Henkel Ag & Co Kgaa S/Adr

Good morning and welcome to Henkel Conference Call. For the duration of the call, you will be in listen only. If you would like to ask a question during the Q&A session, please press star and 1 on your telephone keypad. If at any time you need assistance, please press star and 0 and you will be connected to an operator. I would now like to turn the conference over to Leslie Iltgen, Head of Investor Relations. Please go ahead, madam.

Thank you, good morning and a warm welcome to everyone joining Henkel's half-year 2026 results conference call today. I'm Leslie Iltgen, Head of Investor Relations at Henkel. Today I'm joined by our CEO Carsten Knobel and our CFO Marco Swoboda. Carsten will begin with an overview of the key developments in the first half. Marco will then follow with a more detailed review of the company's financial performance. As always, following the presentation, we will open up the lines and Carsten and Marco will be happy to take your questions. Before handing over to Carsten, please let me remind you that this call will be recorded and a replay will be made available on our Investor Relations website shortly after this call. By asking a question during the Q&A session, you agree to both the live broadcasting as well as the recording of your question, including salutation, to be published on our website. Also, please be reminded that this presentation contains the usual formal disclaimer in regard to forward-looking statements within the meaning of relevant US legislation. It can also be accessed via our website at Henkel.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 Carsten Knobel. Carsten, please go ahead.

