Henkel AG & Co. KGaA

Kasper Rorsted - Chief Executive Officer Carsten Knobel - Executive Vice President Finance, Chief Financial Officer

Christian Faitz - Kepler Cheuvreux Iain Simpson - Société Générale Harold Thompson - Deutsche Bank Graham Jones - HSBC Bank Plc Pinar Ergun - Bank of America Merrill Lynch James Targett - Joh. Berenberg, Gossler & Co.

KG Guillaume Delmas - Nomura International Plc

Good morning, ladies and gentlemen, and welcome to our conference call. First, I would like to focus on the key developments of the third quarter 2015 and our progress in margin protection.

Then Carsten will provide to you with the third quarter financials in greater detail. After that, I'll close the presentation with a brief summary and the update of our fiscal year guidance for the year 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 access via our website at henkel.com/ir.

The presentation and discussion 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 call.

And now, let's get started with the key development of the third quarter of 2015. We achieved an OSG of 3.2% and an adjusted EBIT margin of 16.9%, an all-time high and a great step in the right direction.

Our adjusted EPS came in at 11.1%, and we saw a continued strong sales growth in the emerging market of 6.5% despite some of the challenges we'd be speaking about in China. Net working capital came in at 6.0%, and our net financial position is at minus €336 million.

Overall, we saw very strong number on sales growth and a solid organic sales growth. The emerging market with continued strong organic sales growth was a mixed picture; Russia, with a clear double-digit growth, 14% for the first nine months.

We saw double growth also in Latin America, and we saw a mixed picture in China with a slight decline in our industrial business, but continued double-digit growth in our fast-moving consumer goods business. And we saw a flat Brazil.

But I like to stress that the emerging markets continued overall strong organic sales growth. I'm also happy to report that after a challenging 2014 in North America, we've now achieved three quarters of organic growth, which has helped driving the performance or the positive performance that we're seeing in the mature market.

As I said before, the adjusted EBIT margin at an all-time high, and we saw all three business groups driving improvement compared to previous year. We saw an excellent performance of our Laundry & Home Care business top and bottom line and, as you'll see later on, we're also upgrading the fiscal 2015 OSG guidance for Laundry & Home Care business.

And we continued the double-digit growth in our adjusted EPS for the year. Now, let me get to the point where we saw a number of challenges.

We continued to see a difficult geopolitical situation, particular in the Middle East, with social tensions not only in the Middle East, but in some of the European countries coming from some of the changes. And that is, of course, impacting our top line, while we still have a very attractive top line in the Middle East.

We're seeing a modest global GDP growth. And when it comes to our Adhesive business, we are seeing the top line being impacted by the Chinese economic slowdown.

Let me try to be specific here. We see from the Adhesive side a solid growth, but it's below a prior year quarter, so down 40 basis points.

But compared to the second quarter, it's up 60 basis points. So, while we're seeing an increased slowdown in China, we are able to compensate the overall top line for Adhesives, which is why you're seeing the increase of the 60 basis points and the sequential development.

Let me now go to the different business groups. Let me start with Laundry & Home Care where we saw a very strong OSG and an excellent margin improvement in the third quarter.

We saw Laundry being solid and Home Care being very strong. The mature market is positive and North America solid.

We saw the emerging markets being double-digit and Russia and Mexico being double-digit. It was the highest growth we've seen since the first quarter of 2014, and we're also seeing a record high in our adjusted EBIT margin.

On the return side, as I said, adjusted EBIT margin showing excellent increase, an all-time high, ROCE is below level of the previous year, which is acquisition-related. We continue to focus on a strong innovation pipeline that helps not only drive the continued expansion of our top line, but also the expansion of our EBIT.

And I'd like to highlight our Perwoll Care & Repair, an area where we're number one in the specialized detergent. It's a product we've announced and implemented in 20 countries so far and will be further implemented in another five this year.

So, it's clear that the strength of our innovation pipeline is helping drive the top and the bottom line. Now, let me move to our Beauty Care business, where we saw solid OSG and very strong margin improvements in Q3.

We saw Retail being solid and Hair Salon being positive. The mature markets were negative, but we saw a very good growth in North America also due to the implementation or introduction of our Schwarzkopf brand.

The emerging markets continued to be very strong; Russia and China, double-digit. We saw the emerging - EBITDA margin showing very strong increase and ROCE above the level of previous year.

So, overall, a good quarter for Beauty Care business. Also in this area, our innovation pipeline helps drive the top line, but also the expansion of our bottom line.

And let me highlight, Schwarzkopf for Men, a new product that we brought into the market and already introduced in Germany, in Russia and in China. Now, let me move on to the Adhesive business.

We saw a solid OSG. We saw Consumer & Craftsmen, Transportation & Metal and General Industry being solid.

The mature markets were positive and North America was positive. We saw the emerging markets being solid, with China being negative, but we saw Russia and Mexico double-digit.

Overall, the adjusted EBIT margin is showing solid increase, so it's the first quarter in 2015 that we're above the previous year. So, our strategy on profit protection is now starting to work.

ROCE is below the level of previous year due to acquisitions. On the innovation side, let me just mention an investment that we done with DropWise Technologies, which is a U.S.

based company that's focusing on developing of unique hydrophobic coating technologies. And we invested in this company because we believe it will give us competitive edge move forward.

