Our company has just ended an extremely successful fiscal 2012. We also managed to reach the financial targets for 2012 that we set for ourselves in 2008. For the first time in the history of our company, we are able to report a year-end adjusted return on sales (EBIT) of 14.1 percent. This is an excellent result, not least in light of the extremely volatile nature of our markets, the political upheavals in the Middle East and North Africa, the debt crisis, and the trend in raw material prices.
I would like to thank all Henkel employees for their untiring commitment, without which we would not have been able to achieve these goals. Thanks are equally due to the members of the Management Board who have steered the company so successfully through these difficult times, and to our employee representatives and Works Councils for their continuous and constructive support in moving our company forward.
Last but not least, my thanks go to you, our shareholders, for again placing your confidence in our company last year.
In fiscal 2012, we again diligently discharged our duties as the Supervisory Board in accordance with the legal statutes, Articles of Association and rules of procedure governing our actions. In particular, we carefully and regularly monitored the work of the Management Board, advising and supporting it in its stewardship, in the strategic further development of the company and in decisions relating to matters of major importance.
Cooperation between the Management Board and the Supervisory Board takes place through extensive dialogue based on mutual trust and confidence. The Management Board kept us fully informed of all major issues affecting the company and its Group companies with prompt, detailed written and oral reports. The Management Board specifically provided explanations of the business situation, operational development, business policy, profitability issues, and our short-term and long-term corporate, financial and personnel planning, as well as capital expenditures and organizational measures. In the course of preparing the quarterly reports, details were given of the sales and profits of Henkel Group as a whole, with further analysis by business sector and region.
Outside Supervisory Board meetings, I as Chairwoman remained in regular contact with the Chairman of the Management Board; this ensured that the Supervisory Board was constantly kept informed of current business developments and major occurrences.
The Supervisory Board and the Audit Committee each held four regular meetings in fiscal 2012. The Supervisory Board also held a separate meeting to discuss future strategic direction and financial targets for 2016.
All of the Supervisory Board members attended the regular meetings; two members were unable to attend the separate meeting. Attendance of the Committee meetings averaged about 88 percent during the year; no Committee member took part in fewer than half the meetings.
There were no conflicts of interest involving Management Board or Supervisory Board members which had to be disclosed to the Supervisory Board and reported to the Annual General Meeting.
Our consultations focused mainly on strategy issues, and the business performance and activities of both the Group as a whole, and the individual business sectors. Our meeting on March 6, 2012 dealt primarily with the approval of the annual and consolidated financial statements for 2011, including the risk report and corporate governance report, the results of our efficiency audit, the 2012 Declaration of Compliance, and our proposals for resolution by the 2012 Annual General Meeting. A detailed report was included in our last Annual Report. We also discussed the euro crisis and the challenges it posed for the company.
The agenda for our meeting on April 16, 2012 included the general performance of the business sectors and, in particular, our global human resources strategy aimed at strengthening our global teams. We focused particularly on issues surrounding the recruitment and development of talented professionals, on our processes for assessing performance and potential, development measures in the emerging markets, measures at the top management level, and encouraging diversity within Henkel.
In addition to discussing our business performance over the first eight months of fiscal 2012, the main focus of discussion at our meeting on September 21, 2012 was the future strategic orientation of Henkel. Based on the megatrends that we had identified, and the impact they would have on Henkel, we discussed the overall strategy of Henkel, the overriding category and regional strategy of our operating business sectors, and the areas of strategic focus of our corporate business sectors. We then discussed details of the enhanced strategy and its implementation at our meeting on November 15, 2012, together with the resulting financial targets for 2016.
Based on comprehensive documentation, we discussed in detail our assets and financial planning for fiscal 2013, the budgets of our business sectors, and our human resource planning at our meeting on December 7, 2012.
In order to efficiently comply with the duties incumbent upon us according to legal statute and our Articles of Association, we assign certain activities to our Audit Committee and Nominations Committee. The Audit Committee was chaired in the year under review by Dr. Bernhard Walter (until April 16, 2012) and Prof. Dr. Theo Siegert (from April 16, 2012), both of whom comply with the statutory requirements of impartiality and expertise in the fields of accounting and auditing. For more details on the responsibilities and composition of these committees, please refer to the Corporate governance/Corporate management report and the membership lists here.
