Henkel AG & Co. KGaA (OTCPK:HENKY) Q1 2019 Earnings Conference Call May 7, 2019 2:00 AM ET
Company Participants
Hans Van Bylen – CEO
Carsten Knobel – CFO
Conference Call Participants
Christian Faitz – Kepler Cheuvreux
Richard Taylor – Morgan Stanley
Ian Simpson – Barclays
Operator
Good morning and welcome to the Henkel Conference Call. Good afternoon today from Hans Van Bylen, CEO, Carsten Knobel, CFO and the investor relations team.
For the duration of the call, you would be on listen only. [Operator Instructions] Please note, that there will be a live webcast of today's conference call, including the Q&A session. In addition, a replay of the conference call and the Q&A session will be available on our website www.henkel.com/IR for certain period of time. [Operator Instructions]
At this time, I'd like to turn the call over to Mr. Hans Van Bylen. Please go ahead, sir.
Hans Van Bylen
Dear investor and analysts good morning, from Dusseldorf and welcome to our earnings call for the first quarter of 2019.
I would like to begin by reminding everyone that the presentation which contains the usual formal disclaimer to forward-looking statements within the meaning of relevant U.S. legislation can be accessed from via by website at henkel.com/IR. A presentation discussion are conducted subject to the disclaimer, but we will not adhere to disclaimer but propose you take that yet into the records for the purpose of this conference call.
Today I'm going to lead you firstly through the key developments in the first quarter of 2019, then Carsten will comment the detailed financials for the quarter, after that I will close my presentation with the guidance for fiscal year 2019 and our focus areas for the remainder of the year and finally Carsten and I will take your questions.
Let me start with an overview on the key macro-economic developments impacting our businesses in the first quarter 2019. The market environment we are operating in continued to be challenging, geopolitical and economic risks remain high with great tensions persisting.
Growth dynamics of the industrial production further slowed in the first quarter 2019. Some key industry segments even displayed negative rates on a global basis such as for example automotive or electronics.
In the consumer goods market developments were mixed. Overall, we continue to face an intense environment with high price and promotion pressure and challenging retail conditions in key metro markets, especially in Western Europe.
Looking at the currencies, we see opposing events, many currencies turned positive for the euro in the first quarter, as evidenced by the stronger U.S. dollar. However, pressure from some key emerging market currencies persists such as the Turkish lira or the Russian ruble.
Concerning raw materials, we continue to feel the pressure from past U.S. price inflation. In general, the market continues to be volatile as evidenced by the most recent hike in crude oil prices.
I would now give you a brief overview of the results of the first three months 2019. Overall a mixed quarter. Our sales amounted to €5 point billion, normally 2.8% highest year-on-year, both currencies and M&A contributed positive to this development.
We recorded a positive organic sales growth of 0.7%. As expected, our Adhesive Technology business was impacted by the deceleration of industrial production in some industries.
Beauty Care recorded a weak start into the year, which was clearly below our expectations. On the other hand, Laundry and Home care had a good start in the year. Adjusted EBIT came in at €795 million corresponding to an adjusted EBIT margin of 16%, down 140 basis points versus the prior year. This was mainly due to lower sales, direct material price pressure and our additional investments. We were able to compensate for this, thanks to pricing initiatives and our strong cost focused management.
At constant currencies, adjusted earnings per preferred share decreased by 6.3%, which is in line with our full year guidance of a mid-single digit percent development below previous year.
Let's take a closer look at the performance of our business units starting with Adhesive Technologies. As expected, the business unit was impacted by the deceleration of industrial production growth. In particular our Automotive and Electronics businesses in China and North America have been impacted and thus recorded negative growth.
Overall sales in the first quarter of 2019 displayed the slightly negative organic developed of minus 0.8%. The adjusted EBIT margin came in at 16.8%, 130 basis points below the prior year level. Wile by the business unit continue to implement strong pricing measures, the lower volumes and transaction FX effects negatively affected profitability.
Despite these short term headwinds and in line with market consensus, we anticipate that industrial production growth, especially in some key industries will pick up in the course of the second half of this year.
While the Adhesive Technology business units face an increasingly difficult market environment some important business areas achieved a strong performance. Let me highlight some examples.
