Henkel Ag & Co Kgaa S/Adr

Good morning to everyone. A warm welcome. Everyone joining the call today on PANCL's Task Year 2025 results. I'm Lydia Skinhead of PANCL's Investor Relations. Today I'm joined by our CEO, Carson Snowville, and our CFO, Marco Solvita. Carson will begin with a overview of the key developments and highlights in the first half. Marco will follow with a more detailed review of the financial performance. As always, following the presentation, we will open up the lines, and Carson and Marco will be happy questions. Before handing over to Carson, please let me remind you that this call will be recorded and will be available on our Investor Relations website shortly after this call. By asking a question during the Q&A session, you are going to go to live broadcasting as well as the recording of your question, including solicitation to be published on our website. Also, please do remind us that this presentation contains the usual formal disclaimer in regard to forward-looking statements, within the meaning of relevant news legislation. It can also be accessed via our website at hankl.com. As always, the presentation and discussion are conducted subject to this disclaimer. With this, it is my pleasure to hand over to our CEO, Karsten Sohles. Karsten, please go ahead.

Thank you so much. So, good morning, and a warm welcome also from my side to everyone joining our conference call today. As always, we do appreciate your interest in our company, and we look forward to answering your questions After walking you through the key developments of the first six months, we will elaborate on Hackman's business performance and the full year outlook in more detail. So let me move straight to the key topics and highlights of the first half. Organic sales growth in the first half was flat, while clearly positive in Q2. Encouraging to see was the clear volume improvement by more than 400 basis points in Q2 in consumer brands, which together with positive pricing led to positive organic sales growth. In adhesive technology, we also saw positive pricing and a positive volume development, due to which also led to positive organic sales growth. Working day adjustment, organic sales growth in age 1 would have been above 2%. Engel also recorded a strong EBIT margin increase, driven by very strong growth margins, while keeping up with appropriate investment levels in order to fuel further growth. In addition, EPS at constant currencies grew strongly by 5% versus the prior year, a good achievement in the exceptionally strong 2024 basement. Share buyback we announced issue 1 has started in May and is well underway. We can execute it faster than the first share buyback we conducted roughly two years ago. As of June 30th, shares worth more than $350 million have already been bought back. In the meantime, we have already exceeded $400 million. We have updated our 2025 guidance and narrowed the ranges, broadly correlating with the current market expectations. In part, even slightly above, and we continue to expect a stronger half to top line levels H1. Our guidance for the full year continues to increase effects from tariffs around the globe. With the setup that we have, we benefit from the fact that we source and produce the vast majority domestically. With that, let's turn to our adhesive technology system, where we leverage global opportunities along the global mega-trends, mobility, connectivity, digitalization, urbanization, and sustainability. Today, I would like to focus on how we drive sustainable innovations across segments and thus help customers across industries to benefit from impactful, eco-efficient solutions and also meet their environmental goals. In the following, I will highlight three specific examples that demonstrate how we are translating sustainable innovation into short, but also into long-term growth. And that begins by reaffirming our strong commitment to advancing smart e-bonding solutions, a key enabler of future-ready design and sustainable growth. Our goal is clear, reducing costs and maximizing resource efficiency to innovative debonding on-demand systems. The impact is substantial. We are enabling circularity at scale, facilitating repair, reuse, and recycling across multiple industries. This is particularly relevant for high-value components, where repair and reuse offer significant economic advantage. Regulatory developments, such as the right to repair in electronics, further accelerates the need for scalable solutions that support extended product lifestyles. With de-bonding and re-bonding, we are taking a key step towards a more sustainable and economically viable future. A good example of how we put this ambition into action is the establishment of a global network of battery engineering centers. These state-of-the-art facilities, located across all major regions, are designed to support the full battery development cycle from digital modeling and simulation to automated material application through testing and validation, including advanced battery debonding capability. To enable circularity at scale, Engel has co-founded, alongside leading industry partner, Path.era, a scalable ecosystem for digital battery platforms. Path.era is built to enable full traceability including information on carbon footprint, materials, and recyclability across the battery value chain. All of this is integrated under one roof within our strong innovation network, enabling collaboration, speed, and scale. We also continue to unlock organic growth through sustainable innovations in the fast-growing market. In our metal packaging business, we are outperforming the market with high single-digit growth, driven by a clear focus on sustainable and customer-centric innovation. An example that clearly stands out within this segment is the first two markets, low-temperature and