The Audit Committee mandated the external auditor, pursuant to the latter’s appointment by the 2012 Annual General Meeting, to audit the annual financial statements and the consolidated financial statements for fiscal 2012, and also to review the interim financial reports for fiscal 2012. The audit fee was also established. The Audit Committee obtained the necessary validation of auditor independence for the performance of these tasks. The auditor has informed the Audit Committee that there are no circumstances that might give rise to a conflict of interest in the execution of its duties.
The Audit Committee met four times in the year under review. The meetings and resolutions were prepared through the provision of reports and other information by the Management Board. The respective Chairs of the Committee reported promptly and in full to the plenary Supervisory Board on the content and results of each of the Committee meetings.
All Audit Committee meetings focused on the company and consolidated Group accounts, including the interim financial reports, with all matters being duly discussed with the Management Board. The three meetings at which we discussed and approved the interim financial reports were attended by the auditor. The latter reported on the results of the respective reviews and on all the main issues and occurrences relevant to the work of the Audit Committee. There were no objections raised in response to these reports.
The Audit Committee also scrutinized the accounting process and the efficacy and further development of the internal Group-wide control and risk management system. In addition, the Audit Committee received the status reports of the General Counsel & Chief Compliance Officer and the Head of Internal Audit, and approved the audit plan put forward by Internal Audit, which extends to examining the functional efficiency and efficacy of the internal control system and our compliance organization.
As part of its remit, the Audit Committee also focused in 2012 on supporting the Supervisory Board in the request for quotations to audit the annual financial statements. After a thorough review of the submitted quotations, the Audit Committee recommended that the Supervisory Board propose to the Annual General Meeting the appointment of KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), Berlin, to audit the annual financial statements.
At its meeting on February 25, 2013, attended by the auditor, the Audit Committee discussed the annual and consolidated financial statements for fiscal 2012, including the audit reports, the associated proposal for the appropriation of profits, and the risk report, and submitted to the Supervisory Board corresponding proposals for resolution by the Annual General Meeting.
Bearing in mind the outcome of its requests for quotation, the Committee further made its recommendation to the Supervisory Board regarding the latter’s proposal for resolution by the Annual General Meeting relating to the appointment of the external auditor for fiscal 2013. A declaration from the auditor asserting its independence was again duly received, accompanied by details pertaining to non-audit services rendered in fiscal 2012 and those envisaged for fiscal 2013. There was no evidence of any bias or partiality on the part of the auditor. As in previous years, other members of the Supervisory Board also took part as guests in this specifically audit-related meeting of the Audit Committee.
On the basis of the objectives agreed by the Supervisory Board with respect to its future composition, the members of the Nominations Committee made appropriate recommendations in preparation for the resolutions to be formulated by the Supervisory Board and placed before the 2012 Annual General Meeting with respect to the election of shareholder- representative members conducted at this meeting.
The Supervisory Board also discussed issues relating to corporate governance, based on the German Corporate Governance Code (Kodex) as last amended on May 15, 2012. In light of the new Kodex regulation governing the impartiality of the Supervisory Board, in particular, we re-examined our objectives in respect of Supervisory Board composition and came to the conclusion that an appropriate number of the members of our Supervisory Board are independent. Further details on this and Henkel’s corporate governance in general can be found in the Corporate governance report, with which we fully acquiesce.
At our meeting on February 26, 2013, we discussed and approved the joint Declaration of Compliance of the Management Board, the Shareholders’ Committee and the Supervisory Board with respect to the German Corporate Governance Code for 2013. The full wording of the current and previous declarations of compliance can be found on the company website.
The annual financial statements and management report of Henkel AG & Co. KGaA have been prepared by the Management Board in accordance with the provisions of the German Commercial Code [HGB]. The consolidated financial statements and the Group management report have been prepared by the Management Board in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union, and in accordance with the supplementary German statutory provisions pursuant to Section 315a (1) German Commercial Code [HGB]. The consolidated financial statements in their present form exempt us from the requirement to prepare consolidated financial statements in accordance with German law.
The auditor appointed for 2012 by the last Annual General Meeting – KPMG – has examined the 2012 annual financial statements of Henkel AG & Co. KGaA and the 2012 consolidated financial statements, including the management reports. The annual financial statements and the consolidated financial statements have been issued with an unqualified opinion.
KPMG reports that the annual financial statements give a true and fair view of the net assets, financial position and results of operations of Henkel AG & Co. KGaA in accordance with German generally accepted accounting principles, and that the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group in compliance with International Financial Reporting Standards and the supplementary German statutes pursuant to Section 315a (1) HGB.