So, not only do we focus on innovation internally but, of course, we also invest in other companies that can help us make a jump in new technologies in order to make sure that we continue to be the leader in adhesive technologies globally. Now, I'll hand over to Carsten, who will take you through the third quarter financials in greater detail.

Thank you very much, Kasper. Good morning to everyone, also warm welcome from my side.

And as stated, I will now guide you through the financial details of our quarter three results. Let me start with our key KPIs.

Overall, we delivered on our profitable growth path using all levers and starting now with our top line performance. Sales came in at €4.590 billion.

This is a nominal increase of 8.4%. We have positive FX effects amounting to roughly 2.3%, sequentially decreasing compared to the first half year.

Acquisitions contributed to a similar extent as in the last two quarters with a magnitude of 2.9%. This leads us then to an organic development with a solid performance of 3.2% in the third quarter.

Looking into our gross margin development, our adjusted gross margin development, we have seen a number now of 48.8% in the third quarter. This is an improvement of 140 basis points compared to Q3 2014.

Adjusted EBIT development, a strong improvement of 50 basis points now to, as Kasper already mentioned, record level of 16.9% from the 16.4% of the comparable number of last year. And finally, our adjusted EPS per preferred share increased double-digit to a level of €1.30 or, in relative terms, plus 11.1%.

So, overall, a strong performance and another quarter of profitable growth. Looking to our cash KPIs and also here, the focus, as you known that also over the last quarters, on the very disciplined cash management, starting with our net working capital development, we came in at 6.0%.

This is at the similar operating level than the prior year quarter. We are up 40 basis points and the acquisition impact of the recent acquisitions we have done is also 40 basis points.

Looking at our free cash flow, free cash flow came in at €597 million. This is very close to the level of the prior year quarter and a very strong number.

With this, we are delivering consistently a strong cash flow. Our net financial position reached minus €336 million.

This is a decrease of €1.076 billion compared to the September 30, 2014. Please keep in mind that we have spent since Q3 2014 roughly €1.7 billion for acquisitions.

We have had a dividend payment of roughly €600 million and also capital expenditures of €600 million. If you add these three numbers and compare that with the decrease of €1 billion, you see that there is a number of roughly €2 billion in between, and this is definitely related to our strong operating cash flow, which came in at €2.2 billion in that quarter.

Looking now into the details of our top line performance and starting with the OSG. As you know, we have 3.2%.

This is composed of a very balanced view between price and volume. Price is up 190 basis points, volume is up 130 basis points.

Our FX impact is a tailwind of 2.3%. And as I said, it's sequentially reducing since the year, because in the first half year, we had recognized a 6.6% tailwind of FX.

M&A at the level impacting plus 2.9%, and this is due to our acquisitions which we recently did, The Bergquist in North America, Spotless in Western Europe, the Xtreme brand in Mexico for our Beauty Care business and the Novamelt in the Adhesives part in Germany, which leads us to €4.590 billion of sales and this is, as I stated before, a nominal increase of 8.4%. With that, let me move to our development in the regions and the first look on our emerging market and mature markets development.

Emerging market, as Kasper has already pointed out, came in with a strong development, plus 6.5% and was that for sure a major contributor to our overall organic net sales development. Looking into the mature markets, we see, on the one side, a double-digit nominal increase, 11.8% to be precise, to a level now of €2.563 billion.

This is majority driven by FX and the acquisitions we did, but also an organic development of 0.4%. The emerging market sales share in total reached the level of 43% compared to the level of roughly 45% of last year.

The impact or the reduction is majority driven by decreasing emerging market currencies. So, as you can see - well, as you will see in a minute, this is a broad-based growth across the regions and, to give you some more details, we go to the next chart and we start with Western Europe.

Western Europe could not reach the level of the prior year period. We had good developments, positive developments in the UK, in France, but also in Southern Europe.

The negative development is mainly caused by the development in Germany. And this is by a very effective intense promotional intensity and a severe competition, and the severe competition is especially among the retailers in the HPC sector.

Now, coming to Eastern Europe, Eastern Europe showed a 9.7% positive organic net sales development and this is mainly driven by a double-digit development in Russia and the Ukraine, but also a double-digit development in Turkey. With that, moving to Africa/Middle East, Africa/Middle East, a strong development, 5.9% in organic terms, and this despite the geopolitical instability and the deteriorated economic environment.

Coming now to North America, North America recorded a solid organic net sales growth, 3.2%, you've heard it before. It's now in three consecutive quarters in a row that we show a positive organic development.

This is supported by all three business divisions. Looking first to our Adhesives division, we have seen a continued competitive environment in packaging, but it was also the development in Adhesives was especially helped by a double-digit development in our transport sector, especially through the automotive situation.

Looking in our HPC sector, both businesses, Beauty and Laundry showed a positive respectively, a strong organic sales development in the quarter, and this is especially due to the fact that we continue to execute, on the one side, our turnaround plan, but especially driven by our innovation offensive and this also has led in both divisions to increase in market shares. Moving to Latin America, here a very positive development, a double-digit development, plus 10.9%.

This is especially driven by a double-digit development in Mexico, but also in the Andean region. You've heard that Brazil, despite the weak economic development, showed a positive organic growth in quarter three.

