Henkel annual report


Published on

Published in: Business, Economy & Finance
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Henkel annual report

  1. 1. Annual Report 2010At a glanceWe continue to focus our efforts on the pursuitof our strategic priorities, formulated in 2008 inorder to secure Henkels success over the longterm. And in fiscal 2010 we again made greatprogress toward their achievement.Central to our approach is a strong, uniquecorporate ethos: a winning culture characterizedby a clear commitment to excellent performanceand being the best in a highly competitiveenvironment. And helping us to constantly raiseour game we have our long-term vision and fiveshared values to guide our decisions and ouractions.Our top brandsOur strong brands are the basis of our economicsuccess. Going forward, we will be keeping our fo-cus on our major, widely recognized brands: WithSchwarzkopf, Loctite and Persil – our three biggestbrands – we generate 23 percent of total sales. Andour ten biggest brands contribute 41 percent tototal sales.The Laundry & Home Care business sector real-izes 32 percent of its sales with its three strongestbrands Persil, Purex (in North America) and Dixan.Cosmetics/Toiletries achieves 71 percent of its
  2. 2. sales with its three biggest brands Schwarzkopf,Dial (in North America) and Fa. And the AdhesiveTechnologies business sector makes 26 percentof its sales with its three biggest brands Loctite,Teroson and Technomelt.Our strategic prioritiesAchieveour fullbusiness potentialWinningCultureStrengthenourglobal teamFocusmore onour customersHow Henkel developed in 2010Global supplier of brands and technologies• 134 years of brand success• Around 48,000 employeesCompetence in three business sectors:• Laundry & Home Care• Cosmetics / Toiletries• Adhesive Technologies
  3. 3. Key financialsin million euros 2009 2010 +/–Sales 13,573 15,092 11.2 %Operating profit (EBIT)1,080 1,723 59.5 %Adjusted1)operating profit (EBIT)1,364 1,862 36.5 %Return on sales (EBIT) in % 8.0 11.4 3.4 ppAdjusted1)return on sales (EBIT) in % 10.0 12.3 2.3 ppNet income 628 1,143 82.0 %– Attributable to non-controlling interests 26 25 –3.8 %– Attributable to shareholders of Henkel AG & Co. KGaA 602 1,118 87.5 %Earnings per preferred share in euros 1.40 2.59 85.0 %Adjusted1)earnings per preferred share in euros 1.91 2.82 47.6 %Return on capital employed (ROCE) in % 9.8 14.9 5.1 ppCapital expenditures on property, plant and equipment 344 240 –30.2 %Research and development expenses 396 391 –1.3 %
  4. 4. Number of employees (annual average) 51,361 48,141 – 6.3 %Dividend per ordinary share in euros 0.51 0.702)37.3 %Dividend per preferred share in euros 0.53 0.722)35.8 %1)Adjusted for one-time charges/gains and restructuring charges.2)Proposed.pp = percentage pointsHenkel at a glanceSales by region1)Eastern Europe, Africa/Middle East,Latin America, Asia (excluding Japan).41 % Growth regions1)36 % Western Europe18 % North America 4 % Japan/Australia/New Zealand 1 % Corporate
  5. 5. Corporate = sales and servicesnot assignable to the individualbusiness sectors.Sales by business sector29 % Laundry & Home Care22 % Cosmetics/Toiletries48 % Adhesive Technologies 1 % CorporateAt a glanceSalesin million euros200620072008200920104,1174,1484,1724,1294,319Salesin million euros20062007
  6. 6. 2008200920102,8642,9723,0163,0103,269Salesin million euros200620072008200920105,5105,7116,7006,2247,306Laundry & Home CareLeading market positions worldwide.Achieving profitable growth through innovation,strong brands and good, solid customer relation-ships.Expanding our strong market position in Europe
  7. 7. and further extending our presence in NorthAmerica and the growth regions.Cosmetics / ToiletriesLeading market positions worldwide.Achieving profitable growth with appealing in-novations under strong brands, aligned to exactingcustomer demands.Expanding our strong market position in Europeand extending our presence in North America and– selectively – in the growth regions.Adhesive TechnologiesLeading our markets worldwide.Achieving profitable growth through innovationsunder strong brands, efficient processes and a firmfocus on our customers.Developing new applications and growth potentialin all regions of the world.+ 1.5 %organic sales growth+ 4.8 %organic sales growth+ 11.8 %organic sales growthKey financialsin million euros 2009 2010 +/–Sales 4,129 4,319 4.6 %
  8. 8. Operating profit (EBIT)501 542 8.2 %Adjusted1)operating profit (EBIT)530 562 6.2 %Return on sales (EBIT) 12.1 % 12.6 % 0.5 ppAdjusted1)return on sales (EBIT) 12.8 % 13.0 % 0.2 pppp = percentage points1)Adjusted for one-time charges/gains and restructuring charges.Key financialsin million euros 2009 2010 +/–Sales 3,010 3,269 8.6 %Operating profit (EBIT)387 411 6.1 %Adjusted1)operating profit (EBIT)
  9. 9. 387 436 12.4 %Return on sales (EBIT) 12.9 % 12.6 % –0.3 ppAdjusted1)return on sales (EBIT) 12.9 % 13.3 % 0.4 pppp = percentage points1)Adjusted for one-time charges/gains and restructuring charges.Key financialsin million euros 2009 2010 +/–Sales 6,224 7,306 17.4 %Operating profit (EBIT)290 878 >100 %Adjusted1)operating profit (EBIT)506 938 85.5 %Return on sales (EBIT) 4.7 % 12.0 % 7.3 ppAdjusted1)return on sales (EBIT) 8.1 % 12.8 % 4.7 pppp = percentage points1)
  10. 10. Adjusted for one-time charges/gains and restructuring charges.Contents The Company 2 Foreword 5 Report of the Supervisory Board 10 Management Board 11 Vision and values 12 Our values 22 Shares and bonds Group management report 25 Group management report subindex 26 Corporate governance 40 Operational activities 40 Strategy and financial targets for 2012 43 Value-based management and control system 45 Business performance 52 Assets and financial analysis 55 Employees 57 Procurement 58 Production 59 Research and development 61 Marketing and distribution 62 Sustainability 66 Business sectors 78 Risk report
  11. 11. 83 Forecast 86 Subsequent events Consolidated financial statements 87 Consolidated financial statements subindex 88 Consolidated balance sheet 90 Consolidated statement of income 91 Statement of comprehensive income 91 Statement of changes in shareholders’ equity 92 Consolidated cash flow statement 93 Notes to the consolidated financial statements 135 Independent auditor’s report 136 Responsibility statement by the Personally Liable Partner 137 Corporate management of Henkel AG & Co. KGaA 142 Further information 143 Quarterly breakdown of key financials 144 Multi-year summary Credits / Financial calendarThe cover photo shows members of the managementteam responsible for Cosmetics / Toiletries Asia-Pacificattending their Vision and Values Workshop in Shang-hai, China. From left to right: VijayManickavasagam,Antje Chu, Rungaroon Koohasaneh and Paul Khol.For more, go to page 14.Our VisionA global leader
  12. 12. in brandsand technologies.Our ValuesWe put our customers at thecenter of what we do.We value, challenge and rewardour people .We drive excellent sustainable -financial performance.We are committed to leadershipin sustainability .We build our future on ourfamily business foundation.Further informationYou will notice a number of cross-references within this Annual Report.We also indicate the availability ofsupplementary information relat-ing to specific subject areas in ourSustainability Report and on theinternet.InternetAnnual ReportSustainability ReportHenkel Annual Report 2010 2 ForewordKasper Rorsted
  13. 13. Chairman of theManagement Board.2010 was an excellent year for Henkel. For thefirst time in our corporate history, we concluded afinancial year with adjusted1) return on sales above12 percent. Organic sales increased by 7 percentwhile adjusted1) earnings per preferred share roseby 47.6 percent. With these strong results, we arewell on our way to achieving our financial targetsfor 2012.We have further improved the market positionsof all our business sectors relative to our competi-tors, have strengthened our top brands and havedeepened our business relationships with ourcustomers. We have been able to further expandour positions in the emerging markets, particularlyin Asia and the Middle East. We have also initiateda comprehensive change process throughout thecompany, aimed at strengthening the “WinningCulture” at Henkel aligned to a clear, long-term vision: A global leader in brands and technologies.The outstanding results achieved in 2010 prove
  14. 14. that we have made the appropriate decisions in thepast. Having adjusted to the decline in global eco-nomic growth at an early stage, we have emergedfrom this crisis stronger than ever. With more efficient structures and improved processes, wehave been able to benefit from the recovery of theworld economy, gaining strength and momentumwith advancing globalization.Growth in all sectors and regionsWhile growth in the US economy was slow, theemerging economies once again exhibited thehighest rate of expansion. Following a substan-tial decline in the recession year of 2009, globalindustrial production again grew strongly in 2010.The recovery was particularly pronounced in Asia,especially in China, South Korea and Taiwan. Ger-many took a leading role among the industrializednations,registering a double-digit growth rate inindustrial output and taking the lead as Europe’sgrowth engine.12.3 %adjusted1)return on sales.+7%organic sales growth.+ 47.6 %
  15. 15. adjusted1)earningsper preferred share.1)Adjusted for one-time charges/gains and restructuring charges.Henkel Annual Report 2010 3 ForewordAn analysis of the individual sectors shows thatmanufacturing – after substantial declines in theprevious year – became a growth driver, with theautomotive, metals and electronics industriesall returning to growth. By contrast, growth inprivate consumption – having suffered only acomparatively minor decline in 2009 – was moder-ate.In an improved yet, in some markets, still difficultenvironment, all our business sectors and regionswere able to make major contributions to our busi-ness success. This was due not just to the generaleconomic recovery but also, and particularly, toour continued strong focus on our strategic priori-ties:• Achieve our full business potential• Focus more on our customers• Strengthen our global teamEveryone at Henkel has made important contribu-tions to our success in 2010. I would like, on behalfof the entire Management Board, to express our
