Dear Friends of the Company,

2011 was a successful year for Henkel – despite major challenges and uncertainties within the economic environment. We made considerable progress in further developing our company, based on our vision, aligned with our values and driven by three strategic priorities: achieve our full business potential, focus more on our customers, and strengthen our global team.

Excellent results in a challenging environment

The progress made in the implementation of our strategic priorities is reflected in our key financials. In a persistently challenging environment marked by intense competition, we achieved organic sales growth of 5.9 percent, significantly outperforming global GDP growth of 2.6 percent. Henkel Group revenues rose to 15,605 million euros. Adjusted1 return on sales rose to 13.0 percent compared to 12.3 percent in the previous year, while adjusted earnings per preferred share increased by 11.3 percent to 3.14 euros. All our business sectors contributed to this successful performance with profitable growth and further expansion of their market shares.

We will be proposing to the Annual General Meeting approval of a dividend payout of 0.80 euros per preferred share, an increase of 11.1 percent compared to the 0.72 euros in the previous year, in line with our established dividend payout policy.

The excellent business performance and solid finances of Henkel were recognized in the financial markets. In the course of 2011, both Standard & Poor’s and Moody’s increased Henkel’s credit rating to our target level, highlighting in particular our strong cash flow and our disciplined reduction of net debt – down to a level below 2 billion euros – since the acquisition of the National Starch businesses.

We fully delivered on our ambitious targets in 2011. Sales, profits and market shares in nearly all our business segments reached new highs. Based on this solid foundation and strong performance, we are very confident of achieving our 2012 targets set in 2008.

On behalf of the Management Board, I would like to extend my sincere thanks to all our employees for their outstanding contributions in this difficult economic environment. Their commitment and their ambition to be the best in everything they do provide the foundation for Henkel’s success, as has consistently been the case during the last 135 years.

We are well aware of our responsibility toward our employees. Following the tsunami and the subsequent reactor incident in Japan, and also during the flood disaster in Thailand and the political unrest in the Middle East and North Africa, we made great efforts to ensure the safety and welfare of our employees and their families, providing a broad range of supportive measures.

Excellence is our Passion

Since the beginning of 2011, our commitment to be the best in everything we do has been reflected in our new claim, “Excellence is our Passion.” We regard this as a performance challenge to ourselves and a performance promise to our customers. In this report we introduce selected examples of how more than 47,000 Henkel employees live up to this commitment – day by day, around the world.

Growth through globalization

Our vision, “a global leader in brands and technologies,” is reflected in our business strategy. A major success factor in our performance in 2011 was the further expansion of our position in the emerging markets, where we generate 42 percent of our sales and employ 54 percent of our people. It is a key element of our long-term strategy to continuously strengthen our position in these markets characterized by above-average growth. For example, in 2011 we began construction of our largest adhesives plant in Shanghai. Over recent years, Henkel has been benefiting from the increasing globalization of our businesses. This shift generates new growth momentum and enables us to better market our technologies to industrial customers on a global scale while growing our strong brands in local markets.

Focus on strong brands

We further strengthened our top brands in 2011 and now generate 42 percent of total sales with our top 10 brands. Thanks to above-average margins, these brands contribute significantly to our profitable growth. Our top 10 brands in the Cosmetics/Toiletries business sector generate 90 percent of its sales, in Laundry & Home Care the figure is 81 percent and in the Adhesive Technologies business sector the share is 54 percent. In our industrial adhesives business we will be further focusing our portfolio on established, global brands.

Continuous change to drive success

2011 provided a number of striking examples of how important flexibility and adaptability to changing business conditions can be. The unrest in North Africa and the Middle East, the natural disaster in Japan and the financial crises in Europe and the USA were still unforeseeable at the beginning of the year. These events had considerable impact on the economic landscape. In addition, significant raw material price increases and volatility in a market environment characterized by tough competition affected all our businesses. Against this background, it was vital to continue making Henkel more flexible, faster and more efficient.

Our response included expansion of our shared services, further simplifying, standardizing and automating our processes. Having successfully introduced the shared services model for corporate functions such as Finance, Purchasing and Human Resources, we are now extending it to business unit processes as well. In addition to our existing shared service centers in Bratislava (Slovakia) and Manila (Philippines), in 2011 we opened a third center in Mexico City serving the Latin America region. By the end of 2011, we had about 1,000 employees in our shared services organization, and we are planning to further increase this number in the coming years.

