Henkel: Better Outlook and FCF Could Drive Spread Tightening

Henkel (HEN GY) published 4Q23 results with a small revenue miss but EBIT inline, much better FCF and credit metrics, and a good set of upgrades to the FY24 outlook. Henkel’s cash curve has been mixed YTD, we can see today as a reason for spread tightening.

• Key credit metrics: net debt appears to be down to roughly zero (from around EUR1.3bn of debt at Sep-23) and FCF in 2H23 looks to have accelerated significantly to around +EUR1.9bn with mgmt alluding to working capital improvements (again, same at Jun-23 statement).
• Revenues are down 6.6% y/y and 1.2% below consensus. EBIT was +10% y/y (and FY23 EBIT is inline with consensus, no 4Q23 consensus is available).
• Outlook: mgmt sees organic sales growth in FY24 at 2-4% y/y (consensus had no growth) with an adjusted EBIT margin of 12-13.5% (from 11.9% just reported for FY23) so quite an upgrade in here, including to EPS for the equity watchers (5-20% growth vs. consensus of 7.5%). So, another upgrade following the one from 9-Nov-23.