  16. 16. sincere thanks for their commitment and hardwork!Ongoing adaptation of our structuresThe volatile business environment in recent yearshas shown how important it is to respond quickly,flexibly and decisively to change. Even though theeconomic situation has stabilized in most markets,the necessity remainsto continuously adapt andoptimize existing structures so we can stay aheadof our international competition. In 2010, we wereable to make further progress in a number of areas.For example, we successfully concluded the inte-gration process of the National Starch businesses,the largest acquisition in our corporate history.Through further improvements in purchasing, hu-man resources and our supply chain, and throughthe expansion of our shared service centers inBratislava (Slovakia) and Manila (Philippines), wehave succeeded in simplifying our processes andfurther increasing efficiency. The ongoing optimi-zation of our production sites around the world hasalso had a positive effect on our cost efficiency.A major factor for success is and will remain expansion in the emerging markets: once again,we were able to generate double-digit growth in2010. We currently realize 41 percent of our totalsales within these emerging economies, and
  17. 17. 53 percent of our employees are now workinginthose markets.Our strong brands are equally important for ourbusiness success. In 2010, we further strength-ened our top brands and continued to optimizeour brand portfolio. In the Laundry & Home Carebusiness sector, we generate 81 percent1) of con-solidated sales with our ten strongest brands, ledby Persil. In Cosmetics/Toiletries, the contribu-tion of the ten strongest brands is even higher at89 percent. Of these, Schwarzkopf has developedinto a mega-brand, accounting for annual sales ofsome 1.8 billion euros. In the Adhesive Technolo-gies business sector, our top ten brands generate52 percent of sales, with Loctite leading the way.Our new and innovative products make a particu-larly important contribution to growth. In thebranded consumer goods segments, we generatearound 40 percent of our sales with products thathave been in the market for less than three years.In the industrial business, where the developmenttimes for our customized technologies are signifi-cantly longer, the share of products that have beenin the market for less than five years is around24 percent.Strengthening our corporate culture
  18. 18. Last year we initiated a process aimed at furtherdeveloping our corporate culture. The interna-tionality and diversity of Henkel require a strong,common culture – with a clear vision and sharedvalues that provide orientation, guidance andidentification for all our employees around theworld. Our vision of being “a global leader inbrands and technologies” defines a clear ambi-tion for every Henkel employee. And in strivingto achieve this goal, everyone at Henkel is guidedin their daily activities by five values: customers,people, financial performance, sustainability andfamily.Our employees have to understand these values inorder to act upon them and make them the foun-dation of our future success. During the secondhalf of 2010, every employee had the opportunityto actively familiarize themselves with our visionand our new values. Participating in around 5,000workshops, they discussed how our vision andvalues can be effectively implemented within theirworkingenvironment. In this report we explainhow we live up to our values on a day-to-day basis(see pages 12 to 21 ).1)Top brand clusters.41 %
  19. 19. of sales generatedin the emerging markets.> 80> 90~ 50Sales from top ten brandsin %Laundry & Home CareCosmetics/ToiletriesAdhesive Technologies811)8952Henkel Annual Report 2010 4 ForewordWe have also aligned our global system for em-ployee assessment directly to our five values. Bythe end of 2010, the performance and developmentpotential of around 9,000 mana gerial staff hadbeen evaluated on the basis of these internation-ally standardized criteria. With this approach, weensure that the decisions and the performance ofour managers are fully aligned to our values.Together, our vision and values define our credoas a company: “One Henkel.” In order to com-municate and strengthen the Henkel brand bothinternally and externally, we are introducing a
  20. 20. new claim in combination with a revised corporateidentity. Our claim captures what we stand for:What do we expect for 2011? In order to achieveour full business potential, we intend to furtheroptimize our portfolio by divesting marginal busi-nesses and non-strategic local brands. In addi-tion, continued focus on costs, adaptation of ourstructures in mature markets and further measuresaimed at efficiency enhancement throughout thecompany will contribute to achieving our targets.Major elements in this process include the furtherexpansion of our shared service center organiza-tion and increased utilization of standardized pro-cesses in all our business sectors and functions.We want to further enhance our strong customerfocus with targeted projects in all our businesssectors. It is becoming increasingly important formany of our customers and consumers to un-derstand how we integrate sustainability in ourbusiness activities. Henkel has already assumeda leading position in sustainability performance,as confirmed numerous times by external ratings.Based on this strong position, we will be furtherdeveloping our long-term sustainability strategyin 2011.We are intro ducing a new compensation systemoffering higher incentives for outperformance, and
  21. 21. we will also increase our focus on talent develop-ment in 2011. We particularly want to increase thenumber of women in our management. By the endof 2010, the share of female managers had alreadyclimbed to around 29 percent.Outlook for 2011We expect further growth in the world economyin 2011. Following the substantial expansion inmany of our customer industries, especially at thebeginning of 2010, growth in the industrial sectoris likely to normalize, with private consumptionshowing moderate growth.We are confident of generating organic salesgrowth (i.e. sales adjusted for foreign exchangeand acquisitions/divestments) in the range of 3 to5 percent in 2011. We anticipate achieving an in-crease to around 13 percent in adjusted1) return onsales (EBIT) and an increase in adjusted1) earningsper preferred share of around 10 percent.Our Supervisory Board and Shareholders’ Com-mittee also made an important contribution toHenkel’s business success in 2010. On behalf ofthe Management Board, I would like to take this
  22. 22. opportunity to thank them for their strong supportand advice throughout the year.And on behalf of the entire company, I would alsolike to express our gratitude to our shareholders fortheir confidence and support. We are also gratefulto our customers for their continuing trust in ourcompany, our brands and our technologies.Henkel is well positioned for the future. We havea solid financial base, hold strong positions in ourinternational markets, and have highly motivatedemployees, successful brands and a strong pres-ence in the growth regions.We intend to continueour transformation process in 2011 and to createa strong foundation for the future success of ourcompany.Düsseldorf, January 28, 2011Kasper RorstedChairman of the Management Board1)Adjusted for one-time charges/gains and restructuring charges.Henkel Annual Report 2010 5 Report of the Supervisory BoardAfter a difficult 2009, fiscal 2010 was a very success-ful year for us. With the world economy recoveringfrom the financial crisis, all our business sectorsmade outstanding contributions to Henkel’s salesand profits – not only our two branded con-sumer goods businesses Laundry & Home Care
  23. 23. and Cosmetics/Toiletries, but also our Adhesive Technologies business sector, which posted significant growth with improved profitability.In recognition of these excellent results, I wouldlike on behalf of the Supervisory Board to expressour deep gratitude to all Henkel’s employees fortheir commitment and diligence. My thanks also goto the members of the Management Board and ourWorks Councils for their constructive support andclose cooperation.We further thank you, our shareholders, for the loyalty and trust that you have shown in our compa-ny, its management, its employees and its productsin the year under review.Ongoing dialogue with the Management BoardThe Supervisory Board again carefully dischargedits duties in fiscal 2010, in accordance with thelegal statutes, Articles of Association and rules ofprocedure governing its actions.We carefully and regularly monitored the work ofthe Management Board, advising and supporting itin its stewardship of the strategic further develop-ment of the corporation and in decisions relatingto matters of major importance.Dr. Simone Bagel-TrahChairwoman of the Share-holders’ Committee and the
  24. 24. Supervisory Board.Henkel Annual Report 2010 6 Report of the Supervisory BoardThroughout the year, the Management Board andthe Supervisory Board remained in close communi-cation, exchanging information with mutual trustand confidence. The Management Board compliedwith its reporting duties punctually and in full,informing us regularly and in detail throughbothwritten and verbal communications of major issuesaffecting the corporation and our Group compa-nies. In particular, the Management Board providedextensive explanations of the business situationand development of the corporation, businesspolicy, the profitability of our operations, and ourshort-term and long-term corporate, financial andpersonnel planning, as well as capital expendituresand organizational measures.In the course of preparing the quarterly reports,details were provided of the sales and profits ofHenkel as a whole, with further analysis by businesssector and region. Outside Supervisory Board meet-ings, I as Chairwoman remained in regular contactwith the Chairman of the Management Board; thisensured that the Supervisory Board constantlyremained in touch with current business develop-ments and events.Major issues discussed atSupervisory Board meetings