Thank you, Leslie, 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. And after walking you through the key developments of the first six months, we will elaborate on Henkel's business performance and the full year outlook in more detail. So let me move now straight to the highlights of the first half 2026. In the first half, we delivered very strong performance on both the top and the bottom line. Organic sales growth showed a clear sequential acceleration in Q2 and came in at above 3% for the first half on group level backed by both business units with adhesive technologies clearly standing out. We saw both positive price and volume dynamics in our two business units. In adhesive technologies, the team was able to swiftly execute pricing initiatives to offset the significant raw material price increases. We also delivered a strong EBIT margin both on group level and in the business units despite an overall highly challenging macroeconomic and geopolitical environment in which we are currently operating. This demonstrates the strength and the high quality of our businesses. In addition, EPS at constant currency grew strongly by 7% versus the prior year. Furthermore, we accelerated the execution of our M&A growth Strategy in both business units. Most recently, we have closed the acquisition of Olaplex. Overall, we expect first positive contributions from the acquisitions on both top and bottom line in fiscal 2026. And finally, turning to our updated full year 2026 guidance, we upgraded. Our top-line expectations for the group and adhesive technologies are on the back of the strong H1 performance, while our expectations for both the adjusted EBIT margin and the adjusted EPS growth at constant currencies remain unchanged. Overall, our strong business performance demonstrates that we have a clear strategy with our purposeful growth agenda, that we have the right priorities, and that we were able to accelerate the execution of our M&A growth strategy, thereby clearly strengthening our long-term competitiveness and position for future success. As you are all aware, we continue to successfully deliver on our M&A growth strategy, which is an integral part of our overall growth strategy in both business units. With the recently announced acquisitions, we are investing a total of roughly 5 billion euros Supported by future mid- to high-single-digit organic sales growth, which is clearly above average, the combined sales of the five acquisitions are expected to increase to €2 billion by 2030. To date, we have already successfully closed four out of the five transactions, whether it be La Roque and ATP adhesive systems in adhesive technologies, Not Your Mothers, and most recently, as mentioned before, Olaplex in consumer brands. We expect the style acquisition to be closed in the course of the second half of fiscal 2026. And for sure, Marco will later provide you with more details on the expected M&A contributions for 2026 and beyond. Let me highlight our most recently closed acquisition in consumer brands and adhesive technologies with the acquisition of the premium hair care brand Olaplex, adding around With 370 million euros in sales, we expand our global presence in the premium hair segment and are now ranked the global number two in hair professionals. The premium hair care market is a highly attractive market and is expected to continue its strong growth trajectory reflected in a CAGR of around 5% for the coming years. Olaplex is a well-established, globally active premium channel hair care brand offering a portfolio of science-led, high-performance products. We are highly confident that we can significantly grow this business by making use of cross-selling opportunities and leveraging on both specialty retail and salons at distribution channels. In addition, OLAPLEX proprietary technologies offer attractive innovation opportunities, unlocking new growth potential through enhanced capabilities and accelerating product development across the portfolio. Furthermore, OLAPLEX benefits from a global footprint. anchored by broad distribution in North America and supported by meaningful international reach. Overall, a promising and highly attractive asset that is now part of Henkel's consumer brands portfolio. In adhesive technologies, we closed the acquisition of ATP adhesive systems effective April 1st. The acquisition expands our portfolio into high-performance water-based specialty tapes. A highly attractive market growing at around 7% annually, with this acquisition we add tapes to our technology platforms, thus expanding beyond liquids. ATP strengthens our innovation capabilities, creates attractive cross-selling opportunities, and enhances our position as a new growth platform for sustainable bonding solutions. Water-based specialty tapes are gaining market share globally as a more sustainable alternative to solvent-based solutions. They deliver up to 90% lower volatile organic compound emissions and an up to 60% lower carbon footprint versus solvent-based solutions. A good example are zero-emission flooring tapes. They combine high performance with regulatory compliance and sustainability benefits. These solutions recorded an impressive growth of above 20% in the US in the first half of 2026. Another example from the automotive industry are customized tape solutions for advanced driver assistance systems including steering wheels with hands-off detection capabilities. This part of the business recorded growth of more than 10% globally. Also here overall, with the acquisition of ATP, we not only drive further profitable growth but also create additional value for our customers. Besides M&A, Innovations and investments in high-growth markets serve as catalysts for organic growth. Innovations drive an increase in the number of Henkel solutions per application, for example in consumer devices as shown here on that slide. In consumer electronics, innovation trends such as miniaturization, water resistance, and thermal management are driving demand for adhesives. As a result, the average number of Henkel solutions in a smartphone is expected to increase by 50% to more than 80% per device within 10 years until 2030. At the same time, we continue to invest in attractive high-growth markets such as aerospace, data centers, and protection