LONDON, Nov 6 (Reuters) - Henkel's new Danish Chief Ex
ecutive Kasper Rorsted on Thursday set out aggressive new targets to help the German consumer goods group catch up with the profit margins of rivals Unilever and Reckitt Benckiser.
The maker of Persil detergents, Loctite glues and Schwarzkopf hair care products is looking to grow its top brands faster, drive growth in emerging markets and cut costs to boost its margins by 4 percentage points over the next four years.
'We are looking to play catchup with our rivals in terms of profit margins,' Rorsted said on the edge of the group's third-quarter results news conference in London.
Duesseldorf-based Henkel has lagged behind its European rivals with a 10.5 percent operating margin in 2007 compared to Unilever with 13.1 percent and Reckitt Benckiser's margin of 22.6 percent.
Rorsted, who took over in April as the first non-German Chief Executive in the group's 132-year history, has set out his ambitious targets for 14 percent operating margins by 2012 and annual earnings growth above 10 percent, while sticking to its present target of 3 to 5 percent underlying sales growth.
Rorsted said he was determined to push his plan through despite already seeing slowing growth with its underlying sales up just 3.5 percent in the third-quarter down from 2007's 5.8 percent as the global slowdown starts to bite.
He admitted the plan is kicking off in a challenging trading environment with a slowdown in the United States and Western Europe, the financial crisis hitting the real economy and high volatility in feedstock markets and currencies.
Analysts say the margin target at the group which makes Fa soaps, Right Guard deodorant and Pritt glues looks ambitious with this year's margin set to come in close to 10 percent and the group set to face margin pressures into 2009.
'The group's record on margin delivery is patchy at best, with all previously communicated targets having been missed,' said Credit Suisse analyst Alex Molloy.
Under Rorsted's 4-year 2008-2012 plan, he aims to boost emerging market sales to 45 percent of the total by 2012 from 37 percent so far in 2008, and grow its top brands twice as fast as its 3-5 percent target. Its three top brands Persil, Loctite and Schwarzkopf currently account for 25 percent of group sales.
He is also looking at new product innovation to raise margins to mirror the success of products like its Loctite Flex Gel Super Glue and at Reckitt where Chief Executive Bart Becht has boosted its margins to top of the industry levels.
Rorsted also expects to save 500 million euros from better purchasing, streamlining production and its supply chain, and other cost savings such as outsourcing some operations.
He added that there will be no additional job cuts to those already planned under its Global Excellence programme announced earlier this year and aimed at cutting 3,000 jobs from its 55,000 global workforce.
Analysts say Henkel's margin performance and its cyclical adhesive technologies division, which supplies the carmaking and construction industries as well as retail outlets, mean the shares trade on a lower multiple than Reckitt and Unilever.
Reckitt shares trades on 16.1 times forecast consensus 2009 earnings, Unilever on 13.4 and Henkel just 9.8.
Henkel shares, controlled 51 percent by the Henkel family, closed down 7 percent at 21.63 euros after third-quarter profits came below forecasts and it cut its earnings forecast for 2008 due to higher raw material prices.
(Reporting by David Jones; Editing by David Cowell) Keywords: HENKEL/RORSTED
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