low-foam can cleaners. This innovation allows for a temperature reduction of up to 24 degrees Celsius in the canned water and thus enables efficient and sustainable beverage can manufacturing, resulting in significant energy savings and up to 25% less water consumption. Over the past three years, we have tripled the size of our low-temperature and low-foam business, and we expect this to grow double-digit through 2028. This momentum will accelerate the performance of our metal packaging business overall even further. Another compelling example of how we drive future growth through innovation comes from the hydrogen market. The sector poised for exponential expansion. With our threat-series test for hydrogen compatibility, we are shaping the hydrogen industry. In the market, where formal standards are still emerging, we are setting the bar with our proven log-type solutions that combine safety through leak prevention and are certified for hydrogen compatibility, whether in electrolysis, pipelines, storage tanks, or to eat cell systems. One of our solutions Validated through high-pressure endurance testing translates directly into higher efficiency across hydrogen production, transport, and use. Our hydrogen ready adhesive and sealant solutions are increasingly supporting critical devices and components throughout the hydrogen ecosystem, leading to an estimated full addressable market of more than 120 euros by 2030 in thread and flange sealing solutions alone. Overall, the global hydrogen market is highly attractive and expected to expand four to five times by 2050. At clean hydrogen scales, our hydrogen-ready solutions are designed to reduce leaks, extend equipment life, and support the industry's transition towards net zero emissions, positioning us uniquely to grow with a clean energy transition. Let's move now to the consumer world. In consumer brands, We are consistently investing in innovation and brand equity, with the same strong momentum particularly across our top 10 brands, which meanwhile represent around 60% of our sales. In the second quarter, our top 10 brands delivered a year's top-line acceleration, achieving more than 3% organic sales growth, shooting by a positive, and a balanced development in both price and volume. Innovations are key. in order to enhance the valorization of our portfolio in consumer brands and drive further top and bottom line growth, and we're keeping up with the appropriate investment levels behind our brands in order to fuel further growth. Let me now also share some specific examples on how we are creating consumer-centric innovation by leveraging global trends and our technology leadership to offer strong added value for consumers. As we continue to drive growth across our top 10 brands, we are also strategically investing in our ambition to become the authority in hair. A key pillar here is the expansion of our global footprint with dedicated regional innovation hubs. After the successful launch of the Anchor House of Hair in Hamburg, we have now opened additional hubs in Los Angeles, Guadalajara, and Tokyo. Into two, our hair business, the Chief More than 3% organic sales growth, the rollout across North America, Latin America and Asia clearly strengthens our position as the number two player in our active hair market globally and reinforces our commitment to consumer-centric innovation. The hubs allow us to be closer to our consumers and professionals in each region, enabling us to better understand and respond to local hair needs and preferences. On a global level, We unite around 1,000 hair experts from R&D, marketing, and sales and integrate customer testing under one roof, creating a collaborative environment to capture global trends and accelerate innovation. Altogether, we drive our over 750 R&D projects, conduct more than 3,000 customer tests annually, and empower more than 11,000 hairdressers with cutting-edge education. By engaging directly with local consumers and professionals, by leveraging shared insights across regions, we are acting as one global team, delivering superior hair solutions that meet diverse needs across all categories. And also here now, let me highlight some recent innovations that are contributing to our strong momentum across care, coloration and styling. Schwarzkopf. Our number one master brand in our consumer brand portfolio, comprising consumer and professional products, and including brands like Gliss and now also Cream Supreme, delivered mid-single-digit organic growth with strong volume contribution in Q2. Gliss contributed to this performance with mid-single-digit organic growth and strong volume development, also supported by the launch of the Gliss Full Hair Wonder Care line in Q1, an innovation rooted in deep consumer insights. Its innovative dual-action formula combining caffeine and peptides directly addresses widespread concerns around hair thinning and breakage, delivering visibly fuller hair in just six weeks. This market success of this innovation translated into a market share gain of 20 basis points in the first half of this year. The ongoing rollout of our new sub-brand Cream Supreme contributed to the high single-digit growth of our consumer coloration category in Q2. It directly addresses the number one concern in hair coloration, damage. With a unique three-step bonding routine, from pre-serum to even out-hair porosity, bonding color cream for long-lasting color and protection, and bonding mask to repair and strengthen post-coloring, it is the first at-home coloration offering anti-damage protection at every step. This innovation not only elevates consumer experience, but also drives premiumization within the category by combining salon-inspired care with high-performance color results. Cream Supreme significantly strengthened our competitive edge, particularly in the strategically important