and repair in infrastructure to further strengthen our platform for sustainable and profitable growth. To support growth in these attractive end markets, We also continue to invest in our manufacturing work, thus further strengthening innovation capabilities and customer proximity in key growth regions. A good example is our new smart factory in Yantai, China. With an investment of around 120 million euros, the site provides a strong backbone for future growth in the region and supports high growth industries such as electronics, automotive, medical and aerospace. and at the same time the facility sets new benchmarks in sustainability operating with net zero emissions from day one. The smart factory leverages state-of-the-art automation, digitized process control and intelligent warehousing to enhance productivity, inventory management and order fulfillment speed. Complementing this investment We have further expanded our customer and innovation capabilities with new application centers in Asia. Most recently, we opened our new electronics co-innovation and application center in India, further strengthening our ability to support customers in one of the world's fast-growing electronics markets. Together, these investments enhance our innovation capabilities, shorten innovation cycles, and position us well to benefit from long-term growth trends in key end markets. Moving to specific innovation examples in construction, where our technologies help customers address highly demanding technical and sustainability requirements. For one of the world's most iconic and technically demanding construction projects, the Sagrada Familia in Barcelona, we customized Loctite bonding solutions for the installation of large stone panels on the Basilica's central towers. Our solution enables the reliable bonding of stone and steel components under highly demanding conditions. Compared with traditional methods, our solution enabled the accelerated installation by a factor of 10 while providing exceptional strength. The project highlights our ability to combine deep engineering expertise with close customer collaboration to customize solutions for highly specialized applications. Another example is our cool roof technology. The waterproofing and coating solution help reduce rooftop temperatures, improving energy efficiency. By lowering cooling requirements and supporting lower carbon emissions, this solution contributes to more sustainable buildings. Turning now to consumer brands. Well, we see continued strong growth dynamics of our top 10 brands with above average growth of more than 4% driven by a balanced contribution from both price and volume. They account for around 60% of the business unit sales and provide a good representation of our portfolio with leading positions in both, laundry and home, and hair. Hair overall continues to be a highly attractive category, driven by trends such as the skinification of hair, hair protection, and hair repair. With tech-driven innovations we develop at Henkel, we can successfully address and shape these trends. A good example is the launch of our premium scalp care line under the Gliss brand. Addressing the growing skinification of hair trends, this trend applies Skincare ingredients, routines and principles to hair and scalp care, reflecting the belief that healthy hair starts with a healthy scalp. And as a result, while the hair market has been growing at a fast pace of around 4.5% over the past years, we have even been able to outperform the market, delivering organic net sales growth of above 6%. Turning to laundry care. We continue to actively shape our portfolio with an increased focus on the premium segment. As highlighted during our Q1 call, we see attractive growth and value creation opportunities in the premium laundry care market. This strategic focus is also reflected in our portfolio mix. The share of premium products has increased from around 45% before the consumer brands merger to around 55% today. With that, Bringing it well above the market average, looking ahead, we do also see further opportunities to expand our premium share in laundry care, supported by technology-driven innovations among our top brands, delivering with that superior consumer benefits. A good example here is Persil, our long-established premium brand. Here we continue to strengthen our offering through superior performance propositions and premium formats such as caps. addressing consumers' increasing demand for superior cleaning results. And turning to Pervol, where we are enhancing our premium positioning by focusing on specialized textiles and garment care solutions, fabric longevity and care benefits. Here, our product innovations support consumers' growing interest in preserving and extending the life of their clothes. Most recently, we launched a new Pervol version, specifically designed for light-colored garments, thereby further broadening the brand's formulation portfolio. The success of our strategy is also reflected in the numbers. Our top brands, Percil and Pervol, recorded a strong performance and together delivered around 5% organic sales growth in the first half. Taking a closer look at the attractive fabric care category, which continues to stand out, Here, we gained another 50 basis points market share in the first half of 26, a very strong development. And overall, we are confident that our focus on premium laundry care is translating into strong brand performance, market share gains, and further profitable growth. And now, turning to our full-year outlook. We upgraded. Our top line expectations for the group and adhesive technologies on the back of the strong H1 performance. For the group we now expect organic net sales growth of 1.5 to 3.5% and for adhesive technologies we are now looking for 2 to 4%. The outlook for the adjusted EBIT margin remains unchanged and is expected to come in between 14.5 and 16%. The same holds true for the adjusted EPS growth at constant currencies, where we continue to expect an increase in the low-to-high single-digit percentage range. And Marco will elaborate now in more detail on our updated outlook in his part of the presentation. And with this, let me hand over to Marco, who will lead you now through the key financials of the half year one. Marco, please.

