UPDATE 1-Henkel beats expectations thanks to emerging markets

Wed May 7, 2014 2:39am EDT

* Q1 adj EBIT up 3.3 pct to 619 mln euros

* Sales down 2.6 pct to 3.929 bln euros

* Confirms full-year outlook (Adds detail, background, CEO quotes)

FRANKFURT, May 7 (Reuters) - German consumer goods group Henkel posted better than expected first-quarter earnings, thanks to strong demand from emerging markets for its washing powders, beauty products and industrial adhesives.

The group confirmed its forecast for the full year, but said the latest developments in Eastern Europe created additional uncertainty in the markets.

"This makes it difficult to forecast economic developments for the year ahead," Chief Executive Kasper Rorsted said.

Russia is Henkel's fourth-largest market with annual sales of about 1 billion euros ($1.4 billion) last year.

Analysts at Kepler Chevreux estimate that Russia and the Ukraine accounted for 10 percent of Henkel's total sales of 16.4 billion euros last year.

As violence in some parts of Ukraine escalates and western countries aim to impose further sanctions, companies with assets in the region fear the consequences for their businesses.

Henkel's first-quarter sales fell 2.6 percent to 3.929 billion euros, mainly because of negative currency effects, the company said. Excluding currency effects, sales from continued operations were up 4.3 percent, it said.

"We do not expect the foreign exchange situation to improve in the short term," Rorsted said.

The depreciation of emerging market currencies has also weighed on earnings at rival consumer goods groups such as Procter & Gamble and Beiersdorf.

Henkel's adjusted earnings before interest and tax (EBIT) increased 3.3 percent in the quarter to 619 million euros.

Analysts polled by Reuters had on average predicted adjusted EBIT of 601 million euros on sales of 3.95 billion euros.

The group, which makes Persil washing powder and Schwarzkopf hair products, confirmed its full-year outlook for sales growth of 3-5 percent, an increase in its EBIT margin to about 15.5 percent and a high single-digit increase in adjusted earnings per preferred share. ($1 = 0.7177 Euros) (Reporting by Kirsti Knolle; Editing by Maria Sheahan)

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