Henkel Central Eastern Europe (CEE) Further Expands Its Market Position

Henkel CEE Revenues Surpass 1 Billion Euro

Henkel Central Eastern Europe, Vienna-based regional headquarters for Germany�'s multinational chemical company Henkel Group, surpassed the very favourable business results posted in 2003, expanding its significant market position in Central and Eastern Europe in all business segments. For the first time in the company�'s history, total annual revenues exceeded the 1 billion Euro mark, rising 25 per cent to 1.027 billion Euro. Henkel CEE�'s core business excluding its newly-acquired operations on the Russian market climbed by 8.4 per cent. The revenue increase amounts to a rise of 14 per cent when adjusted to exclude the effects of exchange rates.

Henkel Central Eastern Europe (Henkel CEE) based in Vienna, one of the leading producers of brand-name consumer products in the CEE region, once again posted record results in the year 2003. Buoyed by its assuming overall responsibility for Henkel Group�'s business operations in Russia, Henkel CEE achieved total revenues of 1.027 billion Euro in 2003 in 18 Central and Eastern European markets. This represents an increase of 25 per cent compared to total revenues of 818 million Euro posted in 2002, a figure which does not take account of revenues derived from Russia. Henkel CEE�'s core business operations excluding Russia amounted to 885 million Euro in 2003, an increase of 8.4 per cent compared to the previous year. The growth in annual revenues actually amounts to 14 per cent when adjusted to exclude the impact of exchange rates.

"Our core business precisely fulfilled the expectations we had for the year. The negative impact resulting from prevailing exchange rates could be compensated by our acquisitions of Henkel Merima in Serbia and of Makroflex, the Finnish manufacturer of insulating materials," says Mr. Friedrich Stara, President of Henkel CEE. The company�'s EBIT (including Russia) in 2003 amounted to 111.6 million Euro, up 8.4 per cent compared to the year before.

New Responsibility for Russian Operations

In May 2003, Henkel CEE assumed overall responsibility and management for Henkel�'s detergents business in Russia. The detergents segment has now been successfully integrated into Henkel CEE�'s organizational structure along with the adhesives business which has been coordinated from Vienna up until now. "This represents responsibility for an additional 147 million Euro in revenues," Mr. Stara adds. The new business activities in Russia have added 1,900 people to Henkel CEE�'s work force, pushing the total number of employees up to 7,700.

Henkel operates three detergents and cleansers facilities in Russia: Henkel-Era in Tosno, located in the St. Petersburg region, Henkel-South in Engels and Henkel-Pemos in Perm. The manufacturing plants apply the most advanced Henkel production technologies, producing international brands such as Persil and Pril as well as well-known local brands such as Pemolux, Pemos, Losk, Deni and Laska.

CEE Accounts for Revenue Growth

The Central and Eastern European markets now account for 83.1 per cent of Henkel CEE revenues. CEE further expanded its position as the most important region within Henkel CEE�'s business operations, achieving revenues of 854 million Euro in 2003.

Henkel CEE is the regional market leader for adhesives and hair care products in Central and Eastern Europe, and a close second in the detergents segment. Henkel is also positioned as the leading regional provider in the technologies segment. Loctite, Pattex, Schwarzkopf, Poly, Fa, Silan and Persil rank among the most well-known Henkel brands in the CEE region.

Despite the unfavorable business environment prevailing on the Polish market, Henkel Polska remains the largest subsidiary within Henkel CEE, accounting for revenues of 188 million Euro. Austria ranks second, achieving annual revenues of 173 million Euro. Henkel is the market leader in Austria in a number of business segments, including detergents, hair care products, adhesives and technologies.

Hungary is the third largest market for Henkel CEE, accounting for 125 million Euro in revenues, followed by Henkel CR located in Prague, Czech Republic, which posted revenues of 93 million Euro in 2003.

Successful Acquisitions

The 2002 acquisition of a majority stake in Merima, Serbia�'s largest detergent manufacturer, represents an important step forward in Henkel CEE�'s ongoing expansion efforts. "Serbia and Montenegro with its 10 million inhabitants is a key market for Henkel CEE. Furthermore, the company is centrally located in a region with 55 million people. For these reasons, we envision large-scale opportunities for us to export into neighboring countries," states Friedrich Stara in justifying the expansion into the Serbian market. This corporate acquisition enables Henkel to further boost its market position in Central and Eastern Europe and ensure ongoing growth in the region.

Henkel CEE�'s Business Segments in Detail

The business segment for detergents and cleansers boosted its 2003 revenues to 461 million Euro, up 35.6 per cent from the year before. This includes the newly-acquired business operations on the Russian market.

Without taking account of Russia, Henkel CEE�'s detergents and cleansers business increased its revenues by 6.2 per cent in 2003.

This business segment accounts for 44.8 per cent of Henkel CEE�'s total revenues.

Henkel CEE�'s cosmetics business segment further expanded its market leadership position in the field of hair care products. Cosmetics accounted for 219 million Euro or a 21.3 per cent share of total Henkel CEE revenues.

The adhesives business segment increased its revenues to 172 million Euro and its share of total Henkel CEE revenues to 16.8 per cent. The adhesives segment succeeded in expanding its market position in the region primarily through the acquisition of Makroflex, the Finnish manufacturer of insulating materials.

The newly-structured technologies segment posted double-digit growth in 2003. Revenues increased to 160 million Euro, representing a 15.5 per cent share of total Henkel CEE revenues.

Consequences of EU Expansion

"With an annual economic growth of close to 4 per cent, the CEE region ranks among the very few growth areas in the world. Nevertheless, the process of integrating the region into the European Union will last much longer. It is a long way to move from political and strategic integration to a economically and globally strong Europe," Henkel CEE President Friedrich Stara concludes in reflecting on the EU expansion process. Henkel CEE will continue to operate as the regional headquarters for CEE on behalf of the worldwide Henkel Group.

Henkel Central Eastern Europe At A Glance

Henkel CEE is responsible for business operations in 18 countries: Austria, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Serbia and Montenegro, Slovakia, Slovenia and the Ukraine.