Henkel to cut 2,000 jobs in face of rising costs, slow demand

BERLIN, May 5 (Reuters) – Consumer goods group Henkel  is slashing 2,000 jobs in response to rising costs and low demand for its shampoos and hair sprays and merging its cosmetics and detergents units to generate gross savings of 500 million euros ($530 million) in the medium term.

The moves announced on Thursday illustrate the depth of problems facing consumer goods companies as they find ways to offset rising costs which cannot be passed on to customers.

Global supply chain issues are adding to the difficulties that prompted Henkel to cut its outlook last month. 

The German company, which has more than 52,000 staff globally, posted 11% sales growth in its adhesives business last year, but its cosmetics business struggled.

Beauty care brands such as Schwarzkopf and Dial generated sales of 3.7 billion euros in 2021 compared with just under 3.8 billion in 2020 and 3.9 billion euros the year before, it said on Thursday.

Revenue from laundry and home care products including Persil, Perwoll and Pril reached 6.6 billion euros last year from 6.7 billion euros in 2020 and 2019 respectively.

The merger of the two units, with nearly 20,000 staff in 60 countries, will be implemented in two steps, leading to net savings of around 250 million euros on an annualized basis until end-2023, Henkel said.

“From today’s perspective, around 2,000 jobs will be affected worldwide, mainly in sales and administration,” it said.

Building on its brands, Henkel aims for organic sales growth of 3-4% and an adjusted margin of earnings before interest and tax in the mid-teens percent range for the new unit in the medium- to long-term.

Henkel said that businesses that do not meet its growth and profitability criteria could be halted or sold.

Businesses and brands with total sales of up to 1 billion euros were under review.

On the other hand, Henkel is open for large takeovers to promote growth, Chief Executive Carsten Knobel said on a conference call.

($1 = 0.9443 euros)

(Reporting by Kirsti Knolle in Berlin and Matthias Inverardi in Duesseldorf; Editing by Miranda Murray and Emelia Sithole-Matarise)