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Henkel warns supply chain problems in North America will hurt Q1'18 results

Henkel AG & Co. KGaA, the maker of Persil and Purex laundry care products, on March 19 warned that supply chain problems in North America during the first quarter of 2018 would cause its sales of consumer goods to shrink, falling short of expectations.

However, the Düsseldorf, Germany-based household products maker said in an ad hoc announcement that based on current forecasts, organic sales growth for the group in the first quarter was expected to be "slightly positive." The company also confirmed its guidance for full-year 2018.

Henkel, which on Feb. 22 offered a conservative outlook for 2018, said transportation issues in North America meant that its laundry and home care division, along with its beauty care division, would post negative organic sales growth year over year in the three-month period to the end of March.

The company said the problems were due to a change in the transportation and logistics systems used by Henkel's consumer goods businesses in North America. A spokesman was not immediately able to provide more detail to S&P Global Market Intelligence.

"The causes of our delivery difficulties in the North American consumer goods businesses have been identified and are currently being solved," Henkel CEO Hans Van Bylen said in a statement. "We expect to return to usual service levels in the course of the second quarter."

"We expect our business performance in the first quarter to be affected by these delivery difficulties," he added. "We are not satisfied with this development, and we are committed to continue our profitable growth."

In addition, Henkel said its adhesive technologies business, which includes the Loctite range of products, continued to show strong progress in the first quarter. Adhesives account for about half of group sales, which totaled €20.03 billion in 2017.

Despite the slow start to 2018, Henkel confirmed that it expected organic sales growth for 2018 of between 2% and 4% year over year, while it expected the beauty care division to deliver "positive organic sales growth below this range." It maintained that its adjusted return on sales would increase to more than 17.5%, and that adjusted earnings per preferred share would increase by between 5% and 8% in 2018.

Henkel is scheduled to report first-quarter results May 9.

In early morning trading, Henkel's shares were down €5.15, or 4.7%, at €105.25.