… we have to change our view on Beiersdorf. Until yesterday evening, we had the impression things were going well, but the unexpected dismissal of the CARE+ initiator, Mr De Loecker, has forced us to re-think our position despite the indication that the new CEO will follow the same path. Like all other CEOs, we believe, Mr Vincent Warnery will put his own mark on the position, but this might be difficult given the current time frame.
Preliminary figures had been released earlier this month.
Companies: Beiersdorf AG
… thanks to smaller tesa. As a quite close competitor in this area already flagged (Adhesives Technologies – Henkel), adhesives in general had a strong start to the year but, due to tesa’s stronger focus on automotive and electronics, the direct comparison differs greatly. The second message was the re-bounce at the group level continued sequentially, and Consumer sending some vital signs was the third message.
Nevertheless, the absolute figures fit into our broad picture as FX headwinds knock
The higher investments under the umbrella of the already expensive CARE programme have to seen and valued against the back of the current CEO’s predecessor and his targets. This meaningful investment needs to be better explained.
Having already pre-released some adjusted figures, the full set of figures brought profitability much closer to our expectations.
But the question is does the given guidance reflect realism or management’s wishful thinking? Beiersdorf needs open shops (DIY & retail stores) and travellers to whom to sell its products as the online distribution channels remain somewhat underdeveloped. The guidance seems to us like a strong bet on Asian markets, especially on China as we see the tide is turning.
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Having already announced some preliminary figures, the decline in the top-line and the drop in profitability was only a matter of magnitude. Beiersdorf had re-started to strip out special factors, but even worse was the given outlook: negative.
The H1 figures came in below our already cautious expectations. Street estimates are not available.
H1 20 figures:
Group: -8.1% (-10.7% lfl) to €3,513m
Consumer: -8.1% (-10.9% lfl) to €2,891m
tesa: -10.0% (-10.0% lfl) to €622m
Beiersdorf’s sales statement provided some more details and the pattern of development was as expected. The effects from the lower oil price are expected to be mitigated by the usual cost-cutting measures. Due to the lockdowns in Europe and the Americas, Q2 is expect to face some strong declines in both its divisions.
Beiersdorf’s reaction is not unexpected, but a bit late. The provided preliminary figures give us an initial glimpse and confirm our view on 2020.
There were hopes in the appointment of Mr De Loecker as the new CEO and some of these have been met (for example higher dynamics, M&A). Higher dividends remain on the list for the future, despite €8.3bn (€8.1bn) of cash on hand. Management delivered towards its targets, when the effects of the acquisition and CARE+ programme are stripped out. But one has to bear in mind, it was only the CEO’s first year. Sustainability has become more strongly into management’s focus as a sustainability agenda h
Beiersdorf’s preliminary FY sales figures were above our expectations. Consumer continued its strong performance, driven by La Prairie and Nivea. tesa was also better than expected as Q4 came in unchanged yoy. Despite the confirmation of the group’s EBIT margin, the clarification ‘from ongoing operations’ raises suspicions. The recent acquisition of the former Bayer brand Coppertone might additionally burden the margin as the line was already brought down by the investments in future growth.
The high price brand La Prairie continued to generate double-digit growth rates and Eucerin also continued its acceleration, giving Consumer a good organic push. tesa’s development was not that good as the division reported the second quarter in a row of negative organic development, which forced management to adjust the division’s guidance, but the group’s guidance remained unchanged!
Beiersdorf reported a mixed set of figures despite showing higher sales and EBITDA. Customer’s core brand, Nivea, reported a weakening growth dynamics. tesa also came in a bit less dynamic.
The reported figures were at the lower end of our expectations. It looks to us that the effects from the CARE program and the related costs might kick in later. The confirmation of the guidance supports this view.
Showing activity for the sake of showing activity? We hope this will not become the new CEO’s mantra. Despite Beiersdorf’s huge cash pile, management will quickly learn one can spend a euro just once.
We believe the announced acquisition of Bayer’s odd brand Coppertone is not a bargain but rather a perfect fit for the established businesses. However, we have some doubts on the business volume that has been provided.
Beiersdorf’s small set of figures (just top-line) shows a good start in all businesses and most brands. However, the launch of the CARE+ programme will have generated higher costs, which will be seen in the H1 report. Due to the confirmation of the FY guidance, we do not expect major surprises. Reported figures were slightly above our expectations.
Preceding the full set of 2018 figures (preliminary had already been released), Beiersdorf announced CARE+ a kind of weak-up programme. It needs additional annual investments of up to €80m injected into Consumers in order to reach the new 2023 targets and the money box might be opened for acqusitions. The presentation of the programme and the higher investments make us feel more comfortable as a continuation of the ‘Heidenrich way’ could have led to an a unfavourable position for the company.
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