  25. 25. The Supervisory Board met a total of four timesin fiscal 2010. At these meetings, we examined indetail the reports of the Management Board andconferred with its members on the development ofthe corporation and on specific strategic issues.In all our meetings, we discussed the general eco-nomic climate and how it was influencing businessperformance at Henkel.The main item of the agenda for our meeting heldon February 23, 2010 was the annual and consoli-dated financial statements for 2009, including therisk report and our corporate governance report. Atthis meeting, we also approved the Annual Reportand finalized our proposals for resolution to be putbefore the Annual General Meeting. We likewisedealt with organizational issues relating to theAdhesive Technologies business sector and the cus-tomer alignment of its five strategic business units.The meeting held on April 19, 2010 dealt with therecent business development of the Henkel Groupand the further elaboration of the compensationconceptdevised for our managerial staff.One of the main issues discussed at our meeting ofOctober 5, 2010 related to purchasing. We discussedin detail the global management and control ofour worldwide sourcing activities, and particularly
  26. 26. action required to secure supply continuity and op-timize the value chain. The movement in raw mate-rial prices was likewise considered in some detail.We further deliberated on R&D strategy, organiza-tion and cross-divisional cooperation and the useof external and globally available R&D resources.Balance-sheet and financial planning, includingitems on the income statement and the projectsand budgetsof our business sectors were thesource of extensive discussion during our meetingof December 14, 2010. We also heard a presentationfrom an external management consultant dealingin detail with the legal principles underlying ourSupervisory Board activities, focusing especially onmore recent developments in this domain.Attendance at the Supervisory Board meetings dur-ing the year under review averaged 92 percent. Nomember of the Supervisory Board took part in fewerthan half the meetings. There were no incidents ofconflicts of interest involving Management Boardor Supervisory Board members. Where such exist,they are notifiable to the Supervisory Board, whichis then required to report to the Annual GeneralMeeting on their treatment.Committee activitiesIn order to efficiently comply with the duties in-cumbent upon us according to legal statute and our
  27. 27. Articles of Association, we have assigned certainactivities to two separate committees: an AuditCommittee comprised of three shareholder-repre-sentative members and three employee-representa-tive members, and a Nominations Committee madeup of three shareholder-representative members.The memberships of the committees are shown inthe table on pages 138 and 139.Henkel Annual Report 2010 7 Report of the Supervisory BoardThe Audit Committee, which has special responsi-bility for preparing the proceedings and proposalsof the Supervisory Board and for approving theannual and consolidated financial statements, metfour times during the year under review. The Chairof the Committee informed the plenary Supervi-sory Board of the content and results of each of theCommittee meetings punctually and in full.The focus in all our meetings was on the annualand consolidated financial statements and also theinterim financial reports, which were extensivelydiscussed with the Management Board. The meet-ings at which the half-year financial report andalso the report on the third quarter were discussedand approved were also attended by the auditor.The latter reported on the results of the respectivereviews and on all the main issues and occurrencesrelevant to the work of the Audit Committee. No
  28. 28. objections were raised.We also dealt in detail with the development andimplementationof the accounting process andwith the efficacy and further development of theinternal Group-wide control and risk managementsystem. The Committee further received the statusreports of the Chief Compliance Officer and theHead of Internal Audit, and approved the auditplan put forwardby Internal Audit. These activitiesalso involved examining the functional efficiencyand efficacy of the Internal Control System and ourcompliance organization.The Audit Committee mandated the external audi-tor, pursuant to the latter’s appointment by the2010 Annual General Meeting, to audit the annualconsolidated financial statements for fiscal 2010,at the same time defining the main areas on whichthe audit was to concentrate. The audit fee was alsoestablished. The Audit Committee likewiseman-dated the external auditor to review the half-yearfinancial report and the report on the third quarterof 2010, and obtained necessary validation of audi-tor independence.At the meeting of February 21, 2011, the AuditCommittee discussed together with the externalauditor the annual and consolidated financial
  29. 29. statements for fiscal 2010, the associated pro-posal for the appropriation of profits, and the riskreport, and submitted to the Supervisory Boardcorresponding proposals for resolution by theAnnual General Meeting. The Committee alsomade recommendations to the Supervisory Boardregarding its proposal for the appointment by theAnnual General Meeting of the external auditor forthe subsequent financial year. A declaration fromthe auditor relating to its independence was againduly received; the auditor likewiseprovided detailsof the non-audit services rendered in fiscal 2010and those envisaged for fiscal 2011. There was noevidence of any bias or partiality on the part of theauditor. Other members of the Supervisory Boardalso took part as guests in this specifically audit-related meeting of the Audit Committee.Each meeting of the Audit Committee was attendedby all its members in the year under review.The Nominations Committee made appropriaterecommendations in preparation for the resolu-tions to be formulated by the Supervisory Boardand placed before the 2011 Annual General Meetingwith respect to the upcoming supplementary elec-tions to the Supervisory Board.Corporate governance anddeclaration of compliance
  30. 30. Again in 2010, we consulted on issues relating tocorporate governance and amendments to the Ger-man Corporate Governance Code.At the meeting of December 14, 2010, we discussedthe objectives and composition of our SupervisoryBoard. Taking into accountthe company’s specificsituation, we established criteria for the electionof new Supervisory Board members, on the basisof which the Nominations Committee would berequired to recommend candidates to the plenarySupervisory Board in preparation for electionby theAnnual General Meeting. For further details on thisand the corporate governance of the company, pleaserefer to the report on pages 26 to 31 , with whichwe fully acquiesce.Henkel Annual Report 2010 8 Report of the Supervisory BoardAt the meeting of February 22, 2011, we discussedand approved the joint Declaration of Compli-ance of the Management Board, the Shareholders’Committee and the Supervisory Board with respectto the German Corporate Governance Code for2011. The full wording of the current and previousdeclarations of compliance can be found on thecompany website.Annual and consolidatedfinancial statements/Audit
  31. 31. The annual financial statements of Henkel AG &Co. KGaA and the management report have beenprepared by the Management Board in accordancewith the provisions of the German CommercialCode [HGB]. The consolidated financial statementsand the Group management report have been pre-pared by the Management Board in accordance withInternational Financial Reporting Standards (IFRS)as endorsed by the European Union, supplementedby the provisions under commercial law applicablepursuant to Section 315a (1) HGB.The auditor appointed for 2010 by the last AnnualGeneral Meeting – KPMG AG Wirtschaftsprüfungs-gesellschaft (KPMG), Berlin – has examined the2010 annual financial statements of Henkel AG &Co. KGaA and the 2010 consolidated annual finan-cial statements, including the management reports,in compliance with the generally accepted stan-dards for the audit of financial statements promul-gated by the Institut der Wirtschaftsprüfer (IDW)and – in the case of the consolidated financialstatements – in supplementary compliance withInternational Standards on Auditing (ISA), and hasissued them with an unqualified opinion.KPMG reports that the annual financial statementsgive a true and fair view of the net assets, financialposition and results of operations of Henkel AG &
  32. 32. Co. KGaA in accordance with generally accepted German accounting principles, and that the consoli-dated financial statements give a true and fair viewof the net assets, financial position, results of opera-tions and cash flows of the Group, in compliancewith International Financial Reporting Standards,for the year under review. KPMG further confirmsthat the consolidated financial statements andGroup management report for the year under reviewmeet the requirements of Section 315a (1) HGB.The annual financial statements and managementreport, consolidated financial statements andGroup management report, the audit reports ofKPMG and the recommendations by the PersonallyLiable Partner for the appropriation of the profitmade by Henkel AG & Co. KGaA were duly laidbefore all members of the Supervisory Board. Weexamined these documents and discussed themat our meeting of February 22, 2011. This was at-tended by the auditor, which reported on its mainaudit findings. We received the audit reports andvoiced our acquiescence therewith. The Chair ofthe Audit Committee provided the plenary sessionof the Supervisory Board with a detailed accountofthe treatment of the annual and the consolidated financial statements by the Audit Committee.
