August 12, 2015 / 6:20 AM / 4 years ago

UPDATE 2-Loctite maker Henkel faces weakening adhesives demand

* Adhesives business in U.S. and China weakened in Q2

* Biggest one-day loss for shares in more than 6 yrs

* Confirms target of 20 bln eur sales in 2016 (Recasts, adds detail, CEO quotes, analyst, shares)

By Kirsti Knolle

FRANKFURT, Aug 12 (Reuters) - Germany’s Henkel, maker of Schwarzkopf shampoo and Loctite glue, missed expectations for sales growth in the second quarter, mainly due to a slowdown in its adhesives business in North America and China.

The United States and China are Henkel’s biggest markets for adhesives and the company said it plans to accelerate cost savings to reach full-year earnings and sales targets.

It posted 2.4 percent growth in organic group sales for the three months through June, from a year earlier, against market expectations of 3.4 percent.

Adhesives contributes half of group sales, providing glues, sealants and coatings for food packaging, car production and electronics assembly. Henkel said it still expected a 3-5 percent full-year rise in sales of adhesives, despite only a 1.7 percent increase in the second quarter.

While fierce price competition weighs on the packaging business in the United States in particular, slowing demand in China reflects stalling industrial growth, Chief Executive Kasper Rorsted said on a call on Wednesday.

“This is not a Henkel problem, this is a market problem,” he said, adding that the group had not lost any market share in China so far.

Rorsted said he did not expect a significant improvement before the fourth quarter.

Shares in Henkel, already hammered by China’s devaluation of the yuan on Tuesday, fell as much as 8.2 percent on Wednesday.

They are trading 13 percent higher than at the beginning of the year, underperforming the European sector which has gained 22 percent.

Henkel, which last month missed out on acquiring Procter & Gamble’s Wella brand, said it is on track to reach a 20 billion euro ($22 billion) sales goal for next year even without large acquisitions.

In the first half, the group reported sales of 9.1 billion euros and adjusted earnings before interest and tax (EBIT) of 1.48 billion euros, an increase of 14 percent helped by the effect of the weak euro.

“We expect bolt-on M&A will contribute a further modest boost to our estimates and Henkel’s targets,” Liberum analyst Robert Waldschmidt said in a note, adding that he expected Henkel to target emerging markets and adhesives. He has a “hold” rating on the stock.

Increasing appetite among U.S. consumers for Henkel’s newly launched Persil detergent, which competes with Procter & Gamble’s market leader Tide, helped laundry and home care sales in North America grow in the three months through June.

Looking to reclaim lost ground, Henkel a few months ago launched its high-end Persil laundry detergent, which is a billion-euro global brand in 60 countries outside the United States, through an exclusive tie-up with WalMart. ($1 = 0.9028 euros) (Editing by Georgina Prodhan and Susan Fenton)

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