In our packaging and consumer goods business we achieved very strong growth with our customer across the food and beverage markets. This was in particular driven by our growing portfolio enabling the high standards of food safety, as well as increase sustainability for the new packaging applications.
The aerospace business achieved double-digit growth, driven by our high performance solutions for aircraft manufacturing. These enable an increased use of lightweight materials supporting more economic and sustainable operations.
Our metal packaging business achieved very strong growth, driven by high impact solutions for cans. Our unique portfolio for every stage of the manufacturing process which we have complemented with the acquisition of Direct [ph] helps our customers to enhance sustainability, while increasing the line speed and to reducing costs.
Moving on to Beauty Care. Overall organic sales came in at minus 2.2%, while we saw first positive effects from newly launched brands and innovations and a continued successfully developed our professional business, our retail business was clearly below expectations. This was mainly due to weak start in Western Europe and in China.
In contrast, our North American business which had a difficult start into the previous year due to logistics difficulties achieved strong growth. In professional, we achieved another quarter with strong organic sales growth outperforming markets. The adjusted EBIT margin of Beauty Care came in at 15%, 170 basis points below the prior year, mainly impacted by continued direct material price pressure and lower volumes.
We are clearly not satisfied with this performance. Our teams put high emphasis on returning to the growth pact with our in-house initiatives in retail, while continuing the momentum in our professional business.
Let me highlight some Beauty Care categories which were contributed with a good performance despite the overall challenging start into the year. At professional we continued our strong growth momentum across mature and emerging markets outperforming key markets and further strengthening our position.
With Body Care, we achieved strong growth mainly driven by Dial in North America. Within Hair retail, got2b achieved double-digit growth with a successful base business and innovative new products, such as [indiscernible] and Influencers.
Concluding the business unit overview with Laundry and Homecare. It continues the high competitive environment the business unit achieved a very strong organic sales growth of 4.7%, driven by both Laundry Care and Home Care categories. This compares to first quarter in the last year which was impacted by the delivery difficulties.
Emerging markets again continued with a significant growth, while North America returned to positive territory with a very strong increase. Laundry and Home Care continue to face strong Dial material headwinds, negatively impacting profitability, as a result the adjusted EBIT margin came in at 17.1%, 140 basis points below the first quarter of 2018.
Let me come to the highlights in our Laundry and Home Care business units. With our leading premium detergents, we recorded significant growth driven by the core portfolio and strong innovation like the new Persil premium re-launch.
The automatic dish washing category achieved a very strong growth, thanks to successful global innovations like the new smart all in one year and strong local innovation.
Middle East Africa, we achieved a double-digit growth, thanks to the ongoing momentum of our portfolio and key innovations like personal premium and Pril 5 [ph] in one.
As announced in the beginning of this year, we are sustainably stepping up our investments to support our leading brands and technologies, innovations in key markets, as well as digitalization. In the course of the first quarter, we have already start with implementation of multiple growth initiatives.
In Beauty Care, we focused on our core brands in North America and successfully expanded the portfolio of our Dial brand. In Europe, we focused on the hair category, for example our trend starting brand got2b.
In professional, we launched our new premium brand authentic beauty concept with pure formulas for authentic hairstyles. In Laundry and Home Care, we started our growth initiatives with major re-launches of all in the US and Persil Deep Clean in first markets. With our four chamber discs in laundry our smart all in one gel were introduced new innovative product formats with these innovations we are executing along the priorities we have set in January.
Also in the area of digitization, we increased our activities in various areas, such as data analytics, digital ready infrastructure cybersecurity, as well as e-commerce. While these initiatives still had limited effect on the top and bottom line in Q1 we expect the momentum to accelerate in the course of the coming quarters.
And with this, I hand over two Carsten to comment the detailed financials of the first quarter 20119.
Carsten Knobel
Thank you very much, Hans. And also good morning to everyone from my side. Let us now have a closer look at the financials of the first quarter 2019 and let's like always start with our key performance indicators.
Our sales amounted to €4,969 billion euros, and with that we are normally 2.8% above the prior year. In the quarter both currencies and acquisitions provided us with slight tailwinds. And our organic sales growth was positive at 0.7%.
