Henkel versus Reckitt

Reckitt Company has grown in revenue from the year 2005 to the year 2009. The percentage increase from 2005 to 2009 is about 50%. In the year 2005 to 2009 the revenue growth were 8%, 18%, 10%, 25%, and 18% respectively. This high rate of growth could have been influenced by the growth in organic substances which particularly showed a rather high rate of improvement. The products sold around the world especially in Europe gave a higher return rate more than any other country in the year 2009. The growth rate at Henkel is very low and mostly as observed it has declined since the year 2005 to 2009. From 2005 to 2009, Henkel showed a reduction in organic growth rate from 12.5%, 5%, 2.6%, 8.1%, and -3.9% respectively (Henkel, 2016). The decline in the revenue margin is much caused by the industrial adhesives. The revenue driven by organic drivers for Reckitt is about 25% of the total 50% of growth profit compared to Henkel which is about 15% of the total 25% of revenue. The growth is for Henkel’s division is not consistency since there has been a reduction in profit margins since 2005 to 2007. This is much likely to be caused by the rate of reduction in industrial products.

What causes the big difference between Reckitt and Henkel company operating margins is the high rate of intangible assets that give Reckitt a competitive advantage over Henkel. Henkel has a higher advantage over Reckitt in terms of the plant and properties. The profit margin of Henkel is however greatly influenced by the European countries since 2005 the rate has improved significantly allowing the company to reap maximum benefits in terms of revenue earned on outside sale offs. However on the personal care companies, Henkel has lesser profits since much of the products are sold locally and at a considerable cheaper price reducing the revenue earning margins of Henkel (Henkel, 2016). On the other hand, Reckitt has also a higher earning capability especially in the year 2009 in the European countries mainly contributed by a cheap selling price of their products. This has given Reckitt a higher profit margin compared to the personal care companies. If the adhesives are stripped off, the numbers in operating margins reduce significantly since the high rate of profits is mainly obtained from the adhesive figures, therefore, leading to a decline. In the year 2009, the adhesives were very little and this is similarly the same year the company experienced a reduction in profit margins therefore if the adhesives are not present for Henkel, a reduction in revenue.

Considering the income capability of both the Reckitt Benckiser and Henkel AG, Reckitt has a higher earning capability (Henkel, 2016). This can be caused by the reduced rate of products they deal with overseas and also the debt rate is much lower from what Henkel has in terms of debts. Reckitt presents a set of payables which in turn helps in reducing losses since the grants, and also the insurance services are well catered for by the company thereby allowing bonuses to stream into the companies operating cost. Henkel, on the other hand, receives a high sales order on a yearly basis and this creates the working and the morale needed to increase the sales. The strong values at Henkel could see the company rise in profits making it a high earning company compared to Reckitt.

 

 

 

 

 

 

Reference

Henkel AG & Co. KGaA. (2016). Henkel AG & Co. KGaA MarketLine Company Profile, 1-150.