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Good morning. My name is Carsten Tilger, I'm the Global Head of Corporate Communications and Public Affairs for Henkel. And together with our Head of Investor Relations, Lars Korinth, I would like to welcome you to our joint investor, analyst and media webcast.Before I hand over to Lars, let me outline briefly our agenda for this morning. We have distributed today 2 news releases: one, relating to our financial results for 2019 and our outlook for 2020; the other one, relating to our new strategic framework. In addition, we have published our annual report and sustainability report online on henkel.com. After this brief intro, Carsten Knobel, Chief Executive Officer for Henkel; and Marco Swoboda, Chief Financial Officer for Henkel, will present to you our financial results, our outlook and strategic framework and ambitions for the future. This will be then followed by a Q&A session.Now let me hand over to you, Lars.
Thank you, Carsten. A good morning and warm welcome to everyone joining us via the webcast also from my side. Thank you very much for your interest in Henkel.I would like to remind you on our disclaimer regarding forward-looking statements you can see on the chart. As always, we will not read it aloud. But please note that today's presentation and discussion is conducted subject to this disclaimer. And with this, let me hand over to Carsten Knobel. Carsten, the stage is yours.
Lars, Carsten, thank you. Good morning, everybody. I'm excited to open this year's investor and media conference. Unfortunately, we were not able to hold our conference in London due to the recent developments of the coronavirus, but it is also our responsibility to help preventing and controlling it. Thanks for joining us via the webcast.Let me start by introducing Marco, our new CFO. Marco joined our Management Board at the beginning of the year. He's a highly esteemed colleague and has been an important change driver for our company. So Marco, warm welcome.
Thanks, Carsten.
I feel honored and privileged to lead Henkel, together with our management team, into the next chapter of our rich history. It's now 25 years ago that I started in this company, leading in many roles and functions. I feel proud to be a part of a company with such a strong tradition, a unique set of values and a committed team of more than 50,000 people across the world.To me, Henkel feels like home. I have led through many ups and downs, through tough times and times of great success, and it's clear to me, I'm taking the helm of Henkel at an inflection point. I'm fully convinced of the potential of our great company, yet it is clear that we cannot continue driving performance as we have in recent years. We need a new game plan. My first 60 days as CEO, I spent a lot of time listening, listening to customers and consumers, listening to business partners and employees and listening to investors and shareholders, including many of you, and here is what I've heard.I've heard acknowledgment of our strengths. Yes. We are a financially healthy company with a strong balance sheet, generating more than EUR 3 billion of profit. Yes. We have high-quality brands, innovations and technologies holding leading market positions across the world with long-standing customer relationships. And yes, we have a strong track record in sustainability. And finally, we have a loyal, passionate and highly committed teams around the world.At the same time, I hear a strong voice of skepticism. I hear concerns about our performance slowing down in the last 2 to 3 years, even to the point of 3 profit warnings last year. I hear criticism of top management sugarcoating results in the past. I hear doubts whether we are agile and dynamic enough to turn the corner. And I hear questions whether I am the right person for leading Henkel's transformation, and I took this at heart.Over the past decade, I have been part of the management team during the performance acceleration as well as the recent slowdown. Yes, the business context was challenging. And yes, in hindsight, we made mistakes. As Henkel feels like my home, I am deeply passionate to put our company back on the track towards purposeful growth. Purposeful growth goes far beyond financials. To me, this is about truly exciting our customers and consumers, inspiring and growing our people, having positive impact on our society and the planet and, ultimately, outperforming the market. Now the context is tough for all of us. We have great assets. What ultimately will make the difference is having the right strategy, the right team and the right culture. With passionate, dedicated people around the world, we will put Henkel back on the purposeful growth track.I strongly believe that the personal commitment is vital to drive change. So here are my 3 commitments that I believe are critical to transform Henkel.Transparency. We will take an unbiased, factual look at our performance and progress, and we will share this transparently to