed to distinct project phases.
Currently, the criteria set out in International Accounting
Standard (IAS) 38 “Intangible Assets” for recognizing development expenditures are not all met in regard to product and
technology developments, due to a high level of interdependence within these developments and the difficulty of assessing which products will eventually be marketable.
26 Administrative expenses
Administrative expenses amounted to 1,062 million euros
(previous year: 1,012 million euros).
Administrative expenses include personnel and material costs
relating to the Group management, Human Resources, Purchasing, Accounting and IT functions, as well as the costs of
managing and administering the business units.
Notes to the consolidated statement of income
166 Notes to the consolidated financial statements Henkel Annual Report 2016
27 Other operating income
Other operating income 150
| in million euros | 2015 | 2016 |
| Release of provisions 1 | 11 | 37 |
| Gains on disposal of non-current assets | 34 | 13 |
| Insurance claim payouts | 4 | 2 |
| Write-ups of non-current assets | 1 | – |
| Payments on derecognized receivables | 2 | 1 |
| Impairment reversal on assets held for sale | – | – |
| Sundry operating income | 75 | 56 |
| Total | 127 | 109 |
1 Including income from the release of provisions for pension obligations
(curtailment gains) of 13 million euros in 2016 (2015: 2 million euros).
Sundry operating income relates to a number of individual
items arising from ordinary operating activities, such as grants
and subsidies, tax refunds for indirect taxes, and similar
income.
28 Other operating expenses
Other operating expenses 151
| in million euros | 2015 | 2016 |
| Losses on disposal of non-current assets | – 8 | – 7 |
| Other taxes | – 1 | – 1 |
| Amortization, depreciation of other assets | – | – 1 |
| Sundry operating expenses | – 96 | –137 |
| Total | –105 | –146 |
Sundry operating expenses include a number of individual
items arising from ordinary operating activities, such as fees,
provisions for litigation and third party claims, sundry taxes,
and similar expenses.
29 Financial result
Financial result 152
| in million euros | 2015 | 2016 |
| Interest result | – 17 | – 5 |
| Other financial result | – 24 | –26 |
| Investment result | – 1 | – 2 |
| Total | – 42 | –33 |
Interest result 153
| in million euros | 2015 | 2016 |
| Interest and similar income from third parties 1 | 28 | 20 |
| Interest to third parties 1 | – 45 | –25 |
| Total | –17 | – 5 |
1 Including interest income and interest expense, both in the amount of
0 million euros in 2016 (2015: 26 million euros) with respect to mutually
offset deposits and liabilities to banks, reported on a net basis.
Other financial result 154
| in million euros | 2015 | 2016 |
| Interest result from net obligation (pensions) | – 27 | –15 |
| Interest income from reimbursement rights (IAS 19) | 5 | 5 |
| Other financial expenses | – 71 | – 118 |
| Other financial income | 69 | 102 |
| Total | – 24 | –26 |
Other financial expenses include –106 million euros (previous
year: –60 million euros) from currency losses. Other financial
income includes 98 million euros (previous year: 63 million
euros) for currency gains. Please see page 157 of the financial
instruments report for information on the net results of the
valuation categories under International Financial Reporting
Standard (IFRS) 7, and the reconciliation to financial result.
Investment result
The investment result includes 2 million euros for expenses
from the valuation of companies that are recognized using the
equity method (2015: 2 million euros).
Henkel Annual Report 2016 Notes to the consolidated financial statements 167
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
30 Taxes on income
Income tax expense/income breaks down as follows:
Income before tax and analysis of taxes 155
| in million euros | 2015 | 2016 |
| Income before tax | 2,603 | 2,742 |
| Current taxes | 708 | 830 |
| Deferred taxes | – 73 | –181 |
| Taxes on income | 635 | 649 |
| Tax rate in percent | 24.4 % | 23.7% |
Main components of tax expense and income 156
| in million euros | 2015 | 2016 |
| Current tax expense/income in the reporting year | 688 | 816 |
| Current tax adjustments for prior years | 20 | 14 |
| Deferred tax expense/income from temporary differences |
– 77 | –164 |
| Deferred tax income from unused tax losses | – 13 | –8 |
| Deferred tax expense from tax credits | 2 | –4 |
| Deferred tax expense/income from changes in tax rates |
– 4 | –8 |
| Increase/decrease in valuation allowances on deferred tax assets |
19 | 3 |
Deferred tax expense by items
on the statement of financial position 157
| in million euros | 2015 | 2016 |
| Intangible assets | – 140 | 16 |
| Property, plant and equipment | – 8 | –38 |
| Financial assets | 82 | –1 |
| Inventories | – 9 | 8 |
| Other receivables and other assets | – 17 | 14 |
| Special tax items | – 2 | –2 |
| Provisions | 1 | –66 |
| Liabilities | 8 | –104 |
| Tax credits | 2 | –4 |
| Unused tax losses | – 9 | –7 |
| Valuation allowances | 19 | 3 |
| Financial statement figures | –73 | –181 |
We have summarized the individual company reports – prepared on the basis of the tax rates applicable in each country
and taking into account consolidation procedures – in the
statement below, showing how the expected tax charge, based
on the tax rate applicable to Henkel AG & Co. KGaA of 31 percent, is reconciled to the effective tax charge disclosed.
Tax reconciliation statement 158
| in million euros | 2015 | 2016 |
| Income before tax | 2,603 | 2,742 |
| Tax rate (including trade tax) of Henkel AG & Co. KGaA |
31 % | 31 % |
| Expected tax charge | 807 | 850 |
| Tax reductions due to differing tax rates abroad | – 100 | –122 |
| Tax increases/reductions for prior years | – 2 | 6 |
| Tax increases/reductions due to changes in tax rates |
– 4 | –8 |
| Tax increases/reductions due to the recognition of deferred tax assets relating to unused tax losses and temporary differences |
19 | 3 |
| Tax reductions due to tax-free income and other items |
– 216 | –208 |
| Tax increases/reductions arising from additions and deductions for local taxes |
4 | –1 |
| Tax increases due to withholding taxes | 43 | 43 |
| Tax increases due to non-deductible expenses | 84 | 86 |
| Tax charge disclosed | 635 | 649 |
| Tax rate | 24.4 % | 23.7 % |
Deferred taxes are calculated on the basis of tax rates that
apply in the individual countries at the year-end date or which
have already been legally decided. In Germany, there is a uniform corporate income tax rate of 15 percent plus a solidarity
surcharge of 5.5 percent. After taking into account trade tax,
this yields an overall tax rate of 31 percent.
Deferred tax assets and liabilities are netted where they
involve the same tax authority and the same tax creditor.
168 Notes to the consolidated financial statements Henkel Annual Report 2016
euros) relating to intangible assets are mainly attributable to
business combinations such as the acquisition of the National
Starch businesses in 2008, Spotless Group SAS in 2014, and
The Sun Products Corporation in 2016.
An excess of deferred tax assets is only recognized insofar as it
is likely that the company concerned will achieve sufficiently
positive taxable profits in the future against which the deductible temporary differences can be offset and tax loss carryforwards can be used. Deferred taxes have not been recognized
with respect to unused tax losses of 269 million euros (previous year: 146 million euros), as it is not probable that sufficient taxable profit will be available against which they may be
utilized. Of these tax losses carried forward, 190 million euros
(previous year: 62 million euros) expire after more than three
years. Thereof 58 million euros (previous year: 53 million
euros) are attributable to state taxes of our US subsidiaries
(tax rate around 2 percent). Of the tax losses carried forward,
73 million euros are non-expiring (previous year: 76 million
euros). Deferred tax liabilities of 62 million euros (previous
year: 42 million euros) relating to the retained earnings of foreign subsidiaries have been recognized due to the fact that
these earnings will be distributed in 2017.
We have summarized the expiry dates of unused tax losses and
tax credits in the following table, which includes unused tax
losses arising from losses on the disposal of assets of 10 million euros (previous year: 10 million euros) which may be carried forward without restriction. In addition to the unused tax
losses listed in the table, an interest expense of 5 million euros
(previous year: 8 million euros) is available which may be carried forward in full with no expiration.
The deferred tax assets and liabilities stated on the reporting
date relate to the following items of the consolidated statement of financial position, unused tax losses and tax credits:
Allocation of deferred taxes 159
| in million euros | Deferred tax assets | Deferred tax liabilities | ||
| December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
|
| Intangible assets | 341 | 360 | 749 | 1,037 |
| Property, plant and equipment |
16 | 18 | 75 | 73 |
| Financial assets | 1 | 1 | 167 | 168 |
| Inventories | 50 | 50 | 1 | 3 |
| Other receivables and other assets |
39 | 38 | 37 | 48 |
| Special tax items | – | – | 35 | 33 |
| Provisions | 704 | 822 | 26 | 9 |
| Liabilities | 58 | 169 | 7 | 12 |
| Tax credits | 3 | 7 | – | – |
| Unused tax losses | 60 | 164 | – | – |
| Amounts netted | – 427 | – 550 | – 427 | – 550 |
| Valuation allowances | – 29 | – 62 | – | – |
| Financial statement figures |
816 | 1,017 | 670 | 833 |
The deferred tax assets of 822 million euros (previous year:
704 million euros) relating to provisions in the financial statement result primarily from recognition and measurement differences with respect to pension obligations. The deferred tax
liabilities of 1,037 million euros (previous year: 749 million
Expiry dates of unused tax losses and tax credits 160
| Unused tax losses | Tax credits | in million euros | ||
| December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
|
| Expire within | ||||
| 1 year | 3 | 12 | 1 | 1 |
| 2 years | 3 | 2 | – | – |
| 3 years | 6 | 7 | – | – |
| more than 3 years | 180 | 674 | 2 | 6 |
| May be carried forward without restriction | 103 | 107 | – | – |
| Total | 295 | 802 | 3 | 7 |
Henkel Annual Report 2016 Notes to the consolidated financial statements 169
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
In many countries, different tax rates apply to losses on the
disposal of assets than to operating profits, and in some cases
losses on the disposal of assets may only be offset against
gains on the disposal of assets.
Tax loss carryforwards in the amount of 353 million euros are
attributable to our US subsidiaries. Of this amount, 112 million
euros relate to federal and state tax loss carryforwards, and
231 million euros (previous year: 101 million euros) relate
exclusively to state taxes.
Equity-increasing deferred taxes of 55 million euros were
recognized (previous year: equity-decreasing deferred taxes
of 82 million euros). Within this figure, income of 55 million
euros (previous year: expense of 88 million euros) results
from actuarial gains and losses on pension obligations, while
income of 0 million euros (previous year: income of 2 million
euros) is attributable to hedges of net investments in foreign
entities and an expense of 1 million euros (previous year:
0 million euros) is attributable to foreign exchange effects.