The annual financial statements and management report, consolidated financial statements and Group management report, the audit reports of KPMG and the recommendations by the Management Board for the appropriation of the profit made by Henkel AG & Co. KGaA were presented in good time to all members of the Supervisory Board. We examined these documents and discussed them at our meeting of February 26, 2013. This was attended by the auditor, who reported on its main audit findings. We received the audit reports and voiced our acquiescence therewith. The Chair of the Audit Committee provided the plenary session of the Supervisory Board with a detailed account of the treatment of the annual and the consolidated financial statements by the Audit Committee. Having received the final results of the review conducted by the Audit Committee and concluded our own examination, we see no reason for objection to the aforementioned documents. The assessment by the Management Board of the position of the company and the Group coincides with our own appraisal. At our meeting of February 26, 2013, we concurred with the recommendations of the Audit Committee and therefore approved the annual financial statements, the consolidated financial statements and the management reports as prepared by the Management Board.
We also discussed and approved the proposal by the Management Board to pay out of the unappropriated profit of Henkel AG & Co. KGaA a dividend of 0.93 euros per ordinary share and of 0.95 euros per preferred share, and to carry the remainder and the amount attributable to the treasury shares held by the company at the time of the Annual General Meeting forward to the following year. This proposal takes into account the financial and earnings position of the company, its medium-term financial and investment planning, and the interests of our shareholders. We consider the proposed dividends to be reasonable and appropriate.
In our meeting on February 26, 2013, we also ratified our proposal for resolution to be presented before the Annual General Meeting relating to the appointment of the external auditor for the next financial year, based on the recommendations of the Audit Committee.
Risk management issues were examined, not only by the Audit Committee but also the plenary Supervisory Board, with emphasis on the risk management system in place at Henkel and any major individual risks of which we needed to be notified. There were no identifiable risks that might jeopardize the continued existence of the corporation as a going concern. The structure and function of the risk management system were also integral to the audit performed by KPMG, which found no cause for reservation. It is our considered opinion that the risk management system corresponds to the statutory requirements and is fit for the purpose of early identification of developments that could endanger the continuation of the corporation as a going concern.
The Supervisory and Management Boards underwent a number of changes, some of which were already reported last year.
Effective January 1, 2012, Dr. Martina Seiler joined the Supervisory Board as Senior Staff Representative, replacing Ulf Wentzien, who resigned his seat as of December 31, 2011. In the course of the regular re-election of shareholder representatives to the Supervisory Board by the 2012 Annual General Meeting, Dr. Bernhard Walter, Thomas Manchot and Johann-Christoph Frey have left the Supervisory Board and have been replaced by Béatrice Guillaume-Grabisch, Boris Canessa and Ferdinand Groos. The other shareholder representatives were re-elected. During the constituent meeting, I was elected to the Chair, and Winfried Zander was confirmed as Vice-chair. We also changed the composition of the Audit and Nominations Committees.
In elections held on January 11, 2013, in accordance with the provisions of the Codetermination Act, the following employee representatives were elected, or re-elected, effective as of the close of the Annual General Meeting on April 15, 2013: Jutta Bernicke, Peter Hausmann, Birgit Helten- Kindlein, Mayc Nienhaus, Andrea Pichottka, Dr. Martina Seiler, Edgar Topsch and Winfried Zander.
Effective January 14, 2013, Thierry Paternot resigned his seat on the Supervisory Board for personal reasons.
Effective June 30, 2012, Dr. Lothar Steinebach retired from the Management Board. Carsten Knobel was appointed to the Management Board as new CFO with effect from July 1, 2012. We wish him all the best for the work that lies ahead.
We are sincerely grateful to all former members of the Supervisory and Management Boards, who – in some cases over many years – worked tirelessly in driving Henkel’s successful development. Our particular thanks go to Dr. Bernhard Walter, whose extensive experience was so valuable in chairing the Audit Committee, Thierry Paternot for his helpful contribution and analysis, and Dr. Lothar Steinebach, who has retired after more than 30 successful years in the dedicated service of the company.
Even though we achieved success in fiscal 2012 and reached our financial targets, we expect both 2013 and the years that lie ahead to pose further challenges for all of our employees and the management at Henkel. Thanks to the great progress we have made and the successful business performance of Henkel, however, we feel well equipped to face the future, and are confident that we will achieve our new targets.
We thank you for your ongoing trust and support.
Düsseldorf, February 26, 2013
On behalf of the Supervisory Board
Dr. Simone Bagel-Trah
Dr. Simone Bagel-Trah
Chairwoman of the Shareholders’ Committee and the Supervisory Board