Henkel AG & Co. KGaA

Quarterly Report • May 11, 2017

Q1 Quarterly statement

January through March 2017

Highlights: first quarter results

• Sales increase to 5,064 million euros: organic sales growth of +4.0 percent (nominal increase +13.6 percent)
• Double-digit increase in adjusted1 operating profit: +13.8 percent to 854 million euros
• Continuous improvement in adjusted1 EBIT margin: +10 basis points to 16.9 percent
• Double-digit increase in adjusted1 earnings per preferred share: +11.0 percent to 1.41 euros

Major events

• Submission of a binding offer to GCP Applied Technologies to acquire its global Darex Packaging Technologies business for 1,050 million US dollars.
• Signing of an agreement to acquire Nattura Laboratorios, S.A. de C.V., Mexico, and associated companies in the USA, Colombia and Spain.

Contents

• 3 Sales and earnings performance
• 7 Net assets and financial position
• 7 Outlook
• 8 Selected financial information

Pursuant to an amendment to the EU Transparency Directive, from 2017 Henkel is switching to a quarterly statement for publishing its results for the first and third quarters of each fiscal year. The quarterly statement will contain, in condensed form, the material information relating to our business performance. After the second quarter we will as before be issuing a half-year financial report; for the fiscal year we will continue to publish an annual report.

Sales and earnings performance Henkel Group

Key financials 1

in million euros	Q1/2016	Q1/2017	+/–
Sales	4,456	5,064	13.6%
Operating profit (EBIT)	717	823	14.8%
Adjusted2 operating profit (EBIT)	751	854	13.8%
Return on sales (EBIT)	16.1%	16.3%	0.2pp
Adjusted2 return on sales (EBIT)	16.8%	16.9%	0.1 pp
Net income – attributable to shareholders of Henkel AG & Co. KGaA	525	597	13.7%
Adjusted2 net income – attributable to shareholders of Henkel AG & Co. KGaA	549	613	11.7%
Earnings per preferred share in euros	1.21	1.38	14.0%
Adjusted2 earnings per preferred share in euros	1.27	1.41	11.0%

pp = percentage points

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

2 Adjusted for one-time charges/gains and restructuring expenses.

Sales development1

in percent	Q1/2017
Change versus previous year	13.6
Foreign exchange	1.1
Adjusted for foreign exchange	12.5
Acquisitions/divestments	8.5
Organic	4.0
of which price	0.1
of which volume	3.9

1 Calculated on the basis of units of 1,000 euros.

• In the first quarter of 2017, sales of the Henkel Group increased nominally by 13.6 percent to 5,064 million euros.
• Positive foreign exchange effects accounted for 1.1 percent of this growth. Acquisitions and divestments – particularly the purchase of The Sun Products Corporation – increased sales by 8.5 percent. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales increased by 4.0 percent.
• Emerging markets again made an above-average contribution to sales growth of the Henkel Group, with organic sales increasing by 6.7 percent. Mature markets delivered a good organic sales growth of 2.1 percent.
• Organic sales increased by 1.8 percent in the Western Europe region, and by 4.4 percent in the Eastern Europe region. Organic sales grew by

Sales development1 by region first quarter 2017

2.2 percent in the Africa/Middle East region and by 2.9 percent in the North America region. In the Latin America region, organic sales increased by 8.2 percent and in the Asia-Pacific region by 9.1 percent.

• Adjusted operating profit (EBIT) rose by 13.8 percent from 751 million euros to 854 million euros. All business units contributed to this growth.
• Adjusted return on sales (EBIT) improved by 0.1 percentage points to 16.9 percent.
• Following double-digit growth in adjusted operating profit, adjusted earnings per preferred share increased by 11.0 percent, rising from 1.27 euros in the first quarter of 2016 to 1.41 euros in the first quarter of 2017.

