Henkel AG & Co. KGaA

Kasper Rorsted - Chairman and Chief Executive Officer Carsten Knobel - Chief Financial Officer

Gale Columbi - MainFirst Katherine Tait - Goldman Sachs International Hermine de Bentzmann - Raymond James Celine Pannuti - JPMorgan Securities Christian Faitz - Kepler Capital Markets SA James Targett - Joh Berenberg, Gossler & Co. Iain Simpson - Société Générale SA

Good morning, ladies and gentlemen, here from Düsseldorf and welcome to our conference call. First, I would like to focus on the key developments of the fiscal year 2014, followed by an update on where we stand in terms of the execution of our strategy 2016.

Then Carsten will provide you with financials in detail of the full year and how we created shareholder value in 2014. And after that, I will close my presentation with a brief summary for 2014 and the outlook for 2015, and finally we’ll be happy to take your questions.

I would like to begin by reminding everyone that the presentation which contains the usual formal disclaimer to forward-looking statements within the meaning of relevant U.S. legislation can be accessed via our website at Henkel.com\ir.

The presentation discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose we take it as read into the records for the purpose of this conference call.

And now let’s get started. We will provide key developments 2014, strategy progress for 2016, financials 2014, and extended value creation, and in the end summary and outlook for FY 2015, and then we’ll go to the Q&A session.

Overall robust performance in a challenging and volatile environment; we grew our sales growth by 3.4%. Our adjusted EBIT margin hit an all-time-high of 15.8%; adjusted earnings per share growth of 7.6%.

Our free cash flow came in at €1.3 billion. We invested €1.8 billion in acquisitions and our dividend payout is proposed to stay at 30%, but of course was an increase relative to the earnings per share growth.

We’ll get further details on that later on. So how do we perform against guidance?

We guided our organic sales growth between 3% and 5%; we came in within the range, but the lower positive range at 3.4%. On the emerging market sales, we expected a slight increase in nominal sales and we ended up in prior level.

I don’t want to stress at this point of time that we had an exceptionally strong year when we take the emerging markets condition into consideration. We grew high single digit and we’re very happy with our overall performance in our emerging markets, with the only deviation to the slight increase is currency driven.

There is nothing organic that is below our expectation. Our adjusted EBIT margin, we guided at just under 16% and we came in at 15.8%.

And our adjusted EPS growth, we guided high single digit defined as 7% to 9%. Following the second quarter, we made a revision within the range and said we will be closed up to 7% to 9%.

We came out at 7.6%, so pretty much in the middle of the range but within – clearly within the range of our guidance. Now, let me describe how we saw the year.

We see a consistent execution of our 2016 strategy. So we are doing the things we said we would do under our four strategic priorities and executing that very diligently.

We have conducted a high quality set of executions that will strengthen our market position, in the short, as well as in the long-term, very much in the core of what we’re doing, market-wise very attractive, and we believe possess very little risk, and attractive from an earnings standpoint. We saw solid organic sales growth driven by all businesses and we continue to see very strong organic sales growth in the emerging markets.

Carsten will speak later about that, but this is an area we are very satisfied with. Our adjusted EBIT margin hit an all-time-high, driven by all business groups.

And our adjusted EPS growth came in at a high-single digit. As I said, that will mean a further increase in dividend assuming the payout ratio of 30% will be approved by the AGM, which will take place in approximately six weeks from now.

There are also areas that we are less content about. There are some macro areas, there are some micro areas and there are some which are self-inflicted.

On the macro side, we have clearly had substantial FX headwind, particularly in the first-half of 2014, pretty much until August, and that is now being ongoing since 2013 also mid-2014. We continue to see severe geopolitical and social unrest in some of the countries we conduct business in, particularly Middle East and despite that, we continue to deliver very strong performance, but, of course, has an impact on the overall growth rate.

We are seeing the Eastern European economy being impacted by the Russian and Ukraine crisis. Ukraine and Russia is, of course, impacted, and as I’ve stated very clearly at every quarterly call in 2014, we are seeing a slowdown in the Eastern European economy because of this political situation.

On the macro side and micro side, we’ve seen a further intensified price and promotion pressure in the HPC market. In most market across the board which is an important development of the HPC market.

And as I’ve also been clear on several calls, North America has been clearly below our expectations in 2014. Organic sales growth in the past year, laundry being solid, and home care, so more the specialty categories, being very strong.

The mature markets we saw Western Europe being solid, despite and not a very exciting economy, Western Europe and North America being negative. In emerging markets, we have continued to see double-digit growth rate in 2014.

We saw adjusted EBIT margin showing a very strong increase throughout the year and ROCE was below the level of previous years because of number of the one-time items that Carsten will comment on more in detail. We’re also seeing a continuous strengthen in our innovation pipeline, approximately 45% of our business in this area is done by products that has been introduced in the last three years, and our innovation help us differentiate in the marketplace and also take pricing in the marketplace.

That has helped to drive the top line, but also the improvement on the bottom line. Vernel, which is one product I like to mention here is where you’re starting to see some of the trends from the Beauty Care market segments coming into the Laundry & Home Care segments.

And here you are seeing the inclusion of oils within detergent-related products. As you know, oils were introduced, particularly in hair products, approximately two to three years ago, very exciting products.

We patented the bill of materials and the way the product has been constructed. It is implemented in sort of countries in the fourth quarter and will be fully implemented in Western, Eastern Europe by the third quarter of 2015.