  33. 33. Having received the final results of the review con-ducted by the Audit Committee and concluded ourown examination, we see no reason for objection tothe aforementioned documents. The assessment bythe Personally Liable Partner of the position of thecompany and the Group coincides with our ownappraisal. At our meeting of February 22, 2011, weconcurred with the recommendations of the AuditCommittee and therefore approved the annualfinancial statements, the consolidated financialstatements and the management reports as pre-pared by the Personally Liable Partner.Taking into accountthe financial position and re-sults of operations of the corporation, its medium-term financial and investment planning and theinterests of the shareholders, we discussed andapproved the proposal of the Personally LiablePartner to pay out of the unappropriated profit ofHenkel AG & Co. KGaA a dividend of 0.70 eurosper ordinary share and of 0.72 euros per preferredshare, and to allocate the remaining amount toother retained earnings and – together with theamount attributable to the treasury shares heldby the company at the time of the Annual GeneralMeeting – retained earnings carried forwardto thefollowing year. We consider the proposed dividendsto be reasonable and appropriate. At this meeting,
  34. 34. we also ratified our proposals, based on the recom-mendations of the Audit Committee, for resolutionto be presented before the Annual General Meetingrelating to the appointment of the external auditorfor the next financial year, and discussed the focalpoints and costs of the audit of the financial state-ments.Henkel Annual Report 2010 9 Report of the Supervisory BoardRisk managementRisk management issues were examined not onlyby the Audit Committee but also in the plenary ses-sions of the Supervisory Board. The emphasis wason the risk management system in place at Henkeland any major individual risks of which we neededto be notified. There were no identifiable risks thatmight jeopardize the continued existence of thecorporation as a going concern. The structure andfunction of the risk management system were alsointegral to the audit performed by KPMG, whichfound no cause for reservation. It is our consideredopinion that the risk management system cor-responds to the statutory requirements and is fitfor the purpose of early identification of develop-ments that could endanger the continuation of thecorporation as a going concern.Changes in the Supervisory Boardand the Management BoardHaving taken retirement, Mr. Fritz Franke and Mr.
  35. 35. Bernd Hinz resigned from the Supervisory Boardeffective December 31, 2009 and July 31, 2010 re-spectively. They were succeeded by new membersMr. Mayc Nienhaus as of January 1, 2010 and Mr.Edgar Topsch as of August 1, 2010. Mr. Konstantinvon Unger resigned from the Supervisory Board asof the end of the 2010 Annual General Meeting. Weexpressed our unreserved gratitude to all the de-parting members for their committed involvementin the Supervisory Board’s work.Dr. Kaspar Freiherrvon Braun was newly electedto the Supervisory Board. In addition, Dipl.-Kfm.Johann-Christoph Frey, who replaced Dipl.-Ing.Albrecht Woeste on the Supervisory Board in 2009and whose mandate, in compliance with the provi-sions of the German Corporate Governance Code,was limited to the end of the 2010 Annual GeneralMeeting, was re-elected. We elected Mr. Frey as amember of the Nominations Committee.Mr. Thomas Geitner resigned from the Manage-ment Board effective December 31, 2010. At ourmeeting of December 14, we thanked Mr. Geitnerfor the successful completion of the integration ofthe National Starch activities within the adhesivesbusiness of Henkel, providing us with exceptionalglobal positions as world market leader in thisindustry. Newly appointed to the Management
  36. 36. Board, Mr. Jan-Dirk Auris took over as ExecutiveVice President responsible for the AdhesiveTechnologies business sector as of January 1, 2011.At our meeting of February 22, 2011, we said good-bye to Dr. Friedrich Stara, who retires as of March 1,2011. We expressed our thanks to Dr. Stara – whojoined Henkel in 1976 and, since July 2005, hasfilled the role of Executive Vice President respon-sible for the Laundry & Home Care business sector– for his many years of commitment and highlysuccessful contribution to the Henkel Group.Worthy of particular mention in this respect is thedevelopment of our businesses in Eastern Europe,which Dr. Stara oversaw with exceptional successas President of Henkel Central and Eastern Europefrom 1998 to 2005.Effective January 1, 2011, Mr. Bruno Piacenza joinedthe Management Board and, as of March 1, 2011,will take over from Dr. Stara as Executive VicePresident responsible for the Laundry & HomeCare business sector.We wish Mr. Auris and Mr. Piacenza every successin their new roles.Düsseldorf, February 22, 2011On behalf of the Supervisory BoardDr. Simone Bagel-Trah
  37. 37. (Chairwoman)Henkel Annual Report 2010 10 Management BoardOur Management BoardKasper RorstedChairman of the Management Board;born 1962; with Henkel since 2005.Jan-Dirk AurisExecutive Vice PresidentAdhesive Technologiessince January 1, 2011;born 1968; with Henkel since 1984.Dr. Lothar SteinebachExecutive Vice PresidentFinance/Purchasing/IT/Legal;born 1948; with Henkel since 1980.Hans Van BylenExecutive Vice PresidentCosmetics/Toiletries;born 1961; with Henkel since 1984.Bruno PiacenzaMember of the Management Boardsince January 1, 2011 and, fromMarch 1, 2011, Executive Vice PresidentLaundry & Home Care;born 1965; with Henkel since 1990.
