Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for Henkel AG & Co. KGaA (issuer rating A/Stable; senior unsecured debt rating: A; short-term debt rating: S-1) on 15 May 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

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The issuer rating reflects a very strong financial risk profile (assessed AA-), with leverage of below 0.5x as of December 2024, and a strong business risk profile (assessed A-), benefitting from Henkel’s leading market position, particularly in Adhesive Technologies, some strong global brands (Persil, Schwarzkopf, Loctite, Technomelt) and business diversification. The business risk profile is constrained by the geographical concentration of operating profits (EBIT) in Europe and by moderate yet improving profitability.

Henkel’s business risk profile (assessed A-) continues to be primarily supported by its leading position within the global adhesives industry (global leader in bonding, sealing and coating), benefitting from a strong ability to set prices, and participation in main megatrends, including mobility, connectivity and the circular economy, thanks to its focus on sustainable product innovation (ESG factor: credit positive). Conversely, the position of Henkel within the consumer products categories in which it operates is weaker on a global scale (number two in Laundry & Home Care as well as in the Professional & Consumer Hair business in active markets). Consumer Brands remains strong in Europe due to its German roots and popular brands. Henkel has increased its focus on technology-driven innovations in response to competition during recent years of low consumer demand. With the divestment of Retailer Brands in North America (annual sales of around EUR 500m) which was closed in April 2025, Henkel has finalised the portfolio optimisation process (phase I) of the Consumer Brands division initiated in 2022, reaching the target to discontinue or divest brands and categories with sales totalling around EUR 1.0bn. This was part of the integration plan to merge Beauty Care and Laundry & Home Care businesses, aimed at achieving total savings of around EUR 525m (thereof more than 80% already achieved by 2024) and including also savings from supply chain optimisation (phase II), which is ahead of plan to be completed during 2025.

Diversification continues to support the rating, positively impacted by Henkel’s conglomerate structure with an equal balance between specialty chemicals and non-discretionary consumer products in terms of revenues, and a proportionate mix between B2B and B2C. The Adhesives Technologies portfolio benefits from a wide product portfolio and a varied end-market mix, although diversification is partly weakened by an estimated 35% of revenues deriving from cyclical industries (primarily automotive and construction). Henkel’s consumer products business benefits from a diverse brand portfolio focused on a few selected non-discretionary consumer categories including Laundry, Home Care and the Hair business (which includes care, styling, and coloration). Despite the global reach, around 40% of group revenues and 50% of EBIT come from Europe.

Profitability still constrains the rating, but it is gradually improving. Scope-adjusted EBITDA/margin* recovered to EUR 3.6bn/17% in 2024 from EUR 3.2bn/15% in 2023, thanks to continued margin improvement in both divisions, leading to the highest gross margin (at 50%) in over 30 years for the company. Adhesives’ profitability benefited from lower input cost particularly in H1 2024, supply chain efficiencies, innovations and positive product mix, while Consumer Brands’ profitability was supported by ongoing portfolio valorisation and portfolio optimisation measures, cost savings and efficiency gains. Despite a slow sales development in Q1 2025 primarily driven by soft demand and supply chain challenges (mainly resolved) within Consumer Brands, Scope anticipates a low-to-mid-single digit percentage organic growth fuelled by continued high investment into R&D (assumed to remain at around 3% of sales) and advertising, leading to EBITDA ranging between EUR 3.8bn and EUR 4.2bn over the medium term, with the EBITDA margin solidifying between 17%-18% amid improving product mix.

Henkel’s very strong financial risk profile (assessed AA-) continues to support the issuer rating. Leverage measured as debt/EBITDA was stable at 0.3x in 2024 and Scope expects this leverage metric to remain below 1.0x over time, with recovering profitability partially offsetting risks of sizeable acquisitions. Scope’s assumptions include EUR 1.5bn of acquisitions per year, dividends of between EUR 850m and EUR 1.0bn per year, as well as EUR 1.0bn share-buyback during 2025/2026. Scope foresees interest cover to remain at comfortable levels well above 30x and free operating cash flow/debt significantly above 35% over time despite capex increasing around EUR 750-800m per year (around 3.5% of sales) going forward compared to EUR 610m in 2024.

Liquidity is adequate. Besides ample recurring free operating cash flow, liquidity is mainly supported by EUR 3.4bn of cash and equivalents as of December 2024 and an undrawn long-term revolving credit facility of EUR 2.0bn maturing in 2029. Cash and equivalents alone are enough to cover current debt maturities until 2028. In terms of outstanding bonds, small maturity of EUR 0.1bn in 2025, increasing to around EUR 0.6bn in 2026 and 2027.

Supplementary rating drivers are credit-neutral. The most relevant supplementary rating drivers for Henkel remain financial policy and ownership structure. The Henkel family is the main shareholder, holding roughly 62% of ordinary shares. Henkel’s financial policy is conservative, based on consistently sound credit metrics in recent years, the commitment to a single A rating category – which mitigates the risks related to very sizeable acquisitions – and a prudent dividend policy, with pay-outs targeted at 30%-40% of adjusted net income after minority interests.

The Outlook is Stable and reflects the expectation that Henkel will keep leverage, measured by debt/EBITDA, at around or below 1.0x over time, while gradually recovering profitability on the back of slowly improving market conditions and cost saving initiatives. The Outlook does not include any large multi-billion-euro acquisitions in the medium term, but rather bolt-on deals.

A positive rating action could be warranted if Henkel's financial policy becomes more creditor-friendly, for example by setting a low leverage target and/or a positively revised rating commitment.

A negative rating action could occur if debt/EBITDA were to rise close to or above 2.0x, e.g. due to an increase in shareholder remuneration, a major acquisition, or a sustained deterioration in profitability.

*All credit metrics refer to Scope-adjusted figures.

The methodologies applicable for the reviewed ratings and/or rating Outlook (General Corporate Rating Methodology, 14 February 2025; Chemicals Rating Methodology, 16 April 2024; Consumer Products Rating Methodology, 31 October 2024) are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eugenio Piliego, Senior Director

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