31 Non-controlling interests
The amount shown here represents the proportion of net
income and losses attributable to other shareholders of consolidated affiliated companies.
Their share of net income was 41 million euros (previous year:
49 million euros) and that of losses was 1 million euros (previous year: 2 million euros).
The non-controlling interests included in the Henkel Group
at the end of fiscal 2016 had no material impact on our net
assets, financial position and results of operations. The Group
has no joint operations or unconsolidated structured entities.
170 Notes to the consolidated financial statements Henkel Annual Report 2016
Other disclosures
32 Reconciliation of adjusted net income
161
| in million euros | 2015 | 2016 | +/– |
| EBIT (as reported) | 2,645 | 2,775 | 4.9% |
| One-time gains | – 15 | –1 | – |
| One-time charges | 100 | 121 | – |
| Restructuring expenses | 193 | 277 | – |
| Adjusted EBIT | 2,923 | 3,172 | 8.5 % |
| Adjusted return on sales in % | 16.2 | 16.9 | 0.7 pp |
| Financial result | – 42 | –33 | – 21.4 % |
| Taxes on income (adjusted) | – 720 | – 775 | 7.6 % |
| Adjusted tax rate in % | 25.0 | 24.7 | – 0.3 pp |
| Adjusted net income | 2,161 | 2,364 | 9.4% |
| Attributable to non-controlling interests | 49 | 41 | – 16.3 % |
| Attributable to shareholders of Henkel AG & Co. KGaA | 2,112 | 2,323 | 10.0 % |
| Adjusted earnings per ordinary share in euros | 4.86 | 5.34 | 9.9 % |
| Adjusted earnings per preferred share in euros | 4.88 | 5.36 | 9.8 % |
The one-time gains recognized in fiscal 2016 and in 2015
stemmed from performance-related purchase price
components.
Of the adjusted charges in fiscal 2016, 33 million euros is
attributable to provisions for litigations (2015: 18 million
euros), 26 million euros to the optimization of our IT system
architecture for managing business processes (2015: 60 million euros), 42 million euros to costs relating to the integration of The Sun Products Corporation (2015: 0 million euros),
and 20 million euros to acquisition-related costs (2015: 8 million euros).
Of the restructuring expenses in fiscal 2016, 47 million euros
is attributable to cost of sales (2015: 18 million euros) and
77 million euros to marketing, selling and distribution
expenses (2015: 87 million euros). A further 3 million euros is
attributable to research and development expenses (2015:
14 million euros), and 150 million euros to administrative
expenses (2015: 74 million euros).
33 Payroll cost and employee structure
Payroll cost 1 162
| in million euros | 2015 | 2016 |
| Wages and salaries | 2,464 | 2,427 |
| Social security contributions and staff welfare costs |
404 | 410 |
| Pension costs | 179 | 164 |
| Total | 3,047 | 3,001 |
1 Excluding personnel-related restructuring expenses of 137 million euros
(previous year: 104 million euros).
Number of employees per function 1 163
| 2015 | 2016 | |
| Production and engineering | 25,400 | 26,550 |
| Marketing, selling and distribution | 14,650 | 13,600 |
| Research and development | 2,800 | 2,700 |
| Administration | 7,000 | 7,100 |
| Total | 49,850 | 49,950 |
1 Basis: annual average headcount of full-time employees, excluding apprentices
and trainees, work experience students and interns; figures rounded.
Henkel Annual Report 2016 Notes to the consolidated financial statements 171
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
34 Share-based payment plans
Global Long Term Incentive Plan (Global LTI Plan) 2013
In fiscal 2013, the general terms and conditions of the previously implemented Global CPU Plan 2004 were amended and
replaced by the Global LTI Plan 2013, which is a share-based
remuneration scheme with cash settlement. Since 2013, Cash
Performance Units (CPUs) are granted on condition that the
member of the Plan is employed for four years by Henkel AG &
Co. KGaA or one of its subsidiaries in a position senior enough
to qualify to participate and that he or she is not under notice
during that period. This minimum period of employment pertains to the calendar year in which the CPUs are granted and
the three subsequent calendar years. In addition, an Outperformance Reward, which awards CPUs based on the achievement of target figures established in advance, may be set at the
beginning of a four-year medium-term plan.
The total value of the cash remuneration payable to senior
management personnel is recalculated on each reporting
date and on the settlement date, based on the fair value of the
CPUs, and recognized through an appropriate increase in
provisions as a payroll cost that is spread over the period of
service of the beneficiary. All changes to the measurement
of this provision are reported under payroll cost.
Due to the extension of the cycle, one tranche with a threeyear term and another with a four-year term were issued in
2013. The number of CPUs granted depends not only on the
seniority of the officer but also on the achievement of set target figures. For the cycles issued from 2013 onward, the target
is based on growth in adjusted earnings per preferred share.
The value of a CPU in each case is the average price of the
Henkel preferred share as quoted 20 stock exchange trading
days after the Annual General Meeting following the performance period. As of the reporting date, the calculation of the
provision was based on a fair value of 113.25 euros (closing
price of Henkel preferred shares on December 30, 2016; on
December 30, 2015: 103.20 euros) per CPU. The overall payout
of the long-term incentive is subject to a cap.
The tenth three-year cycle, which was issued in 2013, became
due for payment in 2016. At December 31, 2016, the CPU Plan
worldwide comprised 505,750 CPUs (December 31, 2015:
537,431 CPUs) from the four-year tranche issued in 2013,
516,200 CPUs (December 31, 2015: 542,998 CPUs) from the
tranche issued in 2014, 576,746 CPUs (December 31, 2015:
673,099 CPUs) from the tranche issued in 2015, and
560,687 CPUs from the tranche issued in the reporting year.
The Outperformance Reward comprised 361,375 CPUs (December 31, 2015: 511,098 CPUs). This resulted in an additional
expense in the reporting year of 61.8 million euros (December 31, 2015: 101.8 million euros). The corresponding provision
amounted to 189.5 million euros (December 31, 2015: 178.9 million euros), of which 97.6 million euros (December 31, 2015:
52.3 million euros) is vested.
35 Group segment report
The format for reporting the activities of the Henkel Group by
segment is by business unit and reportable segments; selected
regional information is also provided. The segment report corresponds to the way in which the Group manages its operating
business, and the Group’s reporting structure.
The assignment of operating segments to individual reportable segments is based on the economic characteristics of the
business, the nature of products and production processes,
the type of customer groups, and the characteristics of the
sales and distribution structure and of the regulatory
environment.
Reportable segments
Adhesives for Consumers, Craftsmen and Building
In the Adhesives for Consumers, Craftsmen and Building operating segment, we market a comprehensive range of brandname products for private users, craftsmen and the construction industry. Based on our four international brand platforms,
namely Loctite, Pritt, Pattex and Ceresit, we offer target-groupaligned system solutions for applications in the household,
in schools and in offices, for do-it-yourselfers and craftsmen,
and also for the building industry.
Industrial Adhesives
The Industrial Adhesives reportable segment covers four operating segments: Packaging and Consumer Goods Adhesives,
Transport and Metal, General Industry, and Electronics.
The Packaging and Consumer Goods Adhesives operating
segment serves major international customers as well as
medium- and small-sized manufacturers of the consumer
goods and furniture industries. Our economies of scale allow
us to offer attractive solutions for standard and volume
applications.
The Transport and Metal operating segment serves major
international customers in the automotive and metal-processing industries, offering tailor-made system solutions and specialized technical services that cover the entire value chain –
from steel strip coating to final vehicle assembly.
In the General Industry operating segment, our customers
comprise manufacturers from a multitude of industries, ranging from household appliance producers to the wind power
industry. Our portfolio here encompasses Loctite products for
industrial maintenance, repair and overhaul, a wide range of
172 Notes to the consolidated financial statements Henkel Annual Report 2016
sealants and system solutions for surface treatment applications, and specialty adhesives.
Our Electronics operating segment offers customers from the
worldwide electronics industry a broad spectrum of innovative high-technology adhesives and soldering materials for the
manufacture of microchips and electronic assemblies.
Beauty Care
The Beauty Care reportable segment covers our globally active
Branded Consumer Goods operating segment with Hair Care,
Hair Colorants, Hair Styling, Body Care, Skin Care and Oral
Care, as well as the professional Hair Salon operating segment.
Laundry & Home Care
This reportable segment covers the global activities of Henkel in
laundry and home care branded consumer goods. The Laundry
Care operating segment includes not only heavy-duty and specialty detergents but also fabric softeners, laundry performance
enhancers, and other fabric care products. Our Home Care operating segment encompasses hand and automatic dishwashing
products, cleaners for bathroom and WC applications, and
household, glass and specialty cleaners. We also offer air fresheners and insect control products for household applications in
selected regions.
Principles of Group segment reporting
In determining the segment results, assets and liabilities, we
apply essentially the same principles of recognition and measurement as in the consolidated financial statements. We have
valued net operating assets in foreign currencies at average
exchange rates.
The Group measures the performance of its segments on the
basis of a segment income variable referred to by Internal Control and Reporting as “adjusted EBIT.” For this purpose, operating
profit (EBIT) is adjusted for one-time charges and gains and also
restructuring expenses.
Of the restructuring expenses, 61 million euros (previous year:
77 million euros) is attributable to Adhesive Technologies,
94 million euros (previous year: 43 million euros) to Beauty Care
and 119 million euros (previous year: 66 million euros) to
Laundry & Home Care.
For reconciliation with the figures for the Henkel Group, Group
overheads are reported under Corporate together with income
and expenses that cannot be allocated to the individual business
units.
Proceeds transferred between the segments only exist to a
negligible extent and are therefore not separately disclosed.
Operating assets, provisions and liabilities are assigned to the
segments in accordance with their usage or origin. Where usage
or origin is attributable to several segments, allocation is effected
on the basis of appropriate ratios and keys.
For regional and geographic analysis purposes, we allocate sales
to countries on the basis of the country-of-origin principle, and
non-current assets in accordance with the domicile of the international company to which they pertain.