Thanks, Carsten, and good morning to everybody on the call, also from my side. And building on what Carsten already shared, let me provide some more color on the group sales performance in the first six months of 2026. We delivered strong organic sales growth of 3.2%, pricing contributed with 1.1%, while volumes showed a positive development of 2.1%. Overall acquisitions and investments had a slightly positive effect of 0.2%. While the divestment of our retailer brands business in North America in April last year had a negative impact, the acquisitions closed in the first half of 2026 in both business units, most notably ATP Adhesive Systems and Not Your Mothers in our consumer business, had a positive impact on sales. The foreign exchange impact was almost minus 4%, but moderated sequentially in Q2 versus Q1. The development reflects in particular the weakened US dollar and related currencies. In nominal terms, sales amounted to 10.3 billion euros, hence 0.5% below prior year. Now turning to the drivers in the respective regions in more detail. Starting with Europe, Sales were below the prior year level but showed a clear acceleration in the second quarter, returning to positive growth. In adhesive technologies, a very strong growth in industrials was more than offset by adverse developments in automotive, packaging and consumer goods and craftsmen, construction and professional. In consumer brands, particularly laundry and home care, continued to face a challenging environment while hair remained stable. North America recorded good organic sales growth of 2.4%. This was driven by strong organic sales growth in adhesive technologies supported by all business areas, with growth in industrials standing out. Consumer brands achieved positive organic sales growth driven by strong growth in hair, while laundry and home care was slightly negative. Going forward, the recent acquisitions will further strengthen our footprint and enhance scale in this important market. Moving on to Asia Pacific, organic sales growth came in at 10.3%, supported by both business units. Double-digit growth in adhesive technologies was again driven first and foremost by electronics and industrials. Packaging and consumer goods also contributed significantly. Consumer brands achieved very strong growth, led by significant growth in hair, while laundry and home care was slightly negative. IMEA also showed double-digit growth of 14.9%, which was supported by both business units despite continued geopolitical volatility. Finally, sales in Latin America were below the prior year level. Similar to Europe, growth accelerated in the second quarter and returned to positive territory in both business units. While the development in adhesive technologies was impacted by negative effects from tariffs on value chains and demand, Consumer brands showed positive growth in the first half of the year. Now back to the global level and turning to adhesive technologies. In the first half, we achieved sales of 5.5 billion euros with organic sales growth of 4.5%. The adjusted EBIT margin increased to a level of 17.7% in the first half of 2026. Overall, adhesive technologies delivered a very strong top-line development in the first half, driven by sequential acceleration of both price and volume. Pricing was positive with 1.8%, also reflecting the swift execution of pricing initiatives as a reaction to the significant raw material price headwinds. This was possible due to the strength of our market position and portfolio. The strong volume development of 2.8% in age 1 was particularly driven by a clear volume expansion in our electronics and industrial businesses. Furthermore, the development was also supported by a positive working day impact, which accounted for around 150 basis points in Q2 and forward buying, mainly in packaging and consumer goods. The adjusted EBIT margin continued to be strong year over year, driven by operating leverage and a positive mix. Mobility in electronics achieved 7.8% organic sales growth in the first half, despite already high comparables. The strong increase was driven by double-digit growth in electronics and significant growth in industrials. In H1, automotive came in below prior year but showed a clear sequential improvement and even returned to positive territory in Q2. This also reflected in the most recent LVP development. Packaging and consumer goods recorded very strong growth of 4.7% in the first half. Consumer goods achieved very strong growth and packaging showed strong growth, particularly driven by sequential acceleration in the second quarter also supported by resilient demand across key end markets and continued forward buying. Finally, craftsmen, construction and professionals delivered positive organic sales growth of 1%. While manufacturing and maintenance showed strong growth, consumer and construction was slightly below prime year, also impacted by seasonal weather effects which weighed on construction activity in Eastern Europe in the first quarter. Turning to consumer brands. The business generated sales of 4.7 billion euros in the first half with good organic sales growth of 1.7%. The adjusted EBIT margin came in at 15.3% and thus was on prior year level. In the first half, consumer brands delivered good organic sales growth with both a positive price and volume development of 0.3% and 1.4% respectively. With this, we achieved positive volumes for four consecutive quarters. Hair continued the very strong growth trajectory with organic face growth of more than 4%. Laundry care is back to positive growth with a clear acceleration in the second quarter. The adjusted EBIT margins sustained on strong previous year levels despite the overall competitive environment. And of course, while keeping up with our elevated investment levels in our brands. Now turning to the performance by business area in consumer brands. Laundry and home care recorded positive organic sales growth of 0.7%. In home care we saw good organic sales growth which was primarily driven by double digit growth in hand dishwash. Encouraging to see that laundry care is back to positive growth with a clear acceleration in Q2 mainly driven by high single digit growth in fabric care supported by a strong performance of our top brand Pervol. Hair achieved 4.2% organic sales growth driven by an almost balanced contribution from both the consumer and the professional business with styling being the strongest contributor. And finally, organic sales growth in our other consumer businesses was below prior year mainly due to body care in Europe while North America reported good growth. Coming back to the group level again, I would like to share some details on the adjusted income statements. We increased our adjusted gross profit by 40 basis points, now reaching 51.7%, mainly driven by an increase in adhesive technologies. Marketing, selling and distribution expenses, as well as R&D and admin expenses in relation to sales, remained more or less on prior year levels. Other operating income and expenses had a rather neutral impact, as a percentage of sales. And as a result, the adjusted EBIT margin slightly increased, reaching now 15.7%. Moving on to the bridge from reported to adjusted EBIT. At 1.4 billion euros, reported EBIT was below the previous year level. One-time expenses of 68 million euros were mainly related to transaction costs associated with recent acquisitions. Restructuring charges amounted to 128 million euros with the majority related to the continuous transformation of our production and logistics footprint as well as the go-to-market models. As a result, adjusted EBIT came in at 1.6 billion euros and was thus slightly above prior year level despite negative FX effects. And now taking a closer look at the bridge leading to adjusted EPS. The adjusted financial result amounted to minus 54 million euros, reflecting a high leverage due to the recent acquisitions and the completion of our share buyback program. The adjusted tax rate stood at 25.5% and thus in line with the prior year. Finally, adjusted net income after minorities came in at 1.2 billion euros. This translates into adjusted earnings per preferred share of 2 euros and 86 cents representing an increase at constant currencies of 7%. On to our cash KPIs. Year networking capital in percent of sales increased by 100 basis points to 7%, also due to the recent acquisitions across both business units. Free cash flow came in at around 600 million euros, representing an increase of around 130 million euros versus prior year, mainly driven by higher operating cash flow. Our net financial position came in at minus 1.9 billion euros, again, mainly reflecting cash outflows for the recently closed acquisitions, as well as for our share-by-back program. As Carsten already mentioned earlier, we made significant progress in executing our M&A growth strategy during the first half of 2026, which is an integral pillar of our overall growth agenda. We expect the recently acquired businesses to make an initial positive contribution to both sales and earnings already in the current fiscal year. In 2026, the acquired companies are expected to contribute 700 million euros in sales. In total, we acquired sales of 1.6 billion euros on a pro forma basis 2025, supported by future mid to high single organic sales growth. which is clearly above average, the combined sales of the five acquisitions are expected to increase to 2 billion euros by 2030. From an earnings perspective, we expect the acquisitions to already contribute in 2026 by roughly 1%, already considering financing and integration costs as well as purchase price allocation effects. Going forward, We expect a further ramp up to at least 10% when it comes to adjusted earnings per preferred share by 2030. I would like to conclude this chapter with our updated outlook for fiscal 2026. As Carsten already pointed out, we upgraded our top line expectations for both the group and adhesive technologies on the back of a strong H1 performance. For the group, we now expect organic sales growth to come in between 1.5% and 3.5%. For adhesive technologies, we now expect a higher organic sales growth of 2-4%. This guidance range is also a reflection of a more normalized growth profile in the second half, as well as the absence of a working day benefit and no further significant forward buying. Our organic sales growth expectations for consumer brands remain unchanged, reflecting the continued market volatility and tougher prior year comparables. Also, the full year outlook for the adjusted EBIT margin and adjusted EBS growth at constant currencies remain unchanged. And turning to adjusted EBIT margins, in line with previous communication, we expect softer margins in the second half versus first half for the Group and both business units, particularly due to more pronounced raw material price headwinds in the second half of the year. However, this shouldn't come as a surprise, and taking a look at current consensus levels, it seems analyst estimates are already reflecting this development. And with that, back to you, Carsten.