With that, let me move to the last region, which is the Asia-Pacific region, where we have generated a positive organic net sales growth of 0.8%. As already flagged, the economic slowdown in China especially impacted our Adhesive situation.

On the other hand, Beauty Care continued their strong development with a double-digit OSG in quarter three. On top, Japan, Indonesia, and also India showed positive and good development in the quarter three.

With that, let me move now to our three divisions, and we start now with Laundry & Home Care first. Laundry & Home Care, overall, the total P&L, excellent development regarding all P&L items, but let me start first with our top line development.

On a nominal basis, a double-digit development in top line supported by a 5.5% organic net sales development, a very balanced composition of OSG driven by 2.1% in price and 3.4% in volume. Looking to our business segments, we had a very good development in Laundry and an even better development in our Home Care business.

Looking now into the regional setup, the emerging markets, again, provided a particular momentum to organic net sales growth with a double-digit development. In more detail, Eastern Europe and Asia-Pacific grow double digits, Latin America made a very strong contribution and Middle East/Africa posted a strong development.

So, overall, as you see, strong developments across all regions in the emerging markets for Laundry & Home Care. Looking into the mature markets, also here the organic sales development was positive compared to the prior year quarter.

We had a flat development in Western Europe and, as already pointed out, a solid growth in North America, especially here driven by our rollout - first of all, by the launch of the Persil ProClean, but we have also now started the rollout to the rest of the retailers. With that, moving to the bottom line development, also here, you see an excellent development, 18.2% of adjusted EBIT margin, all-time high for Laundry & Home Care, an improvement of 140 basis points.

And also, looking to our net working capital development, we reached here, in that area, a very low level of minus 4.1%. This is an increase of 100 basis points compared to the prior year quarter.

But please take into account that the acquisitions we did had an impact of 120 basis points. So, you see on a like-for-like or in operative level even an improved situation compared to the year before.

Moving now to our Beauty Care business, Beauty Care business also, again, showed a solid development overall. Good development across the P&L line.

Also here, starting with our sales development, organically plus 2.1%, driven by 160 basis points increase in price and 50 basis points in volume. Looking into the business segment, the Retail business showed a solid development, but also Hair Salon, again, now for a second quarter in a row, a positive development.

Region-wise, emerging market, like in the Laundry & Home Care business, was a very strong development. We had double-digit contributions from Latin America, here especially driven by Mexico but also Brazil and a very strong growth in Eastern Europe.

China, as mentioned now two times, had double-digit growth in the Beauty Care segment and continuing their path since we have seen over a couple of years now. Moving to the mature markets, mature markets in Beauty Care could not reach the level of the prior year quarter.

We had a mixed development, a negative development in Western Europe, especially caused by the reason I already explained before, which we had in Germany the very intense promotional activities, but also the fierce competition among the retailers. But on the other side, a strong development in North America, same reason as in Laundry, the innovations which we put to the market especially in body and hair are paying off.

And with that, we could also increase market shares, which is a quite good development. Coming now to the bottom line development, also here, you see a very strong development, 90 basis points increase to a level of 16.1%.

And also, if you look to net working capital, you see an excellent performance. We reached a level of 3.6%.

This is an improvement compared to the prior year quarter of 120 basis points. Let me now move to the third division to our Adhesive Technology business and here we have seen a solid organic net sales growth, 2.3%, predominantly driven by price, 200 basis points and, to a lower extent, of volume by 30 basis points.

Looking also here into the segment, we have a very solid development in the areas of Consumer Adhesive, in Transport/Metal and also in the General Industry business. We have seen the packaging development showing a positive organic net sales growth, while electronics was slightly negative.

As you know, the OSG in electronics is affected by the pass-through of our silver price. I only would like to highlight the fact that without the negative impact of the silver price, also electronics, the underlying organic net sales growth would have been solid.

And please take into account, we have a very positive and very good performance in our Bergquist acquisition, which is currently, at this moment, still calculated in the acquisition effect, so we are also in that area electronics going into the right direction. With that, let me move to the regional perspective.

Emerging markets showed solid organic net sales growth. Eastern Europe was strong.

We had a double-digit contribution also here from Russia, from Ukraine and from Turkey. China was negative, as pointed out by Kasper.

We had the General Industry, which was positive, but we have seen for sure the ongoing difficult economic environment, especially in the Transport and Metal business, which moved into negative territory. This was affected by the current weakness in the automotive segment.

Latin America recorded a double-digit development in the emerging market for Adhesives and here the major contributor was Mexico. Our Brazil business in Adhesives was flat despite the negative economic development.

Mature markets, overall positive in Adhesives. We have seen a flat European - Western European business and, as already pointed out, North American business, which was positive.

Looking to the bottom line of Adhesives, we have seen now after two quarters where we had a reduction compared to the prior year quarter in Q1 and Q2, you are seeing now with 18.1%, an increase of 30 basis points, which is also here a good development. This is helped by favorable input costs for sure.

But, as you know, we have disclosed to you during quarter two that we are implementing measures to adapt our structures. We also started already on that and that has a first impact, but we will continue to do that over the next couple of quarters in order to further drive the situation what we are striving for.

With that, let me come to our net working capital development, 13.2%. This is up 80 basis points, but the majority of the impact is also here related to the acquisitions we did.