regain trust.Ownership of our results. We will deliver and take full ownership, meaning, explanations, yes; excuses, no. I stand for pace, and I will enable the entire organization to speed up.And third, driving real change. Driving our performance in a more sustainable way and evolving our culture mindfully to support the change journey. It is a mindset shift for Henkel and the team effort. Therefore, I'd like to set today's scene with a new level of transparency and our aspiration for new momentum in mind. So what to expect from today?First, I will start with a brief overview of our results 2019. I will then hand over to Marco, who will provide more specifics and background on '19, and we'll finish with our outlook 2020. After this, I will share with you the Henkel Group review, giving you the perspective of the management team regarding both our foundations and the areas of change. That leads to our future direction, where Marco and I will elaborate on our purposeful growth agenda. We will then open up for questions and close with a brief summary.2019 wasn't an easy year for us, and we delivered a mixed performance. Overall, we fell short on expectations. First, we did not grow organically; second, our EBIT margin as well as our earnings per share were at the lower end of our expectations. Nevertheless, we managed successfully to build on our strong foundation. We grew normally to more than EUR 20 billion, and we generated a strong EUR 3.2 billion of profit. We achieved a high -- free cash flow, all-time high, and despite our mixed results, we proposed a stable dividend of EUR 1.85 per preferred share. Throughout '19, we faced an environment with both significant headwinds and some tailwinds. On the other hand, our industrial business was affected by a slowdown in key sectors such as automotive. The expected recovery in industrial demand did not materialize. The consumer markets we play in, on the other hand, showed a good growth dynamics, yet being very competitive. And it is fair to say that we didn't leverage the full market potential in '19. Again, our business was impacted by geopolitical tensions across the globe. However, we benefited from currency tailwinds and the lower increase of direct material prices throughout the year. With this in mind, let's give more color into our 2019 performance. Marco, handing over to you.
Thank you, Carsten. So good morning to everyone also from my side, and thank you very much, Carsten, for the kind introduction. I'm excited to have the opportunity to present to you today, and I look very much forward to meet you and speak to you in person in the future. Onto our '19 financials now, starting with our top line development. Organic sales development was flat, which is, for sure, not what we had expected in the beginning of 2019, as Carsten also elaborated. Volume was negative at minus 1.8%, mainly due to weaker development in Adhesive Technologies as well as in Beauty Care. This was compensated by positive pricing in the same magnitude, thanks to our efforts in our industrial business but also strongly supported by Laundry & Home Care. The net effect of our acquisitions and divestments had a positive impact on sales of 0.5%. Currencies were also slightly positive, with plus 0.6%. We had support from a stronger U.S. dollar, while some emerging market currencies had a counteracting impact. As a result, Henkel recorded an increase of 1.1% in nominal sales totaling EUR 20.1 billion. Moving on now to the organic sales performance by region. Overall, mature markets were negative, with minus 1.6% inorganic sales growth. And while our businesses in emerging markets increased organically by 2.5%, this is far below the levels we achieved historically. Let us dig a bit deeper now. As you can see, both Western Europe and North America were below prior year. To a large extent, this was due to negative organic sales development in our Adhesive Technologies business due to the weakness in industrial demand, which even accelerated in the second half. Beauty Care also recorded a negative performance. And Laundry & Home Care was flat, respectively, negative in Western Europe and North America. However, in both consumer businesses, we saw an improving trend over the second half of the year. The performance in emerging markets was heavily impacted by Asia Pacific, which recorded a negative organic sales growth of minus 6.5%. This is particularly due to weaker volumes of Adhesive Technologies, mainly in China. Here, the negative trend is over the course of the year, partly due to easier comparables. Asia Pacific was, to a smaller extent, also impacted by the destocking in our Chinese beauty retail business. On the other hand, we achieved double-digit organic sales growth in the Middle East/Africa region, which is of high importance, especially for Laundry & Home Care. And in Eastern Europe, we recorded very strong growth. And while pricing was a key driver, also volumes grew very strongly in both regions. Let's have a look at the performance