Thank you, Marco. So, let me wrap up today's presentation. First of all, we delivered strong organic net sales growth of more than 3% on group level, driven by both positive price and volume development important in both business units. with a clear sequential acceleration in Q2 versus Q1. We also delivered a strong adjusted EBIT margin development, also here supported by both business units. Second, we are successfully delivering on our M&A growth strategy in both business units by adding highly attractive assets. Overall, we expect first positive contributions from the acquisitions on both top and bottom line in fiscal 2026. And finally, turning to our updated full-year guidance for 2026, we upgraded our top-line expectations for the Group and adhesive technologies on the back of the strong H1 performance. Overall, our strong business performance demonstrates that we have a clear strategy with our purposeful growth agenda, the right priorities, and that we are able to accelerate the execution of our M&A growth strategy, thereby clearly strengthening our long-term competitiveness and the position for future success. With that, we would like to thank you for your attention and we are now moving to take your questions.

Thank you, Mr. Knobel. Ladies and gentlemen, the question and answer session will be conducted electronically. If you would like to ask a question, please press star and 1 on your telephone keypad. If you change your mind about asking a question, please press star and 2 on your touch-tone keypad. We will take questions in order received and we will take as many as time permits. Please limit your question to one question at a time to allow everyone to ask a question. The first question comes from Guillaume Delmas from UBS. Please go ahead.

Thank you very much. Good morning, Carsten, Marco, and Leslie. So my one question will then be on direct materials guidance because you left it unchanged. You're still expecting high single-digit percentage increase despite the fact that oil price has come down quite significantly since you published your Q1 training update in May. So the question is, why no change to the guidance could lower oil prices from some downward price adjustments in adhesives, so maybe you running back some prices in the back half, and if we were to assume that Oil stays at current levels until the end of the year. I mean, would you be more likely to hit the top end of your margin guidance? Thank you very much.

Guillaume, I think that is a question Marco will take. Marco?

Yeah, good morning, Guillaume, also from my side. I mean, yes, short-term oil price has come down, but before I go into further details, very clear, it's highly volatile. When I remember when basically going mid of July into my vacation, oil price came down and just a week later the whole situation in the Middle East Thank you very much. Second, also, we noted before, there is a time lag between oil prices moving and our input material costs really moving. So that has to eat through the value chain. So that will take some time, even if that oil price remains on a lower level, that that really arrives at our P&L side. and that's what we all baked into the guidance and that's why we didn't see any reason why now to change it. At the moment we see that still being valid.

And Guillaume, I think Not directly asked but the end of your question was related to our margin guidance and I think we have set out at the beginning of the year with 14.5% to 16% quite ambitious guidance in the context in which we are operating and on top the consensus which is out already is reflecting also all of that and therefore I think at this point No need to change the guidance. Hope that helps.

Very clear. Thank you.

You're welcome.

The next question comes from Olivier Nicolai from Goldman Sachs. Please go ahead.

Hi, good morning, Carsten, Marco and Leslie. First of all, you mentioned the pre-buying in H1 in the presentation. I was just wondering if you could quantify the impact seen in Q2 and which part of adhesive benefited the most from it. And then, if I may, just on laundry, it has accelerated in Q2. The sell-out data, whether it's still pointing out to share losses in the U.S. and Europe. So, what actions are you taking to improve the relative performance in these markets, and how do you see the current promotional environment? Thank you very much.

Olivier, so to your first question in terms of the effects I think Marco was already pointing that out partly and you know we have two effects which we have been calling out that is one the working day impact and it is also a kind of forward buying based on the situation which especially happened in quarter one and also the geopolitical topics and if you try to bring that in a quantification it is that you know the working day impact on half year one is roughly 70-75 basis points for adhesive technologies and the forward buying effect is for the half year around 100 basis points. So that is how the things are impacting. And if you would, because I think your point was on Q2, if you take that on Q2, you know that we had an organic net sales growth of 7.4. That would be roughly 5% if you would take these effects out, means the working day impact is roughly 150 basis points for the Q2 and is around 120 basis points for Q2 when it comes to That's maybe on the first part, and I hope that answers your question on that. The second question was on the roundy part. Absolutely right. The situation is that you know that we are faced within the laundry segment over the last couple of quarters with a more intense competitive but also pressure in terms of organic net sales growth while Q1 was still negative we have seen a Q2 with positive growth development in terms of the organic net sales growth in laundry. And it is also reflected that we have consistent marketing investments behind our activities. You also have heard me talking about our strategy that we are focusing on premium or premiumization of our brands that was for Persil always existing. But over the last couple of years, we have been talking about that Since the merger, we have been putting also Pervol more and more on that premiumization part with also backed technology and reworked formulation and recipes. And I think that is paying off. And you also see if you look at our top 10 brands, For sure Persil and Pervol are part of that. I've been mentioning before that the top brand brands have been with 60% share but also with growth between 4 and 5% over the last couple of years and also in the first half. So I think that's clearly pointing out. that we are doing quite well on that you also see that our gross margins are still on a very high level which brings me to your promotional question so the promotional environment is I would say not significantly changed so with more or less unchanged Promotional activity has been high now for quite some time and we stick to our strategy to be prudent when it comes to promotions and not overdo it and I think that is something which is related if you now see the longer term we have been improving the gross margins of HCB by more than 1,200 basis points over the last three years and one part of that is also for sure related to the promotional topics and we don't want a high share of ranked values volumes on that and again for the whole year maybe and that's the last statement on that we see a positive territory of pricing and volume for the full year which you also see reflected in the half-year results for sure more prominent with the volumes but I think that's exactly our strategy after we have finalized our portfolio work that volume should come back. We always said that and I think we promised on that in that context. Hope that helps, Olivier.