The adjusted gross margin reached to 46.2% after 47.5% in the prior year quarter, thanks to the successful pricing initiatives in adhesives, as well as our efficiency measures, we could partially compensate for continued direct material headwinds in our P&L.
In addition, the lower volumes in the quarter left their marks and resulted in lower fixed cost absorption. As a consequence, we recorded and adjusted margin of 16.0%, 140 basis points below the prior year level where we reached 17.4% and we recorded adjusted earnings per preferred share of €1.34 corresponding to a decline of minus 6.7% both normally and also at constant currencies.
Looking at our cash KPIs, the ratio of networking capital to sales increased to 6.6%, 40 basis points up versus the prior year quarter. And here this is driven by higher inventories and account receivables, as well as effects from past acquisitions and the integration of that. The free cash flow was significantly higher at €523 million, mainly driven by an improved operating cash flow and lower CapEx. And lastly, our net financial position increased by more than €400 million ending the quarter at the robust number of minus €2.5 billion euros.
With that, let's take a closer look at our sales bridge in the first quarter of 2019. Organically as already said, we recorded a positive growth of 0.7% driven by pricing of 2.4%, while volume was negative at 1.7%. The net effect of our acquisitions and divestments had a positive impact on sales of 0.6%. So adding the two components of organic, plus inorganic growth this amounted in the first quarter to a plus of 1.3%.
Currency displayed a mixed picture in the first quarter. Many key currencies turned positive compared to the prior year quarter and here most important the US dollar appreciated versus the euro. However, pressure from some key emerging market currencies persisted. In particular, the Turkish lira and the Russian ruble. So overall currencies constituted a slight tailwind of 1.5% in quarter one. As a result sales amounted to €4,969 billion, and that's normally an increase of 2.8% above the first quarter of 2018.
With this now moving to the organic sales performance by region. The organic growth of 0.7% on group level continued to be driven by the emerging markets with a growth rate of 2.2% and very heterogeneous development in the different regions. Emerging market sales amounted to €2 billion, representing about 40% of the Henkel group since.
Looking first to the mature markets. Sales came in at €3 billion, organically slightly below the prior year. This was due to a negative organic sales development in Western Europe of minus 1.3% has backed by ongoing price and promotional pressure and an intense competitive environment.
In contrast, North America recorded a positive organic sales growth of 1.1%, while our consumer businesses overall recorded a very strong growth in the region, Adhesives was below the prior year quarter due to a softer demand across some key customer segments.
Asia-Pacific overall at minus 8.8% were significantly below the prior year, driven by weaker volumes of Adhesives and Beauty Care, especially in China. While other regions in the emerging markets contributed strongly to our organic sales performance, looking at Eastern Europe and Latin America both recorded significant sales growth, organic sales growth of 6.5% respectively 8%. In Africa, Middle East we achieved another double-digit organic sales growth of 13.5% in Q1.
And with this now, let me move to the business unit and here as always as you are used to starting with Adhesive Technology. The business unit posted a slightly negative organic sales growth of minus 0.8%, solely driven by lower volumes of minus 3.7%, while pricing again was strong at 2.9% and thanks to the continued implementation of price increases I have always shown you over the last couple of quarters how this development has been. You know we reached a peak in the quarter for of 2018 of the price component of 3.8%, but also in Q1 a very strong and high price component of 2.9% and we had also on top cost efficiency measures with that we could offset the pressure from direct materials resulting in a broadly flat gross margin in quarter one of 2019.
Acquisitions contributed 0.6% to sales, while currency effects had an impact of 1.9% positive. As a result, net sales normally increased by 1.7% to an absolute level of €2.3 billion for quarter one.
The performance of the business areas was mixed. Packaging and Consumer goods business achieved a good organic sales growth. General industry contributed with a positive growth, while the Consumer Craftsman business was roughly flat.
The overall slightly negative organic performance was mainly driven by two parts, our Electronic business, which was significantly below the prior year quarter and transport and metal recorded a slightly negative organic sales development.
From a regional perspective, Adhesive Technology achieved continued strong growth in the emerging markets outside China. Key drivers were a significant growth in Eastern Europe and a double-digit development in Latin America. China in contrast recorded a negative development mainly driven by the weak demand in automotive and electronics as already alluded to.