On the Beauty Care side, we saw a more solid organic sales growth, retail was solid, hair salon was negative, was positive in the fourth quarter, but I do not want to make any final adjustments on whether the market has finally churned. On the mature markets, the Western European – Europe continue to be positive, similar comments, as I gave in the Laundry & Home Care side and North America also here disappointing.

Emerging markets continue to be strong, China double-digit. Just to remind everybody, we are not present in China in Laundry & Home Care, which is why I didn’t set separate comment on China in Laundry & Home Care.

The adjusted EBIT margin continued to show solid increase and ROCE will be below previous years or it is below previous years for the same reasons as stated in Laundry & Home Care, which Carsten will comment on. Also in this area, 45% of our sales is conducted by products, which have been introduced in the last three years.

And in 2014, we introduced Schwarzkopf Essence Ultime, which is a high end hair products areas. It is non-comparable to Syoss, I want to be very clear on this.

So where Syoss is a volume product, this is a high-end product with a very different marketing portfolio and incremental to the market shares that we’re gaining here, because in this market segment, we not been present before. So we’re very excited about the introduction of this product and is going according to plan in 2014.

Now, let me move to our biggest business group Adhesive Technologies, where we saw solid OSG and solid adjusted EBIT margin improvements in 2014. We saw, as I said, all – solid organic sales growth in all businesses are growing particularly what we call our, gel industry, our Loctite business was very strong in 2014.

In the mature markets again similar pressure; Western Europe, positive, North America, negative; and the emerging markets is strong; China double-digit also in the fourth quarter. We saw the adjusted EBIT margin showing solid increase in all-time high and also ROCE further increase.

When it comes to our Adhesive Technologies, particularly technology in this space, it helps us differentiate in the marketplace and drive pricing actually into the marketplace, which has been positive, reason, why we’ve been able to take the margin from 10% to about 17% in the past six years. In this area, we have approximately 30% of our business being conduct with products that have less than five years in the marketplace.

This is a different item, because simply some of the products that we introduce, the customers do not want us to change them over a longer period of time, I speak about automotive, where you have a lifecycle account seven years or aerospace where it’s, of course, longer. So that’s where you simply cannot change the product as quickly as in other areas simply because of the customer requirements.

One of the areas that are quite exciting is our overall surface treatment business, where in the past, we’ve only delivered products. Now, with some of our new products, we’re also delivering total solution, so we’re also making certain that the product is being applied to the customer product.

In this area we’ve had some very exciting wins, particularly in the tepid markets, where we’re not only delivering the product, but also conducting the application of the product to the customer product. So a much more solution-driven business which is very much in line with what we’re trying to do deliver differentiation through technology and application knowhow.

That was and highlight our 2014. Now, let me just review where we are in our strategy execution towards 2016.

You all know our strategy built around, outperform, globalize, simplify, and inspire and our three financial targets €20 billion, €10 billion, 10%, where our 10% EPS CAGR is our primary target towards 2016, and on the one where we’ve made substantial focus. It’s clear that we’ve done – made the progress on the €20 billion sales so far simply because of one item, headwinds and currency.

We expect that to change in 2015, and make a substantial step forward, but that has been the primary reason for the lack of progress on the €20 billion. As I said, our primary guidance target is 10% EPS CAGR.

On outperform we have – we are conducting a number of activities, which will continue to help us make us more competitive and our top brands – our top three brands today account for €5 billion and our top 10 brands for 59% of our total sales. A couple of years ago, one of the criticisms of our Henkel was, we don’t have any strong brands.

As you can see, our top 10 brands was account for 60% of our business, almost have a average of €1 billion of piece and that, of course, allows us to spend much more focus on marketing spend, because we have fewer brands to spend there. Our innovation, I’ve spoken about.

It is helping us to drive differentiation and is helping, of course, drive pricing into the marketplace, and we are seeing an increase in innovation rate across all businesses. On our R&D census, we stated that we would open up seven new R&D centers in the emerging countries by 2016.

We have so far opened up five and two to go, and we’re very confident that we will also open up the remaining two and we will report it building on that, when we have done so far. But overall, we are building the infrastructure, consolidating our brands, and driving innovation that will allow us to continue to what we are trying to do grow profitably towards our 2016 targets.

On globalize, we’re focusing on regions with high potentials, and this is where mature and emerging markets place two different roles. In the mature markets, we want to consolidate our strong market positions and increase leveraging to profitability, and we will invest to drive efficiency into this area.

So we expect slower growth rates, but higher profitability. We are seeing that, particularly in Europe in 2014, which was an exceptionally good year.

On the emerging markets, they need to continue to drive our top line growth for the future and of course also over time increased profitability. In order to do so, we’re investing heavily in our emerging markets.

And for the first-year ever, the total amount of CapEx investments was around 50-50 between mature markets and emerging markets. So we are clearly investing for the future in the emerging markets with those manufacturing processes, systems, or people.

We’ve also spent €1.8 billion in acquisitions to strengthen our core business going forward. We’ve done, I would say, 3.5 or 4 on our Laundry & Home Care business.

We acquired a number of brands in our core business, Laundry, Adhesives, and insecticides in Europe to strengthen our core position in laundry, but also now present number two position in insecticides in Europe. We have a strong position in the U.S.

and we’re a market leader in Korea. And in the beginning of the year, we acquired the brand E in Poland to strengthen our longer position in Poland.