Absolutely. Thank you very much for the answer.

You're welcome.

The next question comes from Christian Seid from Kepler-Chevreux. Please go ahead.

Yes, thanks. Good morning, Carsten, Marco and Leslie and team. Here's my one question. So I guess it's for Marco. You have quite a few acquisitions on the table this year. How smoothly would you believe they can be integrated from a systems perspective? Have all of them or most of them already or are they running on SAP S4 HANA, for example? Thanks very much.

Despite the fact that you said that Marco should answer that question, and I let Marco answer this question, but one thing is also important, Christian, and that is more now branding strategy and business strategy. Not with all the acquisitions, we immediately believe they should be completely integrated. As an example, not your mother's. Thank you very much.

Good morning, Christian from my side. It really depends by deal and I think that Carsten introduced that already. We do expect from a pure system integration the consumer brands acquisitions, not your mother's.

OLAPLEX will be rather fast.

It's also less complex. While what Carsten said is that doesn't mean that we also fully integrate that into the business structure from day one. I think that is here where what Carsten alluded to. We really designed the integration according to the needs and we are for sure considering that we need to maintain the dynamics also of the businesses that we bought. So a very tailored integration approach. and on adhesive technologies both acquisitions run on SAP but as you know STAHL has not even been closed yet so we're going to look at that once also closed and then define the detailed timing here we will take probably our time one two years to get that fully done because they operate on a quite consistent system already. And we will do that step by, as I said. But again, that will be determined once we also have full access to STAHL.

Okay, great. Thanks both. And obviously, congrats on the solid results. Thank you.

The next question comes from Nicola Ceron from Bank of America. Please go ahead.

Morgan, Carsten, Marco and Leslie, just a question on pricing in adhesive. Could you tell us how much further pricing you think you need to take in H2 to cover the increased input cost? And given you've priced early in adhesive, why do you think the margin should be down in H2 in that business? Because I thought that the whole point of pricing early was to protect the margin in H2. Thank you.

So, Nicola, if you say Guten Morgen, then we say Bonjour. Hope you're doing fine. So, regarding your pricing question in adhesives. So, first of all, yes, we have been taking, and I think that was one of the learnings out of the last, call it environmental or geopolitical challenges, We took pricing quite early, which also was a little bit impacting the so-called forward buying impact in adhesives. And I think we have shown in both, in quarter one and quarter two, quite good pricing components. I think in quarter one, not I think, it was in quarter one. We expect also pricing to remain strong in H2, supported by the swift execution of the pricing initiatives in response to the raw material cost inflation. On the other side, for sure the cost will come in, as Marco alluded that before, more in the and the pricing will annualize in the remainder of the year and anyway remain strong as said before. I think that's how I would see that overall in terms of the pricing situation in adhesives and how we do that.

Marco, anything to add? Yeah, maybe on the material cost. I mean, we said there is a time lag and that also results in H2 being much more exposed to the raw material cost headwind than the first half. I think that's what we also said before. So H2 from a raw material cost perspective will be hit much harder. And then second, there's also a mathematical effect if you fully pass it on at the end, the increase in raw material costs and in absolute terms, then percentage wise, you also see that your margin will decrease slightly just as a result of mathematics. And that is all what we baked into the guidance for the year. Thank you, Marco.

Hope that helps, Nicolas.

Vielen Dank. Very good. Thank you. Thank you.

The next question comes from Elliott Callum from Bernstein. Please go ahead.

