Henkel Eyes More Price Rises as Glues Improve

German consumer goods company Henkel said more price increases would help it meet its 2012 guidance as it reported a slow return to sales growth at its adhesives unit in the first quarter.

While industrial adhesives were a bright spot for companies such as Henkel and local rival Beiersdorf last year, Henkel in March said its adhesives business was slowing as customers in China used up stock.

The company said on Wednesday that sales growth in the division had improved to 5.6% from 4.2 % in the previous quarter.

"The adhesives business in China has improved, but it is still slightly negative," Chief Executive Kasper Rorsted told analysts. "But we expect the situation to improve in the summer and for it to be positive for the year as a whole."

Adhesive peers 3M and ITW also showed signs of weaker business in Asia in the first quarter.

Henkel, whose brands include Persil in most of Europe and Schwarzkopf hair products, stuck to its guidance for an adjusted operating return on sales of 14% in 2012 even as global economies slow and raw material price increases cause headaches for the consumer goods sector.

"We remain committed to counteracting the effects of rising raw material prices," Chief Financial Officer Lothar Steinebach told analysts on Wednesday.

"We do not expect consensus estimates to move this morning, as despite the first-quarter beat, the market might be concerned by the continued decline in volumes in adhesives," Nomura analyst Guillaume Delmas wrote in a note to clients.

The company, controlled by the Henkel family, said its adjusted earnings before interest and tax (EBIT) in the first three months of 2012 came in at €551 million ($716 million), compared with a forecast for 536 million euros in a Reuters poll.