With that, I would leave the three divisions and now come to our income statement adjusted and first of all looking from sales to our gross margins. As already pointed out, sales came in with a strong nominal sales growth of 8.4% leading to €4.590 billion.

The gross profit increased by a double-digit number plus 11.6% to a level of €2.239 million. What are the reasons behind?

The majority three to mention: first of all, the execution of saving measures or cost reduction measures; secondly, our continuous improvement in our production and supply efficiency set up; and thirdly, also lower prices for our total direct materials, which had the positive impact. So, especially with the material cost impact, we could compensate the transactional impacts which we have already disclosed to you already at the end of last year, especially in Russia and the Ukraine, where we could compensate certain effects.

With that, we reached the 48.8% in gross margin, which is above the average of the first half year. Also this is completely in line, which we already communicated to you that what we would like to see is impacts in gross margin more in the second half than in the first half, which leads to 140 basis points increase.

Also in this situation, we decided to adapt slightly our guidance. For the full year, regarding direct material prices, we changed from stable prices to slight decline in prices.

With that, let me further move in the income statement adjusted now from the gross profit to EBIT. We have seen marketing, selling, distribution expenses at the level of 24.8% .This is an increase of 40 basis points, mainly affected by acquisitions which we did and the FX environment.

R&D reached a level of 2.5%. This is slightly higher than the comparable number of Q3 2014, and the admin expenses reached a level of 4.6%, 30 basis points up compared to the prior year quarter.

Also here, similar reason like in the marketing, selling and distribution setup, higher impact because of our acquisitions and the FX impact. No impact of OOI/OOE, which leads to the already mentioned EBIT of €778 million or 16.9% all-time high for the third quarter at Henkel.

Moving now to our bridge, as we already used to, from reported to adjusted EBIT, here we have the point that we had no one-time gains in the quarter. We had one-time charges of €34 million.

This is related to two reasons. The one reason is our investments in the ONE!

Global Supply Chain setup with roughly €26 million and €8 million are related to the majority of these charges to the incidental cost for the acquisition of the Colgate-Palmolive detergent business in Australia/New Zealand. Moving to the biggest impact, the restructuring charges in quarter three, which is a level of €78 million.

This is our continuous way of adapting our structures to the market conditions. You have already Kasper and myself talking about the measures we are taking Adhesive Technology, the majority of the €78 million is related to that, and as we indicated, we expect finalization in the course of Q2 2016 of this activity.

That leads us to an adjusted EBIT of €778 million and an increase of 12.3%. Please also, let me allude to the point that we also here have [indiscernible] our guidance when it comes to the restructuring amount.

We have first set €150 million to €200 million. That was the guidance at the beginning of the year.

Now, we assume that we will have roughly €200 million of restructuring charges for the full year 2015. Finally, let me comment on the improvement of our net financial position.

You see, we reached minus €336 million. I already alluded to the bridge from the end of - from September 30 of last year.

If you also compare that to the middle of the year to the June 30, you see also here an improvement of roughly €300 million. One side remark, on the October 16, we had announced the redemption of our hybrid bond at the principal amount of €1.3 billion, plus through interest on November 25.

To be very clear on that item, this half or this measure has no impact on our fire power. That means our financial headroom remains on the level of €4.5 billion to €5 billion.

We have even taken the step to align this recalling of the hybrid bond with the rating agencies. They have no concerns with companies who are calling hybrids without replacing them in cases when the company has received a rating upgrade since the issue of the hybrid and this is the case for Henkel because after we had issued the hybrid we got an upgrade, therefore, there's no issue, no impact on our potential headroom when it comes to taking the integration as a part of our strategy of M&A.

With that, I would like to hand back to Kasper.

Thank you very much, Carsten. Let me just summarize the quarter.

We saw sales of 4.6%, up 8.4%, organic sales growth of 3.2%. And I think more important, organic sales growth in the emerging market of 6.5%, which is very similar to the same level of last year.

So, what you've seen is despite the slowdown in China, which is our third largest market globally, we've been able to compensate the slowdown in China with strong organic sales growth in other emerging markets. The emerging markets will continue to be the growth driver for Henkel.

We saw the adjusted EBIT go up by 12.3%, the margin at an all-time high at 16.9%, up 50 basis points, and adjusted EPS at €1.30, up 11.1%. As the year is coming closer to an end, let me just give you a wrap up of one to nine.

Revenue of €13.7 billion, up 11.5% versus last year, growth of 3.1% and organic sales growth of 6.4% in the emerging markets. Adjusted EBITDA €2.3 billion, up 13.4% compared to prior year.

Adjusted EBIT margin at 16.4%, up 30 basis points compared to last year, and EPS at 3.77%, up almost 12 points or more precisely 11.9%. Overall, we're focused on continuing to deliver a profitable growth.

We're seeing a significant increase in the nominal sales, which has is articulated in a solid organic sales growth. We saw a strong top line performance in the emerging markets, very consistent to last year.

North America, which was our problem child last year, we've now seen three consecutive quarters of organic growth, which is driving the performance in the mature markets. The adjusted EBIT margin hit an all-time high and we delivered double-digit adjusted EPS growth now for all three quarters of 2015, which leads me to the guidance which we have specified and updated.