In the mature markets sales organically remained below the prior year. This was driven by a negative development in North America and Asia Pacific, while Western Europe was slightly lower.
Moving now also to the profit of Adhesives, at 16.8% the adjusted EBIT decreased by 130 basis points compared to the prior year, while the gross margin was roughly stable, the lower volumes and mix effects negatively affected the profitability in quarter one.
Moving on to Beauty Care, which had a difficult first quarter. Organic sales development was negative at minus 2.2% with almost stable pricing but volumes declining at a level with minus 2.0%. Currency effects for the divisions were positive with plus 2.0%, acquisitions and divestments did not have a material impact on sales in the quarter one. As a result, sales in nominal terms came in at €960 million and by that being almost on par with the prior year quarter.
The Hair Professional business continued its positive momentum and achieved another quarter with strong organic sales growth. In retail sales were organically below the prior year, especially with organic sales development in Western Europe and China below expectations. In contrast, North America posted a strong organic sales growth.
Overall, the mature markets displayed a slightly negative development. The performance in Western Europe was negative mainly due to a very challenging retail conditions. The emerging markets also posted negative growth here driven by a weak performance in the Chinese retail business, which was negatively impacted by destocking effects. In contrast, we achieved good organic sales growth in Eastern Europe and the very strong performance in the Middle East Africa region.
Also having a look on profitability, Beauty Care recorded and adjusted EBIT margin of 15.0% and this corresponds to reduction of 170 basis points compared to Q1 2018. With pricing roughly stable, the continued direct material pressure and lower volumes had a negative effect which we could partially compensate by our fund growth initiative.
And finally now move on – moving onto our Laundry and Home Care business. The business unit showed a very strong top line performance with organic sales up by 4.7% and this was driven both by pricing of 3.3% and volume of 1.4%. Acquisitions contributed 1.1% to the growth, currency a slight tailwind of 0.5%, so that in total nominal sales were up 6.3% compared to the prior year.
In terms of business areas both Laundry and Home Care, Laundry Care and Home Care achieved a very strong organic sales growth. Looking here also to the regions, starting with the mature markets, our business activities in North America were recovering and generated very strong top line improvement. On the other hand, Western Europe and the mature markets of Asia-Pacific organically were slightly below the prior year.
Looking at the emerging markets, here we recorded a significant organic sales growth driven by another quarter with double-digit performance in Africa and Middle East. Both Eastern Europe and Latin America achieved a very strong growth, while Asia excluding Europe and Japan was negative.
Onto the margin development in a continuously high competitive environment pressures from direct material pricing and the transactional currency effects persisted in the quarter. We were able to partially compensate with positive pricing and our fund growth initiatives. However, the adjusted EBIT margin was 140 basis points lower on a year over year at 17.1%.
Let's now move back to the Henkel Group and in particular to our adjusted income statement. The adjusted gross margin as already pointed out came in at 46.2% and this was down by 130 basis points compared to prior year level.
Despite the continued headwinds from direct material prices, adhesives has already commented was able to keep the gross margins roughly stable, thanks to further pricing initiatives and the continued savings from our fund growth initiatives.
Also in Laundry and Home Care, we recorded positive pricing and we continued our strong cost management in both consumer goods businesses. However, we could only partially offset the continued pressures from the direct material prices and the transactional currency effect.
Based on the current raw material price trends, we anticipate that the headwind to turn into a tailwind in the second half of the year. For the full year, we continue to expect low single digit percentage headwind in our P&L.
In the first quarter, marketing, selling and distribution in percent of sales came in at 23.8% and this increased then by 20 basis points versus the prior year quarter. Our R&D and administrative expenses, as well as the balance of our other operating income and expenses remained roughly stable. Overall, our adjusted EBIT came in at €795 million corresponding to an adjusted EBIT margin of 16.0%, 140 basis points below the prior year.
Let me now share with you the detailed bridge from reported to adjusted EBIT. Our reported EBIT came in at €736 million, almost on par with the previous year. We did not recur record any onetime gains in the quarter and only small onetime charges of €2 million.