  38. 38. Dr. Friedrich StaraExecutive Vice PresidentLaundry & Home Careuntil February 28, 2011;born 1949; with Henkel since 1976.Management Board of Henkel Management AG, January 2011.Henkel Annual Report 2010 11 Vision and ValuesWe hold our customers in the high-est regard and place them at thecenter of all that we do. This is theonly way we can offer them addedvalue. The “customer” value isvital to our success, and since notall Henkel employees are in directcontact with our customers, it isall the more important for us tounderstand what this value meansfor Henkel. In order to offer thebest products, the highest qualityand outstanding service, we needto understand our customers andconsumers better than our com-petitors do. If we succeed in this,we can look forward to successfulgrowth in all our markets.People always make the differ-ence. Through their creativity andknowledge, good ideas become
  39. 39. great business successes. They areour interface with our custom-ers, make innovation possible,develop successful strategies andgive our company its unique iden-tity. Only by valuing, challengingand rewarding our employees willwe establish a “Winning Culture”within Henkel. It is up to each ofus to set a good example: in theway we lead our teams and in theway we take personal responsibil-ity for our development. Togetherwe will make Henkel a globalleader in brands and technologies.We are pursuing our strategicpriorities in order to achieve ourfinancial targets and make Henkeleven more successful. Excellentand sustainable financial perfor-mance allows us to act more flexi-bly in the future. It enables healthygrowth over the long term, and willbenefit not only our shareholdersbut also our employees. This valueinfluences our decisions on invest-ments, personnel, strategies, ourteamwork and many other aspectsof our daily business.A strong commitment to sustain-ability has always been a majordriver of our performance. We
  40. 40. take a long-term, entrepreneurialapproach toward all elements ofsustainability, aiming not just tocomply with existing standards butalso to set new ones. Henkel hasalways strived to create a balancebetween people, planet and profit.This approach brings us a clearcompetitive advantage and helpsus achieve our full business poten-tial – and it will provide us witha significant edge in the futurecompetition for new talent.The “family” value makes usunique. We build our future on asolid foundation. Since 1876, theyear Henkel was founded, theHenkel family has shown a strongcommitment to the company. Thefamily provides us the opportunityto operate in the long term. It alsosupports us when we have to makedifficult strategic decisions. We arecommitted to leading Henkel withan entrepreneurial spirit, whichhas been a strong characteristic
  41. 41. since our foundation, and that iswhat ultimately makes the differ-ence in the marketplace.We put our customers at thecenter of what we do.We value, challenge and rewardour people .We are committed to leadershipin sustainability .We build our future on ourfamily business foundation.Our ValuesOur VisionA global leader in brandsand technologies.We drive excellent sustainablefinancial performance.12 Henkel Annual Report 2010 Our ValuesWe put our customers at thecenter of what we do.Trade marketing managerDagmar Nelles (left) and JochenWagener (second from the left),Head of Marketing ConsumerAdhesives Germany, talking todo-it-yourselfer Philipp Schmid
  42. 42. at one of the newly designedPattex shelving systems.Pattex brings the internet to theshelves: with a camera phone,the link in the form of a quickresponse code on the pack isinstantly captured, enabling therelevant web page to be quicklyretrieved.Guiding Pattex customers aroundthe shelvesMarket research studies into consumer behaviorduring the purchase of adhesives have shownthat shoppers feel overwhelmed by the hugevariety of products on show. So Henkel hasdeveloped a new shelf concept for householdadhesives in DIY stores. It quickly leads con-sumers to the right product, increasing theirsatisfaction at a stroke. Colored orientation aidsand a new classification structure within theshelving take the frustration out of the search.Plus: our widely known brands Pattex, Pritt andPonal now have a new packaging design withclear category designations.An easy-to-use customer advice computer withan online link at the shelving offers additional
  43. 43. information on the bonding performance ofmore than 1,700 types of adhesive. By mid-2011,around 1,000 DIY stores will be equipped withthis new adhesive product shelving system.We anticipate, respond to and meet our customers’ and consumers’ expectations byproviding the best value, quality, and most innovative brands and technologies.Oliver BossmannVice President Consumer andCraftsmen AdhesivesGermany and Switzerland.Increasing customer satisfaction“We want to enhance the satisfaction of bothour trade customers and our consumers withinsuccessful, enduring business relationships. Ourretail clients are also our partners and an inte-gral part of our business model. Consequently,we need to ensure that their expectations arefulfilled to the best possible degree. Only byfocusing on our customers can we achieve ourfull business potential. So it is all the moreimportant that we support our trade clients intheir efforts to satisfy the consumer.Innovative solutions such as the new Pattexshelving system with its clear structure, infor-mative labeling, and the integral computer fordirect access to the latest information on the
  44. 44. internet, ensure that consumers in the DIY storequickly get the details they need. Because thesenew concepts enable them to find the rightadhesive, there is less load on the sales person-nel, and the number of mis-buys, returns andcomplaints is reduced, thus promoting customersatisfaction.”Henkel Annual Report 2010 13 Our ValuesASK Academy Schwarzkopf trainshairdressersASK Academy Schwarzkopf offers hairdressers in38 countries professional training to provide bothtechnical and business know-how. Over 460,000hairdressers passed through these Schwarzkopf Pro-fessional courses in 2010, learning cutting, coloringand styling techniques as well as management skills.In Asia and South America in particular, ASK helpsto establish training standards and developmentcourses for hairdressers.Green Yao, a seminar leader fromSchwarzkopf Professional inChina, demonstrates on a modelhow hair is parted into sectionsas preparation for a professionalcut. The audience is made up ofboth upcoming hairdressers andSchwarzkopf customers, all keen
  45. 45. to expand their skill base by par-ticipating in an “Essential Look”cutting seminar, provided hereby ASK Academy Schwarzkopf inShanghai.Application engineers MarioWerner (left) and Harald Neeshave just applied a sound-damping coating to a carbody with the aid of a robot-assisted application system.Now, Harald Nees is checkingthe layer thickness.Practical tests for the cars of tomorrowIn the Global Technology Center of the Adhe-sive Technologies business sector in Heidelberg,Germany, customers and employees are trainedand innovative adhesives, sealants, coatingtechnologies and application processes developed– all to the highest standards. Our experts carryout tests for and develop prototypes with clientsfrom the automotive, components and transportindustries. Our customers benefit enormouslyfrom the knowledge of our adhesives experts,with optimum solutions the invariable outcome.www.ask-schwarzkopf.comCreating added value for customersFocusing on our customers and consumers iskey to our success. Hence our corporate value of
  46. 46. putting our customers at the center of what wedo. And it isn’t just our employees in Marketing,Customer Services or Sales and Distribution – thepeople who are in direct and daily contact withcustomers – to whom this applies, it’s all our peo-ple. Because whether in research, human resourcesor accounting, the decisions made invariable filterthrough to our customer relations.In all that we do, this core value reminds us thatour customers in industry, in retail and in thebuilding trades are more than just purchasers ofour products, technologies and services – they arealso our partners. Together with them, we developsolutions tailored to their specific needs. Our solu-tions also increase the quality and sustainabilityof the products that our customers offer to theircustomers. For example in the automotive indus-try where our customers are constantly striving toproduce innovative vehicles capable of withstand-ing extreme stresses and loads. To assist themin this endeavor, our experts work closely withtheir experts, researching and testing in order todevelop the right adhesives, sealants and surfacetreatments. Applied to car bodies, our productsand technologies increase accident safety, dampvibrations and noise, protect against corrosion,reduce weight and thus fuel consumption, andextend vehicle service lifetimes.Through our innovations, we create added value
  47. 47. for our customers and consumers, at the sametime laying the foundation stone for furthergrowth in all our markets.Henkel Annual Report 2010 14 Our ValuesIn their Vision and ValuesWorkshop in Shanghai, AntjeChu (second from the left) andher team from Cosmetics/Toiletries Asia-Pacificdiscussed how they couldsuccessfully implement thevision and values as a meansof focusing on their customersand consumers. Next to AntjeChu (from left to right): PaulKhol, Vijay Manickavasagamand Rungaroon Koohasaneh.We value, challenge and rewardour people .We treat each other with respect and dignity and develop our capabilities. We expecteveryone to take personal responsibility and perform to high standards. We rely on eachother for our success as a company.Vision and Values Workshops“Henkel Day,” September 24, 2010 – the com-pany’s “birthday” – heralded the start of a waveof Vision and Values Workshops for Henkel’s
  48. 48. employees around the world. In all our sites,line managers sat together with their teamsin order to explore and discuss our vision andvalues. They analyzed the direct significancethat these had for their day-to-day work anddrafted a list of actions for the future. Such closescrutiny gives employees a heightened aware-ness of the relevance of the vision and valuesto themselves, their team and their work, andenables them to more effectively apply theassociated principles.By the end of 2010, some 5,000 workshops hadtaken place around the world. Every workshopproduced a specific action plan in which eachteam prepared a written record precisely defin-ing time schedules and responsibilities for theidentified measures.Challenging and rewarding our people“At Henkel, we are striving to establish a‘Winning Culture’ characterized by a clear focuson performance and the will to succeed in ahighly competitive international environment.In order to promote and underpin this corporateculture, we have put in place a system enablingus to both challenge and reward our people,encouraging outperformance with a compen-sation system offering clear incentives.Our line managers bear a major responsibil-ity for the development of their teams and the