In our Beauty Care business, we acquired branch in the business. We acquired three branch in U.S., which make us now number three in the professional hair care market in the U.S.

I just want to remind everybody, by 2010 we had zero position the U.S. and right now we are number three in the U.S., so very strong position in attractive marketplace.

And in our adhesive business, we acquired the Bergquist Company, the leader in thermal management systems, so the distribution of heat generated by processors in the electronics industry, it can be consumer electronics, of course, business electronics or automotive or aerospace. This will help expand our position in the overall electronics market, which is very attractive, not only from a growth standpoint but also profitability standpoint, so we believe we have invested actively in very attractive acquisitions with very attractive P&Ls, that will help the company moving forward, not only towards 2016 but also beyond.

On Simplify, making us a better company, so driving a much more scalable business model; we now have more than 2,600 people in shared service centers and this we opened Cairo and Shanghai, so we are now present globally in shared services and we are confident towards moving towards the target of having more than 3,000 people working in shared services by 2016. We converted 45,000 employees to our new digital platform in 2014 without any business disruption.

We finalized the rollout of SAP Horizon in Asia and are now starting the implementation work in Europe without any business disruption, which is not self-explanatory. A lot of companies stumbling in this area; we had a very successful rollout and we created our global supply chain company set up in Amsterdam and we’re looking for further sourcing hubs for the future that will allow our global supply chain to operate more efficiently.

Overall, we are building a scalable business model. But most importantly, we continue to strengthen our global management team.

There is no doubt that the core reason why we have been able to consistently improve our performance has been through good and solid execution done globally by good leadership. And we are working effectively with Harvard Business School to ensure that our top 200 leaders are trained by trainers so to speak a co-development program between Henkel and Harvard that ensures that our senior leaders across the company knows what is expected from them from a cultural standpoint but also from a performance standpoint.

We are a performance-driven company. On talent and performance, we continue to conduct our, what we call, our Development Round Table where we stack-ring our people to ensure that we treat people fairly but differently.

We want to make sure that the top performers get top attention within our company and performance is recognized and that allows us also to promote more than 1,000 people internally, internal promotion is a high priority for us, under the assumption that the performance is appropriate and the compliance to our values is in order. Diversity, the last point, 33% of our managers are women, but even more important, we have a global workforce.

We have today in our top managers Chinese, Arabs, Russians, American, Latin Americans, and that is what truly characterizes a global company. We do not want to be a global managed company.

We are a global company, globally headquartered in Germany, but we want to have a global management team and we made substantial focus on this, where in most regions the regions are run by strong local leaders. Now, I’d like to hand over to Carsten, who will take us through the financials in detail for 2014.

Carsten, please.

Thank you very much, Kasper. Good morning to everyone.

Let’s have now a look on our financials for the full year 2014 in more detail. And let’s start as always with an overview of our key performance indicators and starting here with our sales performance.

In 2014, our sales accounted for €16,428 million. This is showing a slight increase in nominal terms of 40 basis points, due to negative FX effect amounting to 4.0%.

Organically, we could increase again with a solid organic net sales growth, our numbers by 3.4% supported by all our three business divisions. Our gross margin, adjusted gross margin came in at 47.5%, this is 50 basis points below the prior year with 48.0%, so with a gross margin of 48%.

The year 2013 represented a tough and high comparable, if you would compare the 47.5% to the year 2012 this would represent an increase of 40 basis. Coming now to our adjusted EBIT margin, our adjusted EBIT margin could be increased for the year 2014 by 40 basis points, now to an all-time-high in terms of margin of 15.8%.

And by that representing a strong result supported by all three business division. Before I now continue with the EPS, let me step-back for a moment and comment on the Q4 adjusted EBIT margin of the quarter.

This is below the prior year of 60 basis points and there are three major reasons behind. First of all, I think you all know that we acquired significantly in the year 2014 and the closing of the majority of the acquisition was in the second-half, being more precise even in the quarter four of the year.

And by that you can imagine that we have taken integration costs, but also inventory step-up which are related to IFRS requirements, into directly into account which affected the Q4 2014 but also be clear these are one-time effect which will not occur going into 2015. The second reason behind is the crisis which you are also aware in Russia and Ukraine, besides the translational impact which we faced, we have also significant transactional impact in Russia and in Ukraine hitting our gross margin and by that also hitting out EBIT and by that impacting also the margin.

And the third point is we have increased our marketing spend in our fast moving consumer businesses on a quarter-to-quarter comparison Q4 to Q4 of last year. So these are the three main reasons why you see 60 basis point decline in the Q4 margins, especially the number, the second reason which I alluded to the situation in Russia and Ukraine, something which is not an one-time effect, which will continue definitely also – which we will see in the first-half of the year 2015 because the crisis started in the second-half of 2014.

With that, let me come back with this excurse and come now to our adjusted EPS, development of our preferred shares, we reached €4.38 which is an increase of 7.6% and by that hitting our high single digit guidance for EPS in the year 2014, even if it is at the lower end of the range as we indicated it already in Q3 release; so overall, the robust performance and another year of profitable growth. Let me now come to our cash situation and here focusing first on our net working capital development.

Net working capital came in at a good level of 4.2%, which is up versus the prior year or 190 basis points, but definitely on a satisfying level. Please consider also here the topic of the recent acquisitions which we did.