Restructuring charges amounted to €57 million in quarter one. The main focus here was on further adapting our go to market approach notably in the emerging markets, as well as optimizing our structures in administration and operations. For example by reducing the number of layers in the organization or adapting our production and logistics footprint. For the full year 2019, we continue to expect restructuring expenses as I already told you beginning of the year of €200 million to €250 million.
Moving now on our adjusted EPS development. Overall the adjusted earnings per preferred share came in at €1.34 in the first quarter and in nominal terms 6.3% below the prior year level. As mentioned earlier, we recorded a small tailwind from currencies on our top line.
Due to counteracting FX [ph] effects on cost positions, the impact on the bottom line reduced to zero. As a result adjusted earnings per preferred share at constant currency which is the basis of our full year guidance also reduced by 6.3% in quarter one.
Moving now onto our cash KPIs and starting with networking capital. Networking capital of Adhesive Technologies came in at 13.8%, that's an increase of 190 basis points. This is mainly the result of higher inventory levels and account receivables and this is mainly related to the weaker demand in key customer segments. Also acquisitions impacted the networking capital levels slightly negative.
In Beauty Care, networking capital increased by 100 basis points to 6.8%, lower volumes and the higher share of the professional by having a mixed effect have been driving this development. Laundry and Home Care recorded a significant improvement of 190 basis points now to a level of minus 3.1%, resulting from the strong operating performance and lower inventories and accounts receivable levels.
As a result, the group recorded a net working capital increase of 40 basis points to a level of 6.6% in quarter one. While we believe that our networking capital in the respective businesses is uncompetitive levels, we see room for improvement. We have shown in the course of the last year that we were able to improve our net working capital levels and we will increase again our focus on reducing these and the corresponding capital commitments throughout the year.
Onto the free cash flow, which increased significantly to €523 million in the first quarter, being up from €22 million in the previous year. A key driver of this strong performance was an improved operating cash flow which increased by €233 million to more than €600 million, as a result of lower working capital movements.
While we continue to invest in our businesses and spend €155 million on capital expenditure, this corresponds to a materially reduction versus the prior year. Just to remind you in Q1 of 2018 we had booked around €200 million for the acquisition of a technology against in the area of CapEx.
Thanks to our strong free cash flow, the net financial position improved to minus €2.5 billion versus the year end of 2018. With this we continue to have a very strong balance sheet. It's important to note that the first time adoption on IFRS 16 accounting effective from the beginning of the year 2019 per Henkel definition this did not have any effect on our free cash flow or the net financial position.
The new IFRS 16 lease standards had an impact on our balance sheet since we recognized new assets relating to operating leases of about €0.5 billion euros. As you can see on the chart, the key KPIs in our P&L statement were not materially impacted by the accounting change. In the first quarter, we recorded a slightly positive effect of €4 million on our EBIT and the corresponding negative effect on our financial results.
Nevertheless, the structure of the P &L has changed and depreciation is increased as a result of the recognized assets, while our operating expenses were lower. For the full year, we expect an improvement in the operating profit in the high single digit or low double digit millions, together with the corresponding adverse effect on the financial result. We don't expect a material impact on our net income.
With that, handing back to Hans.
Hans Van Bylen
Thank you very much, Carsten. Let me now conclude with our outlook for 2019 and our priorities for the remainder of the year before we move on to the Q&A. Our business environment is characterized by slowing economic and industrial growth, mixed consumer markets, as well as high end increasing volatility and uncertainty.
The short term growth of global GDP and industrial production is expected to remain soft. However in line with market consensus we anticipate industrial growth momentum to pick up again in the second half of the year, especially in some key industries.
Challenges in the consumer goods environment are expected to prevail. Developments of both exchange rates and direct material prices are expected to remain volatile with a high level of uncertainty. We will focus on the implementation of our growth initiatives and increase investment in brands and technologies and innovation and digitalization in the coming quarters.
While we expect to realize the first benefits on the top line in 2019 both the adjusted EBIT, as well as the adjusted EPS will be affected by the increased spending levels as announced earlier this year.
Based on the results in the first quarter and our expectations for the remainder of the year, we confirm our guidance for 2019. We have set clear business priorities for the remainder of the year. We aim to return to growth and achieve technologist supported by the anticipated improved growth dynamics, especially in the electronics and automotive industries.