Diversity – an asset for a global company

We are convinced that the commitment and diversity of our employees are critical success drivers for Henkel. For both our consumer goods and our industrial businesses, the variety of backgrounds, knowledge and expertise of our diverse employee base makes the difference in a competitive environment. In promoting diversity at Henkel, we focus on three dimensions: gender, internationality, and age combined with professional experience. Henkel employs people from more than 120 countries and there are 26 nations represented among our top 180 managers.

In 2011, the focus in Germany and other countries was on the topic of women in management. At Henkel, we have been able to raise the proportion of female managers by one percentage point as an annual average over the last six years. The figure currently stands at approximately 30 percent, putting Henkel among the leading corporations listed in the DAX. Going forward, we are committed to steadily raising this ratio by one to two percentage points per year.

As part of our effort to strengthen our global team, we expanded our worldwide career and development activities in 2011. We now evaluate and differentiate the performance levels and development potential of our 9,000 managers and leaders around the world using a standard process. From the results we derive their long-term career and development requirements.

At Henkel, we prefer to promote talent from within, but without compromising on quality. I am particularly pleased that, in the course of 2011, we promoted three senior managers with long-standing experience within Henkel to our Management Board. And, as already announced, in July of 2012 we will be appointing a new Chief Financial Officer from our ranks. This ensures a high degree of continuity and competence within the company.

Leadership in sustainability

“We are committed to leadership in sustainability” is one of our five company values. Henkel holds a top international position in this field. For the fifth consecutive year, we were acknowledged as the global leader in our industry by the Dow Jones Sustainability Index; and we are also at the top of other recognized, independent rankings.

We intend to maintain and further extend this leading position in the future, not least because our customers in the industrial business and also retail partners and consumers are placing increasing emphasis on sustainable products and processes.

Well ahead of schedule, by the end of 2010 we achieved our sustainability targets originally formulated for 2012. Consequently, in 2011 we developed a new, long-term sustainability strategy for Henkel, incorporating the insights from external, international experts. At the heart of this strategy lies the ambition to achieve more with less. We aim to triple our resource efficiency by the year 2030. As an interim objective, we want to improve our efficiency by 30 percent by the end of 2015. Our Annual Report details a number of important contributions that have been made in the implementation of this strategy. Detailed information relating to this strategy, our specific targets and our progress can be found in our Sustainability Report and on the internet.

2012 outlook and long-term strategic alignment

We are very confident of meeting our targets for fiscal 2012: We aim to achieve organic sales growth of 3 to 5 percent. For our consumer goods businesses we expect growth in the low single-digit percentage range, and for our Adhesive Technologies business, we are targeting sales growth in the mid single-digit percentage range. Building on our strong 2011 results, we intend to increase adjusted return on sales (EBIT) to 14 percent for the Henkel Group, coupled with a rise in adjusted earnings per preferred share (EPS) of at least 10 percent.

In 2011, we were able to achieve significant milestones in our development, making progress in many key areas and establishing a strong platform for the future. In the course of the year, the Management Board analyzed major trends which will be affecting Henkel in the future, as well as various scenarios for the potential development of our business environment. These analyses will inform the strategic direction and focus of our company in the future, as will be communicated at the end of this year.

In addition to our appreciation of our employees, I would like on behalf of the entire Management Board to extend our special thanks to our supervisory bodies. And in the name of the entire company I thank you, our shareholders, for your continued trust and support. We also thank our customers throughout the world for the confidence they have shown in Henkel, in our brands and in our technologies.

Düsseldorf, January 27, 2012


Kasper Rorsted
Chairman of the Management Board

Kasper Rorsted
Chairman of the Management Board

+5.9 %organic sales growth.

13.0 %adjusted1 return
on sales.

+11.3 %adjusted1 earnings
per preferred share.

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

42 %of our sales generated
in the emerging markets.

42 %of our sales generated
by our top 10 brands.

Around30 %
of our managers
are women.

“In 2011, we established
a strong platform for Henkel’s future.”