They have not the same level of net working capital as we are used to, so this has an impact of roughly 70 basis points, and on top, we are attributable to negative currency effects of roughly 50 basis points. If you add these two components it’s 120 basis points, and if you see that, then you would have a like-for-like comparison of roughly 3.0 of net working capital.

And if I could remind you on what I said last year, we see our net working capital on a level between 3% and 3.5%, that’s the reason why we see this – the number of 4.2% on a satisfying level for 2014. Nevertheless, we will not give up to further improve net working capital also in the coming years.

Coming now to our free cash flow development, we reached the free cash flow of €1,333 million, which is in line with the average over the last six years which we take as a reference period since 2008. For sure it’s below the previous year with €1.6 billion, which was an all-time-high when it comes to free cash flow.

With that, let me move now to our net financial position. The net financial position at the end of 2014 reached a level of minus €153 million, considering the increased dividend payout which we had in 2014 and the recent acquisitions of €1.8 billion, which we spent, a remarkable result, so we used also here our cash in a very disciplined way.

After this overview, let me now go into the details of the KPIs and starting with our sales situation. As I mentioned before, our sales came in organically with a solid development of 3.4% for the year, and this is split by 40 basis points of price increases or price development and 300 basis points of volume development.

As anticipated in 2014, we continued to face a headwind with foreign exchange with 400 basis points, as I mentioned before the absolute amount is in that terms €650 million and especially decreasing or depreciation of the emerging market currency contributed the majority of that part and even be more precise Russia and Ukraine, these two countries amount for one-third of this €650 million of FX effect. M&A, the net effect of M&A contributed plus 1.0%, so in total we reached €16,428 million, showing a slight nominal increase as pointed out before of 40 basis points.

Having now a look on our situation in the emerging markets and the mature markets, you heard already Kasper pointing that out we have been very satisfied with our development in the emerging markets. We could again show a strong organic net sales growth of 7.8%, reaching €7,249 million in absolute terms.

And also our situation in the mature markets was slightly positive with 0.2% especially with a very satisfying performance in Western Europe. The emerging markets now account for 44% of our total sales, despite the FX headwinds, this is a stable situation compared to the prior year.

If we would adjust for FX for the same level as of last year, we would have increased the emerging market level to 46%. With that, I would like to now go into the details of the region and give you a glance how we have been developing here.

And first of all, overall statement, all regions show organic growth besides or except North America. Starting with Western Europe; Western Europe in total amounts for 35% of our total sales and as you can see we have increased organically the situation by 1.7%.

This is as I said before supported by a very good performance in Germany across all business units, but it’s also noteworthy to mention that also in Southern Europe, all major countries showing positive development besides one country, which is Italy, Italy is still negative in terms of organic net sales development. Coming now to Eastern Europe, similar to Q3, we see a counter intuitively sales development in Eastern Europe.

Eastern Europe is amounting for 17% of our sales. And we have a polarized situation; we have in total in organic net sales growth of 4.5% by Russia showing a very strong development in terms of organic development, while Ukraine and some other countries are negative.

Moving now to Africa/Middle East, Africa/Middle East again in 2014 showed double-digit development plus 16.9% in terms of organic net sales development. Coming now to North America, amounting for 18% of our sales, organic sales remained below the prior year.

Our consumer businesses Laundry & Home Care and Beauty Care were both impacted by an intense promotional and price competition but also our execution was also not always optimal and by that impacting our business negatively. The situation in our Adhesive Technologies business in North America is different.

Here we are affected by portfolio optimization measures that mean we are deemphasizing our commoditized businesses especially in the area of packaging – adhesive packaging and consumer goods. With that, I would like to move to Latin America, Latin America amounts for 6% of our total sales, shows solid development in organic net sales growth of 4.4% with a strong development in Mexico and flat development in Brazil, especially impacted by the weak development of the market.

Finally Asia Pacific, again also here a very strong sales performance plus 8.2% in terms of organic terms and this was especially driven as Kasper has pointed out before by a double-digit development in China, but also a strong development of India. With that, let me finalize the situation in terms of commenting on our BRIC situation, I expanded more or less but summarizing it.

BRIC, a very good development; double-digit in China; very strong in Russia and India; and the only one was flat is Brazil. With that, I would like to move to our three divisions and starting now with Laundry & Home Care.

Laundry & Home Care amounts for 28% of our total sales of the company, showed an organic growth of 4.6%, driven by volume of 5.1% and by that over compensating a negative pricing effect of 50 basis points. And the two businesses, Kasper mentioned that laundry showed a solid organic net sales growth, while the Home Care business was very strong in terms of growing organically.

The emerging market again in 2014 showed double-digit development with Eastern Europe and a solid development while Asia Pacific and Latin America both were very strong and Africa/Middle East in a double-digit development. Mature markets remained below the prior year.

We had a good development in Western Europe supported by good development of Germany, but that could not fully compensate the situation you are aware of in North America where we have a negative development due to a fierce promotional environment and on top of declining markets in 2014. Bottom line situation, adjusted EBIT margin again could be increased by 60 basis points on a full-year basis.

Now to a level of 16.2%, this is in all-time high. Also if you give you now a longer perspective, since 2008 we have improved the adjusted EBIT margin in Laundry & Home Care by 450 basis points since 2012.

This development shows an increase of 240 basis points. Finalizing the situation in Laundry & Home Care with a look on net working capital, we show here also a very good number of minus 6.6%, this is above the prior year of 140 basis points.

But if you consider also here the M&A effect, which amounts to 70 basis points. We are quite satisfied with development also on that level.