  49. 49. Kathrin MengesGlobal Head of HumanResources at Henkel.nurturing of talent through objective, candidfeedback . And we encourage each and everyindividual to assume responsibility for theircareer and future development – for whichHenkel as a global company offers a wide rangeof attractive possibilities.Our orientation to a clear vision and sharedvalues is an important prerequisite for theachievement of success. We want all our employ-ees to understand our values and to incorporatethem into their daily activities and decision-making processes.”Henkel Annual Report 2010 15 Our ValuesPages 55 to 57.Sustainability Report,pages 30 to 37.Employees as vital factors for successHenkel is a globally active corporation witharound 48,000 employees of whom 80 percentwork outside Germany. Collaborating with ourcustomers, they develop innovations, successfullyimplement strategies and provide the companywith its unique identity. Our employees are a vital
  50. 50. factor for success in the competitive internationalenvironment in which we operate.Our new vision and the revised values have beenintroduced in order to contribute to establish-ing a sustainable “Winning Culture” within thecompany. A shared vision and actively promotedvalues generate a feeling of unity and offer us guid-“It is important for acompany to have a visionand values for employeesto follow. They reinforcewhat our organization isstriving for and the goalswe are trying to attain.They give us guidance ondoing what’s best for ourbusiness.”“The ‘people’ valuesupports a fundamentalhuman need for respect,to be appreciated andrewarded for excellentperformance, to be sup-ported by our colleaguesand to be part of a suc-cessful team.”“Henkel performs withina family-business atmo-sphere, with belief andtrust in its people and a
  51. 51. willingness to take riskswith them. Proof of thiscan be found in the emerg-ing markets where Henkelstarted as a small playerand is now a competitive,strategic company for itscustomers.”Around 32 %of our employeesare women.Around 29 %of our managerial staffare women.Crystal Frazier, Chemist, Product DevelopmentAdhesive Technologies, USA.Olga Gadetskaya, Human Resources DirectorHenkel Russia.Eduardo Díaz Cortazar, Laundry & Home CareWalmart Team Leader, Mexico.Emmanuelle Manier, Key Account Lawyer,Legal Department, France.“Our vision and valuesare authentic. Abiding bythese values in our dailylife will definitely help
  52. 52. us establish a ʻwinningcultureʻ differentiate andus from our competitors– by reminding us neverto let the consumer downand to be compliant inall circumstances.”ance in the performance of our everyday work.They encourage us to develop innovative andsustainable products, technologies and services forour customers, and to devise effective marketing,selling and distribution concepts.Around the world, our corporate culture serves asa bond, enabling us to utilize the full potential ofour internationality and diversity. Our employeeshave a key role to play in our future success: by be-ing open, by adopting a positive approach to newdevelopments and challenges, by helping to shapeevents, by adopting an entrepreneurial attitudeand through their willingness to assume and ac-cept responsibility.Henkel Annual Report 2010 16 Our ValuesIntegrating suppliers in our productionprocessWithin Laundry & Home Care, all our major liq-uid-product factories collaborate with selectedpartners for the manufacture of plastic contain-ers right next to the production line.The majority of our bottles are supplied in this
  53. 53. way. Working hand-in-hand with our suppliers,we can optimize the manufacturing processeson our sites while maintaining high flexibilityWe drive excellent sustainablefinancial performance.We are a performance-driven company committed to growing the value of our businessand providing a competitive return to our shareholders.Maria Lancellotti monitorsthe filling of liquid laundryand home care detergents inDüsseldorf. The plastic bottlesare manufactured by an exter-nal supplier in a facility nextto the filling plant, maximiz-ing both cost efficiency andenvironmental compatibility.and low inventories. This approach also reducesour carbon footprint – due to the avoidance ofthousands of truck loads and more than a mil-lion kilometers in the transportation of emptyplastic containers.Promoting the global implementation of thislogistics concept has taken us to the top ofinternational supply chain benchmarks withinthe detergents industry.High efficiency throughcentralized services“Our Shared Service Centers in Bratislava and
  54. 54. Manila serve the global Henkel organization pri-marily in the fields of finance, procurement, hu-manresources and information technology (IT).Processes such as invoice recording, costing, andthe preparation of price lists or reports, to namebut a few, are performed centrally by special-ist teams within the Henkel organization. Asthese services are provided on behalf of manyunits at Henkel, we can achieve a high degree ofstandardization, assisted by our advanced, high-performance IT systems, enabling us to increaseoverall efficiency and speed while reducing thecosts for each individual operation.Important processes also become more trans-parent and we can guarantee better compliance.Further, these facilities enable us to attractyoung management talent from within Henkel’semerging markets. And I am sure that the SSCconcept offers a great deal more for the future.”Gaby DeussenHead of the Shared ServiceCenter in Bratislava, Slovakia.Henkel Annual Report 2010 17 Our ValuesProfitable growthEfficient processes and effective developmentare the cornerstones of our economic success. Forus as a performance-driven company, progressin these domains is key if we are to maintain andconstantly strengthen our long-term competitive-ness. We intend, through innovation, to growfaster than our peers in our highly competitive
  55. 55. markets, and to develop new markets whereverwe can.Increasing profitability is not an end in itself. Onthe other hand, we can only spend money that weearn. The more we earn, the more we can investin research and innovations, and in our markets.Communication with the capital marketThe Investor Relations team from Henkel hadmore than 500 meetings and events involvinginvestors and analysts last year. One of the mainhighlights happened on September 16, 2010 inDüsseldorf: top management from AdhesiveTechnologies provided around 70 internationalinvestors and analysts with a comprehensiveinsight into our adhesives markets, innovativeportfolio and growth drivers. Aside from presen-tations, Henkel employees held an exhibition toshow investors and analysts more of the greatpotential that Adhesive Technologies has to offer.The success of the Schwarzkopf brandOur hair cosmetics brand Schwarzkopf is thebiggest and fastest growing within the Henkelportfolio. Indeed, it is one of the most impor-tant hair cosmetics brands in the world. Its saleshave grown from 500 million euros in 1995 to1.8 billion euros in 2010. For the last 113 years, thename Schwarzkopf has been synonymous with
  56. 56. hair competence, and values such as modernity,high quality and innovative strength. This makesSchwarzkopf an ideal umbrella for a clearlydifferentiated brands portfolio serving both ourconsumer segment and our international hairsalon business, Schwarzkopf Professional.20quarters of profitablegrowth in a row posted byour Cosmetics/Toiletriesbusiness sector.This basic understanding guides the approachadopted by our three business sectors and ourcorporate functions, each of which endeavors tooptimize its processes and find synergies withinthe value chain – in close alliance with ourstrategic suppliers and our partners in research,development, production and logistics.A high level of profitability guarantees usgreater financial scope, gives us more flexibilityand enhances our development possibilities.And the better we manage our business, thebetter are the conditions under which we canobtain funds for investment from the financialmarkets.
  57. 57. Peter Rushe presents to theaudience of investors and ana-lysts some of our new productsfor consumers and craftsmen:Pattex Power PU Foam and thePritt Ecomfort Roller.Henkel Annual Report 2010 18 Our ValuesThe sustainability challenge“Companies are facing a very significant andgrowing challenge; that is, regulators, suppliers,employees and customers increasingly expectthem to act thoughtfully regarding their use ofenergy and natural resources, their impact onthe environments in which they operate and thewell-being of the people and communities theyserve.At the same time, companies must make profitscommensurate with their investments andshareholders’ expectations. In 2011 and beyond,determining strategies and taking actions thatcreate sustainable outcomes will be the key toindustry leadership.Henkel was among the first global companies tomake a profound commitment to sustainabilityas a core value. It has done a remarkable and
  58. 58. commendable job of achieving balance amongquality products, profitability and sustainabil-ity, something that other companies shouldemulate.”Dr. Rob MelnickExecutive Dean, Global Instituteof Sustainability, PresidentialProfessor of Practice, School ofSustainability at the ArizonaState University, USA.We are committed to leadershipin sustainability.We provide products, technologies and processes that meet the highest standards.We are committed to the safety and health of our employees, the protection of theenvironment and the quality of life in the communities in which we operate.Solar energy with adhesives from HenkelAround the world, our researchers and engineersdevelop products and technologies that combinetop performance with economic and ecologicalbenefits for our customers and consumers. Withour adhesives expertise, for example, we havebeen supporting the company Novatec Biosolsince 2006 in the development of concentratedsolar thermal systems – mirrors that generateenergy from sunlight. The challenge was to bondthe slightly curved mirrors to their galvanized
  59. 59. steel frames. An elastic Terostat MS adhesivecombined with a hardener compound provedto be the best solution. The adhesives – whichdo not require hazard labeling – offer excep-tional weather resistance. By the end of 2011, a30-megawatt power plant will have been built inSouthern Spain using our adhesives. This Adhe-sive Technologies project is an excellent exampleof how we cooperate with our customers in thedevelopment of new, sustainable technologiesthat are also economically viable.At the Puerto Errado 1 pilotthermal power plant in South-ern Spain, Meike Schumann,quality engineer at NovatecBiosol, and Thomas Witt-mann, field representative atHenkel, discuss the perfor-mance of Henkel’s TerostatMS adhesives. The banks ofmirrors generate energy byconcentrating the sun’s rays.For the fourth time in a row,Henkel has been named assector leader in the Dow JonesSustainability World Indexand in the DJSI Europe, againtaking first place in the “FastMoving Consumer Goods”category.