Adhesive Technologies

Key financials 1

in million euros	Q1/2016	Q1/2017	+/–
Sales	2,144	2,295	7.1%
Proportion of Henkel sales	48%	45%
Operating profit (EBIT)	364	431	18.6%
Adjusted2 operating profit (EBIT)	376	415	10.5%
Return on sales (EBIT)	17.0%	18.8%	1.8pp
Adjusted2 return on sales (EBIT)	17.5%	18.1%	0.6pp

pp = percentage points

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

2 Adjusted for one-time charges/gains and restructuring expenses.

• In the Adhesive Technologies business unit, sales increased nominally by 7.1 percent to 2,295 million euros in the first quarter of 2017.
• Foreign exchange effects accounted for 2.2 percent of this sales growth, while acquisitions/divestments reduced sales by 0.6 percent. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales increased by 5.5 percent.
• In the emerging markets, our businesses achieved significant organic sales growth. The Latin America and Asia (excluding Japan) regions both recorded double-digit sales growth. While sales in the Eastern Europe region exhibited significant growth, in the Africa/Middle East region sales were slightly lower compared to the prior-year quarter.

Sales development1

in percent	Q1/2017
Change versus previous year	7.1
Foreign exchange	2.2
Adjusted for foreign exchange	4.9
Acquisitions/divestments	–0.6
Organic	5.5
of which price	–0.3
of which volume	5.8

1 Calculated on the basis of units of 1,000 euros.

• Organic sales growth in the mature markets was good. The Western Europe region recorded very strong sales growth, while sales performance in the North America region was positive. Sales in the mature markets of the Asia-Pacific region were on a par with the first quarter of 2016.
• All business areas contributed to this very strong organic sales performance. The Electronics business area recorded double-digit sales growth. Sales increased significantly in the General Industry business area, accompanied by very strong growth in the Transport and Metal business area. Sales in the Packaging and Consumer Goods Adhesives, and the Adhesives for Consumers, Craftsmen and Building business areas exhibited a good improvement.
• Adjusted operating profit (EBIT) grew doubledigits to 415 million euros.
• Adjusted return on sales, at 18.1 percent, showed very strong growth compared to the prior-year quarter.

Beauty Care

Key financials 1

in million euros	Q1/2016	Q1/2017	+/–
Sales	950	1,011	6.4%
Proportion of Henkel sales	21%	20%
Operating profit (EBIT)	143	149	4.3%
Adjusted2 operating profit (EBIT)	157	169	7.4%
Return on sales (EBIT)	15.0%	14.7%	–0.3pp
Adjusted2 return on sales (EBIT)	16.5%	16.7%	0.2pp

pp = percentage points

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

2 Adjusted for one-time charges/gains and restructuring expenses.

• In the Beauty Care business unit, sales increased nominally by 6.4 percent to 1,011 million euros in the first quarter of 2017.
• Foreign exchange effects accounted for 2.1 percent of this sales growth, while acquisitions/divestments increased sales by 2.0 percent. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales increased by 2.3 percent.
• The organic sales growth achieved by our businesses in emerging markets was strong. The Africa/Middle East region contributed to growth with a significant increase in sales, while sales development in Asia (excluding Japan) and Eastern Europe was good compared to the prior-year quarter. The Latin America region posted positive growth.

Sales development1

Q1/2017
6.4
2.1
4.3
2.0
2.3
1.8
0.5

1 Calculated on the basis of units of 1,000 euros.

• In the mature markets, organic sales performance was positive year on year. We were able to continue our successful growth in the North America region with a very strong increase in sales. While sales remained flat in the Western Europe region, they were below the level of the prior-year quarter in the mature markets of the Asia-Pacific region.
• Organic sales performance was good in our Branded Consumer Goods business and strong in our Hair Salon business.
• Adjusted operating profit (EBIT) increased by 7.4 percent compared to the prior-year quarter, to 169 million euros.
• Adjusted return on sales exhibited a good increase to 16.7 percent.