The organic sales growth, which we, at the beginning of the year, specified in a range of between 3% and 5%, we're now guiding at approximately 3%. We're updating the Laundry & Home Care growth that was in the range of 3% to 5% and narrowing the range down to between 4% and 5%.

So, we're taking that up. Beauty Care, we see unchanged.

And Adhesive, which we were originally guiding at 3% to 5%, we're now guiding at 2% to 3%. We're seeing no change on the emerging market sale share or the adjusted margin.

What we are seeing, we're seeing an increase in EPS, where before we saw approximately 10% and now we see greater than 10%. So, also, as we say here is, we'll continue as we said in the second quarter call also in previous calls to ensure that we adapt the structures to the market, i.e.

when we see slower growth rates, we will be consistent and disciplined in taking cost out to ensure that our business model will work also with different growth dynamics. Moving forward, we have February 25 our full fiscal year reporting and also Q4 reporting and the guidance for 2016.

We have the AGM in April, our Q1 results in May, and we have our Investor Day, which next year is focusing on Adhesives Technologies and will take place in Heidelberg, approximately one hour from Frankfurt. August and November, we have quarterly results, and November 17, we will present - we will be presenting the long-term new strategy for Henkel and that presentation will take place in London.

Now, Carsten and I will be happy to take any questions you might have, and thank you so far.

Yes. Good morning, gentlemen.

Congratulations on the great results. I have three questions, if I may.

First of all, regarding your altered - changed EPS guidance for fiscal year 2015, if I recall correctly, in August during your H1 report, you guided for double-digit increase in EPS. Now, you're guiding for more than 10%.

Can you explain the qualitative difference in wording? Second question would be, can you shed some light on the success of Persil launch in the U.S.?

Where's the rollout now happening beyond Walmart et cetera? And third question, industrial adhesives, which customer segments in China suffered the most?

Is it construction, electronics or automotive, if you maybe could illustrate that? Thank you very much.

Good. Thank you.

This is Kasper. I'll take the first two questions and Carsten will take the third question.

We have made no change to our guidance. We've been consistently saying that the guidance is around 10% - was 10% in the second quarter, which is double-digit, and now we're guiding above.

And you can see, one to nine, we are growing at 11.9%, which is then also the natural to uptick guidance above 10%. And we change guidance normally if change in the third quarter.

So, no change in that and I don't believe that we said anything different. On Persil in the U.S., we've had an exclusive rollout with Walmart.

And as the plan was all the time, we are now rolling that out across a number of other retailers, so national rollout, which is taking place starting the fourth quarter going into the full year. And without being specific of numbers Persil specifically, but it's living full up to our expectation.

And you can see on our overall market share for our Laundry position in the U.S. that has grown, which will allude to that the Persil rollout is going according to expectation.

I would like, at the same time, to say that we now have Persil in more than 50 countries. And in all the countries where we rolled out Persil, it takes two to three years before we know if we have a sustainable position.

And that will be the same in the U.S. We had the same experience in Korea, where we have a strong position today.

We had the same experience in Mexico, where we have a strong position today. And we'll have the same situation in the U.S., meaning that within two to three years, we will know to which extent which market share we can actually be getting.

Carsten, on Adhesives and China.

Yeah. Christian, to your question of Adhesives, I already alluded to that a little bit during the division of Adhesives.

So, if you look, we were in total slightly negative in China. We had a quite okay development in our General Industry business.

And the driver for the negative development was especially in Transport & Metal, which is related to the weakness in the automotive sector in China. And maybe to add, regarding construction business, we are under-represented in construction, or was minor.

So, these are the majority impacts, as I said, General Industry, okay, flat, and the automotive segment negative.

Okay. Thank you very much.

Thank you very much. Good morning, everyone.

Three questions from me, if I may. Firstly, could you talk a bit about Mexico?

I think every division there grew double-digit and it's been sort of strong for a while. What's making the difference?

Because I remember a year or two ago that was a bit of a problem area for you and it's now doing pretty well. Secondly, just thinking about next quarter, fourth quarter 2014 you had a lot of one-off costs both at the corporate level and in Laundry in the run-up to Persil launching in the U.S.

So, you've got a very, very easy margin comp next quarter. Any other similar one-off we should be thinking of or do we just drop all of those through?

And then lastly, just a bit of housekeeping. I recall that hybrid bond being quite expensive.

What difference does redeeming it make to your interest costs when we think about 2016? Many thanks.

I'll take the first question regarding Mexico and Carsten will take the two last questions. What we're seeing in Mexico now is we reached a critical mass in the size of the country and, thereby, we're capable of not only driving higher growth but also driving higher profitability.

We've done a number of small acquisitions also in the space of Beauty Care in the last two years, which is now giving us a sustainable and strong position of Beauty Care. So, it's critical mass.

It's all three business groups having a size where they've been in the country, and we have a strong management team, and that's where we start seeing a very consistent performance in this area. It's approximately 3% of total sales.

And maybe to give you just a rough number to make sure that you see the balance of our emerging markets. China accounts for approximately 9% and the size of Mexico and Russia is also 9%.

So, when you're seeing double-digit growth in Mexico and in Russia, that's actually the same size market as China. And that's what we're trying to see now.

So, the critical size in Mexico is now at a level whereby we can actually drive a much better performance out of it. So, that's why it's so important that we get some of the emerging markets to have the size whereby actually you can get the synergies out of the size.