Moving now to Beauty Care, Beauty Care now showed a 9th year of consecutive profitable growth, showing an organic net sales growth of 2.0%, driven exclusively by volume so the price component was flat. The retail business showed a solid organic net sales growth and our hair salon business is still characterized by a market decline in the mature markets and as you know the mature markets are the majority of our sales, so sales therefore show the negative development, but also commenting again on that as Kasper said the Q4 of professional was positive in terms of OSG.

The emerging market grew strongly with double-digit contribution in the emerging Asia region and here with double-digit development of China. Africa/Middle East and Latin America showed growth – strong growth rates.

Mature markets could not be maintained on the prior year level, we have a similar situation like in laundry, we have a very good development in our Western European countries, which could not fully compensate the situation in North America due to similar reason as pointed out in Laundry & Home Care. Coming also now to the bottom line of Beauty Care, we have seen an increase of our adjusted EBIT margin in 2014 of 30 basis points, bringing us to a level of 15.3% also here the comparison on the long-term basis, since 2008 we increased the margin by 270 basis points or respectively since 2012 of 80 basis points.

Net working capital is also here on a very good level of 1.3% being up 180 basis points, here are two effects, which are remarkable on the one-side also the effects from acquisitions which amount to 80 basis points, but here we have also FX effects of roughly 60 basis points, so in total 140 basis points on to make it like-for-like. With that moving now to our Adhesive Technologies division and also stating here we have 49% of our sales in the total group which are amounting or representable for adhesive.

We have seen a solid organic net sales growth of 3.7%, which have balanced mix of volume and price, represents 270 basis points of volume, 100 basis points is price. All segments contributed to that development, especially general industry segment, so the strong or very strong organic net sales growth all other segments had a solid development when it comes to OSG.

Emerging markets especially here a strong development with Russia and China being double-digit but also strong developments from Mexico and India. Mature markets recorded a positive organic net sales growth, here again a strong development or a good development.

Western Europe and Mature Asia could overcompensate the slight negative development in North America. Bottom line, adjusted EBIT margin is up 30 basis points to an all-time-high-level of 17.2% and if you also look here historically back, we have increased since 2008, 710 basis points the adjusted EBIT margin in adhesive and since 2012 of 210 basis points.

Net working capital is at the level of 12.2%, also here impacted by FX and acquisition. FX amounts for 60 basis points – sorry, acquisition amounts for 60 basis points, while FX amounts for 90 basis points, so in total 150 basis points in order to come to like-for-like comparison so there we would be up only 70 basis points, so very satisfied also here with net working capital.

With that I would like to move further in our income statement adjustment and starting with gross margins or from sales to gross margins. I’ve commented on the sales development of €16,428 million.

We have a gross profit of €7,798 million, which is down compared to the prior year of minus 0.8%, that brings of our margin to 50 basis points reduction compared to the prior year I already commented on that the prior year was a high comparable and that we are 50 basis points down, but compared to 2012 we are 40 basis points up. So especially here increase in our raw material costs as one-item and also the high promotional intensity could – were affecting our 2014 numbers and we could not overcompensate that by goods cost, development measures, and efficiency gains, which we realized in our supply chain area.

With that, moving to further in our income statement, adjusted now from gross profit to EBIT, you will see marketing, selling and distribution expenses decreased in percentage of sales especially to efficiency gains realized in selling and distribution expenses. After the adjustment for foreign exchange effects, we kept our absolute marketing spend for full-year stable, taken to account that we have a number – significant reduced number of brands, which we support as Kasper is pointing that out.

So less than 300 brands we have now in our portfolio and on top we spend more efficiently and therefore stronger supporting our key brands. Overall, our clear strategy is to grow sales, increase market shares and have margins increasing.

And this is the balanced way, how we steer and how we develop the situation when it comes to the mix of advertising and the market conditions related to promotions. R&D expenses are at the level of 2.5% related to sales and are almost on the level of 2013.

Administration expenses in absolute terms are down by 2% with strict cost discipline and efficiency focus behind the percentage of sales remains on the level of the year before. We have operating – or other operating income, other operating expense balance of €36 million, which is very low level and by that we reach an adjusted EBIT of €2,588 million, or a respective margin of 15.8%, which I commented before on.

With that, I would like to move now to our bridge from reported to adjusted EBIT. You see one-time gains of €28 million.

We have one-time charges of €159 million. I would like to comment on two specific topics here.

First, as already commented in Q3, we have been negatively impacted by expenses of €109 million for provisions related to proceedings by anti-trust authorities in Europe. And the proceedings are related to violations occurred between the years 2003 and 2006, so more than 10 years below.

Secondly, we have charges related to the set up of our global supply chain and set up the integrated global supply chain company which is amounting of roughly €40 million. Moving to our expenses regarding restructuring in total €230 million, which is above the prior year, but which is in line with the guidance we have given to you at the beginning of 2014.

With that, we come to the €2.588 billion I just mentioned before in terms of adjusted EBIT for 2014. Looking at the bottom line, profit expansion is ensured in a tough environment, while we do come to that conclusion if you see the financial results €49 million of negative, which is an improvement of 56% or €64 million compared to the prior year and we paid taxes on income of €533 million, which is related to an effective tax rate 24%, also here in line, what we in general see for the year, and therefore we come with a net income of €1,662 million.

Closing the financials, looking at the net financial situation, where you see the minus €153 million, I commented on, and there are three topics to be mentioned. First, we invested roughly €1.8 billion in acquisitions, which you are aware of.