Hi, good morning. It's Callum Elliott, as you guys probably know. So my question is on mobility and electronics, please. Collectively, I think you guys said last year 36% of adhesives revenues from mobility electronics. But I guess very, very different trends between the mobility part and the electronics part. So I'm hoping that I can get you to speak a bit about the relative size of the two parts. I think a few years ago, the last time you quantified this, it was about a third electronics and two thirds mobility. But I imagine that's changed quite a bit over the past few years. And so hoping to get a bit of an update on what that split looks like today. And then maybe just some more color on specifically the growth of the electronics part I think you said double digit but maybe just some color on where in the range of 10 to 99 that that sits please thank you so good morning Callum so yeah to give you a little bit on that as we said mobility and electronics has been the most yeah

growing part within the three divisions of adhesive technologies. If you go on the split, auto in the meantime is slightly less than 20% of the overall portfolio of adhesive technologies, while electronics and industrials each have a high single digit percentage within our portfolio. Yes, for sure, electronics over the last couple of years has been based on, you know, the overall double digit growth, which is a pattern which we have seen over a couple of years, you know, in that context also slightly increased their overall share, while automotive went a little bit down. And, you know, the point is, and I think that is important, already despite quite high comms, which are in the electronics as I said before the double digit and even it's more than 10% in that context it is something which has always been for sure increasing the comps year by year and if you look at electronics again in Q2 we have seen a clear double digit growth rate despite the tough or the prior year comparables growth was driven by strong underlying demand across the core electronic Electronics application supported by solid customer activities in the key end markets. And we did not observe any relevant or broad-based prebuying in electronics. I think that's also important to mention. And that, I think, is the overall situation. And I referred during my presentation also about, you know, The content part in electronics, the number of solutions which we are in devices, mobile devices, tablets, is significantly increasing. It will go up to 80 components and that's doubling over a longer term period and I think on that part I think I mentioned it already but I think in that part I think it's also important to repeat it again the automotive part stabilized in Q2 and we see that stabilization part not only in Q2 we are also expecting that for the second half of the year returning to positive territory. And I also mentioned here the differentiation between combustion engines and the electronic-based vehicles where we have two times the higher potential, at least two times the higher potential than in the combustion engine with roughly 250 euro of net sales per car in that context. And I hope that gives you a little bit more insight in the topic of automotive electronics and in that situation overall. Thank you very much. You're welcome.

The next question comes from David Hias from Jefferies. Please go ahead.

Thank you. Good morning all. I'm going to do a cheeky follow-up and then the question if I can. So the cheeky follow-up of Adam's question just now. One of your Editors and adhesives called out electronics seemingly slowing quite sharply in China. They also called out second half semiconductor shortage risks, which you don't seem to be alluding to at all. So I just wonder whether you'd confirm that that's something that's unique to them rather than anything that you're anticipating or factoring. And then my question, still on adhesives, is on tapes. You called out again that tapes has got this better growth profile. The chatter in the Adesys world seems to be that the tapes is the future. So obviously you're now in the area with ATP, but is this an area you need to acquire more deeply into, or is this an area you can evolve into organically so that you're kind of keeping up with that trend as we move into the midterm?

Thank you.

Good morning, David. So for the first question, I can be very short. We don't see that, what you have described, In our business, for sure, I've also seen some cross-reads, but I can't confirm that for Henkel or for Henkel Adhesive Technologies in that perspective. On your second part regarding to tapes, I think, first of all, we see definitely that, oh, I start differently. I think we talked about that before, that we have seen specialty coatings and also tapes We pointed that out before we internally see that as new strategic platforms for our portfolio to broaden our portfolio based on the attractivity of these markets also from a growth perspective. That was the reason why we went behind these two categories and with ATP already closed and Marco talked about that. Stahl should be closed within the second half of the year. We will step into these new platforms and therefore ATP really is a growth platform organically, but also potentially for further M&A. Going forward, it's a highly attractive and fast-growing part of the global tapes market, especially which is beyond the liquid systems. I think that is, I think strategy-wise, absolutely the right thing, what we want to do. You know, the market offers in that segment highly single-digit growth rates in that part which ATP is predominantly playing. So in that context, ATP is a high-performance water-based specialty tapes provider with a broad and wide variety of end markets. And that's, I think, absolutely in line with our strategy. And for sure, we will continue a clear strategic fit. We would like to take what we have bought as an organic basis to participate. You have also heard me saying that in all the acquisitions which we have done, the five, We see high single-digit, mid to high single-digit growth rates which will contribute to the point that in 2030 we see at least 2 billion of sales with these five acquisitions. David, I hope that helps. That's great, thank you.

The next question comes from Warren Ackerman from Barclays. Please go ahead.