Henkel Annual Report 2016 Notes to the consolidated financial statements 173
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Reconciliation between net operating assets /
capital employed and financial statement figures 164
| in million euros Goodwill at book value |
Net operating assets | Financial statement figures |
Net operating assets Annual average 1 2016 December 31, 2016 |
Financial statement figures |
||
| Annual average1 2015 |
December 31, 2015 |
December 31, 2015 |
December 31, 2016 |
|||
| 8,605 | 8,850 | 8,850 | 9,742 | 11,626 | 11,626 | |
| Other intangible assets and property, plant and equipment (including assets held for sale) |
5,266 | 5,503 | 5,503 | 5,833 | 6,899 | 6,899 |
| Deferred taxes | – | – | 816 | – | – | 1,017 |
| Inventories | 1,836 | 1,721 | 1,721 | 1,818 | 1,938 | 1,938 |
| Trade accounts receivable from third parties | 3,171 | 2,944 | 2,944 | 3,326 | 3,349 | 3,349 |
| Intra-group accounts receivable | 1,018 | 1,246 | – | 1,291 | 1,311 | – |
| Other assets and tax refund claims 2 | 505 | 440 | 1,313 | 530 | 617 | 1,699 |
| Cash and cash equivalents | 1,176 | 1,389 | ||||
| Operating assets/Total assets | 20,401 | 20,704 | 22,323 | 22,540 | 25,740 | 27,917 |
| Operating liabilities | 6,435 | 6,716 | – | 7,104 | 7,815 | – |
| of which: Trade accounts payable to third parties |
3,242 | 3,176 | 3,176 | 3,382 | 3,665 | 3,665 |
| Intra-group accounts payable |
1,018 | 1,246 | – | 1,291 | 1,311 | – |
| Other provisions and other liabilities 2 (financial and non-financial) |
2,175 | 2,294 | 2,437 | 2,431 | 2,839 | 3,011 |
| Net operating assets | 13,965 | 13,988 | – | 15,436 | 17,925 | – |
| – Goodwill at book value | 8,605 | – | – | 9,742 | – | – |
| + Goodwill at cost 3 | 9,151 | – | – | 10,201 | – | – |
| Capital employed | 14,511 | – | – | 15,895 | – | – |
1 The annual average is calculated on the basis of the 12 monthly figures.
2 We take only amounts relating to operating activities into account in calculating net operating assets.
3 Before deduction of accumulated impairment pursuant to IFRS 3.79 (b).
174 Notes to the consolidated financial statements Henkel Annual Report 2016
36 Earnings per share
Earnings per share 165
| 2015 | 2016 | in million euros (rounded) | ||
| Reported | Adjusted | Reported | Adjusted | |
| Net income attributable to shareholders of Henkel AG & Co. KGaA | 1,921 | 2,112 | 2,053 | 2,323 |
| Dividends, ordinary shares | 377 | 377 | 416 | 416 |
| Dividends, preferred shares | 256 | 256 | 283 | 283 |
| Total dividends | 633 | 633 | 699 | 699 |
| Retained earnings, ordinary shares | 771 | 885 | 810 | 972 |
| Retained earnings, preferred shares | 517 | 594 | 544 | 652 |
| Retained earnings | 1,288 | 1,479 | 1,354 | 1,624 |
| Number of ordinary shares | 259,795,875 | 259,795,875 | 259,795,875 | 259,795,875 |
| Dividend per ordinary share in euros | 1.45 | 1.45 | 1.603 | 1.603 |
| Of which preliminary dividend per ordinary share in euros 1 | 0.02 | 0.02 | 0.02 | 0.02 |
| Retained earnings per ordinary share in euros | 2.97 | 3.41 | 3.12 | 3.74 |
| EPS per ordinary share in euros | 4.42 | 4.86 | 4.72 | 5.34 |
| Number of outstanding preferred shares 2 | 174,482,312 | 174,482,312 | 174,482,323 | 174,482,323 |
| Dividend per preferred share in euros | 1.47 | 1.47 | 1.623 | 1.623 |
| Of which preferred dividend per preferred share in euros 1 | 0.04 | 0.04 | 0.04 | 0.04 |
| Retained earnings per preferred share in euros | 2.97 | 3.41 | 3.12 | 3.74 |
| EPS per preferred share in euros | 4.44 | 4.88 | 4.74 | 5.36 |
| Number of ordinary shares | 259,795,875 | 259,795,875 | 259,795,875 | 259,795,875 |
| Dividend per ordinary share in euros | 1.45 | 1.45 | 1.603 | 1.603 |
| Of which preliminary dividend per ordinary share in euros 1 | 0.02 | 0.02 | 0.02 | 0.02 |
| Retained earnings per ordinary share in euros (after dilution) | 2.97 | 3.41 | 3.12 | 3.74 |
| Diluted EPS per ordinary share in euros | 4.42 | 4.86 | 4.72 | 5.34 |
| Number of potentially outstanding preferred shares 2 | 174,482,312 | 174,482,312 | 174,482,323 | 174,482,323 |
| Dividend per preferred share in euros | 1.47 | 1.47 | 1.623 | 1.623 |
| Of which preferred dividend per preferred share in euros 1 | 0.04 | 0.04 | 0.04 | 0.04 |
| Retained earnings per preferred share in euros (after dilution) | 2.97 | 3.41 | 3.12 | 3.74 |
| Diluted EPS per preferred share in euros | 4.44 | 4.88 | 4.74 | 5.36 |
1 See combined management report, Corporate governance, Capital stock denominations/Shareholder rights/Amendments to the Articles of Association
on pages 30 and 31.
2 Weighted annual average of preferred shares.
3 Proposal to shareholders for the Annual General Meeting on April 6, 2017.
Henkel Annual Report 2016 Notes to the consolidated financial statements 175
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
37 Consolidated statement of cash flows
We prepare the consolidated statement of cash flows in accordance with International Accounting Standard (IAS) 7 “Statement of Cash Flows.” It describes the flow of cash and cash
equivalents by origin and usage of liquid funds, distinguishing
between changes in funds arising from operating activities,
investing activities, and financing activities. Financial funds
include cash on hand, checks and credit at banks, and other
financial assets with a remaining term of not more than three
months. Securities are therefore included in financial funds,
provided that they are available at short term and are only
exposed to an insignificant price change risk. The computation is adjusted for effects arising from currency translation.
In some countries, there are administrative hurdles to the
transfer of money to the parent company.
Cash flows from operating activities are determined by initially adjusting operating profit for non-cash variables such as
amortization/depreciation/impairment/write-ups on intangible assets and property, plant and equipment – supplemented
by changes in provisions, changes in other assets and liabilities, and also changes in net working capital. We disclose payments made for income taxes under operating cash flow.
Cash flows from investing activities occur essentially as a
result of outflows of funds for investments in intangible assets
and property, plant and equipment, subsidiaries and other
business units, as well as investments accounted for using the
equity method, and joint ventures. Here, we also recognize
inflows of funds from the sale of intangible assets and property, plant and equipment, subsidiaries and other business
units. In the reporting period, cash flows from investing activities mainly involved outflows for the acquisition of subsidiaries and other business units in the amount of –3,727 million
euros (previous year: –322 million euros), as well as outflows
for investments in intangible assets, and property, plant and
equipment, including payments on account, in the amount of
–557 million euros (previous year: –625 million euros). Outflows for the acquisition of subsidiaries and other business
units relate to the acquisitions as described in the section
“Acquisitions and divestments” on pages 123 to 126.
In cash flow from financing activities, we recognize interest
and dividends paid and received, the change in borrowings
and in pension provisions, and also payments made for the
acquisition of non-controlling interests and other financing
transactions. In fiscal 2016, the change in borrowings was
influenced by the acquisition-related issuance of four fixedrate bonds with a total volume of 2.2 billion euros, a floatingrate syndicated bank loan of 1.1 billion US dollars that was
taken out, and outflows from the repayment of commercial
paper.
Free cash flow shows how much cash is actually available for
acquisitions and dividends, reducing debt and/or contributions to pension funds.
38 Contingent liabilities
Analysis 166
| in million euros | December 31, 2015 |
December 31, 2016 |
| Liabilities under guarantee and warranty agreements |
12 | 5 |
39 Lease and other unrecognized financial
commitments
Operating leases as defined in IAS 17 comprise all forms of
rights of use of assets, including rights of use arising from rent
and leasehold agreements. Payment commitments under
operating lease agreements are shown at the total amounts
payable up to the earliest date of termination. The amounts
shown are the nominal values. At December 31, 2016, they
were due for payment as follows:
Operating lease commitments 167
| in million euros | December 31, 2015 |
December 31, 2016 |
| Due in the following year | 72 | 162 |
| Due within 1 to 5 years | 139 | 98 |
| Due after 5 years | 17 | 144 |
| Total | 228 | 404 |
Within the Group, we primarily lease office space and equipment, automobiles, and IT equipment. Some of these contracts
contain extension options and price adjustment clauses. In the
course of fiscal 2016, 75 million euros became due for payment
under operating leases (previous year: 66 million euros).
Finance lease commitments 168
| in million euros At Dec. 31, 2016 |
Future payments relating to finance lease commitments |
Interest portion |
Present value of future lease installments |
| Due in the following year | 2 | 0 | 2 |
| Due within 1 to 5 years | 10 | 2 | 9 |
| Due after 5 years | 7 | 1 | 6 |
| Total | 19 | 3 | 17 |
176 Notes to the consolidated financial statements Henkel Annual Report 2016
At December 31, 2015, the company had no finance lease
commitments.
As of the end of 2016, commitments arising from orders for
property, plant and equipment amounted to 68 million euros
(previous year: 65 million euros).
As of the reporting date, payment commitments under
the terms of agreements for capital increases and share purchases contracted prior to December 31, 2016 amounted
to 4 million euros (previous year: 0 million euros).
40 Voting rights / Related party disclosures
Related parties as defined by IAS 24 “Related Party Disclosures”
are legal entities or natural persons who may be able to exert
influence on Henkel AG & Co. KGaA and its subsidiaries, or be
subject to control or material influence by Henkel AG & Co.
KGaA or its subsidiaries. These mainly include all members of
the Henkel family share-pooling agreement, the non-consolidated affiliated companies in which Henkel holds shares, the
associated companies, and the members of the corporate bodies of Henkel AG & Co. KGaA, whose remuneration is explained
in the remuneration report in the combined management
report (pages 39 to 51). Related parties as defined in IAS 24 also
include Henkel Trust e.V. and Metzler Trust e.V.
Information required by Section 160 (1) no. 8 of the German
Stock Corporation Act [AktG]:
Henkel AG & Co. KGaA, Düsseldorf, has been notified that on
December 17, 2015 the proportion of voting rights held by the
members of the Henkel family share-pooling agreement represented in total a share of 61.02 percent of the voting rights
(158,535,741 votes) in Henkel AG & Co. KGaA (International Securities Identification Number [ISIN]: DE0006048408), held by
• 131 members of the families of the descendents of Fritz
Henkel, the company’s founder,
• four foundations set up by members of those families,
• three trusts set up by members of those families,
• two private limited companies (GmbH) set up by members
of those families, 13 limited partnerships with a limited
company as general partner (GmbH & Co. KG), and one
limited partnership (KG),
under the terms of a share-pooling agreement per Section
22 (2) of the German Securities Trading Act [WpHG], whereby
the shares held by the two private limited companies, by the
13 limited partnerships with a limited company as general
partner, and by the one limited partnership, representing a
percentage of 16.97 percent of the voting rights (44,081,965
votes), are attributed (per Section 22 (1) no. 1 WpHG) to the
family members who control those companies.