We will build on the good starting Laundry and Home Care executing our strong innovation strategy and we focus on reinforcing growth in beauty retail and continue the outperformance in professional. We will continue to drive digitalization in all aspects, at the same time we will keep our strong focus on cost discipline further drive efficiency and adapt our structures. We will implement extra measures to improve our net working capital and further focus on free cash flow expansion and we will enhance the value proposition of our portfolio organically and via acquisitions.
Let us now move on to the Q&A.
Question-and-Answer Session
Operator
Thank you, Mr. Hans Van Bylen. [Operator Instructions] The first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead.
Christian Faitz
Yes. Good morning, gentlemen. Thanks for taking my two questions. First of all, Laundry apparently saw some sales increase in North America. Is that you fighting [ph] back against P&C on the premium front side or is it also your Sun [ph] product range improving?
And then second Asia is down some 9% percent year-on-year on a group level as you elucidated and it is down on all three divisions. Can you please be specific on the weaknesses by division? That would be helpful to understand what's going on there. Thank you.
Hans Van Bylen
Thank you, Christian Faitz for both the question. Let me start with a Laundry and Home Care. Indeed, we see a very good growth in US being well aware that the comparable is also is low because of last year's issues worth in our logistics. That is being settled. We do see it's across the board, so it's across the different segments because we are also taking activities across the different segments.
We have in fact as we announced in Jan we have re-launches on all our top form brands which are now getting fully to the market. So here we talk about the different price segments in which we are set. At the moment we see the growth up taking, in fact, across the portfolio. Asia Carsten?
Carsten Knobel
Yes. Christian, good morning. So looking at Asia Pacific as you pointed out and also as I said negative of minus the 8.8% in the region, this was mainly driven by a software development in Asia, especially in China and looking into the three divisions, Adhesives Technology was negatively affected by softer demand within China and especially here of two important industries, the Automotive and the Electronics part which I alluded to.
Beauty Care also recorded a negative state development in China, mainly as a result of destocking effect, the sell out in the quarter nevertheless was up double-digit, especially here driven by our business, in the online channels and for Laundry and Home Care you know, that we are not so prominent in Asia Pacific. The negative development was here within Korea. But yeah, that's I would say giving you the details on the development of the three divisions in the – in this area. I hope that helps.
Christian Faitz
Yes. Thank you. Very helpful. Thanks, Hans and Carsten.
Operator
The next question comes from the line of Richard Taylor from Morgan Stanley. Please go ahead.
Richard Taylor
Good morning, everyone. Just two very quick ones from me. Firstly on Adhesive's, what gives you the confidence that Adhesive will pick up in the second half. And I think previously you've given us the latest reading of the IPX index [ph] it would be helpful if you give us that.
And then secondly just on the consumer business what is the underlying growth in Laundry and the Beauty Home Care businesses, ex those launches that you've been making and ex obviously the easy comp from last year?
Hans Van Bylen
Thank you, Richard for both questions. Let me answer the question also on Adhesives Technologies. So we do indeed anticipate as a general consensus that in some key industries in the coming quarters industrial production will pick up. And here we talked specifically on Automotive and the Electronics. On IPX facing we do see that IPX generally is still around 2% growth with the first quarter which was around 18 and picking up to the end of the year towards some two. So that's where how the official forecast we'll see industrial production look like. And on top I mean, if you then take the total mix of Adhesives looking at the total forecast we also expect the pressure front the raw to ease also in the second half of the year. Concerning consumers?
Carsten Knobel
Yes, Richard I think to understand your question rightly, looking at Laundry and Home Care we achieved as we pointed out a growth of 4.7% which was driven by a very strong growth also supported by North America excluding the North America [indiscernible] we still have seen a very strong development also across the other regions.
And you know, we had to for sure selective – we see first positive effect in the first quarter of the initiative which we have pointed out in detail in February in both in Beauty Care and in Laundry and Home Care. For example the successful launch of the Persil four chamber for the deep clean in the market or the introduction of smart all in one. And that's where we see the positive things.
On the other hand, especially now this is relevant for the Beauty Care business, we have seen also some areas where we are not happy with especially in Western Europe in Hair Europe, so hair care Europe and this is what we can allude to.
