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Henkel to cut 2,000 jobs in face of rising costs, slow demand

05/05/2022 | 05:37am EDT
FILE PHOTO: A logo of consumer goods group Henkel is pictured in Duesseldorf

BERLIN (Reuters) -Germany's Henkel is slashing 2,000 jobs in response to rising costs and low demand for its shampoos and hair sprays and aims to make 500 million euros ($530 million) in gross savings in the medium-term from the merger of its cosmetics and detergents units.

The job cut and savings targets, announced on Thursday, illustrate the depth of problems facing consumer goods companies as they find ways to offset rising costs which cannot be passed on to customers. Global supply chain issues are adding to the difficulties that prompted Henkel to cut its outlook last month.

Henkel shares gained as much as 2% after the announcement on Thursday and traded unchanged at 60.72 euros at 0919 GMT.

The company, which has more than 52,000 staff globally, posted 11% sales growth in its adhesives business year, but its cosmetics business struggled.

Beauty care brands such as Schwarzkopf and Dial generated sales of 3.7 billion euros in 2021 compared with just under 3.8 billion in 2020 and 3.9 billion euros the year before.

Revenue from laundry and home care products including Persil, Perwoll and Pril reached 6.6 billion euros last year from 6.7 billion euros in 2020 and 2019 respectively.

The merger of the two units, with nearly 20,000 staff in 60 countries, will be implemented in two steps, leading to net savings of around 250 million euros on an annualized basis until end-2023, Henkel said.

"From today's perspective, around 2,000 jobs will be affected worldwide, mainly in sales and administration," it said. Talks with workers' representatives are about to start, Chief Executive Carsten Knobel said on a conference call.

Building on its brands, Henkel aims for organic sales growth of 3-4% and an adjusted margin of earnings before interest and tax in the mid-teens percent range for the new unit in the medium- to long-term.

Henkel said that businesses that do not meet its growth and profitability criteria could be halted or sold.

Businesses and brands with total sales of up to 1 billion euros were under review.

On the other hand, Henkel is open for large takeovers to promote growth, Knobel said.

Henkel confirmed first-quarter sales were around 5.3 billion euros and that it expects organic sales growth of 3.5% to 5.5% for the full year. Adjusted earnings per preferred share (EPS) are expected to decline in a range from -35% to -15%.

($1 = 0.9443 euros)

(Reporting by Kirsti Knolle in Berlin and Matthias Inverardi in Duesseldorf; Editing by Miranda Murray and Emelia Sithole-Matarise)

© Reuters 2022
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