Henkel Earnings: Record Gross Margin Driven by Cost Savings, Pricing and Lower Material Costs

Narrow-moat Henkel delivered first-half 2024 organic sales growth of 2.9% and an adjusted EBIT margin of 14.9%, in line with the preliminary figures shared in July. Most impressively, the group gross margin was 50.2%, 660 basis points ahead of the same period of last year and a record level for Henkel in recent history. The main factors behind this performance were lower material costs, pricing actions, and savings from cost reduction and efficiency measures implemented as part of the ongoing integration of consumer brands into one business unit. With direct material costs expected to increase sequentially in the second half, the full-year gross margin should be slightly lower. Henkel has also stepped up marketing and promotional investment in 2024 to reignite volume growth and support innovation launches. We expect this to continue in the second half, which, together with the slightly lower gross margin, should bring the full-year adjusted EBIT margin in the range of 13.5%-14.5% as per the guidance update shared in July. We do not expect to make significant changes to our EUR 86 fair value estimate after incorporating the full set of results into our forecast.