Henkel Coordinates Business Operations in 29 Markets from Vienna

Vienna, February 22, 2005

Russia Key Future-Oriented Market for Henkel

Vienna, February 22, 2005 - Henkel Central Eastern Europe (Henkel CEE) posted a significant improvement in its 2004 business results. The company increased its annual revenues to 1.144 billion Euro in 2004, a rise of 14 percent in local currency (+11.4 percent when adjusted for currency fluctuations) from the previous year�'s total of 1.027 EBIT (earnings before income and taxes) climbed 22 percent to 123.2 million Euro (+ 10.1 percent when adjusted) from the 2003 total of 111.9 million Euro.

"Henkel is successfully taking advantage of the exciting opportunities on the Central and Eastern European markets," says Günter Thumser, the new President of Henkel CEE, in summarizing the company�'s performance during the 2004 business year. The adhesives and technologies business segments achieved particularly strong growth, whereas the production of detergents in Vienna reached a record level.

Henkel CEE, with its headquarters in Vienna, Austria, coordinates the company�'s business operations in 29 countries. The region�'s 420 million inhabitants represent an enormous economic growth potential. "Eastern Europe is, in fact, an emerging growth region. However, for the same reason, the region poses major challenges to us", Mr. Thumser states in focusing on the investments which are required. "A total of 48 million Euro have been invested in the supply chain alone in order to build up new structures in countries such as Russia, Serbia or the Ukraine." Henkel employs 7,688 people in Central and Eastern Europe.

Growth in All Business Segments

Russia was the main focus in 2004 in the Laundry & Home Care segment. Henkel CEE achieved a high growth in revenues in Russia, underlining the company�'s increased presence in this future-oriented market. Business in Poland was also particularly successful, with Henkel CEE boosting its market share to record levels in almost all categories. In Austria, Henkel CEE achieved its highest market share in this business segment in the company�'s history.

The Cosmetics/Toiletries business in CEE is highly competitive. Nevertheless, Henkel CEE successfully consolidated its market leadership position in the hair cosmetics, hair colorant and styling segments. In the second half of 2004, revenues grew more rapidly than in the previous six months. This can be attributed to the successful market launch of Fa Aroma Range, a relaunch of the Schauma hair care product line and a new launch of Taft Silk-Flex in the CEE region.

Business development in the Henkel Technologies segment was also particularly profitable in 2004. This is due to broad-based investments in Eastern Europe�'s automobile industry as well as Henkel�'s being represented on the local markets through its own qualified employees before multinational companies initiated business operations in the region. Henkel also supplies Austrian manufacturing facilities with products from its high-value technologies segment. For example, Henkel is an industrial partner of Magna Steyr in Graz, which not only assembles the BMW X3, but which will manufacture a large number of Chrysler 300 vehicles as of the middle of 2005.

2004 marked the most successful year for the Consumer and Craftsmen Adhesives segment since Henkel CEE was first established. Henkel Bautechnik, with its popular Ceresit and Thomsit brands, is in the process of commencing business operations in Belarus. A production facility is under construction in Zaslavl (near Minsk), where 80 employees will manufacture cement-based powdered products.

Henkel Focus on Russia, Serbia and the Ukraine

The situation in those countries in which Henkel CEE most recently began doing business pose major challenges for Henkel. "Russia itself means that a market with 146 million inhabitants is open to Henkel�'s expansion," says Henkel CEE President Günter Thumser, looking optimistically into the future. Business results for the year 2004 were promising. Three Henkel production facilities are currently manufacturing detergents in Russia. "This represents an enormous challenge for logistics, sales and marketing, in the light of the distances involved and frequent deficiencies in the existing infrastructure", Mr. Thumser says.

In this connection, demand is particularly strong for liquid products. For this reason, investments had to be made in Tosno (Russia) and in Krusevac (Serbia) in order to modernize production processes.

In addition to manufacturing, there are logistic challenges, which often lead to the development of Henkel�'s own product lines. On the one hand, construction is being started on a modern distribution center in Tosno. On the other hand, the Vienna research and development group has developed Vernel, a fabric softener brand adapted to Russian conditions, which is particularly frost-resistant. Vernel can defy freezing temperatures which often prevail on the long transport routes, during storage or when products are sold at open-air markets.

In the field of construction engineering, the expansion of production capacity was an important issue in 2004. Henkel Bautechnik opened a second plant in the Ukraine, and constructed a production facility for building chemicals at Henkel Merima�'s detergent factory in Krusevac, Serbia.

CEE as Driving Force for Growth

Henkel CEE now achieves 85 percent of its total revenues in Central and Eastern Europe. Poland, Russia, Austria and Hungary are the biggest markets for Henkel CEE in terms of revenues. The CEE region with an annual GDP growth rate of close to five percent ranks among the very few growth regions in the world. It is necessary to continue transferring extensive know-how to CEE, due to problems with the local infrastructure as well as the varying degrees of economic development in the different markets. For this reason, Henkel CEE will continue to serve as the headquarters for the entire CEE region within the worldwide Henkel Group.

Vienna is a Strategically Important Location for Henkel

For one thing, Vienna has overall management responsibility for coordinating Henkel�'s business activities in 29 countries in the Central Eastern Europe region. In addition, Vienna also plays an important role as a production and logistics location for Henkel. The manufacturing facility located in Vienna�'s third district achieved record production figures for both powdered and liquid products, characterized by the highest possible product quality and safety levels in a closed, dry neutralization process.

The product development work being carried out in Vienna responds closely to Central and Eastern European needs. The Vienna-based product development team has left its imprint on products such as Dixan Universal for colored and white laundry or the CEE powdered detergent brands Rex, Merix and Tomi with soda effect. However, a particular highlight was the development of the frost-free, triple-concentrated Vernel fabric softener. This can be described as Henkel�'s response - made in Austria - to the extremely frosty temperatures prevailing in Russia�'s "open-air distribution structures".

Henkel is currently working on adapting central warehouse facilities which will be ready for use in September 2005. Located on what was formerly the grounds of the Grundig production plant in Vienna�'s 12th district, the new distribution center will provide jobs for 80 people. This is a clear signal, that "Henkel will continue to move ahead in the same direction as it has done successfully in the past," Mr. Thumser adds.

Henkel Central Eastern Europe in Brief

Henkel CEE is responsible for business operations in 29 countries: Austria, Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Mongolia, Poland, Romania, Russia, Slovakia, Slovenia, Serbia and Montenegro, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

Henkel CEE is the market leader in Central and Eastern Europe in the adhesives and hair cosmetics segments, and a strong number two in the detergents segment. Henkel is also the leading technologies provider in the region. The most well-known Henkel brands include Loctite, Pattex, Schwarzkopf, Poly, Fa, Silan and Persil.