  60. 60. Henkel Annual Report 2010 19 Our ValuesResponsibility toward people and theenvironmentSustainable development has always been part ofthe Henkel credo. With our brands and technolo-gies, and also as an employer, we endeavor to meetthe needs of people today without jeopardizing thedevelopment opportunities of future generations.We pursue the precepts of sustainable develop-ment and corporate social responsibility alongthe entire value chain. This has contributed tothe acquisition of an outstanding reputation forus as a company and of globally leading positionsin our markets. And, with sustainability becom-ing an increasingly important factor for successin a competitive world, we fully intend to furtherextend this lead.Aid for schoolchildren in NigeriaEmmanuel Nweke, IT advisor at Henkel’s GlobalDelivery Service in Düsseldorf, shows childrenin Awkuzu, Nigeria, how to work and learn withlaptops donated by Henkel through the MITvolunteering initiative. For most of the children,this is their first ever contact with a computer.Emmanuel Nweke’s project “Awkuzu Children”opens the door to a better education for thesekids. Donations provided since 2007 have beenused to equip two school buildings and purchase
  61. 61. essential educational materials.Fritz Henkel FoundationIn January 2011, Henkelestablished the Fritz HenkelFoundation. In the future, thefoundation will serve as theumbrella for our socialengagement. The establish-ment of the foundationunderscores Henkel’slong-term commitment forsocietal concerns that extendbeyond its direct businessinterests. The mission of thefoundation comprises supportfor volunteer work on thepart of our employees,international disaster aid,and corporate and brandengagement.Modern energy technology in TolucaWe are continuously optimizing production in ourfactories. In our Toluca laundry products plant inMexico, the introduction of new technologies suchas a “secondary air injection system” has, since2007, reduced energy consumption in powder
  62. 62. production by 28 percent per ton. The productionplant, commissioned in 2009 for the manufactureof liquid detergents, is also state-of-the-art, withexceptional water and energy efficiencies. Heretoo, the packaging is manufactured next to theproduction line.Some 730,000people in 72 countriesaround the world werehelped by Henkel Smileprojects in 2010.www.henkel.com/smilePages 62 to 65.Sustainability Report,page 26.Our passion for combining product performancewith responsibility for people and the environmentdrives innovation, bringing commercial success toboth ourselves and our customers. We offer the lat-ter efficient and environmentally sound products,technologies and services with consumer-relevantbenefits. And our portfolio also empowers consum-ers to use resources in a more sustainable manner– without any adverse effect on their quality of life.Through effective communication, we explain toconsumers the advantages of our products, helpingto ensure their efficient use.
  63. 63. Day in, day out, millions of customers and consum-ers around the world decide in favor of our brandsand technologies as our core value-add for society.Our products, systems and services help supportclimate protection, promote resource conservationand encourage social progress.Henkel Annual Report 2010 20 Our ValuesThe company and the familyThe Henkel HQ of our North American consumergoods business in Scottsdale, Arizona, was in-augurated in March 2009. And, as in Düsseldorf ,Moscow, Shanghai and Vienna, there is a bustat the entrance of company founder FritzHenkel. This symbolizes both our entrepreneur-ship and the close ties that exist between thecompany and the family, happily perpetuatedby Dr. Simone Bagel-Trah and, from the fourthgeneration of Henkel family, Dipl.-Ing. AlbrechtWoeste, Chairman of both the Supervisory Boardand the Shareholders’ Committee between 1990and 2009.We build our future on ourfamily business foundation.We value the continuity of our purpose and vision based on our long history of successand a strong focus on our values. We are guided by our long-term vision which rests on afair entrepreneurial spirit and a solid financial basis.Identity and orientationWith the entrepreneurial spirit of company
  64. 64. founder Fritz Henkel – still an example for ouremployees around the world – having left an indel-ible mark on the corporation, the “family” valueprovides us with a quite special and unmistakableidentity.Henkel has always been a company with firmlyheld beliefs. Naturally, companies and their envi-ronments change in the course of time. However,these core values are as valid today as ever theywere. For founder Fritz Henkel too, it was the cus-tomer who was at the focal point of every decision,with the company equally conscious of its respon-sibility toward its employees and its duty to pursuesustainable economic development.The “family” value represents a clear commitmenton the part of the Henkel family to the company.The importance of entrepreneurship and respon-sibility for the future, so deeply rooted in our his-tory,is reaffirmed time and time again by peopleboth inside and outside the company. The “family”value distinguishes us from other companies.Ours is a long-term perspective. But we also knowthat without short-term success, there can be nolong-term success.Henkel Annual Report 2010 21 Our ValuesEntrepreneurship epitomized at Henkel Bulgaria:Darina Stoyanova (center), President Henkel Bulgaria, indiscussion with her assistant Nina Metodieva (left) andPanaiot Dimitrov, Head of Sales Laundry & Home Care.Hugo Henkel AwardSince 2005, Henkel has
  65. 65. been awarding the “Hugo-Henkel-Preis” to schools inthe communities surround-ing its German sites thatespecially promote scienceand technology in their cur-ricula. The award is namedfor Dr. Hugo Henkel, theyounger son of companyfounder Fritz Henkel andthe first chemist to join hisfather’s firm.Henkel in BulgariaHenkel began exporting toBulgaria in 1998. Just twoyears later, we foundedHenkel Bulgaria in the capitalSofia. Today we are the Bul-garian market leader in allthree of our business sectors.Our most important brandsthere are Bref, Ceresit, Clin,Fa, Gliss, Loctite, Moment,Palette, Persil, Perwoll,Pur, Rex, Schauma, Silan,Somat, Taft and Thomsit. Theworkforce driving the furthersuccess of Henkel Bulgariacurrently numbers 152.
  66. 66. “At the beginning, the Bulgarian market wasquite turbulent, characterized by strong localand international competitors,” Stoyanovareports. “Nevertheless, we have succeededin overtaking all our competitors within justa short timeframe, so that, by 2009, we hadalready gained the number one spot in themarket.” For her, there is no doubt: “Thiswould never have been possible withouteveryone in the company adopting thisspecial entrepreneurial approach.”For Stoyanova, this also means developinga passion for the task in hand. “Those whowork with passion show enthusiasm. Theyconstantly develop their talents and achievecorrespondingly high levels of performance.”The entrepreneurial approach personifiedby company founder Fritz Henkel and hisdescendants provides the paradigm for theteam in Bulgaria: “Our company’s historymakes us proud and enables us to identifywith the entrepreneurship that Henkel epito-mizes,” explains Stoyanova. “It also teachesus that success is a constantly developingprocess that takes time, hard work, staminaand forward thinking.”