Secondly, we paid dividends of around €550 million, which is €100 million more than the comparable year 2013 and we also invested more into PPE and intangible assets, roughly €500 million, also €100 million more than the year before. With that, we still and taking our flat rate into account, we have a financial headroom of roughly €4 billion to €4.5 billion.

And taking a step back, over the last year you see that we have improved the situation by €3.6 billion. With that, I’m moving now to the excellence in value creation and taking three steps; one on organic performance; second on acquisitions; and third on cash return options.

Let me start with the organic performance. We have seen a situation that we increased our capital expenditures by 19% now to a level of €517 million compared to €213 million, this is in line within our guidance.

We significantly increased the share of investments in our emerging markets, as you can see from the chart plus 30% and thereof we’re spending now half of the group capital expenditures in the emerging markets and for sure then the other half in the mature markets. The investments are focused on expansion and optimization projects, two-third of that and we also, as I pointed out several times before, significantly increased our investments in our IT infrastructure, what brings me to the next point, because we would like to further build on our scalable business model, where IT investments are one of the major focus areas.

We are focusing on best-in-class processes, IT focus and global supply chain. I will not spend so much on shared services, because Kasper has already done that.

We significantly increased the number of people already now to a level of more than 2,600 and we are well ahead of our plan to reach the 3,000 people, which we have foreseen for the end of 2016 and we finalized our global footprint with opening two shared service centers in Cairo and Shanghai. With the IT platform, we would like to further consolidate, we are doing the second initiatives by consolidating our IT systems, we executed that in Asia, we reduced the number of ERP systems on 21 to one system which is fully in operation since 2014 and we started to roll out and the majority of the roll out in Europe we start in 2015 in order to continue the execution what we have done in Asia.

And finally, coming to our global supply chain company, here we have completed the blueprint. It is about further milestone in standardization and harmonization and process optimization of our processes.

We would like to have an integrated setup of our global supply chain organizations of the three business divisions, including our purchasing activities and we have established at the end of 2014 our supply company in Amsterdam and we will continue to work on these over the next year. With that, moving to our acquisitions, a very disciplined and focused approach also with execution measures in 2014, €1.8 billion we spent in acquisitions on all our three business divisions and by that further strengthening our positions in attractive segments in Laundry & Home Care besides the brand E in Poland, we had the major acquisition of the Spotless Group, which has a purchase price or an enterprise value of €940 million.

In the Beauty Care area, despite the acquisition of Pert in Latin America, we acquired three professional hair care businesses in North America, where we spent €274 million. And in Adhesive Technologies, we acquired the Bergquist Company at the end of the year, and here a clear point where we would like to further gain technological leadership in growing markets of the electronic industry and we spent €467 million on that.

Going forward, we remain committed to the acquisitions and we will continue our disciplined and very focused approach, where we definitely have our criteria, which have not changed, that means strategic fit, financial attractiveness, and availability of targets, and then we will also correspondingly execute. The last pillar, our cash return options as already mentioned this year again, we would propose at the Annual General Meeting April 13, that we will propose a dividend payout of roughly 30% of our adjusted net income after controlling interest, and this is in line with our change – of our dividend policy, which we disclosed last year from 25% to a range of 25% to 35%.

If you look on our further – on our dividend, you will see the 25% over the last years, and in 2013 and in 2014, the 30%, which will bring us to a dividend of €1.31 for the preferred shares being up more than 7%, 7.4%, and this translates into a total amount of dividend of €569 million and but that’s an increase of €40 million to the year before. With that, I’m at the end and would like to hand back over to Kasper.

Thank you very much, Carsten. Coming to the end, let me just comment on challenges and opportunities in our global markets, because the question I’ve been asked very frequently when I met with many of you in 2014, and I have chosen to comment on our largest countries in the world, U.S., Germany, China, and Russia, and that is the sequence of the spec.

The U.S. clearly represents a huge opportunity for us moving forward.

We have invested heavily in the U.S. market in 2014, not only in OpEx, but also on CapEx.

I mentioned in my presentation and Carsten detail about the acquisitions we’ve done to not only strengthen, but also expand our position in the U.S. and clearly, we’ve not executed up to par, we will do that, and you can rely on that.

We’re very, very committed to make sure that U.S. will get back to us within the organization as the biggest country, which is already, but also as a revenue contributor and a EBIT growth contributor.

Germany, we have to win your home games and we’ve done that in the past several years also in 2014. Germany was an exceptionally good year for us in 2014, not only in terms of growth, but also EBIT expansion and the market share expansion.

We will continue to defend and grow our Home Care. China, a lot of people have been concerned about the growth rates in China from a GDP standpoint going to 7% or 7.2% outlook for 2015, which is very similar by the way to the GDP number in 2014.

I’ve been consistently almost in the last four to five years been asked about when do we see this slowdown in China. Of course, there is a economic slowdown, despite that we continue to grow double-digit in China and China in an over proportionally profitable market for us.

We also invest ahead of time. We have 16 plants, building the 17.

We’re expanding our footprint when it comes to offices, when it comes to people, we will continue to experience in China and we continue to be bullish around China. Russia, Russia is – was our fourth largest country in the world has been an exceptional success story of our inflow, and we grew very rapidly also in the past year.

Of course, in nominal terms, we have been heavily impacted by the ruble. But I do want to remind all of you and I have said this on to one-to-one meeting, this is the fourth crisis we’re experiencing in Russia.