Operator
Your next question comes from the line of Ian Simpson from Barclays. Please go ahead.
Ian Simpson
Thank you very much. Good morning. So just going into that North American Laundry again, are you seeing underlying brand growth there in addition to the easy comp. And if so which brands are driving the U.S. laundry performance.
And then just more generally thinking about the various brand re-launches that you're spending the money on in the first half of this year. Could you talk a little bit about which brands you're seeing this working really well, perhaps anywhere it hasn't gone as well as you'd expect. Just give us a bit of a color on how your brand progress is going? Thank you.
Hans Van Bylen
Thank you, Ian. Again as I indicated before, we see across the portfolio I can be a little bit more specific also if we see what's next to our sale development. What we also see happening in our share development, which compared to – if take Gen Fab [ph] compared to November, December or first in the same period last year, we see some dynamics, where we see very good dynamics is on the event all in which also we are putting in our company to relaunch in the markets where we see a strong pickup.
Persil is doing, it continues to do quite well, but also Snuggle [ph] Snuggle also perhaps it's one of the top brands which we have out of the four, which we have in US. And Pure [ph] there we see a quite stable development. So which means I mean overall we see shares falling back and on top then we see on our top brands there we will take specific initiatives that we see some positive take off. Hope this helps to give some clarity on the different portfolio parts in US.
Carsten Knobel
Maybe to add Ian, I think it's also a little bit too early to make a judgment on all the initiatives you know, as we pointed it out last time we brought these launches and re-launches in within the first quarter and partly also to the end of the first quarter. So to give you a judgment, if these things are working, not working I think we need a little bit more time. But overall as sunset, I think we see the good signs and good development in both Beauty and Laundry.
Ian Simpson
Thank you.
Operator
The next question comes from the line of Philip Frey from Lubbock Research [ph] Please go ahead.
Unidentified Analyst
Hello, gentlemen. Just a little bit on Beauty Care again, can you comment a bit also under the development of shelf space that you had in the first quarter, that did actually your weak performance already induce a loss of head space and while you also had quite some launches last year and could you comment on how this 2018 launches like for example Nature Box to actually improve performance or is it fair to say that these launches not have not really fully lift up to your expectations?
Hans Van Bylen
Thank you for your question on Beauty. Important in the beauty development is that we do see that as we are disappointing our sales developments, linked to the especially deviations which we see in West Europe in and in China, sell outs also in both regions looks up to good and okay. So in China as we said we see a double-digit growth in sell out, but also our market share is in Western Europe look okay in the way that we see an overall stable development with clear winds in hair color and in hair styling.
And this of course, I mean also leads to the fact if our March share are okay it also means that overall are also of shelf space, I mean it's not – we're not touched at the moment on the contrary with our new launches of course we also are getting in shelves with new initiatives.
The initiatives of last year I mean, once which you mentioned Nature Box, last year was a test launch with for us with positive results and now we're in the rollout of Nature Box. So this is one of our growth initiatives.
We also do see that last year the initiatives which were started on the brand side got2b or in coloration that they had quite good take off and we continue to build on that momentum. So all in all I would say in beauty of what we do what gives us also the encouragement, and also confirming our guidance that we see market share looks overall quite healthy.
Unidentified Analyst
Okay. Thanks a lot.
Operator
The next question comes from the line of Ian Simpson from Barclays. Please go ahead.
Ian Simpson
Thank you very much for allowing me a follow up. Just pulling back on that I suppose your guidance for the full year of 2% to 4% organic sales growth, broadly speaking, you've obviously came in below that in the first quarter. Broadly speaking we see tougher comparisons as the year goes on for your HPC business.
And then you know people have their own view as to what the macro will be, but it feels like the macro decelerated in the first quarter. So I suppose to get to your full year guidance, we the need to signal – if we even need further help from HPC launches to kind of kick in or we need a macro improvement.
How much is your guidance dependent on seeing a second half macro pickup in Adhesives or do you feel confident enough about your HPC launch pipeline that that will be enough to get you into the 2% to 4% for the year? Thank you.
Hans Van Bylen
Thanks, Ian for your question. As we have indicated, we confirm our total guidance and also within the different business units and as you right to indicate of course this is also built on a general consensus that industrial production, especially as we mentioned in the two segments, electronic and automobile will pick up.