  67. 67. Success through entrepreneurshipUnder the entrepreneurial leadership of DarinaStoyanova, the Henkel Bulgaria team has suc-cessfully built a thriving national laundry andhome care product business. Stoyanova is alsoPresident of Henkel Bulgaria. She and her teamregard entrepreneurship as a major factor forsuccess and market differentiator in the devel-opment of Henkel’s businesses in Bulgaria.Dr. Jost Henkel Foundation Konrad Henkel FoundationSince 1958, the “Dr. Jost-Henkel-Stiftung” hasbeen supporting students with a stand-outstudy record who are unable to sufficientlyfinance the expeditious completion of theirstudies from within their own means. Scholar-ships are awarded on an international basisfollowing completion of an individual selec-tion process. The foundation is open to alldisciplines, albeit with the emphasis on busi-ness and scientific studies. The company andthe Henkel family established the foundationin 1958 to mark the 25th year of service of thethen CEO, Dr. Jost Henkel.The “Konrad-Henkel-Stiftung” has been vari-ously promoting research and education atthe Heinrich Heine University in Düsseldorfsince 1985. The Henkel company establishedthis foundation to mark the 70th birthday oflong-time CEO and then Chairman of the Su-pervisory Board, Dr. Konrad Henkel. The mainfocus of the foundation is on supporting eco-nomics and the business sciences, togetherwith the process of international knowledge
  68. 68. interchange. In 1990, the foundation intro-duced an award, conferred twice a year, forthe best economics students at the Düsseldorfuniversity: the Konrad Henkel Exams Prize.Henkel Annual Report 2010 22 Shares and bondsShares and bonds• Henkel share prices outpace overall market to reach new historic highs• Weighting of the Henkel preferred share within the DAX 30 increased• International, widely diversified shareholder structure• Ongoing and extensive capital market communicationsHenkel share prices again experienced above-average increases in 2010, reaching historic highs.Thanks to the end of the global recession andpositive growth rates in the world economy, theDAX gained 16.1 percent compared to the closingprice of the previous year. The industry benchmarkin the form of the Dow Jones Euro Stoxx ConsumerGoods index increased by 25.6 percent. Within thispositive market environment, the price of Henkel’spreferred shares actually outpaced that increase,closing the year at 46.54 euros, 27.7 percent abovethe prior-year level, having reached a historichigh on December 1 with 48.40 euros. Closingat 38.62 euros, our ordinary shares showed anincrease of 24.0 percent, having likewise reacheda historic high of 40.30 euros on December 6.In the first ten months of 2010, Henkel shares
  69. 69. initially tracked the market as a whole with overallpositive tendencies, thereafter rising substantiallyas the end of the year approached. Henkel shareprice levels were positively influenced by the verystrong operational developments undergone by thecompany. Toward year-end, Henkel’s shares wereable to successively further improve on their previ-ous highs, outperforming the relevant benchmarkindexes.Trading volumes in preferred shares remainedalmost unchanged in the year-on-year comparison .Each trading day saw an average of 1.0 millionpreferred shares changing hands (previous year:1.0 million). The average volume in the case ofour ordinary shares decreased to 130,000 pertrading day (previous year: 200,000). Due to thepositive increase in share price levels, the marketcapitalization of our ordinary and preferred stockcombined rose from 14.6 billion euros to 18.3 bil-lion euros.For long-term investors, Henkel’s shares remain avery attractive investment. Shareholders who in-vested 1,000 euros when Henkel’s preferred shareswere issued in 1985, and then re-invested thedividends received (before tax deduction) in thestock, would have had a portfolio value of about14,344 euros by the end of 2010. This represents aninvestment growth of 1,334 percent or an average
  70. 70. yield of 11.1 percent per year. Over the same period,DAX tracking would have provided an annual yieldof 7.4 percent. And over the last five and ten years,Henkel preferred shares have shown an averageyield of 12.4 and 9.1 percent per year respectively,offering a significantly higher return than the DAXwhich yielded 5.0 and 0.7 percent in the samerespective periods.www.henkel.com/shares504030201002003 2004 2001 2002 2005 2006 2009 2010 2007 2008December 31, 2010December 31, 2000Henkel preferred share performanceversus market 2001 to 201046.54 euros23.10 eurosDAX (indexed)
  71. 71. Henkel preferred shareDJ Euro Stoxx Consumer Goods (indexed)in euros5045403530Henkel preferred share performanceversus market 2010December 31, 200936.43 eurosDecember 31, 201046.54 eurosApril May Feb.Jan. March June July Oct. Nov. Aug. Sep. Dec.DAX (indexed)Henkel preferred shareDJ Euro Stoxx Consumer Goods (indexed)in eurosHenkel Annual Report 2010 23 Shares and bondsfor the capital markets and as benchmarks for fundmanagers. Particularly noteworthy in this respectare the MSCI World, the Dow Jones Euro Stoxx,
  72. 72. and the FTSE World Europe indexes. Henkel isalso listed in the Dow Jones Titans 30 Personal &Household Goods Index, confirming our positionas one of the 30 most important listed corporationsoperating in the personal and household goodssectors worldwide. And as a DAX stock, Henkelcounts as one of the 30 most important listed com-panies in Germany.As of year-end 2010, the market capitalization ofthe DAX-relevant preferred shares was 8.3 billioneuros, placing Henkel 21st among the DAX com-panies (2009: 20th). In terms of trading volumes,Henkel was ranked 26th on the list (2009: 28th).Our DAX weighting rose to 1.32 percent (2009:1.22 percent).International shareholder structureThe ownership structure of our preferred shares– the significantly more liquid class of stock –shows a free float of 100 percent. A large majorityof these shares are owned by institutional inves-tors with globally distributed shareholdings.According to notices of disclosure received bythe company, members of the Henkel family owna majority of the ordinary shares amounting to53.21 percent. We have received no further noticesKey data on Henkel shares 2006 to 2010in euros 20061)
  73. 73. 20071)2008 2009 2010Earnings per shareOrdinary share 1.97 2.12 2.81 1.38 2.57Preferred share 1.99 2.14 2.83 1.40 2.59Share price at year-end2)Ordinary share 32.73 34.95 18.75 31.15 38.62Preferred share 37.16 38.43 22.59 36.43 46.54High for the year2)Ordinary share 33.14 37.50 34.95 31.60 40.30Preferred share 37.82 41.60 38.43 36.87 48.40Low for the year2)Ordinary share 25.66 29.96 16.68 16.19 30.31Preferred share 28.21 33.70 19.30 17.84 35.21DividendsOrdinary share 0.48 0.51 0.51 0.51 0.703)Preferred share 0.50 0.53 0.53 0.53 0.723)Market capitalization2)
  74. 74. in bn euros 15.1 15.9 8.9 14.6 18.3Ordinary share in bn euros 8.5 9.1 4.9 8.1 10.0Preferred share in bn euros 6.6 6.8 4.0 6.5 8.31)Comparable based on share split (1:3) of June 18, 2007.2)Closing share prices, Xetra trading system.3)Proposed.Henkel shares listed in all major indexesHenkel shares are predominantly traded on theXetra electronic market of the Frankfurt StockExchange. Henkel is also represented on the floorof this and all other regional stock exchanges inGermany. In the USA, investors are able to acquireHenkel preferred and ordinary shares by way ofstock ownership certificates obtained throughthe Sponsored Level I ADR (American DepositaryReceipt) program. The number of ADRs represent-ing ordinary and preferred shares outstanding atthe end of the year was about 4.1 million (end of2009: 5.1 million).Share dataPreferred OrdinarySecurity code no.: 604843 604840ISIN code DE0006048432 DE0006048408
  75. 75. Stock exch. symbol HEN3.ETR HEN.ETRNumber of shares 178,162,875 259,795,875ADR dataPreferred OrdinaryCUSIP 42550U208 42550U109ISIN code US42550U2087 US42550U1097ADR symbol HENOY HENKYThe international importance of Henkel preferredshares derives not least from their inclusion inmajor indexes that serve as important indicators€18.3 bnmarket capitalization.Shareholder structure:Institutional investorsholding Henkelpreferred sharesSource: Thomson Reuters.27 % USA23 % UK14 % Germany10 % France17 % Rest of Europe 9 % Rest of WorldHenkel Annual Report 2010 24 Shares and bondsof disclosure from other shareholders indicating
  76. 76. a shareholding in excess of 3 percent of the votingshares (notifiable ownership).In the period up to 2007, Henkel repurchasedaround 7.5 million preferred shares to fund theStock Incentive Plan operated for our seniorexecutive personnel. As of December 31, 2010, thistreasury stock amounted to 4.0 million preferredshares.Employee share programSince 2001, Henkel has been operating an employ-ee share program (ESP). For each euro invested byan employee (limited to 4 percent of salary up to amaximum of 5,000 euros per year), Henkel addedan additional 33 cents in 2010. The number of sub-scribers increased by 12 percent in the year underreview compared to the previous year, with around10,500 employees in 57 countries buying Henkelshares within the framework of this program. Atyear-end, around 14,000 employees held a totalof some 3.6 million shares within the ESP, repre-senting roughly 2.0 percent of the total preferredshares outstanding. The vesting period for newlyacquired ESP shares is three years.Henkel bondsHenkel is represented in the international bondsmarkets by three bonds with a total nominal vol-ume of 3.3 billion euros:Bond dataSenior bond Senior bond Hybrid bond
  77. 77. Due date June 10, 2013 March 19, 2014 Nov. 25, 21041)Volume 1.0 billion euros 1.0 billion euros 1.3 billion eurosNominalcoupon 4.25 % 4.625 % 5.375 %Couponpaymentdate June 10 March 19 Nov. 25Listing Frankfurt Luxembourg LuxembourgSecuritycode no. 664196 A0AD9Q A0JBURISIN code DE0006641962 XS0418268198 XS02344342221) First call option for Henkel on November 25, 2015.Further detailed information regarding thesebonds, current developments in their respectiveprices and the associated risk premium (creditmargin) can be found on our website www.henkel.com/bondsPro-active capital market communicationHenkel is covered by numerous financial ana-lysts, primarily in the UK, Germany and the USA.Over 35 equity and debt analysts regularly publishreports and commentaries on the performance ofthe company.Henkel places great importance on meaningful