blonding segment. Another strong example is our successful styling brand Got2D, which delivered high single-digit organic growth in Q2, This was driven by trend-led innovations like the glued, waxed-stick and tinted gels for brows and edges, addressing the demand for ultra-sleek looks and fuller brows, resonating strongly with younger audiences. With presence in over 50 countries, Got2D has firmly established itself as the number one styling brand globally for Gemset and Alpha. And finally, SIOS is a great example of how we drive premiumization across all categories, care, color, and styling. Following a comprehensive brand relaunch, SIOS achieved mid-single-digit organic growth in Q2. With more advanced formulations and a renewed brand identity, SIOS now delivers an upgraded product experience while reinforcing its long-standing heritage of professional performance. For the full year now, we built on our strong innovation pipeline with impactful launches across laundry and home and hair, launching new formulations and filling geographical white spots. Our pipeline for 2025 is well-filled and as outlined at the beginning of the year and during our Q1 call, we expect a stronger contribution from innovation launches to the top line growth in the second half of 2025. For the first half of 2025, we had numerous launches across categories with a stronger focus on hair. Let me give you some more examples of what lies ahead. Amongst others, key highlights will include the launch of Persil Giant Discs, designed for large laundry loads with triple action formula for deep cleaning. Furthermore, we will be introducing the super premium sublimic Timic line by Shiseido in Asia, offering advanced hair repair and scalp care technology, and with Pervol, we will proceed with the regional and geographical expansion of this very successful top brand, thus further strengthening our premium fabric care footprint in high potential markets. These and other launches will play a key role in supporting the top line acceleration in consumer brands in the second half of 2025. And now, turning to our full year 2025 outlook. We have updated our 2025 guidance and narrowed the ranges, broadly correlating with current market expectations, in part, even slightly above. At the group level, we now expect an organic sales growth of 1-2%, an adjusted EBIT margin of 14.5% to 15.5%, and a low to high single-digit percentage increase in our adjusted EPS at constant exchange rates. As outlined before, our guidance for the full year continues to include effects from tariffs around the globe. We also still expect a stronger top line in the second half of the year, as outlined before. Among the main drivers are the following. In adhesive technologies, we expect a stronger top line performance in H2, supported by the partial reversal of the negative working day impact in Q3, continued strong growth in the electronics and industrial business, and additional wins in the automotive. In consumer brands, we have a well-filled innovation pipeline with stronger top-line contributions expected in the second half of the year, while investments in marketing and R&D remain on elevated levels. Also, the self-inflected supply chain-related topics have been fully resolved by the beginning of Q2. Furthermore, we see our more recent acquisitions contributing in both business units and also see benefits in regard to positive mix on gross margins deriving from the retailer-branded investment in consumer brands. And beyond these drivers, we are well underway when it comes to our margin development, which is why we updated the range to 14.5% to 15.5%, supported by an overall good product mix, efficiency gains, and net savings from the consumer brand's integration. With this, let me hand over to Marco, who now will lead you through the key financials of the first half in more detail. Marco.

Yeah, thanks a lot, Carsten, and good morning to everyone in the call, also from my side. So building on what Carsten already shared, let me provide some color on the drivers of the group sales performance in the first six months of fiscal 2025. Organic sales growth came in flat in the first six months, and after a softer start into the year, we saw a clear acceleration in the second quarter with positive growth of close to 1%. On group level, pricing contributed with plus 1.3%, while volumes were below prior year. More on the business unit specifics in a minute. Acquisition investments reduced sales by 0.9%. While the divestment of our retailer brands business in North America had a negative impact, the acquisitions of the Delta Soon and Seal for Life contributed positively. And for the full year, we continue to expect a low single digit negative impact on sales, mainly driven by the divestment of our retailer brands business in North America. Foreign exchange was a headwind of minus 2.8% in the first half, And given the overall high volatility in relevant currencies, and in particular, of course, the weakening dollar, we now expect the headwind for the full year 2025 to rather be in the low to mid single digit percentage range. And in nominal terms, sales amounted to 10.4 billion euros, hence 3.8% below the prior year. And now turning to the drivers in the respective regions in more detail. Starting with Asia Pacific, where we achieved good growth of plus 3.4%. The adhesive technologies business contributed with a very strong increase, which was particularly driven by the continued growth dynamics of our electronics business in China. In contrast, the consumer brands business was below prior year. In IMEA, i.e. India, Middle East, Africa, we grew 9.1% with significant contributions from both business units. In Latin America, growth was 0.4%. Consumer brands came in below prior year, mainly due to laundry and home care, while hair recorded very strong