No party to the share-pooling agreement is obliged to notify
that it has reached or exceeded 3 percent or more of the total
voting rights in Henkel AG & Co. KGaA, even after adding
voting rights expressly granted under the terms of usufruct
agreements.
Dr. Simone Bagel-Trah, Germany, is the authorized representative of the parties to the Henkel family share-pooling agreement. (Latest notification November 5, 2014.)
Financial receivables from and payables to other investments
in the form of non-consolidated affiliated entities and associated entities are disclosed in Notes 3 and 18.
Henkel Trust e.V. and Metzler Trust e.V., as parties to relevant
contractual trust arrangements (CTA), hold the assets required
to cover the pension obligations in Germany. The claim on
Henkel Trust e.V. for reimbursement of pension payments
made is shown under other financial assets (Note 3 on page
137). The receivable does not bear interest.
41 Exercise of exemption options
As was also the case in 2015, the following German companies
included in the consolidated financial statements of Henkel
AG & Co. KGaA exercised exemption options in fiscal 2016:
• Schwarzkopf Henkel Production Europe GmbH & Co. KG,
Düsseldorf (Section 264b German Commercial Code [HGB])
• Henkel Loctite-KID GmbH, Hagen (Section 264 (3) HGB)
• Henkel IP Management and IC Services GmbH, Monheim
(Section 264 (3) HGB)
• The Bergquist Company GmbH, Halstenbek
(Section 264 (3) HGB)
The Dutch company Henkel Nederland B.V., Nieuwegein,
exercised the exemption option afforded in Article 2:403 of the
Civil Code of the Netherlands.
Henkel Annual Report 2016 Notes to the consolidated financial statements 177
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
45 Auditor’s fees and services
The total fees charged to the Group for services provided by
the auditor KPMG AG Wirtschaftsprüfungsgesellschaft and
other companies of the worldwide KPMG network in fiscal
2015 and 2016 were as follows:
Type of fee 169
| in million euros | 2015 | of which Germany |
2016 | of which Germany |
| Audits | 8.4 | 1.8 | 9.6 1.6 1.2 0.2 12.6 |
2.3 0.6 0.2 0.1 3.2 |
| Other audit-related services Tax advisory services Other services Total |
1.7 | 0.6 | ||
| 0.8 | 0.1 | |||
| 1.1 | 1.0 | |||
| 12.0 | 3.5 |
The item “Audits” includes fees and disbursements with
respect to the audit of the Group accounts and the legally prescribed financial statements of Henkel AG & Co. KGaA and its
affiliated companies. The fees for “Other audit-related services”
relate primarily to the quarterly reviews. The item “Tax advisory
services” includes fees for advice and support on tax issues
and the performance of tax compliance services on behalf of
affiliated companies outside Germany. “Other services” comprise
fees predominantly for project-related consultancy services.
42 Remuneration of the corporate
management bodies
The total remuneration of the members of the Supervisory Board
and of the Shareholders’ Committee of Henkel AG & Co. KGaA
amounted to 1,572,896 euros plus value-added tax (previous
year: 1,546,000 euros) and 2,350,000 euros (previous year:
2,350,000 euros), respectively. The total remuneration (Section
285 no. 9a and Section 314 (1) no. 6a HGB) of the Management
Board and members of the Management Board of Henkel
Management AG amounted to 26,503,197 euros (previous year:
25,804,019 euros).
For pension obligations to former members of the Management Board and the management of Henkel KGaA, as well as
the former management of its legal predecessor and surviving
dependents, 100,771,135 euros (previous year: 98,729,434 euros)
is deferred. The total remuneration for this group of persons
(Section 285 no. 9b and Section 314 (1) no. 6b HGB) in the
reporting year amounted to 7,127,205 euros (previous year:
7,163,382 euros). For further details regarding the compensation of the corporate management bodies, please refer to the
audited remuneration report on pages 39 to 51.
43 Declaration of compliance with the Corporate
Governance Code [DCGK]
In February 2016, the Management Board of Henkel Management AG and the Supervisory Board and Shareholders’ Committee of Henkel AG & Co. KGaA approved a joint declaration
of compliance with the recommendations of the German Corporate Governance Code [DCGK] in accordance with Section
161 of the German Stock Corporation Act [AktG]. The declaration has been made permanently available to shareholders on
the company website: www.henkel.com/ir
44 Subsidiaries and other investments
Details relating to the investments held by Henkel AG & Co.
KGaA and the Henkel Group, which are part of these financial
statements, are provided in a separate schedule appended to
these notes to the consolidated financial statements but not
included in the printed form of the Annual Report. Said
schedule is included in the accounting record submitted for
publication in the electronic Federal Gazette and can be
viewed there and at the Annual General Meeting. The schedule
is also published on our website: www.henkel.com/reports
178 Notes to the consolidated financial statements Henkel Annual Report 2016
Subsequent events
After December 31, 2016, there were no reportable events of
particular significance for the net assets, financial position
and results of operations of the Henkel Group.
Düsseldorf, January 30, 2017
Henkel Management AG,
Personally Liable Partner
of Henkel AG & Co. KGaA
Management Board
Hans Van Bylen,
Jan-Dirk Auris, Pascal Houdayer, Carsten Knobel,
Kathrin Menges, Bruno Piacenza
Henkel Annual Report 2016 Notes to the consolidated financial statements 179
116 Consolidated statement of
financial position
118 Consolidated statement of
income
118 Consolidated statement of
comprehensive income
119 Consolidated statement
of changes in equity
120 Consolidated statement
of cash flows
121 Group segment report
by business unit
122 Key financials by region
123 Accounting principles and
methods applied in preparation
of the consolidated financial
statements
131 Notes to the consolidated
statement of financial position
166 Notes to the consolidated
statement of income
171 Other disclosures
179 Subsequent events
Independent Auditor’s Report
To Henkel AG & Co. KGaA, Düsseldorf
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Henkel AG & Co. KGaA, Düsseldorf, and its subsidiaries, which comprise the consolidated statement of financial
position, the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated
statement of changes in equity, the consolidated statement of
cash flows, and notes to the consolidated financial statements
for the business year from January 1 to December 31, 2016.
Responsibility of the Personally Liable Partner
of the Company for the Consolidated Financial Statements
The personally liable partner of Henkel AG & Co. KGaA is
responsible for the preparation of these consolidated financial
statements. This responsibility includes preparing these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and
the supplementary requirements of German law pursuant to
§ [Article] 315a Abs. [paragraph] 1 HGB [Handelsgesetzbuch:
German Commercial Code], to give a true and fair view of the
net assets, financial position and results of operations of the
Group in accordance with these requirements. The personally
liable partner of the company is also responsible for the internal controls that management determines are necessary to
enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with § 317 HGB and German generally
accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of
Public Auditors in Germany] (IDW). Accordingly, we are
required to comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing audit procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial statements. The selection of audit procedures
depends on the auditor’s professional judgment. This includes
the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or
error. In assessing those risks, the auditor considers the internal control system relevant to the entity’s preparation of the
consolidated financial statements that give a true and fair
view. The aim of this is to plan and perform audit procedures
that are appropriate in the given circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Group’s internal control system. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the company’s personally liable partner, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
Pursuant to § 322 Abs. 3 Satz 1 HGB, we state that our audit
of the consolidated financial statements has not led to any
reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply in all material respects with
IFRSs as adopted by the EU and the supplementary requirements of German commercial law pursuant to § 315a Abs. 1 HGB
and give a true and fair view of the net assets and financial
position of the Henkel Group as at December 31, 2016, as well
as the results of operations for the business year then ended,
in accordance with these requirements.
Report on the Combined Management Report
We have audited the accompanying Group management report
of Henkel AG & Co. KGaA, which is combined with the management report of the company, for the business year from
January 1 to December 31, 2016. The personally liable partner
of Henkel AG & Co. KGaA is responsible for the preparation of
the combined management report in compliance with the
applicable requirements of German commercial law pursuant
to § [Article] 315a Abs. [paragraph] 1 HGB [Handelsgesetzbuch:
German Commercial Code]. We conducted our audit in accordance with § 317 Abs. 2 HGB and German generally accepted
standards for the audit of combined management reports promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Accordingly, we are required to
plan and perform the audit to obtain reasonable assurance
180 Notes to the consolidated financial statements Henkel Annual Report 2016
about whether the combined management report is consistent
with the consolidated financial statements and the audit findings, complies with the German statutory requirements, and
as a whole provides a suitable view of the Group’s position
and suitably presents the opportunities and risks of future
development.
Pursuant to § 322 Abs. 3 Satz 1 HGB, we state that our audit of
the combined management report has not led to any
reservations.
In our opinion, based on the findings of our audit of the consolidated financial statements and combined management
report, the combined management report is consistent with
the consolidated financial statements, complies with the
German statutory requirements, and as a whole provides a
suitable view of the Group’s position and suitably presents
the opportunities and risks of future development.
Düsseldorf, January 30, 2017
KPMG AG
Wirtschaftsprüfungsgesellschaft
Prof. Dr. Kai C. Andrejewski Simone Fischer
Wirtschaftsprüfer Wirtschaftsprüferin
(German Public Auditor) (German Public Auditor)
Henkel Annual Report 2016 181
Recommendation for the approval of the annual
financial statements and the appropriation of the
profit of Henkel AG & Co. KGaA
It is proposed that the annual financial statements of Henkel AG & Co. KGaA be approved
as presented and that the unappropriated profit of 1,027,893,701.02 euros for fiscal 2016
be applied as follows:
a) Payment of a dividend of 1.60 euros per ordinary share
| (259,795,875 shares) Payment of a dividend of 1.62 euros per preferred share (178,162,875 shares) |
= 415,673,400.00 euros | b) |
| = 288,623,857.50 euros |
c) Carried forward as retained earnings = 323,596,443.52 euros
1,027,893,701.02 euros
According to Section 71b German Stock Corporation Act [AktG], treasury shares do not
qualify for a dividend. The amount in unappropriated profit which relates to the shares
held by the corporation (treasury shares) at the date of the Annual General Meeting will
be carried forward as retained earnings. As the number of such treasury shares can
change up to the time of the Annual General Meeting, a correspondingly adapted proposal
for the appropriation of profit will be submitted to it, providing for an unchanged payout
of 1.60 euros per ordinary share qualifying for a dividend and 1.62 euros per preferred
share qualifying for a dividend, with corresponding adjustment of the payout totals and
of retained earnings carried forward to the following year.
