Case study Henkel Romania

NicolaeNicolae OlteanuOlteanu, , President Henkel Romania

Albert Albert ŞŞutruutru, , Operations Director CEE South, Adhesives

Bucharest, February 28, 2012

Summary

1. Henkel business in Romania

2. EU Funding - Henkel experience

3. Conclusions

1. Henkel in brief

1 Adjusted for one-time charges/gains and restructuring charges.

Sales: 15,605 mill. euros

Adjusted1

operating profit (EBIT): 2,029 mill. euros

Adjusted1

return on sales (EBIT): 13.0 %

• Brands and technologies worldwide

• About 47,000 employees

Henkel worldwide Fiscal 2011

Laundry & Home Care

Adhesive Technologies

Beauty Care

Three areas of competence Top brands

Henkel in Romania• Established in 1994 as affiliate company of Henkel Central EasternEurope

• Net Total Sales 2011: 130 mil. EUR (542 MRON) • in Top 10 countries Henkel CEE

• Over 500 employees in Romania

• 2 Head offices in Bucharest

• 2 operational plants and the 3rd plant will be opened soon

• Henkel is operating in Romania based on the principles of sustainable development, by balancing its economical, ecological andsocial objectives.

Henkel Romania: responsible citizen

The first private company in Romania who invested in an ecological & educational program in the Danube Delta: “Together for a clean Delta” (2004-2007)

The first company in Romania to invest in an educational program in the schools all over Romania: “Henkel in Schools” (over 100 schools were visited during 2000-2004)

The only company in Romania who rewards every year the most talented Romanian contemporary artists: “Henkel Art Award” (the 1st CEE winner was Dan Perjovschi in 2002)

First social/charity project started in 2001 (Petrila Day Care Center/ Save the Children) and continued ever since then.

Henkel Romania- Brand portfolio

Beauty Care

Laundry & Home care

AdhesiveTechnologies

Henkel Investments in RomaniaProduction units (Adhesives)

• Production capacity: 300.000 tons/ year• Total investment: >15 mil. EUR• Additional investment to increase the energeticefficiency (cofinanced by the European Regional Development Fund)•Implementation:28.03.2012-04.02.2013

1. Pantelimon (opened inPantelimon (opened in 2000)2000)

2. CampiaCampia TurziiTurzii/ / ClujCluj county (opened in October 2007)county (opened in October 2007)

• Production capacity: 200.000 tons/year

• Investment : ca. 12 Mil. Eur

• Ongoing initiatives to decrease the resource

consumption

3. Roznov/ 3. Roznov/ NeamtNeamt county (NE part of RO)county (NE part of RO)• Total area: 36.000 sq m

• Production capacity: 180.000-200.000 to/year cca. 25 mio EUR/year

• 2.8 mil. EUR financing/ EU (total investment: 10.7 mil. EUR)

•72 employees

Production sites

1. Pantelimon

2. Câmpia Turzii

3.3. RoznovRoznov

ROZNOV

11

22

Henkel Investments in Romania (II)

Henkel invested in Romania, only in Production > 35 mil. EUR

Henkel plant no.3 - Roznov

2. EU Funding - Henkel ExperienceHenkel applied for 2 projects

1.Increase of energy efficiency in Pantelimon plant through change in sand dry technology

-total project value 3.438.305 RON-total eligible amount 2.324.825 RON

from which 40% EU financing 929.929 RON-non-eligible amount 1.113.480 RON

2.Henkel Romania implication in sustainable development of North-East region, Roznov adhesives plant

-total project value 48.319.510 RON-total eligible amount 24.021.000 RON

from which 50% EU financing 12.010.500 RON-non-eligible amount 24.298.510 RON

First project was less complicated • Very good cooperation with authorities• Successful project from our perspective

Second project (greenfield investment) was more complicated

• SWOT analysis where we will present our experience from 2 points of view:

• Internal: Henkel Romania perspective (business related)

• External: society, social involvement

2. EU Funding - Henkel Experience

Strengths• Free financing through non-reimbursable

EU funds• Production & sales increase• Exports increase• Positive social impact:

– New working places in a “non-favored area”– Taxes for the local budget– Community involvement/local social project

S

Weaknesses• “Applicant guideline” is unclear, leading to misunderstandings and

interpretations and redundant requirements from Authority.

• Lack of communication between Authority and Beneficiary as well as between different departments of the Authority/Ministry

• We missed the “partnership” between Authority and Beneficiary, although both should benefit from the EU funds. Authority is too circumspect. We faced a lack of responsibility at all levels and areas

• Difficult to follow the change of legislation/rules during project implementation

• Delays in answers from the authority as well in the reimbursement process

• Piles of files to be prepared; each page must be signed and stamped

W

Opportunities• Attract other companies in the area (increase interest

of other serious investors) opportunity for the community.

• Stimulate local community (economical, social, etc.).

O

• Uncertainty and delays in receiving all contracted amount

• Facing the threat of possible cuts of the funds in case of irregularities

TThreats

3. Conclusions/recommendations

• An external consultant with good expertise is pre-requisite for a successful project

• It is advisable to apply for EU funding only in case ownfinancing resources are available.

• A real “partnership” between Authority and Beneficiary is a must.

• For green-filed projects at least one dedicated person (project manager) is necessary

Thank you!