Laundry & Home Care

Key financials 1

in million euros	Q1/2016	Q1/2017	+/–
Sales	1,333	1,726	29.5%
Proportion of Henkel sales	30%	34%
Operating profit (EBIT)	236	274	15.8%
Adjusted2 operating profit (EBIT)	243	298	22.8%
Return on sales (EBIT)	17.7%	15.9%	–1.8pp
Adjusted2 return on sales (EBIT)	18.2%	17.3%	–0.9pp

pp = percentage points

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

2 Adjusted for one-time charges/gains and restructuring expenses.

• In the Laundry & Home Care business unit, sales increased nominally by 29.5 percent to 1,726 million euros in the first quarter of 2017.
• Negative foreign exchange effects reduced sales by 1.0 percent, while acquisitions and divestments – particularly the purchase of The Sun Products Corporation – increased sales by 27.5 percent. Organically (i.e. adjusted for foreign exchange and acquisitions/divestments), sales in the business unit increased by 3.0 percent.
• The strong organic sales growth was driven mainly by our emerging markets. The Asia (excluding Japan) region achieved double-digit growth, while sales in the Latin America region showed a very strong improvement. The Eastern Europe and Africa/Middle East regions contributed to this growth with a good increase in sales.

Sales development1

in percent	Q1/2017
Change versus previous year	29.5
Foreign exchange	–1.0
Adjusted for foreign exchange	30.5
Acquisitions/divestments	27.5
Organic	3.0
of which price	–0.6
of which volume	3.6

1 Calculated on the basis of units of 1,000 euros.

• Organic sales growth in the mature markets was good, while sales experienced a very strong increase in the North America region. In a highly competitive environment, sales performance in the Western Europe region was positive. The mature markets of the Asia-Pacific region achieved double-digit sales growth.
• Organic growth was good in Laundry Care and very strong in the Home Care business.
• We were able to increase adjusted operating profit (EBIT) by 22.8 percent to 298 million euros compared to the first quarter of 2016.
• As a result of acquisitions, adjusted return on sales was lower versus the prior-year quarter.

Net assets and financial position of the Henkel Group

• Compared to year-end 2016, total assets rose by 1.7 billion euros to 29.6 billion euros.
• Equity ratio remained virtually unchanged at 53.6 percent compared to year-end 2016.
• Effective March 31, 2017, our net financial position amounted to –1,961 million euros (December 31, 2016: –2,301 million euros). The change compared to the end of the previous year was primarily due to positive free cash flow and proceeds from divestments.

• Compared to the prior-year quarter, the ratio of net working capital to sales improved by 0.5 percentage points to 4.9 percent.

• At 300 million euros, free cash flow was slightly higher in the first quarter of 2017 compared to the prior-year quarter (290 million euros).

• Our long-term ratings remain at "A flat" (Standard & Poor's) and "A2" (Moody's).

Outlook

Guidance for 2017

Organic sales growth	Henkel Group: 2–4 percent All business units within this range
Adjusted1 return on sales (EBIT)	Increase to more than 17.0 percent
Adjusted1 earnings per preferred share	Increase of 7–9 percent
1 Adjusted for one-time charges/gains and restructuring expenses.

• We confirm our guidance for fiscal 2017.

Selected financial information

Consolidated statement of financial position

Assets

in million euros	March 31, 2016	%	Dec. 31, 2016	%	March 31, 2017	%
Intangible assets	11,347	49.2	15,543	55.7	15,424	52.2
Property, plant and equipment	2,613	11.3	2,887	10.3	2,868	9.7
Other financial assets	63	0.3	95	0.3	115	0.4
Income tax refund claims	7	–	7	–	7	–
Other assets	190	0.9	155	0.7	170	0.6
Deferred tax assets	910	3.9	1,017	3.6	1,019	3.4
Non-current assets	15,130	65.6	19,704	70.6	19,603	66.3
Inventories	1,726	7.5	1,938	6.9	2,056	7.0
Trade accounts receivable	3,205	13.9	3,349	12.0	3,639	12.3
Other financial assets	584	2.5	734	2.6	965	3.3
Income tax refund claims	170	0.8	274	1.0	272	0.9
Other assets	303	1.3	434	1.6	452	1.5
Cash and cash equivalents	1,933	8.4	1,389	5.0	2,492	8.4
Assets held for sale	10	–	95	0.3	93	0.3
Current assets	7,931	34.4	8,213	29.4	9,969	33.7
Total assets	23,061	100.0	27,917	100.0	29,572	100.0