Our experience have been by sticking in Russia and staying the course, we have in the long-term strengthened our market share position and that is our position in Russia. Russia will in the short- to medium-term be a challenge for us over the long-term a huge opportunity.

We have no change in our Russia strategy. Moving to 2014, it was overall a robust performance in a challenging and volatile environment.

We delivered our key financial indicators in 2014, despite challenging markets with very strong adverse currency. We strengthened our portfolio with high-quality assets predominantly in the mature countries, which might represent a lesser growth opportunity, but are very strong from an earnings opportunity.

And with the U.S. position, I’m certain that we not only strategically, but also tactically improved our position in the U.S.

We saw solid organic sales growth driven all – by all business groups. We saw very strong organic sales growth in the emerging markets at 7.8%, which is almost similar to previous years, despite the Russian crisis, despite the war in the Middle East, et cetera, and we saw an all-time high of our EBIT margin and high single-digit EPS growth.

It is another, what we call a successful year towards our 2016 targets that we have set ourselves, and we’re very committed to. We see 2015 as an ongoing challenging business environment.

We expect a moderate pick up in global GDP according to fairer, GDP grew 2.2% last year and is supposed to grow 2.8% this year, so there should be an upside. We saw – we’ll see high volatility in some key currency and crude oil prices, some will deliver upside dollar and dollar pegged and also the raw materials, and some will deliver downside.

And we see a persistent geopolitical tension mainly in Eastern Europe and in the Middle East. And now let me say something, which is extremely important, so let me try to be clear on this.

As you know, Russia and Ukraine together account for about 7% of group sales – group sales level. Even if we look at production, we are facing strong FX headwinds.

Based on the current FX rate levels, which is pretty consistent in the last month, which as well as the current, we expect a transactional and transition impact of around €100 million negative on group EBIT for 2015, for Russia and Ukraine together, meaning, a decline over 2014 of approximately €100 million. Please remember also that our total direct materials in Russia and Ukraine are highly dependent on currency movement.

As a large part it’s either sourced in euro or U.S. dollar or linked to those currencies.

While I do want to stress, so that’s why I’m clear. What I have just said is included in the guidance.

So the €100 million in Russia and Ukraine is included in the 10% EPS guidance. Moving forward, we’ll have a focused and balance investment to foster organic and inorganic growth.

We have a clear North American roadmap and concrete initiatives has been underway, and we’ll see results. We have a strong innovation pipeline, at the same time, we will continue our cost focus and make sure that we adapt our structure to the market also moving forward.

And this leaves me now to the guidance. We expect organic sales growth of 3% to 5% and Laundry & Home Care and Adhesives being in the same range, Beauty Care at 2%.

Emerging markets sales at prior level due to predominantly currency and adjusted EBIT market around 16%. We expect an adjusted EPS growth of 10%, including what I just said about Russia and Ukraine.

So I want to be very, very clear, so we don’t misunderstand that that is included in the guidance. With this, I’m coming to the end of the presentation.

We have our AGM in April. We have our first quarter numbers in May, and we have our Investor Conference.

And this year, we’ll be – we’ll focus on Laundry & Home Care, it will take very simple-floor [ph]. And now we have approximately 10 to 15 minutes – seven minutes for Q&A.

So please now switch to Q&A.

Yes, good morning, gentlemen. My first question would be on, I’m trying to understand better the Q4 EBIT margin performance, because at your slide…

Can’t hear what you are saying.

Sorry, can you hear me better?

No, you have some background noise.

Okay, I’m sorry. I try to reconnect later then.

Thank you.

Okay. Thank you.

Thank you.

Next?

Good morning. Thank you for the presentation.

I was wondering if you could talk a bit more about the promotional environment in the U.S. at the moment in the HPC market.

I know, it’s something that you’ve been saying for a while, is a big focus on your management team. But I was wondering if you could give us some more color on the significant changes that you mentioned that you are taking to confront the issues and whether or not you expect the nature of intensified promotions and pricing pressure to change over the course of 2015?

Thank you.

We do not expect a significant change in the promotional activity in the U.S. We expect potentially a slight slowdown, but not any significant change.

And we believe that basically, we can counteract that through bringing new and more innovative products into the market. And we believe, we have a stronger price, innovation pipeline in 2015, but no significant changes to the promotion activity in the U.S.

in 2015.

Thank you.

Hi, good morning. My first question will be on Eastern Europe, so you have a good acceleration in Q4.

Can you talk about your pricing policy in this region and particularly in Russia, so can we expect the slowdown in Q1 after a very strong Q4? And my second question will be on the EBIT margin expectation of around 16%.

Do you think you have room to increase the margin of old divisions in 2015? Thank you.

I’ll do the first and Carsten will do the second. Overall on pricing, we do, of course, see in a high inflationary countries that there’s room for more pricing.

We expect an ongoing pricing going on in Russia in 2015, but the pricing will not be able to offset the currency devaluation that we have seen, so that is a stepwise approach. In Europe, the different environment, you will have slight pricing going on, but very slight even in a pretty much deflationary environment in Western Europe.

Carsten, on the market?

Yes. Kasper pointed out the guidance for 2015, which is around 16%, and this is driven by all three business divisions, so all three business divisions will support the increase of our margin.

Thank you.

Yes, good morning. I have two questions.