growth. In adhesive technologies, we recorded very strong growth in Latin America while supported by an ongoing strong performance in mobility and electronics. Moving on to Europe, where sales were below the prior year in both business units. In adhesive technologies, this was mainly due to craftsmen, construction, and professionals. And in consumer brands, hair recorded good growth, while laundry and home care was below prior year. And important to note, in consumer, since May, we saw positive OSG rates, so basically confirming the positive trend that we have seen in the second quarter. In North America, the sales development came in at minus 3.4% in the first half, and thus improved with minus 5.6% in Q1. Adhesive technologies came in below prior year, driven by the negative development of packaging and consumer goods, as well as mobility and electronics. The latter was impacted by the overall challenging development in the automotive market, with a light vehicle production index of close to minus 6% for the region in the first half. Consumer brand sales development in North America came in below prior year in the first half, reflecting the subdued consumer sentiment and customer destocking, particularly in the first quarter, while in the second quarter we saw a clear sequential improvement leading to positive growth in the quarter in North America. Back to the global level and turning to adhesive technologies in more detail. We have reached sales of 5.4 billion euros in the first half of fiscal 2025. Organic sales growth was 1.2%, supported by balance price and volume mix. And this despite the negative working day impact, which accounted for around one percentage point. The adjusted EBIT margin came in at 17.2%, and that's around 20 basis points higher compared to the first half of 2024. Overall, adhesive technologies showed a robust development. Encouraging to see was a slight increase in organic sales growth in the second quarter. Pricing clearly remained in positive territory, which reflects the strength of our market positions globally and the broad portfolio we have in place. Volume development was also in the positive territory, working day adjusted, even reaching around plus 1.4% in H1. The adjusted EBIT margin came in at 17.2%, reflecting an improvement versus the comparable prior year. And this positive development was primarily supported but an overall better mix with our electronics and industrious businesses being the main growth drivers this year. As Carsten mentioned earlier, we expect a stronger top line in the second half versus first half of 2025, particularly driven by volumes and the partial reversal of the working day impact in Q3, while pricing is expected to remain more or less on similar levels. Now let's turn to the performance in the individual business areas where we saw different dynamics. Mobility and electronics was again the main driver with a plus of 2.8%. This increase was mainly coming from a double-digit growth in electronics and very strong growth in industrials. This could more than offset the still muted performance in automotive. Packaging and consumer goods remained flat when it comes to organic sales growth in the first half In consumer goods, we saw positive development, while packaging was slightly negative due to lower demand. Craftsmen, construction, and professional delivered organic sales growth of 0.6%. This was particularly driven by good growth in construction. Consumers and craftsmen, as well as manufacturing and maintenance, showed a stable top-line development. Moving now to consumer brands. The business generated sales of 4.9 billion euros. Organic sales growth was minus 1.6%, thus reflecting high prior year comparables due to strong innovation launches in the first half of 2024, pronounced customer destocking in North America, particularly in Q1, and some supply chain challenges we faced in the first quarter, which in the meantime have been fully resolved. Please note that in 2025, top-line contribution from innovation launches is still expected to be more skewed towards the second half of the year. Pricing remained in positive territory, contributing 1.8% to organic sales growth. We also recorded an EBIT margin expansion in the first half of 100 basis points versus the comparable prior year level. An overall better mix further net savings and efficiency gains in the ongoing valorization contributed to this development. We saw a clear volume improvement of 430 basis points in Q2 when comparing to the first quarter, leading to positive organic sales growth in the second quarter. The supply chain self-inflicted challenges we dealt with, particularly in Q1, have been fully resolved by the beginning of the second quarter, thus only having had a minus bill over impact into Q2. Also, destocking was less of a drag in Q2 versus Q1. We expect volume development to improve further in the course of the year, supported particularly by a top-line contribution from innovation launches. Considering prior year comparables, Top line growth in Q4 is expected to be stronger than in Q3. Continued positive pricing reflects the ongoing valorization of our portfolio with strong innovations flanked by marketing investments at sustained elevated levels. We also recorded an EBIT margin expansion in the first half of 100 basis points versus the comparable prior year margin level. The ongoing valorization contributed to this positive development while we continue to invest behind our brands, including marketing, to fuel further growth. In addition, we also succeeded in realizing further incremental net savings in the first half. One main driver was a complexity reduction by around 22% in our supply chain and thus getting close to the targeted 25% by the end of 2025. This was achieved by reducing the number of production sites, production lines, warehouses, contract