Henkel Coordinates Business Operations in 29 Markets from Vienna / Russia Key Future-Oriented Market for Henkel

Vienna, 22.02.2005 (PROTEXT/ots) - Henkel Central EasternEurope (Henkel CEE) posted a significant improvement in its 2004business results. The company increased its annual revenues to1.144 billion Euro in 2004, a rise of 14 percent in localcurrency (+11.4 percent when adjusted for currency fluctuations)from the previous years total of 1.027 EBIT (earnings beforeincome and taxes) climbed 22 percent to 123.2 million Euro (+10.1 percent when adjusted) from the 2003 total of 111.9 millionEuro.

Henkel is successfully taking advantage of the excitingopportunities on the Central and Eastern European markets, saysGünter Thumser, the new President of Henkel CEE, in summarizingthe companys performance during the 2004 business year. Theadhesives and technologies business segments achievedparticularly strong growth, whereas the production of detergentsin Vienna reached a record level.

Henkel CEE, with its headquarters in Vienna, Austria,coordinates the companys business operations in 29 countries. Theregions 420 million inhabitants represent an enormous economicgrowth potential. Eastern Europe is, in fact, an emerging growthregion. However, for the same reason, the region poses majorchallenges to us, Mr. Thumser states in focusing on theinvestments which are required. A total of 48 million Euro havebeen invested in the supply chain alone in order to build up newstructures in countries such as Russia, Serbia or the Ukraine.Henkel employs 7,688 people in Central and Eastern Europe.

Growth in All Business Segments

Russia was the main focus in 2004 in the Laundry & Home Caresegment. Henkel CEE achieved a high growth in revenues in Russia,underlining the companys increased presence in this future-oriented market. Business in Poland was also particularlysuccessful, with Henkel CEE boosting its market share to recordlevels in almost all categories. In Austria, Henkel CEE achievedits highest market share in this business segment in the companyshistory.

The Cosmetics/Toiletries business in CEE is highlycompetitive. Nevertheless, Henkel CEE successfully consolidatedits market leadership position in the hair cosmetics, haircolorant and styling segments. In the second half of 2004,revenues grew more rapidly than in the previous six months. Thiscan be attributed to the successful market launch of Fa AromaRange, a relaunch of the Schauma hair care product line and a newlaunch of Taft Silk-Flex in the CEE region.

Business development in the Henkel Technologies segment wasalso particularly profitable in 2004. This is due to broad-basedinvestments in Eastern Europes automobile industry as well asHenkels being represented on the local markets through its ownqualified employees before multinational companies initiatedbusiness operations in the region. Henkel also supplies Austrianmanufacturing facilities with products from its high-valuetechnologies segment. For example, Henkel is an industrialpartner of Magna Steyr in Graz, which not only assembles the BMWX3, but which will manufacture a large number of Chrysler 300vehicles as of the middle of 2005. 2004 marked the mostsuccessful year for the Consumer and Craftsmen Adhesives segmentsince Henkel CEE was first established. Henkel Bautechnik, withits popular Ceresit and Thomsit brands, is in the process ofcommencing business operations in Belarus. A production facilityis under construction in Zaslavl (near Minsk), where 80employees will manufacture cement-based powdered products.

Henkel Focus on Russia, Serbia and the Ukraine The situationin those countries in which Henkel CEE most recently began doingbusiness pose major challenges for Henkel. Russia itself meansthat a market with 146 million inhabitants is open to Henkelsexpansion, says Henkel CEE President Günter Thumser, lookingoptimistically into the future. Business results for the year2004 were promising. Three Henkel production facilities arecurrently manufacturing detergents in Russia. This represents anenormous challenge for logistics, sales and marketing, in thelight of the distances involved and frequent deficiencies in theexisting infrastructure, Mr. Thumser says.

In this connection, demand is particularly strong for liquidproducts. For this reason, investments had to be made in Tosno(Russia) and in Krusevac (Serbia) in order to modernizeproduction processes. In addition to manufacturing, there arelogistic challenges, which often lead to the development ofHenkels own product lines. On the one hand, construction is beingstarted on a modern distribution center in Tosno. On the otherhand, the Vienna research and development group has developedVernel, a fabric softener brand adapted to Russian conditions,which is particularly frost-resistant. Vernel can defy freezingtemperatures which often prevail on the long transport routes,during storage or when products are sold at open-air markets. Inthe field of construction engineering, the expansion ofproduction capacity was an important issue in 2004. HenkelBautechnik opened a second plant in the Ukraine, and constructeda production facility for building chemicals at Henkel Merimasdetergent factory in Krusevac, Serbia. CEE as Driving Force forGrowth Henkel CEE now achieves 85 percent of its total revenuesin Central and Eastern Europe. Poland, Russia, Austria andHungary are the biggest markets for Henkel CEE in terms ofrevenues. The CEE region with an annual GDP growth rate of closeto five percent ranks among the very few growth regions in theworld. It is necessary to continue transferring extensive know-how to CEE, due to problems with the local infrastructure as wellas the varying degrees of economic development in the differentmarkets. For this reason, Henkel CEE will continue to serve asthe headquarters for the entire CEE region within the worldwideHenkel Group.

Vienna is a Strategically Important Location for Henkel Forone thing, Vienna has overall management responsibility forcoordinating Henkels business activities in 29 countries in theCentral Eastern Europe region. In addition, Vienna also plays animportant role as a production and logistics location for Henkel.The manufacturing facility located in Viennas third districtachieved record production figures for both powdered and liquidproducts, characterized by the highest possible product qualityand safety levels in a closed, dry neutralization process.

The product development work being carried out in Viennaresponds closely to Central and Eastern European needs. TheVienna-based product development team has left its imprint onproducts such as Dixan Universal for colored and white laundry orthe CEE powdered detergent brands Rex, Merix and Tomi with sodaeffect. However, a particular highlight was the development ofthe frost-free, triple-concentrated Vernel fabric softener. Thiscan be described as Henkels response made in Austria to theextremely frosty temperatures prevailing in Russias open-airdistribution structures.

Henkel is currently working on adapting central warehousefacilities which will be ready for use in September 2005.Located on what was formerly the grounds of the Grundigproduction plant in Viennas 12th district, the new distributioncenter will provide jobs for 80 people. This is a clear signal,that Henkel will continue to move ahead in the same direction asit has done successfully in the past, Mr. Thumser adds. HenkelCentral Eastern Europe in Brief Henkel CEE is responsible forbusiness operations in 29 countries: Austria, Albania, Armenia,Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia,Czech Republic, Estonia, Georgia, Hungary, Kazakhstan,Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Mongolia,Poland, Romania, Russia, Slovakia, Slovenia, Serbia andMontenegro, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

Henkel CEE is the market leader in Central and Eastern Europein the adhesives and hair cosmetics segments, and a strongnumber two in the detergents segment. Henkel is also the leadingtechnologies provider in the region. The most well-known Henkelbrands include Loctite, Pattex, Schwarzkopf, Poly, Fa, Silan andPersil.

Vienna, February 22, 2005 Contact:

Henkel Central Eastern Europe Ms. Sabine SchauerTelephone: +43 1 71104-2253 Fax: +43 1 71104-2650 E-Mail:sabine.schauer@at.henkel.com http://www.henkel-cee.com

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