Düsseldorf, January 30, 2017
Henkel Management AG,
Personally Liable Partner
of Henkel AG & Co. KGaA
Management Board
182 Notes to the consolidated financial statements Henkel Annual Report 2016
Responsibility statement by the
Personally Liable Partner
To the best of our knowledge, and in accordance with the applicable accounting principles, the consolidated financial statements give a true and fair view of the net assets,
financial position and results of operations of the Group, and the management report of
the Group, which is combined with the management report of Henkel AG & Co. KGaA,
includes a fair review of the development, performance and results of the business and
the position of the Group, together with a cogent description of the principal opportunities and risks associated with the expected development of the Group.
Düsseldorf, January 30, 2017
Henkel Management AG
Management Board
Hans Van Bylen,
Jan-Dirk Auris, Pascal Houdayer, Carsten Knobel,
Kathrin Menges, Bruno Piacenza
Henkel Annual Report 2016 183
Dr. rer. nat. Simone Bagel-Trah
Chair,
Private Investor, Düsseldorf
Born in 1969
Member since: April 14, 2008
Memberships:
Henkel Management AG (Chair) 1
Henkel AG & Co. KGaA (Shareholders’
Committee, Chair) 2
Bayer AG 1
Heraeus Holding GmbH 1
Winfried Zander *
Vice Chair,
Chairman of the General Works Council of
Henkel AG & Co. KGaA and Chairman of the
Works Council of Henkel AG & Co. KGaA,
Düsseldorf site
Born in 1954
Member since: May 17, 1993
Jutta Bernicke *
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1962
Member since: April 14, 2008
Dr. rer. nat. Kaspar von Braun
Astrophysicist, Pasadena
Born in 1971
Member since: April 19, 2010
Supervisory Board of Henkel AG & Co. KGaA
Boris Canessa
(until April 11, 2016)
Private Investor, Düsseldorf
Born in 1963
Member from: April 16, 2012
Johann-Christoph Frey
(since April 11, 2016)
Private Investor, Klosters
Born in 1955
Member since: April 11, 2016
Ferdinand Groos
(until April 11, 2016)
Managing Partner, Cryder Capital Partners LLP,
London
Born in 1965
Member from: April 16, 2012
Béatrice Guillaume-Grabisch
(until March 31, 2016)
Chairwoman of the Executive Board,
Nestlé Deutschland AG, Frankfurt am Main
Born in 1964
Member from: April 16, 2012
Peter Hausmann *
Member of the Executive Board of
IG Bergbau, Chemie, Energie and responsible
for Wages / Finance, Hannover
Born in 1954
Member since: April 15, 2013
Memberships:
Continental AG 1
Covestro Deutschland AG 1
Vivawest Wohnen GmbH (Vice Chair) 1
50 Hertz Transmission AG (Vice Chair) 1
Birgit Helten-Kindlein *
Member of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1964
Member since: April 14, 2008
Benedikt-Richard Freiherr von Herman
(since April 11, 2016)
Private Investor, Wain
Born in 1972
Member since: April 11, 2016
Timotheus Höttges
(since April 11, 2016)
Chairman of the Executive Board,
Deutsche Telekom AG, Bonn
Born in 1962
Member since: April 11, 2016
Memberships:
BT Group plc, Great Britain 2
FC Bayern München AG 1
Telekom Group:
Telekom Deutschland GmbH (Chair) 1
T-Mobile US, Inc. (Chair), USA 2
Prof. Dr. sc. nat. Michael Kaschke
Chairman of the Executive Board,
Carl Zeiss AG, Oberkochen
Born in 1957
Member since: April 14, 2008
Memberships:
Deutsche Telekom AG 1
Robert Bosch GmbH 1
Carl Zeiss Group:
Carl Zeiss Industrielle Messtechnik GmbH (Chair) 1
Carl Zeiss Meditec AG (Chair) 1
Carl Zeiss Microscopy GmbH (Chair) 1
Carl Zeiss SMT GmbH (Chair) 1
Carl Zeiss Australia Pty. Ltd. (Chair), Australia 2
Carl Zeiss Far East Co. Ltd. (Chair), China/Hong Kong2
Carl Zeiss Inc. (Chair), USA 2
Carl Zeiss India (Bangalore) Private Ltd., India 2
Carl Zeiss Pte. Ltd. (Chair), Singapore 2
Carl Zeiss (Pty.) Ltd., South Africa 2
Corporate management bodies of Henkel AG & Co. KGaA
Boards / memberships as defined by Section 125 (1) sentence 5 of the German Stock Corporation Act [AktG] as at January 2017
Honorary Chairman of the Henkel Group: Dipl.-Ing. Albrecht Woeste
* Employee representatives.
1 Membership of statutory supervisory and administrative boards in Germany.
2 Membership of comparable oversight bodies.
184 Notes to the consolidated financial statements Henkel Annual Report 2016
Nominations Committee
Functions
The Nominations Committee prepares the resolutions of the Supervisory
Board on election proposals to be presented to the Annual General Meeting
for the election of members of the Supervisory Board (representatives of the
shareholders).
Members
Dr. Simone Bagel-Trah, Chair
Dr. Kaspar von Braun
Prof. Dr. Theo Siegert
Supervisory Board committees
Angelika Keller*
(since January 1, 2017)
Member of the General Works Council of
Henkel AG & Co. KGaA and
Chairwoman of the Works Council of
Henkel AG & Co. KGaA, Munich site
Born in 1965
Member since: January 1, 2017
Barbara Kux
Private Investor, Zurich
Born in 1954
Member since: July 3, 2013
Memberships:
Engie S.A., France 2
Firmenich S.A., Switzerland 2
Pargesa Holding S.A., Switzerland 2
Total S.A., France 2
Umicore N.V., Belgium 2
Mayc Nienhaus *
(until December 31, 2016)
Member of the General Works Council of
Henkel AG & Co. KGaA and
Chairman of the Works Council of
Henkel AG & Co. KGaA, Unna site
Born in 1961
Member from: January 1, 2010
Andrea Pichottka *
Managing Director, IG BCE Bonusagentur GmbH,
Hannover
Managing Director, IG BCE Bonusassekuranz GmbH,
Hannover
Born in 1959
Member since: October 26, 2004
Dr. rer. nat. Martina Seiler *
Chemist, Duisburg
Chairwoman of the General Senior Staff
Representative Committee and of the Senior Staff
Representative Committee of Henkel AG & Co. KGaA
Born in 1971
Member since: January 1, 2012
Prof. Dr. oec. publ. Theo Siegert
Managing Partner of
de Haen-Carstanjen & Söhne, Düsseldorf
Born in 1947
Member since: April 20, 2009
Memberships:
E.ON SE 1
Merck KGaA 1
DKSH Holding Ltd., Switzerland 2
E. Merck OHG 2
Edgar Topsch *
Member of the General Works Council of
Henkel AG & Co. KGaA and
Vice Chairman of the Works Council of
Henkel AG & Co. KGaA, Düsseldorf site
Born in 1960
Member since: August 1, 2010
Audit Committee
Functions
The Audit Committee prepares the proceedings and resolutions of the Supervisory Board relating to the approval of the annual financial statements and the
consolidated financial statements, and relating to ratification of the proposal to
be put before the Annual General Meeting regarding appointment of the auditor. It also deals with accounting, risk management and compliance issues.
Members
Prof. Dr. Theo Siegert, Chair
Prof. Dr. Michael Kaschke, Vice Chair
Dr. Simone Bagel-Trah
Peter Hausmann
Birgit Helten-Kindlein
Winfried Zander
Henkel Annual Report 2016 185
Dr. rer. nat. Simone Bagel-Trah
Chair,
Private Investor, Düsseldorf
Born in 1969
Member since: April 18, 2005
Memberships:
Henkel AG & Co. KGaA (Chair) 1
Henkel Management AG (Chair) 1
Bayer AG 1
Heraeus Holding GmbH 1
Dr. rer. pol. h.c. Christoph Henkel
Vice Chair,
Founding Partner, Canyon Equity LLC, London
Born in 1958
Member since: May 27, 1991
Prof. Dr. oec. HSG Paul Achleitner
Chairman of the Supervisory Board,
Deutsche Bank AG, Munich
Born in 1956
Member since: April 30, 2001
Memberships:
Bayer AG 1
Daimler AG 1
Deutsche Bank AG (Chair) 1
Boris Canessa
(since April 11, 2016)
Private Investor, Düsseldorf
Born in 1963
Member since: April 11, 2016
Finance Subcommittee
Functions
The Finance Subcommittee deals principally with financial matters, accounting
issues including the statutory year-end audit, taxation and accounting policy,
internal auditing, and risk management in the company.
Members
Dr. Christoph Henkel, Chair
Stefan Hamelmann, Vice Chair
Prof. Dr. Paul Achleitner
Prof. Dr. Ulrich Lehner
Dr. Dr. Norbert Reithofer
Shareholders’ Committee of Henkel AG & Co. KGaA
Subcommittees of the Shareholders’ Committee
Johann-Christoph Frey
(until April 11, 2016)
Private Investor, Klosters
Born in 1955
Member from: April 16, 2012
Stefan Hamelmann
Private Investor, Düsseldorf
Born in 1963
Member since: May 3, 1999
Prof. Dr. rer. pol. Ulrich Lehner
Former Chairman of the Management Board
of Henkel KGaA, Düsseldorf
Born in 1946
Member since: April 14, 2008
Memberships:
Deutsche Telekom AG (Chair) 1
E.ON SE 1
Porsche Automobil Holding SE 1
ThyssenKrupp AG (Chair) 1
Dr.-Ing. Dr.-Ing. E.h. Norbert Reithofer
Chairman of the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft,
Munich
Born in 1956
Member since: April 11, 2011
Memberships:
Bayerische Motoren Werke Aktiengesellschaft
(Chair) 1
Siemens AG 1
Konstantin von Unger
Managing Director, CKA Capital Limited, London
Born in 1966
Member since: April 14, 2003
Membership:
Henkel Management AG 1
Jean-François van Boxmeer
Chairman of the Executive Board
of Heineken N.V., Amsterdam
Born in 1961
Member since: April 15, 2013
Membership:
Mondelez International Inc., USA 2
Werner Wenning
Chairman of the Supervisory Board
of Bayer AG, Leverkusen
Born in 1946
Member since: April 14, 2008
Memberships:
Bayer AG (Chair) 1
Henkel Management AG 1
Siemens AG 1
Human Resources Subcommittee
Functions
The Human Resources Subcommittee deals principally with personnel matters
relating to members of the Management Board, issues pertaining to human
resources strategy, and with remuneration.