The first one on the administrative – sorry, the A&P costs that have increased in Q4. Can you, I mean, because this is an area, where you had been able to lower the A&P, because you had said invested more in the promotional side.

So are we now at a point where you feel that you need to increase the A&P and should we expect that to be the case for 2015? My second is on the gross margin, you said that 2014 was impacted by raw material prices.

Can you shed light on the roadmap, I’ve seen that you said flat roadmap guidance that sounds a bit surprising given the – how the all prices have moved, if you could shed light on that and whether we could expect gross margin to grow again in 2015? Thank you.

So to the point of marketing spend, I think, I use the term of marketing spend especially to explain the reduction of our adjusted EBIT margin in the fourth quarter. We are not guiding or we are not looking on quarters when it comes to spending, we’re looking on overall years.

And here I was also clear in the presentation that I said, we spent FX adjusted roughly the same amount in absolute terms in marketing, as the year before, and there is also no change foreseen for the future. One thing is clear, one thing will state the same.

This is the promotion level at a very high level. This is, for sure, has over the last year changed also the mix in total, but overall, the situation was not significant to change, that’s the first thing.

And your question regarding the gross margins, for sure, it is right that the oil prices have gone down significantly, but important is that, it takes three to six months until the things can – will come to our P&L. Kasper has also alluded on that, for sure, we will take into account that is we’ll have an impact on our gross margin, but there are lot of factors, which are impacting our margin, and therefore this is something, where we are not guiding on the gross margin per se.

But, for sure, the oil will positively impact us.

Yes. Thanks for taking my two questions.

First of all, just back to deck – back regarding the raw material question, can you put any numbers on that, if oil/the oil derivatives stayed where they were, what kind of relief would you see for 2015, in terms of absolute numbers? And second of all, looking at the regions you had a massive EBITDA increase in Q4 in Asia Pacific by, I believe plus 46% of my calculation is correct after rather weak development at the nine months level, what is behind that?

Thank you.

On the first one, the comment is no, we don’t comment on it. And on the second, we’re very happy to come back to you on that, that is simply, that is not by default and what you call a one-to-one comparison, there’s probably one-time items, and we’ll get back to you on that.

I can’t answer that on the fly so to speak.

Okay. Thank you.

We’ll get back to you.

Good morning. Two quick questions.

Firstly, could you quantify the impact from acquisitions on the margins in Q4, as you did slack it out as being one of the reasons for them being down? And then secondly, on acquisitions, you also mentioned that they were impact - negatively impacting your working capital development.

Do you expect that also to be a drag in working capital in 2015? Thank you.

So to your first question, I could, but we are not disclosing these numbers. And for the second point, I think, we have proven over the last years that we are very strong in developing our net working capital and that, for sure, now the task of the operated businesses in Laundry, in Beauty Care, and in Adhesive to take the measures we have taken into our organization and also to integrate that in the way how we deal in these three now integrated businesses, and how long this will take, I cannot comment on, this will be shown over the next quarters.

But, for sure, we are very – we know exactly what we need to do and therefore we will also drive that in that direction, where Henkel has been before.

Thank you.

And last question, please.

Thank you very much. So two questions for me.

Firstly, U.S. Laundry, it’s been a while, since we’ve heard anything about a big sort of Purex innovation, and that’s clearly, business has been struggling.

Does U.S. Laundry need a stronger innovation pipeline and is that part of the changes?

And then secondly, just on Professional Hair Care, you’ve called out how, you’re now the number three in U.S. Professional Hair Care.

How do you feel about Professional Hair Care as a cash degree, it’s clearly been slowing in recent years, but is it still somewhere that you see it’s being structurally attractive? Thank you.

On the innovation, the U.S., I was very clear on that, we needed a strong innovation pipeline. We believe we have that and you can see that throughout the year and some of the Purex products that will come into market.

So we’re confident that we have an appropriate pipeline when it comes to laundry in the U.S. Overall, the reason why – question one.

Question two, on Professional Hair Care, it is an attractive category, predominately because most of the innovation that takes place related to hair coloration takes place in the professional side. And hair coloration has a over proportionally high margin, which is why it’s very attractive.

It has been a category that has been characterized by negative growth in probably the last two to three years. But we believe all the time, it will return back to growth, but it is really the key.

If you want to be the leader in hair coloration and retail, it is a pre-assumption or prerequisite to also be in Professional Hair Care. And that’s why I believe it’s a very attractive market to be in from a margin standpoint.

And it will grow over time, had a very difficult period as category in the last three years.

That’s very clear. Thank you.

Okay. With this, I’d like to come to a close, and thank everybody for dialing in today.

Within a challenging environment characterized by high volatility, political tensions, and persistent high promotion pressure, we have delivered a robust performance in 2014. Looking ahead of 2015, it seems to be a year with exciting opportunities, but also several changes.

However, we’re confident, but thanks to our innovative strength and strong brands coupled with continuous adoption of our structure to the market, and by further driving operational excellence we will continue throughout 2015 and outperform 2015 and beyond. That’s why I believe the 10% EPS target is an appropriate target.

I wish you all the best and I look forward to talking to you on May 7, 2015, for the first quarter. And before I close, I’d like – again to remind you of our Investor and Analyst Conference hosted by Bruno Piacenza and his team of the Laundry & Home Care business unit.

It will take place Monday, June 1, 2015 here in Düsseldorf. The invitation, including agenda and further details will follow soon, but please save the date.

Thank you very much, and thank you for dialing in today.