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UPDATE 2-Germany's Henkel sees years of southern Europe woes
August 1, 2012 / 6:25 AM / 5 years ago

UPDATE 2-Germany's Henkel sees years of southern Europe woes

* Q2 sales of 4.2 bln euros meet analysts' expectations

* Q2 adjusted EBIT 609 mln euros vs poll avg 590 mln

* 2012 EPS target increased to 15 pct from 10 pct

* Expects moderate sales decline in southern Europe

* Shares up 1.6 percent in early trading

FRANKFURT, Aug 1 (Reuters) - German consumer goods group Henkel said there was no end in sight to falling sales in southern Europe as it reported second-quarter results boosted by price rises and increased its outlook for earnings per share in 2012.

Henkel, whose brands range from Schwarzkopf hair products to Loctite glue, said that organic sales in western Europe, which includes Greece, Spain, Italy and Portugal, were down 0.1 percent in the second quarter and that it expected sales to decline moderately in southern Europe over the next few years.

"What we are seeing is a market in decline, no matter the price level," Chief Executive Kasper Rorsted said, dismissing the suggestion that Henkel could introduce new cheaper lines or smaller packaging sizes.

Its industrial division, which serves the transport, metal and electronics industries, is coming off worse in the region than the market for consumer products such as laundry detergents. "Even in a crisis, people still have to do their washing," Rorsted said.

Other consumer goods companies are also feeling the pain in the region, with Procter & Gamble warning on profit and Reckitt Benckiser also suffering from tough trading in southern Europe.

Shares in Henkel rose 1.6 percent to 59.41 euros ($73.17) by 0957 GMT after it raised its target for adjusted earnings per share (EPS) growth in 2012 to 15 percent, from a previous goal of at least 10 percent.

"We have long seen the 2012 earnings per share target to be far too low, so the new target now looks more reasonable, and we still believe there is good potential for further increases and/or over-delivery," Bernstein analyst Andrew Wood said in a note to clients. He had pencilled in 23 percent EPS growth before Wednesday's statement.

Price rises in all areas from detergents to toiletries and adhesives helped to boost sales by 4 percent in the second quarter, resulting in adjusted operating profit of 609 million euros ($750 million), above the average forecast of 590 million euros in a Reuters poll of analysts.

Overall, the group, which also makes Right Guard deodorants and Persil in most of Europe, reported total second-quarter sales of 4.21 billion euros, matching expectations.

It confirmed its other targets for 2012, for sales to rise by between 3 percent and 5 percent, with an adjusted return on sales of 14 percent.

German rival Beiersdorf, which makes Nivea skincare cream, is due to report second-quarter results on Thursday.

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