Members
Dr. Simone Bagel-Trah, Chair
Konstantin von Unger, Vice Chair
Boris Canessa (since April 11, 2016)
Johann-Christoph Frey (until April 11, 2016)
Jean-François van Boxmeer
Werner Wenning
1 Membership of statutory supervisory and administrative boards in Germany.
2 Membership of comparable oversight bodies.
186 Notes to the consolidated financial statements Henkel Annual Report 2016
Hans Van Bylen
Chairman of the Management Board
(since May 1, 2016)
Born in 1961
Member since: July 1, 2005 3
Kasper Rorsted
(until April 30, 2016)
Chairman of the Management Board
Born in 1962
Member since: April 1, 2005 3
Memberships:
Anheuser-Busch InBev SA, Belgium 2
Bertelsmann Management SE 1
Danfoss A/S, Denmark 2
Jan-Dirk Auris
Adhesive Technologies
Born in 1968
Member since: January 1, 2011
Membership:
Henkel Corporation (Chair), USA 2
Pascal Houdayer
(since March 1, 2016)
Beauty Care
Born in 1969
Member since: March 1, 2016
Membership:
The Dial Corporation (Chair), USA 2
Carsten Knobel
Finance / Purchasing / Integrated Business Solutions
Born in 1969
Member since: July 1, 2012
Memberships:
Henkel Central Eastern Europe GmbH (Chair),
Austria 2
Henkel (China) Investment Co. Ltd., China 2
Henkel & Cie AG, Switzerland 2
Henkel Consumer Goods Inc. (Chair), USA 2
Henkel Ltd., Great Britain 2
Henkel of America Inc. (Chair), USA 2
Kathrin Menges
Human Resources / Infrastructure Services
Born in 1964
Member since: October 1, 2011
Memberships:
Adidas AG 1
Henkel Central Eastern Europe GmbH, Austria 2
Henkel Nederland BV, Netherlands 2
Henkel Norden AB, Sweden 2
Henkel Norden Oy, Finland 2
Bruno Piacenza
Laundry & Home Care
Born in 1965
Member since: January 1, 2011
Membership:
GfK SE, Nuremberg 1
Management Board of Henkel Management AG *
Dr. rer. nat. Simone Bagel-Trah
Chair,
Private Investor, Düsseldorf
Born in 1969
Member since: February 15, 2008
Memberships:
Henkel AG & Co. KGaA (Chair) 1
Henkel AG & Co. KGaA (Shareholders’
Committee, Chair) 2
Bayer AG 1
Heraeus Holding GmbH 1
*Personally Liable Partner of Henkel AG & Co. KGaA.
1 Membership of statutory supervisory and administrative boards in Germany.
2 Membership of comparable oversight bodies.
3 Including membership of the Management Board of Henkel KGaA.
Konstantin von Unger
Vice Chair
Managing Director, CKA Capital Limited, London
Born in 1966
Member since: April 17, 2012
Membership:
Henkel AG & Co. KGaA (Shareholders’ Committee) 2
Werner Wenning
Chairman of the Supervisory Board
of Bayer AG, Leverkusen
Born in 1946
Member since: September 16, 2013
Memberships:
Bayer AG (Chair) 1
Siemens AG 1
Henkel AG & Co. KGaA (Shareholders’ Committee) 2
Supervisory Board of Henkel Management AG *
Henkel Annual Report 2016 187
Quarterly breakdown of key financials
170
| in million euros | 2015 2016 | 2015 2016 | 2015 2016 | 2015 2016 | 2015 2016 | |||||
| 1st quarter 2nd quarter | 3rd quarter | 4th quarter | Full year | |||||||
| Sales | ||||||||||
| Adhesive Technologies | 2,160 | 2,144 | 2,343 | 2,290 | 2,279 | 2,272 | 2,209 | 2,255 | 8,992 | 8,961 |
| Beauty Care | 940 | 950 | 1,006 | 988 | 964 | 968 | 922 | 932 | 3,833 | 3,838 |
| Laundry & Home Care | 1,298 | 1,333 | 1,314 | 1,345 | 1,314 | 1,479 | 1,211 | 1,638 | 5,137 | 5,795 |
| Corporate | 32 | 30 | 31 | 31 | 33 | 29 | 32 | 31 | 128 | 121 |
| Henkel Group | 4,430 | 4,456 | 4,695 | 4,654 | 4,590 | 4,748 | 4,374 | 4,856 | 18,089 | 18,714 |
| Cost of sales | – 2,264 | –2,293 | – 2,439 | – 2,373 | – 2,361 | –2,453 | – 2,304 | –2,623 | – 9,368 | –9,742 |
| Gross profit | 2,166 | 2,163 | 2,256 | 2,281 | 2,229 | 2,295 | 2,070 | 2,233 | 8,721 | 8,972 |
| Marketing, selling and distribution expenses |
– 1,166 | –1,092 | – 1,185 | –1,167 | – 1,158 | – 1,171 | – 1,099 | –1,205 | – 4,608 | –4,635 |
| Research and development expenses |
– 119 | –114 | – 122 | – 118 | – 120 | –116 | – 117 | –115 | – 478 | – 463 |
| Administrative expenses | – 245 | – 225 | – 241 | –240 | – 278 | – 232 | – 248 | – 365 | – 1,012 | –1,062 |
| Other operating expenses and income |
12 | –15 | 7 | 1 | – 7 | –1 | 10 | –22 | 22 | –37 |
| EBIT | ||||||||||
| Adhesive Technologies | 345 | 364 | 388 | 403 | 367 | 423 | 362 | 371 | 1,462 | 1,561 |
| Beauty Care | 133 | 143 | 158 | 162 | 142 | 155 | 128 | 67 | 561 | 526 |
| Laundry & Home Care | 192 | 236 | 198 | 218 | 211 | 228 | 186 | 121 | 786 | 803 |
| Corporate | – 22 | – 25 | – 29 | – 26 | – 54 | – 31 | – 58 | – 33 | – 164 | –115 |
| Henkel Group | 648 | 717 | 715 | 757 | 666 | 775 | 616 | 526 | 2,645 | 2,775 |
| Interest result | – 3 | 2 | – 3 | 2 | – 8 | –4 | – 3 | –5 | – 17 | –5 |
| Other financial result | – 6 | –9 | – 7 | – 2 | – 3 | –11 | – 8 | –4 | – 24 | – 26 |
| Investment result | – | – | – 1 | – 1 | – | – | – | – 1 | – 1 | – 2 |
| Financial result | – 9 | – 7 | –11 | – 1 | –11 | –15 | – 11 | –10 | – 42 | –33 |
| Income before tax | 639 | 710 | 704 | 756 | 655 | 760 | 605 | 516 | 2,603 | 2,742 |
| Taxes on income | – 157 | –172 | – 173 | –184 | –161 | –176 | – 144 | –117 | – 635 | –649 |
| Net income | 482 | 538 | 531 | 572 | 494 | 584 | 461 | 399 | 1,968 | 2,093 |
| Attributable to non-controlling interests |
12 | 13 | 10 | 11 | 10 | 8 | 15 | 8 | 47 | 40 |
| Attributable to shareholders of Henkel AG & Co. KGaA |
470 | 525 | 521 | 561 | 484 | 576 | 446 | 391 | 1,921 | 2,053 |
| Earnings per preferred share in euros |
1.09 | 1.21 | 1.20 | 1.30 | 1.12 | 1.33 | 1.03 | 0.90 | 4.44 | 4.74 |
| in million euros | 2015 2016 | 2015 2016 | 2015 2016 | 2015 2016 | 2015 2016 | |||||
| 1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Full year | ||||||
| EBIT (as reported) | 648 | 717 | 715 | 757 | 666 | 775 | 616 | 526 | 2,645 | 2,775 |
| One-time gains | – | – | – | – 1 | – | – | – 15 | – | – 15 | –1 |
| One-time charges | 5 | 7 | 24 | 22 | 34 | 27 | 37 | 65 | 100 | 121 |
| Restructuring expenses | 54 | 27 | 29 | 41 | 78 | 35 | 32 | 174 | 193 | 277 |
| Adjusted EBIT | 707 | 751 | 768 | 819 | 778 | 837 | 670 | 765 | 2,923 | 3,172 |
| Adjusted earnings per preferred share in euros |
1.18 | 1.27 | 1.29 | 1.40 | 1.30 | 1.42 | 1.11 | 1.27 | 4.88 | 5.36 |
The quarterly figures are specific to the quarter to which they refer and have been rounded for commercial convenience.
Calculated on the basis of units of 1,000 euros.
