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Henkel cuts FY'19 outlook as Q2 profit drops 7.4% YOY; shares down 5%

Shares of Henkel AG & Co. KGaA were down more than 5% on Aug. 13 as the German consumer goods company slashed full year outlook over anticipated slowness in industrial demand in the second half after reporting a year-over-year drop in second-quarter profit that was below expectations.

"The development in the second quarter was mainly characterized by a significant decline in demand in key industries such as the automotive industry. This particularly affected our industrial business," said Henkel CEO Hans Van Bylen.

For the three-month period ended June 30, net income attributable to shareholders of Henkel fell 7.4% year over year to €554 million from €598 million, while adjusted EPS plunged 9.5% to €1.43 from €1.58 a year ago, missing the S&P Global Market Intelligence consensus normalized EPS estimate of €1.46.

Second-quarter net sales inched down 0.4% year over year to €5.12 billion from €5.14 billion.

Across the company's segments, the adhesive technologies unit saw sales fall 0.4% year over year to €2.42 billion from €2.43 billion, while Henkel's beauty care segment saw a 3.2% drop in sales in the second quarter to €1.0 billion from €1.04 billion. Henkel's laundry and home care segment saw second-quarter sales inch up 1.3% year over year to €1.67 billion from €1.64 billion.

"The development of the Beauty Care Retail business was significantly below our expectations. On the one hand, this was due to not satisfying developments in mature markets such as North America and Western Europe. In China, the Retail business was impacted by ongoing stock adjustments," Van Bylen said.

The company now expects the beauty care business unit to develop below its initial expectations during the year.

Henkel revised its full-year outlook as it no longer expects industrial demand to improve in the second half, slashing the guidance range for organic sales growth to flat to 2% year over year from the previous outlook of 2% to 4%. The company now expects mid- to high-single-digit percentage range drop in adjusted EPS from its previous guidance of mid-single percentage range drop year over year.

During morning trading hours in Frankfurt, Henkel stock was trading as low as 86.64, down 5.7%.