Carsten, you want to take two and three?

Yes. Iain, good morning.

So, to your first question regarding next quarter, you know we're not guiding on quarters. We are guiding on years.

You pointed out the point of last year where we had quite lower margin. This was especially impacted by, at that time the, Spotless step-up which we have taken regarding inventories, but also, at that time, pre-production activity for, at that time, the original launches of Persil and [indiscernible] which happened then in the first quarter of 2015.

On the other side, you know the economic development is not very positive at these days. So that at that point where we are, as we said, we have - I think we were very clear on the guidance for the full year, where we have either raised or being changed the guidance on particular topics.

So, I think, at that point, not to be mentioned nor for Q4. Regarding your hybrid bond question, yes, the hybrid bond, at that time, when we launched it, as you know, always, hybrids are more expensive than other debt instruments.

The coupon at that point was 5.375%. On the other side, I hope you also know that we have a very proactive interest rate strategy, what does it mean.

In the meantime or really already at the beginning, we swapped that coupon which was quite high from a fixed to a floating interest rate and by that we have benefited already in the past and paid less than that. That also leads for sure to a smaller reduction then as benefits which you can look forward into 2016, because we already took the measures as soon as possible in order not to just paying to the balance sheet.

Thank you very much.

Yeah. Good morning, everyone, and likewise well done on the results.

Just on China, could you just remind us slightly again your China exposure, how it differs between the consumer business and the Adhesives business? So the 9% how does that compare at the two divisions?

Beauty, clearly, as you say, you're still winning share in challenging markets. But at the end of the day, the growth rate in absolute term remains pretty low, but your margins are doing really well.

Do you not see a scope of any investing a bit more in that business? And what is driving the margin increase?

How's the marketing budget doing? And on the restructuring charges, you've increased the guidance to €200 million.

Is that simply faster implementation of what you had planned, so we should see less restructuring going forward, or is that simply incremental restructuring and just a higher number to get there? Thanks very much.

Thank you very much, Harold. I'll take the first part and Carsten will take the second part.

On the Chinese side, approximately two-thirds of our business in China is our Adhesive business and one-third is our Beauty Care business. So, you are seeing the Beauty Care business becoming a substantial part of our business.

And we have now reached a position where you say we still don't show more market share position. I have to remind you that four years ago, we had a zero - five years ago, we had a zero market share position and, today, China is our third largest market in the world for our Beauty Care business.

It continues to have double-digit growth. It continues also to be dilutive to overall margins in our Beauty Care business.

So, we continue to actively invest in the market that will allow us to a double-digit growth. Today, we have Single Day in China and you've seen Alibaba also been out and saying very attractive numbers.

This will be a massive day for us sales-wise. So, we believe that we have found the right level of - now, it's time to get a margin or positive margin expense in China, while, at the same time, be very aggressive in the way we invest in the market.

So, it is still dilutive from a market standpoint, but we need to get the right balance that we create the right price point, and I think we've done that. And today, we have a very solid market share position in China.

We have a sustainable position, which we didn't have five years ago. But it's clear, our aim is to continue to grow far beyond the market, which we are and gain market share, but I don't believe we are insufficiently investing.

I think that you saw today in my call that we're also introducing now the Schwarzkopf Men product in China. This is one of three countries globally, Germany, Russia and China.

So, we are selectively picking countries to ensure that we put the right product investment behind. So, one-thirds, two-thirds, we're making the right position.

Five years ago, it was 99% Adhesive and 1% Beauty Care.

Can I just ask on the Beauty business? Just because you spoke to quite a lot more on China than I thought, so how much are your actually Chinese Beauty sales are already going through online?

A third.

A third? Oh, well, okay.

So, when you then see that the online market overall is growing much stronger than the brick-and-mortar. That's where you see bigger the engine growth - the growth engine is coming from.

Yeah. Thank you.

Sure.

So, commenting on your A&P question, I think you should understand that I'm not commenting that on detail, but what I can tell you is that - and I said it already, marketing, selling and distribution expenses were up both in absolute but also in percentage of sales terms. One factor of that was for sure also the impact of our acquisitions and the currency effect.

And I think our general philosophy is the following and I think we have shown that in quarter three. Again, we are looking for a solid organic net sales growth, which we had.

We have increasing margins, which we did. And we also commented on that we are increasing our market share.

And I think we believe that this is the right strategy. And by that, we come at least to the conclusion that this is an adequate investment into our brands, technologies, and, by that, into the market.

To your third question regarding the restructuring, our original assumption, beginning of this year when we guided, was €150 million to €200 million. You all know that we have not been overall satisfied with our Adhesives development in the middle of the year.

And by that, we made the point to adapt our structures, means additional restructuring, and as I pointed that out, we are developing on that quite positive. So, we are good on track compared to that what we originally planned.

This is also related then to the fact that we could announce certain restructurings and this is then in the consequence that we have now specified the guidance to the upper-end of that range to roughly €200 million. But you also please understand that we will guide for next year in February on 2016 in order to give you a perspective how the year 2016 will look like.

And as I said and also Kasper said, our initiatives, the adaptation of the structures in Adhesives will last until the course of Q2, for sure this then will also have an impact on - or you will see also related to that initiative in Q2 - sorry - in Q1 and Q2 2016. Hope that answers.

