Dynamic Growth for Henkel CEE

Henkel Expands Market Leadership Position in Central and Eastern Europey

Henkel Central Eastern Europe with headquarters in Vienna has further expanded its market leadership position in Central and Eastern Europe in all business segments. The company posted revenues of EUR 367.5 million in the first half of 2001.

Henkel CEE based in Vienna, one of the largest manufacturers of brand-name products in Central and Eastern Europe, further strengthened its market leadership position in the region. The company achieved revenues of EUR 367.5 in the first six months of 2001, an increase of 8.8 per cent compared to EUR 337.5 last year. According to Friedrich Stara, President of Henkel CEE, total revenues in the year 2001 are expected to surpass EUR 700 million for the first time.

The success story of Henkel in Central and Eastern Europe dates back to 1984, which marks the initial launch of exports to the region. Since the first foreign CEE subsidiary was established in Hungary in 1987, Henkel has set up an additional 20 joint ventures in Central and Eastern Europe, and has invested more than EUR 174 million to date to expand its presence in the emerging CEE markets.

Today, Henkel CEE operates 12 subsidiaries with a total of 14 production facilities, with responsibility for 15 countries and 185 million inhabitants. Henkel does business in Austria, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Ukraine and Yugoslavia. 3,600 of Henkel CEE’s 4,400 employees work in Central and Eastern Europe, which now accounts for three-quarters of the company’s total revenues.

Despite intensive international competition, the company has successfully positioned itself in Central and Eastern Europe. In the year 2000, total revenues were EUR 690 million, close to a six-fold increase compared to revenues of EUR 122 million in 1989.

Henkel CEE is number one in adhesives and hair care products in the CEE region, the top provider of surface technologies and a strong number two in the market segment for detergents and household cleansers. Its most well-known brands include Persil, Silan, Loctite, Pattex, Schwarzkopf, Poly and Fa.

Successful Strategy

The company’s extensive know-how and experience are optimally applied within the framework of a regional operational plan. This puts Henkel closer to the business pulse of its CEE target markets and makes the company more flexible in responding to complex issues and trends. The formula for success is positioning Henkel as a partner to Central and Eastern Europe, providing products of the highest quality tailored to individual needs.

Ongoing Positive But Cautious Growth Perspectives

The year 2000 went well for the markets of Central and Eastern Europe. This was due, above all, to positive external factors influencing growth. All CEE countries posted economic growth, several of which did so in an impressive manner. The whole region took a big step forward in catching up economically.

However, since the beginning of 2001, world market conditions have been characterised by a significant cyclical downturn. “A slowdown in the EU, which absorbs the lion’s share of exports from Central and Eastern Europe, would have a major impact on these markets. Weak economic growth in the EU could also negatively influence the CEE candidates for EU membership,” Henkel President Stara says.

Growth in the gross national products of the CEE markets continued into the first few months of 2001, whereas a slowdown in some countries, for example Poland, can be attributed to internal factors such as high interest rates and currency revaluation. Inflation in most CEE countries is under control and inflation rates are declining. A rise in unemployment continues to remain a major challenge, particularly in Poland and in Slovakia. This is complemented by a deterioration in the balance of trade and current account balance due to higher consumer demand in these countries, which has led to an increase in imports. The financing of the current account deficits, which make up 5 per cent of gross national product in the case of most CEE candidates for EU membership, is ensured for the time being. However, this could pose a problem in the next two to three years, following the end of large-scale privatisations.

Henkel CEE: Market Overview

Austria Henkel Austria is one of the largest companies within Henkel CEE in terms of both size and annual revenues. With one production facility and 770 employees, Henkel Austria achieved revenues of EUR 167 million in the year 2000. The company is Austrian market leader for detergents and household cleansers, hair care products, adhesives and surface technologies.

Poland

Henkel Polska with six production facilities and 1135 employees posted revenues of EUR 196 million in 2000, making it the largest company within Henkel CEE for the first time instead of Henkel Austria. Henkel Polska is the country’s market leader for hair care products, and is strongly positioned in the market segments for detergents, toiletries, adhesives and surface technologies.

Hungary Henkel Magyarország based in Budapest operates four production facilities. The company employs a work force of 800, posting annual revenues of EUR 102 million last year. Henkel
Magyarország is number one in the country for detergents and household cleansers, hair care and body care products, adhesives and surface technologies.

Czech Republic

Henkel CR with 280 employees achieved EUR 73 million in revenues in 2000, and is positioned as the number one provider in the country for adhesives, hair care products and toiletries as well as for surface technologies. Henkel CR ranks a close second in the market segment for detergents and household cleansers.

Slovakia Henkel Slovensko was established in 1991. With one manufacturing facility and 240 employees, the company had revenues of EUR 33 million last year. Henkel Slovensko is market leader for adhesives, hair care products and surface technologies, and is ranked a close second in detergents and household cleansers.

Slovenia

Henkel Slovenija with headquarters in Maribor is Henkel’s fifth largest European factory for cosmetics and body care products. With 660 employees, the company had revenues of EUR 36 million in the year 2000, serving as the nation’s top producer of detergents and household cleansers, hair care and body care products and surface technologies.

Romania Henkel Romania, established in 1994, markets detergents and household cleansers, cosmetics, body care products and adhesives on the Romanian market. 285 employees achieved revenues of EUR 39 million in the year 2000. Following the setting up of the joint venture Henkel Bautechnik in 1999, the first Henkel manufacturing plant for structural engineering products in Romania commenced production in the year 2000.

Croatia

Henkel Croatia in Zagreb is a sales company which markets detergents and household cleansers, cosmetics, toiletries and adhesives. With a work force of 53, the company achieved revenues of EUR 17 million last year. Schwarzkopf & Henkel is the undisputed market leader in the cosmetics sector. The brands Fa, Poly Color, Taft and Schauma dominate the Croatian market.

Baltic States

Henkel is represented in all three Baltic States -- Estonia, Latvia and Lithuania. 125 employees achieved revenues of EUR 15 million in these three markets last year.

Ukraine

The latest addition to Henkel CEE is the Ukraine. Henkel is represented in the country with two companies: Henkel Uzhgorod, which was established at the end of 1999, and Henkel Bautechnik, a joint venture founded in 1998 with a production plant in Kiev which began operating in 1999. Henkel Uzhgorod produces detergents on a compound basis, along with scouring agents and shoe polish. Henkel expects revenues in the Ukraine to reach a level of EUR 14 million in 2001.