Good morning, Carsten, Marco, Leslie, it's Warren here at Barclays. I'm going to try and squeeze two in. The first one, just on hair care, still very good in the first half, but in Q2, I think it did slow versus Q1. 3.3, I think, versus 5% in Q1. Can you maybe just outline what's happening in the hair care market? It's obviously still very dynamic, but are you seeing any signs of your share gains slowing? Maybe you can outline how Schwarzkopf is doing versus the rest of hair, retail hair, and how you're thinking about hair in the back half? And then secondly, just back on M&A, I think you spent €5 billion on M&A, but your balance sheet is still very strong. How much more firepower do you still have to do more deals? And then Marco, can you maybe say what the sales and EPS contribution you expect from the M&A for 2027? You kindly gave us the help for 2026, but for 2027. Thank you.

So, Marco will take the M&A question, but I can tell you Marco has always money. Marco will quantify that and allude on that. But to your first question, or better my answer to your first question is quite short. It is really quarterly volatility. There is the hair is a growth engine, you know, and I could now elude to that we had a little bit tougher comes in that context. But the point is we're doing very well in professional and consumer. We're doing that now since a couple of years in a row and there is nothing to read out of a little bit, you know, Smaller, no, a little bit less organic growth in quarter two than in quarter one. And I think it's also backed by the point, you know, the acquisitions which we are doing, Not Your Mothers and Olaplex, both in the field of hair. One in more retail, one more professionals. We see market share gains in here throughout the whole year. We have strong innos behind that and there's nothing to read out of, you know, even a three point something is a fantastic, is a good result in that environment in which we're in. You know, I also finally said, no, I said it during my part of the presentation. We are now the global number two in the professional era with the acquisition of Olaplex. And I think nothing more to say on that. And now it's time for Marco.

Good, Warren. So on the firepower question. So what our learning is that after the conclusion of the style acquisition, i.e. end of the year, Now we're going to see a leverage of 1.5 times EBITDA roughly and that stands well within the A category for the rating. And the A rating category is our policy as well. So we want to be within that policy and that border for that policy is 2.5 times EBITDA. So you see that we still have firepower to even engage more into acquisitions The leverage is not too high yet, but it has to be, of course, the right transaction before we would engage.

Would that be another 5 billion on my calculation? I mean, would it be like 10 billion, if it's two and a half, one and a half? It would seem like you got another five at least.

Warren, we will be creative when it comes to that and therefore there is not a single number which we will give you. If there is a once in a lifetime opportunity, we will make sure that we will get that lifetime opportunity. The rest Marco has said.

And for 27?

The 27 M&A benefits. So what we can say is, and I think we said that in the call, when you look at the acquisitions, assuming all have closed, then we look at an annual sales contribution of 1.6 billion euro that is on a pro forma 2025. So that, of course, you can assume that the businesses will grow and that that will be then also the top line contribution in 2027 from a net sales perspective. and on the bottom line we will come back later in the future and give you more insight but what we said is that by 2030 we're going to see at least a 10% contribution to EPS with a gradual ramp up over the years while we realize synergies and so on but we will not be more outspoken today because I first want to see also the purchase price allocation effects all that being now finalized before I comment on a single year 2027.

And you heard me saying, based on Marco's number of the 1.6, we expect in 2030 that this number will be at least 2 billion. Got you. Thank you. You're welcome.

The next question comes from Juan Rios from Santander. Please go ahead.

Buenos dias, team. Congrats on the strong results. One question from my side. Could you provide some more details on the weaker performance in adhesive technologies in Latin America? What were the main factors behind the decline and how should we think about the outlook for the region going forward? Thank you very much.

Good morning. And yes, we can give you a little bit of insight on that. You know, The point is more, you know, we had a negative development in Q1, which was mainly due to negative effects from the US tariffs on value chain and demand. Latam returned to positive organic growth. Thanks. You're welcome, Juan.

The last question for today comes from Michael Odomadze from BNP Paribas. Please go ahead.

Morning, Carsten, Marco and Leslie. One question from me, please. I know you cannot comment much on current trading, but I was wondering if you could give any high-level commentary on how both businesses performed in July. And more specifically on adhesives, are you seeing any signs of reversal of pre-buying? And if not, do you expect to see some degree of reversal in H2? Thank you.

So, Mischa, you're absolutely right that we don't comment on current trading, but I have a smile on my face if I look at the performance in July.

Hope that helps. That's very clear, thank you. And on the reversal of pre-buying?

Now, you know, we said that there will be, and I think Marco was also a little bit talking about that, you know, this part is related to adhesive technologies. Marco, you want to say something?

I mean, so far we haven't seen that reversal happening. I think that's what we can say. But still, as we said before, timing when that will happen is unclear and we need to assume that that will happen once there's really the situation in the Middle East and the supply chains once that is really resolved. And I don't think we can say that now.

Very clear. Thank you.

Thank you, ladies and gentlemen. I will now hand over to Mr. Knobel for his closing remarks.

Thank you for your questions and with that let me close today's call reminding you to the upcoming financial reporting dates. We are looking forward to connecting with you again in November when we all publish our Q3 results and with this I would like to thank you for joining our call today. Have a good day, take care and goodbye.