of our business units, starting with Adhesive Technologies. The business unit posted an OSG of minus 1.5%. As a result of the weak industrial demand, volumes were down by 3.3%. We have been securing positive pricing throughout the year, and it remained positive also in the fourth quarter, but on a lower level. By business area, we faced significant headwinds in Transport & Metal and Electronics, which both experienced declining organic sales. A key drag was the continued weakness of global light vehicle production, which declined by close to 6% in the full year, with declines across all regions. General Industry also came in below prior year. The business area was affected by destocking in its distribution channels, which was due to lower demand. In contrast, Consumers, Craftsmen and Building achieved positive organic sales growth. The rather noncyclical Packaging & Consumer Goods business was flat. Let's now also have a look at the other financial KPIs of Adhesive Technologies. Thanks to the continued implementation of price increases and cost-efficiency measures combined with the neutral direct materials impact, we were able to increase our gross margin. Nevertheless, the adjusted EBIT margin came in 60 basis points lower year-on-year, closing the year at a competitive level of 18.1%. This was mainly due to the impact from lower sales as well as mix effects. Net working capital in percent of sales improved slightly. Summing up, I believe it is fair to say that Adhesive Technologies delivered a robust performance in a very challenging environment, a result of our strong and well-balanced portfolio and business model. Beauty Care. Beauty Care recorded an organic sales development of minus 2.1%, a performance clearly below our expectations and our ambition. Both pricing and volume were negative. The development was driven by the performance of our beauty retail business, which was significantly impacted by the destocking in the Chinese retail distribution channels. Adjusted for this effect, organic sales growth of total Beauty Care would have been slightly positive in the full year. Market shares of beauty retail was slightly down in Western Europe. The market was characterized by low growth dynamics and intense price pressure. North America remains slightly negative in terms of organic sales in the full year. However, thanks to successful innovation initiatives, we returned to growth in the third and the fourth quarter. In hair coloration and styling, Beauty Care continued to increase market shares globally driven by strong product launches. Hair Professional achieved another year with strong growth. Both our base business as well as the brands we acquired in the past few years contributed to this development. The adjusted EBIT margin of Beauty Care came in at 13.4%, 370 basis points below the previous year level. This was, to a large extent, due to negative sales growth as well as regional mix effects. In addition, direct material prices continued to be a headwind, which could not be compensated with pricing. As a result, Beauty Care recorded a decline in gross margin. Increased marketing investments into our innovation and growth initiatives also lowered the EBIT margin. Net working capital in percent of sales improved strongly to a level of 1.9%, 280 basis points lower compared to year-end 2018. Good development largely driven by the Chinese retail business. Over to Laundry & Home Care. The business unit achieved an overall strong organic sales growth of 3.7%, predominantly driven by pricing, while volume growth was also positive. From a category point of view, Laundry Care recorded good organic sales growth. During the year, the fourth quarter was by far the strongest quarter in terms of organic sales performance. This was, to a large extent, due to our mega brand Persil, which had an extraordinary year, with double-digit organic sales growth. Home Care achieved very strong organic sales growth, thanks to successful product launches and rollouts in Toilet Care and Hand Dishwashing. Our business in the largest laundry market, North America, continued to be an attention point. Sales remained below the prior year due to negative volumes and declining market shares. Organic sales growth in our Western European business was flat, while the emerging markets grew double digit, equally driven by price and volume gains. Laundry & Home Care recorded an adjusted EBIT margin of 16.5%, 160 basis points below prior year. Our gross margin was stable. Here, positive pricing as well as our continued focus on cost management compensated for the persisting headwinds from higher direct material prices, the main driver behind the decline in the margin, with the high investments in marketing supporting the continued launch and the rollout of important innovations. Net working capital in percent of sales improved by 140 basis points to a level of minus 5.3%, a strong performance. Let us move back to the Henkel Group, taking a closer look at adjusted income statement. Henkel