Equity and liabilities

in million euros	March 31, 2016	%	Dec. 31, 2016	%	March 31, 2017	%
Issued capital	438	1.9	438	1.6	438	1.5
Capital reserve	652	2.8	652	2.3	652	2.2
Treasury shares	–91	–0.4	–91	–0.3	–91	–0.3
Retained earnings	13,327	57.8	14,234	51.0	14,931	50.5
Other components of equity	–676	–2.9	–188	–0.7	–198	– 0.7
Equity attributable to shareholders of Henkel AG & Co. KGaA	13,650	59.2	15,045	53.9	15,732	53.2
Non-controlling interests	144	0.6	138	0.5	125	0.4
Equity	13,794	59.8	15,183	54.4	15,857	53.6
Provisions for pensions and similar obligations	1,099	4.8	1,007	3.6	935	3.2
Income tax provisions	89	0.4	106	0.4	108	0.4
Other provisions	414	1.8	347	1.2	386	1.3
Borrowings	4	–	3,300	11.8	3,276	11.1
Other financial liabilities	2	–	114	0.4	97	0.3
Other liabilities	16	0.1	25	0.1	32	0.1
Deferred tax liabilities	653	2.8	833	3.0	869	2.9
Non-current liabilities	2,277	9.9	5,732	20.5	5,703	19.3
Income tax provisions	311	1.3	358	1.3	394	1.3
Other provisions	1,596	6.9	1,966	7.0	1,901	6.4
Borrowings	1,515	6.6	425	1.5	1,445	4.9
Trade accounts payable	3,152	13.7	3,665	13.1	3,774	12.8
Other financial liabilities	115	0.5	164	0.6	143	0.5
Other liabilities	295	1.3	395	1.5	347	1.2
Income tax liabilities	6	–	16	0.1	8	–
Liabilities held for sale	–	–	13	–	–	–
Current liabilities	6,990	30.3	7,002	25.1	8,012	27.1
Total equity and liabilities	23,061	100.0	27,917	100.0	29,572	100.0

Consolidated statement of income

in million euros		Q1/2016	%	Q1/2017	%	+/–
Sales		4,456	100.0	5,064	100.0	13.6%
Cost of sales		–2,293	–51.5	–2,649	–52.3	15.5%
Gross profit		2,163	48.5	2,415	47.7	11.7%
Marketing, selling and distribution expenses		–1,092	–24.5	–1,237	–24.4	13.3%
Research and development expenses		–114	–2.6	–121	–2.4	6.1%
Administrative expenses		–225	–5.0	–258	–5.0	14.7%
Other operating income		13	0.3	37	0.7	–
Other operating expenses		–28	–0.6	–13	–0.3	–53.6%
Operating profit (EBIT)		717	16.1	823	16.3	14.8%
Interest income		4	0.1	6	0.1	50.0%
Interest expense		–2	–	–10	– 0.2	–
Other financial result		–9	–0.2	–9	–0.2	–
Investment result		–	–	–	–	–
Financial result		–7	–0.1	–13	–0.3	85.7%
Income before tax		710	16.0	810	16.0	14.1%
Taxes on income		–172	–3.9	–203	–4.0	18.0%
Tax rate in %		24.2		25.1
Net income		538	12.1	607	12.0	12.8%
Attributable to non-controlling interests		13	0.3	10	0.2	–23.1%
Attributable to shareholders of Henkel AG & Co. KGaA		525	11.8	597	11.8	13.7%
Earnings per ordinary share – basic and diluted	in euros	1.20		1.37		14.2%
Earnings per preferred share – basic and diluted	in euros	1.21		1.38		14.0%