Yes. Thank you.

You're welcome.

Good morning. My first question relates to Adhesive.

It might be an impossible question for you to answer, but the acceleration you've seen in your performance in Q3 over Q2, is that mirrored by an improvement in the overall market conditions globally or is that you outperforming the market? And in relation to that, you commented that input costs in adhesives were down in Q3, yet your pricing has accelerated.

Has that - is that also mirrored by the market conditions in pricing? Or is that something you're pushing in particular?

Or is that a mix or innovation effect? That's on Adhesives.

And then, secondly, on Beauty, particularly in terms of Western Europe, I just wondered whether you could sort of talk a little bit more about how you think you can get the business back to growth. I'm sure you're not sort of sitting there with your fingers crossed hoping that the retail environment improves.

Do you think that the new innovation that you're announcing will be sufficient to return your European Beauty business back to growth?

So, on the Adhesive side, the two first questions was no and no. We believe that we are - the market has not improved and we are growing the market, which you can see, than the peers and the same in the pricing.

So, we believe we've taken a different route in the market and I think the reason why we're capable of pulling pricing through is very much that we're focusing on high-end technology areas where actually the value to the customer is higher because we're not in a commodity space. On the European market, what you are seeing is, you're seeing, particularly in Germany, a change in the retail landscape which is - within the retail landscape, you're seeing very, very hard competition and you're also seeing overall in the European market, a high level of promotional area.

We've been able to grow our market share during that period of time, which is not reflected in the revenue numbers. But that's simply a current position of the market.

Long-term, I'm not so worried about - of course, it is a concern in the short-term. We are, particularly in Germany, seeing a very, very aggressive retail market competitive landscape, which is impacting all category.

And we are focused on here, which is one - which is very - which is extremely competitive. So, we're looking upon and say, can we grow the market share over - in the long period of time, which we are doing, and our assumption is through innovation.

And I mentioned the men's product as one. We believe we can also grow the top line.

So, it is a nuisance in the short-term, but in the long-term, we're actually not so concerned about it.

Okay. Thank you.

Thank you very much for taking my question. Two questions.

First, regarding your decision not to replace the hybrid, I was wondering if this means that buying back your bond is the best use of cash in the near-term. It's clear that your financial headroom is unchanged, but has your view on the current availability of potential targets changed?

And then the second question is, how much visibility do you have in your businesses on a real-time basis? Do your IT systems allow you to see things as they happen or with a bit of a lag?

The reason I'm asking is, clearly, Henkel's performing very well in Russia despite your cautious tone last quarter and even last year. Thanks very much.

So, let me start with the last question and Carsten will take the first. We don't have real-time performance.

There's a slight delay in the way we operate. And I won't give you the actual time, but we believe we have a decent view into the way it works.

Part of the reason why we're putting, what we call, our ONE! Global Supply Chain in with our Global One Instance SAP infrastructure horizon is to get the real-time information which will - which we already now set up and successfully piloted in three countries this summer and we'll get into the next set of countries beginning next year and that will, within the next couple of years, allow us to have real-time data.

I think that, frankly, whether you have real-time data or not real-time data in a volatile environment makes very little difference, because in Russia it is very much also to a level of confidence that's in the market. We've been very precautious in Russia and we actually - we are seeing, as we said in the beginning of the year, a €100 million EBIT drop in Russia and Ukraine due to a lot of the currency impacts that we have and also the volume.

And whether we have real-time and unreal-time would not change it. We have been surprised, positive surprised, of our capability to continue to drive strong OSG, which is above market and you can clearly see that to other competitors.

But I don't think that Russia - would have changed the way we look upon Russia had we had real-time data. Carsten?

Yes. Good morning, Pinar.

To your question of hybrid and the correlation to our M&A, I think, to be very clear and precise on that, M&A is an integral part of our strategy and the recalling of the hybrid or the calling of the hybrid has really nothing to do with our strategy related to M&A. I think I tried to be clear on that that we have the same financial headroom, that we - whenever we want to act, I think we have A-rate - a flat rating.

We have a high credit on the market whenever we want to get certain amount of money when we would need it for a transformational acquisition. We can get easy access to that.

We can recall the hybrid or place another hybrid whenever we want. We do not need really long time in order to set that up.

So, therefore, the correlation between hybrid and M&A is not existing, not at all.

Okay. Thank you very much.

Good morning. A couple of questions for me.

Firstly, just on China, I wonder if you could just give a bit more color on the change in the rate of sales decline in Adhesives in the second and third quarter just so we get an idea of what momentum is there. And then secondly, just on the margin guidance for the full year coming back to that, I assume we're expecting more benefits from the construction implementation in the fourth quarter and ongoing tailwinds in the short-term on the input side.

So, I'm just wondering why you want a bit more - haven't become more positive on margin outlook for the full year? Is it just the macro conditions which keep you cautious?

Thank you.

I think you gave the answer to the last question with your first question. That you're seeing an increased volatility in the Chinese market and when we don't know how the short to medium-term outlook in China is, that potentially has a negative impact on the overall margin development.

And that's why I think we're being appropriately in the way we guide. We saw a slight positive development in our organic sales in the second quarter and we saw a slight negative development in the third quarter.