On the other hand, I mean, what we what we do see is that in Laundry and Home Care having a fairly good stack, I mean we're confident that we will built on that momentum. And of course, I mean as we indicated in Beauty Care we put our full emphasis on coming back to a growth momentum. This being set at professional, has another good quarter, so this will further strengthen and we're quite optimistic that this performance will continue.
And as we indicated on our retail, I mean that's what we did have to come back to growth in the way that's based on a market shift which globally look quite okay. I mean taking all the initiatives now. I mean our ambition is indeed and this is why we have some confidence that we will also make for beauty our guidance.
Carsten Knobel
And maybe to add, it's not only hope, it's also facts. For example, if you look at the forecast for lightly HECOs [ph] based on IHS which is the data source which is providing us forecasts for that – we see for the second half of the year positive growth rates compared to the first half year. So it's on that definitely a FX based. Also it's not only hope, it's also really facts.
And secondly you were referred to easier [ph] comps in HPC, for example for the first quarter, which is right. But on the other side we have also in Adhesives the outcomes for Q3 and Q4. So it's a combination of a lot of fact. And that makes us confident as Hans pointed out that we are confident to stay in the range of 2% to 4% which we originally guided and which we are confirming today.
Ian Simpson
Thank you.
Operator
The next question is a follow up question from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead.
Christian Faitz
Just quickly on CapEx, your 150 million in Q1, I believe – you indicated to €750 million to €850 million CapEx for fiscal '19. So do we still assume much higher CapEx in the remainder of the year?
Carsten Knobel
Answer is yes, very clear. You know, we are confident and we have clear measures in place for all three divisions and also based on infrastructural topics that we will stay in this guidance what we have brought at the beginning to 750 to 850. But you know it's always about the projects when we execute and to bring them into execution and therefore you cannot plan at 750 to 850 divided by four. It's really depending on projects and therefore we confirmed today and there is no indication that this CapEx number or guidance will change within the year.
Christian Faitz
Thanks, Carsten.
Carsten Knobel
Welcome.
Operator
[Operator Instructions] The next question is a follow up question from the line of Philip Frey from Lubbock Research. Please go ahead.
Unidentified Analyst
Hello, gentlemen. Thanks for letting me post another question. Quickly housekeeping wise on €300 million extra growth expenses if you've labored for the year, can you comment on how much of that was already spent in Q1?
And secondly regarding your Adhesives, is it correct may you always comment on the second half pick up that to read into that that you don't see any pickup so far in the second quarter or so some light on that one?
Carsten Knobel
So the first – to your first question I have to disappoint you. We will not disclose details on that. To the second part – to your second question. Yes, on the one side it's definitely the second half of the year and adhesives will be definitely significant stronger, but we will also – what we currently see is also that Q2 will be better than Q1.
Unidentified Analyst
Thanks.
Carsten Knobel
Yeah.
Operator
Thank you. This was the last question. Thank you ladies and gentlemen, I will now hand over to Mr. Hans Van Bylen for his closing remarks. Please go ahead.
Hans Van Bylen
Thank you. The investor and analyst, thank you again very much for your questions. And let me summarize the key takeaways we wanted to convey to you today. The difficult market environment Henkel recorded positive organic sales growth with a bit of a genius performance in the different business units, both the adjusted EBIT margin and EPS came in below the previous year's quarter, but within the corridor of the full year guidance.
Based on these results and our expectation of recovery in our industrial business, as well as our clear growth path for our consumer businesses, we confirm the outlook for the full year 2019. Henkel significantly improved the free cash flow in the first quarter and our balance sheet continues to be fairly strong. We have set clear priorities to reinforce our growth momentum and will fully focus on the execution of our growth initiatives and investments in the upcoming quarters. As always, please be reminded of our upcoming events at our next event, [indiscernible] together with his management team will be pleased to welcome you to the Investor and Analyst Day of Adhesive Technologies on July 2 at our headquarters in Dusseldorf. Please get in touch with the investor relations team to register for this event. Thanks again for listening and good night.
Operator
Thank you for joining today's conference call. You may not replace your handsets.