Consolidated statement of cash flows

in million euros	Q1/2016	Q1/2017
Operating profit (EBIT)	717	823
Income taxes paid	–113	–137
Amortization/depreciation/ impairment /write-ups of intangible assets and property, plant and equipment1	114	165
Net gains / losses on disposal of intangible assets and property, plant and equipment, and from divestments	–	–24
Change in inventories	–34	–116
Change in trade accounts receivable	–315	–274
Change in other assets	36	–16
Change in trade accounts payable	19	106
Change in other liabilities and provisions	–1	–90
Change in further assets and liabilities	–	5
Cash flow from operating activities	423	442
Purchase of intangible assets and property, plant and equipment including payments on account	–108	–118
Acquisition of subsidiaries and other business units	–8	–
Purchase of associated companies and joint ventures held at equity	–	–
Proceeds on disposal of subsidiaries and other business units	–	47
Proceeds on disposal of intangible assets and property, plant and equipment	2	1
Cash flow from investing activities	–114	–70
Dividends paid to shareholders of Henkel AG & Co. KGaA	–	–
Dividends paid to non-controlling shareholders	–13	–22
Interest received	5	6
Interest paid	–3	–9
Dividends and interest paid and received	–11	–25
Repayment of bonds	–	–
Other changes in borrowings	693	1,016
Allocations to pension funds	–142	–16
Other changes in pension obligations	–29	–22
Purchase of non-controlling interests with no change of control	–1	–
Other financing transactions2	–31	–224
Cash flow from financing activities	479	729
Net change in cash and cash equivalents	788	1,101
Effect of exchange rates on cash and cash equivalents	–31	2
Change in cash and cash equivalents	757	1,103
Cash and cash equivalents at January 1	1,176	1,389
Cash and cash equivalents at March 31	1,933	2,492

1 Of which: Impairment, first quarter 2017: 4 million euros (first quarter 2016: 0 million euros).

2 Other financing transactions in the first quarter of 2017 include payments of –224 million euros for the purchase of short-term securities

and time deposits as well as for the provision of financial collateral (the figure for the first quarter of 2016 includes payments of –32 million euros).

Additional voluntary information

in million euros	Q1/2016	Q1/2017
Cash flow from operating activities	423	442
Purchase of intangible assets and property, plant and equipment including payments on account		–118
Proceeds on disposal of intangible assets and property, plant and equipment		1
Net interest paid	2	–3
Other changes in pension obligations	–29	–22
Free cash flow	290	300

Performance by region

Key figures by region 1 first quarter 2017

in million euros	Western Europe	Eastern Europe	Africa/ Middle East	North America	Latin America	Asia Pacific	Corporate2	Henkel Group
Sales January–March 20172	1,539	695	356	1,338	277	827	32	5,064
Sales January–March 20162	1,528	629	349	926	247	747	30	4,456
Change from previous year	0.7%	10.4%	2.1%	44.5%	12.2%	10.8%	–	13.6%
Adjusted for foreign exchange	1.3%	5.1%	14.8%	39.7%	9.1%	8.2%	–	12.5%
Organic	1.8%	4.4%	2.2%	2.9%	8.2%	9.1%	–	4.0%
Proportion of Henkel sales January–March 2017	30%	14%	7%	26%	6%	16%	1%	100%
Proportion of Henkel sales January–March 2016	34%	14%	8%	21%	5%	17%	1%	100%

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

2 Corporate = sales and services not assignable to the individual regions and business units.

Reconciliation of adjusted earnings

Reconciliation from sales to adjusted operating profit1

in million euros	Q1/2016	%	Q1/2017	%	+/–
Sales	4,456	100.0	5,064	100.0	13.6%
Cost of sales	–2,283	–51.2	–2,639	–52.1	15.6%
Gross profit	2,173	48.8	2,425	47.9	11.6%
Marketing, selling and distribution expenses	–1,084	–24.4	–1,209	–23.9	11.5%
Research and development expenses	–112	–2.6	–120	– 2.4	7.1%
Administrative expenses	–211	–4.7	–243	–4.7	15.2%
Other operating income/expenses	– 15	– 0.3	1	–	–
Adjusted operating profit (EBIT)	751	16.8	854	16.9	13.8%