But we saw a decline in development month by month from the beginning of the second quarter until now. And we expect that negative development to continue into at least mid-2016.

And that's why we believe that we have an appropriate guidance the way we have it. Also, if you look upon the recent GDP numbers that has been released, not only from China but globally, they're not really opting the end.

And I think if you look upon the numbers that has been released in the last five to seven working days, very few companies have been able to consistently deliver double-digit growth. And let alone start in 2012, giving a time for 2016 that has not been revised so far.

So, we believe that, right now, we're giving the appropriate growth. And assuming we can delivery, which we assume we can, more than 10% EPS, we're more than happy with 2015 where the challenges contains.

Okay. Thank you.

Good morning. A couple of questions from me.

The first one on the thesis for Consumer, Craftsmen and Building division, for the first time in almost six quarters, we're now seeing some margin expansion along with some good organic sales growth. So, my question on this is what has changed sequentially?

Is it more pricing in Russia? I remember Eastern Europe being a drag to that business.

Is it the commodity tailwinds? Any color on this would be helpful.

And then my second question is on SG&A in Adhesives, which clearly affected your numbers last quarter. It's getting under control in Q3.

But given your gross margin is expanding by 140 basis points, I appreciate that's the group level, but surely, it can't be that far off for Adhesive. It still means that in Q3, your SG&A in Adhesives must be up by around 100 basis points as a percentage of sales.

So, why is this? Is it still FX, Bergquist or clearly the sign that all the restructuring activities you've announced are yet to benefit your numbers?

Thank you.

So, Guillaume, good morning. To your second question regarding Adhesives and SG&A, the gross margin improvement we see across the company that is not specific for Adhesives, Laundry or Beauty.

So, as I said before, and this is clearly in line what we always said that we expect a higher impact - a higher positive impact of gross margin in the second half of the year, especially through the inventory step-ups we had in the first half year, we're seeing now the benefits on that. As you have seen, Adhesives in general is predominantly driven by the price component.

And one of that reason is for sure also you see the double-digit development in Russia and the Ukraine, and a significant part of that is related to the inflationary development and, by that, also then for sure which you see in pricing. The admin cost, this is one of the topics while we - these certain activities and announced certain activities mid of the year, because we were not 100% satisfied with the SG&A development, especially - specifically in the Adhesives sector.

And I've said, first steps - first measures are taking place and, by that, also positively impacting our business. But on the other side, we also clearly communicated and we are very beyond that, that it will take some quarters and some quarters means until the course of Q2, until we will get back to that what we think is the appropriate and right level.

And this for sure is a balance of play which we are currently executing and with these first measures and with the input cost, we had been able to stop the development of negative development in the adjusted EBIT margin and recorded a 30-basis point increase in quarter three.

Your question regarding Construction Adhesives, we are seeing is we're seeing over-pricing across the board and we saw a positive development among other countries in the U.S. and also in Russia, whereas if you remember back, we had a negative development in the second quarter.

So, we are seeing some of the bigger countries growing to the level that we should be growing and we're also seeing pricing coming through.

Thank you very much.

Thank you ever so much for allowing me a follow-up. It would be very useful if you could give us a sense as to the phasing of cost saving realization during the quarter.

I seem to recall that you had some people put at risk during your Adhesives business in September, presumably the bulk savings realization was towards the end of the quarter. But any color you could give us on that?

And then secondly, I think after the second quarter stage, you talked a little bit about how some of the top line headwind you were seeing in China Adhesives was destocking. Do you think there's an element of destock in these numbers still or has that now dropped out?

Thank you very much.

Well, that was the latter. As I said on previous comments, I think that the Chinese slowdown will continue at least until mid-next year.

So, I think you'll continue to see a level of destocking going on. I don't think destocking goes up quickly.

So, unfortunately, I don't see that. I think that is not only related to us, I think that is really generally to most industries being active in China.

And if you look upon peers or other industrial companies, you're seeing a similar development. When it comes to savings that we expect from the initiative we're taking, particularly in the SG&A side, we don't really specify what we're trying to do.

What we did say and [indiscernible] we will take up to 1,200 head count out. And our assumption is that we'll have executed that plan by mid of second quarter next year and we were in line to do that.

We don't give any specific savings or we don't specify how it actually comes in quarter by quarter. But as I said, we expect it to be finalized by mid of second quarter next year and finalized meaning more or less.

With this, I'd like to thank everybody for participating in today's conference call. And also reiterating that in the current environment that continues to be uncertain, we are very continued on a disciplined execution of our strategy and deliver a strong quarter performance.

Looking ahead, the high volatility and the uncertainty in the market seem to remain. However, we are confident through our innovation strength and strong brands, coupled with the ongoing adaption of our structures to the market that we just touched upon, we'll continue to further drive operational excellence, which will mean that we'll continue to outperform.

As said before, before closing today's call, I'd like to give you some details on next year's IR event. It will take place in Heidelberg, as I said, will be hosted by our Adhesives Technologies business.

It would take place Monday, June 6, until Tuesday, June 7 in Heidelberg. That's very close to Frankfurt.

And in addition, as I said, our strategy presentation will take place November 17, 2016 in London. Thank you very much for dialing in today and looking forward to talking to you soon.

For those who will participate to today's UBS European Conference, I will see you at 3 PM for the fireside chat. Thank you very much and goodbye.