188 Further information Henkel Annual Report 2016
Multi-year summary
171
| in million euros 2010 |
2011 restated 1 |
2012 | 2013 | 2014 | 2015 | 2016 | |
| Results of operations | |||||||
| Sales | 15,092 | 15,605 | 16,510 | 16,355 | 16,428 | 18,089 | 18,714 |
| Adhesive Technologies | 7,306 | 7,746 | 8,256 | 8,117 | 8,127 | 8,992 | 8,961 |
| Beauty Care | 3,269 | 3,399 | 3,542 | 3,510 | 3,547 | 3,833 | 3,838 |
| Laundry & Home Care | 4,319 | 4,304 | 4,556 | 4,580 | 4,626 | 5,137 | 5,795 |
| Corporate | 199 | 156 | 155 | 148 | 128 | 128 | 121 |
| Gross margin | 46.5 | 45.3 | 46.8 | 47.7 | 47.0 | 48.2 | 47.9 |
| Research and development expenses | 391 | 410 | 408 | 415 | 413 | 478 | 463 |
| Operating profit (EBIT) | 1,723 | 1,765 | 2,199 | 2,285 | 2,244 | 2,645 | 2,775 |
| Adhesive Technologies | 878 | 1,002 | 1,191 | 1,271 | 1,345 | 1,462 | 1,561 |
| Beauty Care | 411 | 471 | 483 | 474 | 421 | 561 | 526 |
| Laundry & Home Care | 542 | 419 | 621 | 682 | 615 | 786 | 803 |
| Corporate | – 108 | – 127 | – 97 | – 141 | – 137 | – 164 | –115 |
| Income before tax | 1,552 | 1,610 | 2,018 | 2,172 | 2,195 | 2,645 | 2,742 |
| Tax rate in % | 26.4 | 26.0 | 24.4 | 25.2 | 24.3 | 24.4 | 23.7 |
| Net income | 1,143 | 1,191 | 1,526 | 1,625 | 1,662 | 1,968 | 2,093 |
| Attributable to shareholders of Henkel AG & Co. KGaA |
1,118 | 1,161 | 1,480 | 1,589 | 1,628 | 1,921 | 2,053 |
| Net return on sales 2 in % | 7.6 | 7.6 | 9.2 | 9.9 | 10.1 | 10.9 | 11.2 |
| Interest coverage ratio | 12.8 | 14.0 | 14.3 | 23.9 | 48.4 | 75.7 | 107.9 |
| Net assets | |||||||
| Total assets | 17,525 | 18,487 | 19,525 | 19,344 | 20,961 | 22,323 | 27,917 |
| Non-current assets | 11,590 | 11,848 | 11,927 | 11,360 | 14,150 | 15,406 | 19,704 |
| Current assets | 5,935 | 6,639 | 7,598 | 7,984 | 6,811 | 6,917 | 8,213 |
| Equity | 7,950 | 8,670 | 9,511 | 10,158 | 11,644 | 13,811 | 15,183 |
| Liabilities | 9,575 | 9,817 | 10,014 | 9,186 | 9,317 | 8,512 | 12,734 |
| Equity ratio in % | 45.4 | 46.9 | 48.7 | 52.5 | 55.6 | 61.9 | 54.4 |
| Return on equity 3 in % | 17.5 | 15.0 | 17.6 | 17.1 | 16.4 | 16.9 | 15.2 |
| Operating debt coverage ratio in % | 71.4 | 91.6 | >500 | not relevant 4 |
274.8 | 375.2 | 80.8 |
| Financial position | |||||||
| Cash flow from operating activities | 1,851 | 1,562 | 2,634 | 2,116 | 1,914 | 2,384 | 2,850 |
| Capital expenditures | 260 | 443 | 516 | 465 | 2,214 | 979 | 4,409 |
| Investment ratio as % of sales | 1.7 | 2.8 | 3.1 | 2.8 | 13.5 | 5.4 | 23.6 |
| Shares | |||||||
| Dividend per ordinary share in euros | 0.70 | 0.78 | 0.93 | 1.20 | 1.29 | 1.45 | 1.60 5 |
| Dividend per preferred share in euros | 0.72 | 0.80 | 0.95 | 1.22 | 1.31 | 1.47 | 1.62 5 |
| Total dividends | 310 | 345 | 411 | 529 | 569 | 639 | 7045 |
| Payout ratio in % | 25.5 | 25.5 | 25.6 | 30.0 | 30.0 | 30.2 | 30.35 |
| Share price, ordinary shares, at year-end in euros | 38.62 | 37.40 | 51.93 | 75.64 | 80.44 | 88.62 | 98.98 |
| Share price, preferred shares, at year-end in euros | 46.54 | 44.59 | 62.20 | 84.31 | 89.42 | 103.20 | 113.25 |
| Market capitalization at year-end in bn euros | 18.3 | 17.6 | 24.6 | 34.7 | 36.8 | 41.4 | 45.9 |
| Employees | |||||||
| Total 6 (at December 31) | 47,850 | 47,250 | 46,600 | 46,850 | 49,750 | 49,450 | 51,350 |
| Germany | 8,600 | 8,300 | 8,000 | 8,050 | 8,200 | 8,350 | 8,250 |
| Abroad | 39,250 | 38,950 | 38,600 | 38,800 | 41,550 | 41,100 | 43,100 |
1 Application of IAS 8 “Accounting policies, changes in accounting estimates and errors” (see notes on pages 116 and 117 of the 2012 Annual Report).
2 Net income divided by sales.
3 Net income divided by equity at the start of the year.
4 Figure not relevant due to the positive balance of net financial position and pension obligations.
5 Proposed.
6 Basis: permanent employees excluding apprentices.
Henkel Annual Report 2016 Further information 189
188 Quarterly breakdown of key
financials
189 Multi-year summary
190 Index of tables and graphs
192 Glossary
194 Credits
195 Contacts
Index of tables and graphs
The Company
Highlights 2016 (inside cover)
1 Key financials
2 Sales by business unit
3 Sales by region
4 Key financials Adhesive Technologies
5 Sales Adhesive Technologies
6 Key financials Beauty Care
7 Sales Beauty Care
8 Key financials Laundry & Home Care
9 Sales Laundry & Home Care
Combined management report
Remuneration report
10 Remuneration structure 40
11 Caps on remuneration 41
12 Remuneration of Management Board
members who served in 2016 43
13 Structure of Management Board
remuneration 44
14 Service cost /
Present value of pension benefits 45
15 Pursuant to DCGK, payments/
benefits granted for the reporting
year to members of the Management
Board serving in 2016 46
16 Pursuant to DCGK, payments/
benefits made for the reporting
year to members of the Management
Board serving in 2016 47
17 Supervisory Board remuneration 50
18 Shareholders’ Committee remuneration 51
Shares and bonds
19 Key data on Henkel shares
2012 to 2016 52
20 Performance of Henkel shares
versus market January through
December 2016 53
21 Performance of Henkel shares
versus market 2007 through 2016 53
22 Share data 54
23 ADR data 54
24 Shareholder structure: Institutional
investors holding Henkel shares 54
25 Bond data 55
26 Analyst recommendations 56
Operational activities
27 Henkel around the world:
Regional Centers 57
Strategy and financial targets 2016
28 Achievement of financial targets
2016 58
29 Acquisitions signed and closed
in fiscal 2016 58
Henkel 2020+ – our ambition and
strategic priorities
30 Financial ambition 2020 59
Sustainability strategy
31 Our focal areas and targets 61
Cost of capital
32 WACC before tax by business unit 62
33 WACC after tax by business unit 62
Economic report
Macroeconomic and industry-related
conditions
34 Average rates of exchange versus
the euro 63
Results of operations
35 Key financials by region 65
36 Sales development 65
37 Sales 65
38 Price and volume effects 65
39 Adjusted operating profit (EBIT) 66
40 Guidance versus performance 2016 67
41 Reconciliation from sales to adjusted
operating profit 68
42 Net income 68
43 Adjusted earnings per preferred
share 69
44 Preferred share dividend 69
Net assets and financial position
45 Financial structure 70
46 Capital expenditures 2016 71
47 Capital expenditures by business
unit 71
48 Net financial position 2012 to 2016 71
49 Net financial position 72
50 Credit ratings 73
51 Key financial ratios 73
Employees
52 Employees by region 74
53 Employees by organizational unit 74
54 Employees by activity 75
55 Employees by age group 75
56 Employees 75
57 Women in management 76
Procurement
58 Material expenditures by business unit 78
59 Material expenditures by type 78
Production
60 Number of production sites 79
61 Sustainability targets 2020 81
Research and development
62 R&D expenditures 81
63 R&D expenditures by business unit 81
64 Selected research and development
sites 82
65 Key R&D figures 82
Adhesive Technologies
66 Key financials 88
67 Sales development 88
68 Sales Adhesive Technologies 90
Beauty Care
69 Key financials 92
70 Sales development 92
71 Sales Beauty Care 94
Laundry & Home Care
72 Key financials 96
73 Sales development 96
74 Sales Laundry & Home Care 98
Henkel AG & Co. KGaA
(condensed version according to the
German Commercial Code [HGB])
75 Condensed income statement in
accordance with the German
Commercial Code [HGB] 101
76 Condensed balance sheet in
accordance with the German
Commercial Code [HGB] 102
Risks and opportunities report
77 Overview of major risk categories 106
78 Classification of risks in ascending
order 106
Consolidated financial statements
79 Consolidated statement of financial
position – Assets 116
80 Consolidated statement of financial
position – Equity and liabilities 117
81 Consolidated statement of income 118
82 Consolidated statement of
comprehensive income 118
83 Consolidated statement of
changes in equity 119
84 Consolidated statement of cash flows 120
85 Additional voluntary information
Reconciliation to free cash flow 120
190 Further information Henkel Annual Report 2016
Notes to the consolidated financial
statements
86 Group segment report by
business unit 121
87 Key financials by region 122
88 Scope of consolidation 123
Acquisitions and divestments
89 Acquisitions 125
90 Reconciliation of the purchase price
to provisional goodwill 126
Currency translation
91 Currencies 127
Recognition and measurement methods
92 Summary of selected measurement
methods 128
New international accounting regulations
according to International Financial
Reporting Standards (IFRSs)
93 Accounting methods applied for the
first time in the year under review 129
94 Accounting regulations not applied in
advance of their effective date 130
95 Accounting regulations not yet
adopted into EU law 130
Non-current assets
96 Useful life 131
Intangible assets
97 Cost 131
98 Accumulated depreciation /
impairment 132
99 Net book values 132
100 Book values – Goodwill 133
101 Book values – Trademarks and
other rights 134
Property, plant and equipment
102 Cost 135
103 Accumulated depreciation /
impairment 135
104 Net book values 136
105 Other financial assets 137
106 Other assets 137
Inventories
107 Analysis of inventories 138
Trade accounts receivable
108 Trade accounts receivable 138
109 Development of valuation
allowances on trade accounts
receivable 138
110 Assets and liabilities held for sale 139
111 Issued capital 139
Provisions for pensions and similar
obligations
112 Actuarial assumptions 142
113 Development of defined benefit
obligation at December 31, 2015 143
114 Development of plan assets at
December 31, 2015 143
115 Development of asset ceiling at
December 31, 2015 143
116 Development of the net obligation at
December 31, 2015 144
117 Development of defined benefit
obligation at December 31, 2016 144
118 Development of plan assets at
December 31, 2016 145
119 Development of asset ceiling at
December 31, 2016 145
120 Development of the net obligation at
December 31, 2016 145
121 Development of reimbursement rights 146
122 Analysis of plan assets 146
123 Plan assets by country 2016 147
124 Classification of bonds by rating 2016 147
Risks associated with pension obligations
125 Future payments for pension benefits 148
126 Sensitivities – Present value of pension
obligations at December 31, 2016 149
Income tax provisions and other provisions
127 Development in 2016 149
128 Analysis of sundry provisions
by function 150
Borrowings
129 Borrowings 151
130 Bonds 151
131 Other financial liabilities 152
132 Other liabilities 152
Financial instruments report
133 Financial instruments report 153
134 Carrying amounts and fair values
of financial instruments 155
135 Carrying amounts and fair values
of financial instruments 156
136 Net results of the measurement
categories and reconciliation to
financial result 157
137 Derivative financial instruments 158
138 Interest rates in percent p.a. 158
139 Gains and losses from fair value
hedges 159
140 Cash flow hedges (after tax) 159
141 Hedges of a net investment in a
foreign entity (after tax) 159
142 Maximum risk position 160
143 Age analysis of non-impaired
overdue loans and receivables 161
144 Financial assets and financial liabilities
from derivatives subject to netting,
collateral, or similar arrangements 161
145 Cash flows from financial liabilities
at December 31, 2015 162
146 Cash flows from financial liabilities
at December 31, 2016 162
147 Currency exposure 164
148 Interest rate exposure 164
149 Interest rate risk 165
150 Other operating income 167
151 Other operating expenses 167
Financial result
152 Financial result 167
153 Interest result 167
154 Other financial result 167
Taxes on income
155 Income before tax and analysis
| of taxes 156 Main components of tax expense and income |
168 |
| 168 |
157 Deferred tax expense by items on
the statement of financial position 168
158 Tax reconciliation statement 168
159 Allocation of deferred taxes 169
160 Expiry dates of unused tax losses
and tax credits 169
161 Reconciliation of adjusted net
income 171
Payroll cost and employee structure
162 Payroll cost 171
163 Number of employees per function 171
Group segment report
164 Reconciliation between net operating
assets / capital employed and financial
statement figures 174
165 Earnings per share 175
166 Contingent liabilities 176
Lease and other unrecognized financial
commitments
167 Operating lease commitments 176
168 Finance lease commitments 176
Auditor’s fees and services
169 Type of fee 178
Further information
170 Quarterly breakdown of key financials 188
171 Multi-year summary 189
Henkel Annual Report 2016 Further information 191
188 Quarterly breakdown of key
financials
189 Multi-year summary
190 Index of tables and graphs
192 Glossary
194 Credits
195 Contacts
Adjusted EBIT
Earnings Before Interest and Taxes (EBIT) adjusted
for exceptional items in the form of one-time charges,
one-time gains and restructuring expenses.