manufacturers, and co-packers. As you can see, we're well on the way to achieve the targeted 100 million euro savings by the end of fiscal 2025. Thus, we are well on track in reaching the targeted 525 million in annual net savings by the end of this year. Now turning to the performance by business area. Laundry and home care reported organic sales growth of minus 2.6%. Home care delivered positive growth, driven by very strong growth in the dishwashing category with a significant contribution from our top brand, Prill. Laundry care was negative due to fabric cleaning, while fabric care continued to deliver very strong growth, supported by top brands such as Pervol. The business area hair, which comprises both consumer and professional, delivered close to 1% organic sales growth plus showing a nice sequential top line acceleration versus this first quarter. The consumer business delivered good growth, mainly driven by very strong growth in coloration and a strong contribution from our mega-brand Schwarzkopf, as well as Got2B and Sios. The professional business was slightly negative in H1, impacted by the muted consumer sentiment and customary stocking in North America, in particular in the first quarter. However, also here, organic growth showed a clear sequential acceleration in Q2 versus Q1. In other consumer businesses, we also saw sequential improvements in Q2. However, on H1 level, organic phase growth remained below five years due to body care in North America and Europe. Back to the group level again, and with that, to the components of the adjusted income statement. We increased our adjusted cross-profit by 60 basis points, now reaching 51.3%. This increase was driven by positive mixed impact and strategic measures, such as the ongoing valorization of our portfolio and supply chain efficiencies in consumer brands. Marketing, selling, and distribution expenses accounted for 27.6% of sales and thus came in on the same level compared to prior year. R&D expenses in relation to sales slightly increased to 2.9%. Other operating income expense had a rather neutral impact as a percentage of sales. And as a result, the adjusted EBIT margin showed a strong increase by 60 basis points to 15.5% for the group. Moving on to the bridge from reported to adjusted EBIT. At 1.5 billion euros, reported EBIT was up 5% compared to the previous year level. One-time income of 23 million euros was mainly related to gains resulting from a previous divestment. One-time expenses of 51 million euros are mainly related to a pension liability adjustment, acquisition-related costs, as well as costs in the context of the consumer-brands merger. Restructuring charges amounted to 46 million euros with a majority related to the optimization of our production and logistics footprint in both businesses. As a result, adjusted EBIT came in at around 1.6 billion euros and thus slightly above the prior year level. Taking a closer look at the bridge leading to the adjusted EPS, the adjusted financial result amounted to minus 21 million euros and thus further improved compared to prior year. Adjusted tax rate at 25.5% and hence on prior year level. Finally, adjusted net income came in at nearly 1.2 billion euros. This translates into adjusted earnings per preferred share of two euros and 81 cents and represents an increase of 1.1% year over year or at constant currencies of even an increase of 5%. So further to our cash KPIs, Networking capital as a percentage of sales increased by 80 basis points year over year to a level of 6%. That development was mainly driven by high inventory levels, including investments into safety stocks. Our free cash flow came in at almost 500 million and hence declined year over year due to, amongst others, networking capital volatility as well as high capex investments. Our net financial position came in at around minus 500 million euros. The decline versus year end was mainly due to cash outflows for increased dividends and the current share buyback. Overall, our financial position remains strong and gives us flexibility and room to further invest into the businesses. Closing the chapter with our updated outlook for fiscal 2025 and with narrowed ranges for both top and bottom line, now broadly correlating with the current market expectations, in parts even slightly above. The full year guidance also continues to cover the currently expected financial impact resulting from the U.S. tariffs. Having said that, we now expect organic sales growth of 1% to 2% for the group, and for adhesive technologies, we now guide 2% to 3%, and for consumer brands, we guide 0.5% to 1.5%. In terms of phasing, we continue to expect organic sales growth to be stronger in the second half versus the first half, and that holds true for both of the business units. When it comes to phasing in the second half, please consider that in consumer brands, we have more favorable comparables in the fourth quarter. And for adhesive technologies, we expect the reversal of the working day impact to happen mostly in the third quarter. For the adjusted EBIT margin, we now anticipate a level of 14.5 to 15.5% on group level, backed by the already strong performance of the first half. For adhesive technologies, we now expect 16.5 to 17.5%, and for consumer brands, 14 to 15%. For adjusted EPS growth at constant currencies, we continue to expect an increase in the low to high single-digit percentage range. Our expectations regarding acquisitions and investments impact direct material prices and capex for fiscal 2025 remain unchanged. We slightly lowered our expectations for restructuring expenses to a range of 150 to 200 million euros. And when it comes to foreign exchange rates, we now expect the negative currency impact on sales to be in the low to mid single digit percentage range. And with that, back to you, Carsten.