1 Calculated on the basis of units of 1,000 euros; figures commercially rounded.

Reconciliation of adjusted net income

in million euros	Q1/2016	Q1/2017	+/–
EBIT (as reported)	717	823	14.8%
One-time gains	–	–19	–
One-time charges	7	39	–
Restructuring expenses	27	11	–
Adjusted EBIT	751	854	13.8%
Adjusted return on sales in %	16.8	16.9	0.1 pp
Financial result	– 7	–13	85.7%
Taxes on income (adjusted)	–182	–218	19.8%
Adjusted tax rate in %	24.5	25.9	1.4 pp
Adjusted net income	562	623	10.9%
Attributable to non-controlling interests	13	10	–23.1%
Attributable to shareholders of Henkel AG & Co. KGaA	549	613	11.7%
Adjusted earnings per ordinary share in euros	1.26	1.40	11.1%
Adjusted earnings per preferred share in euros	1.27	1.41	11.0%

• The one-time gains in the first quarter of 2017 relate to the sale of Henkel's professional Western European building material business.
• The adjusted charges for the first quarter of 2017 include expenses of 31 million euros relating to the integration of The Sun Products Corporation (first quarter 2016: 0 million euros) and 8 million euros of expenses relating to the optimization of our IT system architecture for managing business processes (first quarter 2016: 7 million euros).

• Of the restructuring expenses in the first quarter of 2017, 1 million euros is attributable to cost of sales (first quarter 2016: 6 million euros) and 6 million euros to marketing, selling and distribution expenses (first quarter 2016: 8 million euros). A further 1 million euros is attributable to research and development expenses (first quarter 2016: 2 million euros), and 3 million euros to administrative expenses (first quarter 2016: 11 million euros).

Contacts

Corporate Communications

Phone: +49(0) 211-797-3533 Fax: +49(0) 211-798-2484 E-mail: corporate.communications@henkel.com

Investor Relations Phone: +49(0) 211-797-3937 Fax: +49(0) 211-798-2863 E-mail: investor.relations@henkel.com

Credits

Published by: Henkel AG & Co. KGaA 40191 Düsseldorf, Germany Phone: +49(0) 211-797-0

© 2017 Henkel AG & Co. KGaA

Edited by: Corporate Communications, Investor Relations, Corporate Accounting Coordination: Renata Casaro, Dr. Hannes Schollenberger, Wolfgang Zengerling English translation: Donnelly Language Solutions, London Design and typesetting: MPM Corporate Communication Solutions, Mainz Pre-print proofing: Paul Knighton, Cambridge; Thomas Krause, Krefeld Printed by: Druckpartner, Essen

Date of publication of this Report: May 11, 2017

PR No.: 05 17 300

This quarterly statement is printed on LuxoArt Silk FSC. The paper is made from pulp bleached without chlorine. It has been certified and verified in accordance with the rules of the Forest Stewardship Council (FSC). The printing inks contain no heavy metals.

Except as otherwise noted, all marks used in this publication are trademarks and/or registered trademarks of the Henkel Group in Germany and elsewhere.

This document contains forward-looking statements which are based on the current estimates and assumptions made by the corporate management of Henkel AG & Co. KGaA. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate, forecast and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by Henkel AG & Co. KGaA and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from forward-looking statements. Many of these factors are outside Henkel's control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace. Henkel neither plans nor undertakes to update forward-looking statements. This document has been issued for information purposes only and is not intended to constitute an investment advice or an offer to sell securities, or a solicitation of an offer to buy securities.

Financial calendar

Publication of Report for the Second Quarter /Half Year 2017: Thursday, August 10, 2017

Publication of Statement for the Third Quarter /Nine Months 2017: Tuesday, November 14, 2017

Publication of Report for Fiscal 2017: Thursday, February 22, 2018

Annual General Meeting Henkel AG & Co. KGaA 2018: Monday, April 9, 2018

Up-to-date facts and figures on Henkel also available on the internet: www.henkel.com

Henkel AG & Co. KGaA 40191 Düsseldorf, Germany Phone: +49(0) 211-797-0 www.henkel.com