Capital employed
Capital invested in company assets and operations.
Equity + interest-bearing liabilities.
Compliance
Acting in conformity with applicable regulations;
adherence to laws, rules, regulations and in-house
or corporate codes of conduct.
Compound annual growth rate
Year-over-year rate of growth, e.g. of an investment.
Corporate governance
System of management and control, primarily within
listed companies. Describes the powers and authority
of corporate management, the extent to which these
need to be monitored and the extent to which structures
should be put in place through which certain interest /
stakeholder groups may exert influence on the corporate
management.
Corporate Governance Code
The German Corporate Governance Code (abbreviation:
DCGK) is intended to render the rules governing corporate management and control for a stock corporation
in Germany transparent for national and international
investors, engendering trust and confidence in the
corporate management of German companies.
Credit default swap
Instrument used by Henkel to evaluate the credit risks of
banks.
Credit facility
Aggregate of all loan services available on call from
one or several banks as cover for an immediate credit
requirement.
Declaration of conformity
Declaration made by the management/executive board
and supervisory board of a company according to
Section 161 of the German Stock Corporation Act [AktG],
confirming implementation of the recommendations
of the Governmental Commission for the German
Corporate Governance Code.
Defined contribution plans
Post-employment benefit plans under which an entity
pays fixed contributions into a separate entity (a fund)
and will have no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee
service in current and prior periods.
Derivative
Financial instrument, the value of which changes in
response to changes in an underlying asset or an index,
which will be settled at a future date and which initially
requires only a small or no investment.
Earnings per share (EPS)
Metric indicating the income of a joint stock corporation
divided between the weighted average number of its shares
outstanding. The calculation is performed in accordance
with International Accounting Standard (IAS) 33.
EBIT
Abbreviation for Earnings Before Interest and Taxes.
Standard profit metric that enables the earning power
of the operating business activities of a company to
be assessed independently of its financial structure,
facilitating comparability between entities where these
are financed by varying levels of debt capital.
EBITDA
Abbreviation for Earnings Before Interest, Taxes,
Depreciation and Amortization.
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.
Equity ratio
Financial metric indicating the ratio of equity to total
capital. It expresses the share of total assets financed out
of equity (owners’ capital) rather than debt capital (provided by lenders). Serves to assess the financial stability
and independence of a company.
Free cash flow
Cash flow actually available for acquisitions, dividend
payments, the reduction of borrowings, and contributions to pension funds.
Gross margin
Indicates the percentage by which a company’s sales
exceed cost of sales, i.e. the ratio of gross profit to sales.
Gross profit
Difference between sales and cost of sales.
Hedge accounting
Method for accounting for hedging transactions whereby
the compensatory effect of changes in the fair value of
the hedging instrument (derivative) and of the underlying
asset or liability is recognized in either the statement of
income or the statement of comprehensive income.
Glossary
192 Further information Henkel Annual Report 2016
KGaA
Abbreviation for “Kommanditgesellschaft auf Aktien.”
A KGaA is a company with a legal identity (legal entity)
in which at least one partner has unlimited liability with
respect to the company’s creditors (personally liable
partner), while the liability for such debts of the other
partners participating in the share-based capital stock
is limited to their share capital (limited shareholders).
Long-term incentive (LTI)
Bonus aligned to long-term financial performance.
Net financial position
Net financial position is defined as cash and cash equivalents plus readily monetizable financial instruments
classified as “available for sale” or in the “fair value
option,” less borrowings, and plus positive and less negative fair values of hedging transactions.
Net working capital
Inventories plus payments on account, receivables from
suppliers and trade accounts receivable, less trade
accounts payable, liabilities to customers, and current
sales provisions.
Non-controlling interests
Proportion of equity attributable to third parties in subsidiaries included within the scope of consolidation.
Previously termed “minority interests.” Valued on a proportional net asset basis. A pro-rata portion of the net
income of a corporation is due to shareholders owning
non-controlling interests.
Operational excellence
A comprehensive program to structure and optimize all
Henkel’s business processes based on customer needs,
quality and efficiency.
Organic sales growth
Growth in revenues after adjusting for effects arising
from acquisitions, divestments and foreign exchange
differences – i.e. “top line” growth generated from within.
Payout ratio
Indicates what percentage of annual net income (adjusted for exceptional items) is paid out in dividends to
shareholders, including non-controlling interests.
Return-enhancing portfolio
Contains investments in equities and alternative investments, and serves to improve the overall return of the
pension plan assets over the long term in order to raise
the coverage ratio of pension funds. In addition, a
broader investment horizon increases the level of
investment diversification.
Return on capital employed (ROCE)
Profitability metric reflecting the ratio of earnings before
interest and taxes (EBIT) to capital employed.
Return on sales (EBIT)
Operating business metric derived from the ratio of EBIT
to revenues. Also known as EBIT margin.
Swap
Term given to the exchange of capital amounts in differing currencies (currency swap) or of different interest
obligations (interest swap) between two entities.
Value-at-risk
Method, based on fair value, used to calculate the maximum likely or potential future loss arising from a portfolio.
Weighted average cost of capital (WACC)
Average return on capital, expressed as a percentage and
calculated on the basis of a weighted average of the cost
of debt and equity. WACC represents the minimum return
expected of a company by its lenders for financing its
assets.
Henkel Annual Report 2016 Further information 193
188 Quarterly breakdown of key
financials
189 Multi-year summary
190 Index of tables and graphs
192 Glossary
194 Credits
195 Contacts
Published by
Henkel AG & Co. KGaA
40191 Düsseldorf, Germany
Phone: +49 (0) 211-797-0
© 2017 Henkel AG & Co. KGaA
Edited by: Corporate Communications, Investor Relations,
Corporate Accounting and Subsidiary Controlling
Coordination: Renata Casaro, Dr. Hannes Schollenberger,
Wolfgang Zengerling
English translation: Donnelley Language Solutions, London
Pre-print proofing: Paul Knighton, Cambridge;
Thomas Krause, Krefeld
Design and typesetting:
MPM Corporate Communication Solutions, Mainz
Photographs: Ralph Belfiglio, Tobias Ebert, Owen Gao,
Anne Großmann, Claudia Kempf, Nils Hendrik Müller; Henkel
Printed by: Druckpartner, Essen
Date of publication of this Report:
February 23, 2017
PR No.: 02 17 3,000
ISSN: 0724-4738
ISBN: 978-3-941517-70-7
Credits
The Annual Report is printed on LuxoArt Silk FSC. The paper is made from pulp
bleached without chlorine. It has been certified and verified in accordance with
the rules of the Forest Stewardship Council (FSC). The printing inks contain no
heavy metals. This publication was cover-finished and bound with these Henkel
products: Cellophaning with Aquence GA 6080 HGL laminating adhesive,
bound using Technomelt PUR 3400 ME COOL and Technomelt GA 3960 Ultra
for the highest occupational health and safety standards.
Except as otherwise noted, all marks used in this publication are trademarks
and/or registered trademarks of the Henkel Group in Germany and elsewhere.
This document contains forward-looking statements which are based on the
current estimates and assumptions made by the corporate management of
Henkel AG & Co. KGaA. Forward-looking statements are characterized by the
use of words such as expect, intend, plan, predict, assume, believe, estimate,
anticipate, forecast and similar formulations. Such statements are not to be
understood as in any way guaranteeing that those expectations will turn out to
be accurate. Future performance and the results actually achieved by Henkel AG
& Co. KGaA and its affiliated companies depend on a number of risks and
uncertainties and may therefore differ materially from forward-looking statements. Many of these factors are outside Henkel’s control and cannot be accurately estimated in advance, such as the future economic environment and the
actions of competitors and others involved in the marketplace. Henkel neither
plans nor undertakes to update forward-looking statements. This document has
been issued for information purposes only and is not intended to constitute an
investment advice or an offer to sell securities, or a solicitation of an offer to
buy securities.
194 Further information Henkel Annual Report 2016
Contacts
Corporate Communications
Phone: +49 (0) 211-797-3533
Fax: +49 (0) 211-798-2484
E-mail: [email protected]
Investor Relations
Phone: +49 (0) 211-797-3937
Fax: +49 (0) 211-798-2863
E-mail: [email protected]
Henkel Annual Report 2016 Further information 195
188 Quarterly breakdown of key
financials
189 Multi-year summary
190 Index of tables and graphs
192 Glossary
194 Credits
195 Contacts
Henkel app available
for iOS and Android:
Henkel in social media:
www.facebook.com/henkel
www.twitter.com/henkel
www.linkedin.com/company/henkel_2
www.instagram.com/henkelglobal/
www.henkel.com/annualreport www.henkel.com/sustainabilityreport www.youtube.com/henkel
196 Further information Henkel Annual Report 2016
Financial calendar
Annual General Meeting
Henkel AG & Co. KGaA 2017:
Thursday, April 6, 2017
Publication of Report
for the First Quarter 2017:
Thursday, May 11, 2017
Publication of Report
for the Second Quarter / Half Year 2017:
Thursday, August 10, 2017
Publication of Report
for the Third Quarter / Nine Months 2017:
Tuesday, November 14, 2017
Publication of Report
for Fiscal 2017:
Thursday, February 22, 2018
Annual General Meeting
Henkel AG & Co. KGaA 2018:
Monday, April 9, 2018
Up-to-date facts and figures on Henkel also
available on the internet:
www.henkel.com
Henkel AG & Co. KGaA
40191 Düsseldorf, Germany
Phone: +49 (0) 211-797-0
www.henkel.com