achieved an adjusted EBIT margin of 16%, minus 160 basis points versus prior year. Group adjusted gross margin at 46.3% was almost flat compared to the prior year. Key driver of the decline in the adjusted EBIT margin was, hence, an increase in marketing, selling and distribution channel expenses, both in absolute and relative terms. In percent of sales, they increased by 130 basis points to a level of 23.9%. This was, to a large extent, due to higher growth investments. Let's have a closer look at these growth investments. Beginning of 2019, we announced a plan to step up growth investments in our brands, technologies, innovation, digitalization by EUR 300 million per annum. Until the end of the year, we have realized about 50% of the planned step-up.Let me give you a couple of examples of the initiatives we supported with these investments. In Laundry & Home Care, we achieved double-digit growth with our premium mega brand, Persil, in 2019. Strong results with our caps and liquid innovations contributed to this performance, especially our unique 4-chamber, 4-in-1 Discs showed a very good performance in Europe and North America. Our core brand breadth generated high single-digit organic sales growth through successful innovations and premiumization in Toilet Care, with Bref De Luxe and Scent Switch launches. Here, we are achieving higher average price points, with positive effects on profitability and new records and market shares in many countries. Beauty Care strongly supported innovations under our millennial brand, got2b, and in coloration, resulting in strong share gains. Due to the further rollout of Nature Box, our Nature brands achieved organic sales growth in the high double digits. And in Hair Professional, growth was strongly supported by the launches of the high-tech coloration, IGORA VIBRANCE, a new premium brand. One of the main projects in digital, also further rollout of our Adhesive Technologies, eShop. Meanwhile, we are generating close to EUR 2 billion in sales via this platform. So why didn't we spend the full EUR 300 million in 2019 already? Firstly, key initiatives started step-by-step only from the end of the first quarter. We have not been able to catch up this backlog in the remainder of the year. Secondly, we also had to compensate for unexpected developments, for example, in our Chinese beauty retail business and the continued deterioration of industrial demand, which, other than expected, did not recover in the second half of the year. Let's take a closer look down the P&L. Adjusted EBIT totaled EUR 3.2 billion, a decrease of minus 7.9% compared to the prior year figure. The financial result amounted to minus EUR 88 million in the reporting year versus minus EUR 65 million in fiscal 2018. The decrease mainly due to interest expenses from lease commitments of EUR 16 million, following the first-time application of IFRS 16. Adjusted taxes on income amounted to minus EUR 760 million. This corresponds to an adjusted tax rate of 24.3%, an increase by 0.8 percentage points year-on-year. As a result, adjusted net income after minorities amounted to EUR 2.4 billion. This translates into adjusted earnings per preferred share of EUR 5.43, down 9.7% year-over-year, or at constant exchange rates, minus 10.1%.Let's look at working capital, free cash flow and the net financial position. On group level, the ratio of net working capital to sales reached 3.9%, an improvement of 120 basis points compared to year-end 2018. We recorded a free cash flow of EUR 2.5 billion, a strong increase of about EUR 550 million compared to the previous year. While this result underlines our strong cash generation capabilities, the increase was, to a large extent, due to an extraordinary reduction in net working capital resulting from this low growth and improvement measures, for example, in our China beauty retail business. Adjusted for those effects, free cash flow would have been close to EUR 2 billion, still a compelling number. As a result of our strong cash flow, our net financial position improved by EUR 850 million, ending the year at minus EUR 2 billion. In 2019, we spent a total of EUR 662 million on CapEx. At 3.3% of net sales, the CapEx ratio was on a healthy level. Around 2/3 of these expenditures were channeled into expansion projects, innovations and streamlining measures. One key project is the construction of our Adhesive Technologies' innovation center at the headquarters in Düsseldorf, which we expect to open end of this year. In Laundry & Home Care, for example, we expanded our innovative detergent capsule production in the U.S. and Hungary. In addition, we spent almost EUR 600 million on acquisitions, adding around EUR 125 million of annual sales. Now closing the review of 2019 with dividends. Despite the decline in net earnings, we kept our dividend proposal for the AGM in April stable at a high level of EUR 1.85 per preferred share, almost twice the payout versus 8 years ago. The payout ratio increased year-over-year by 3.3 percentage points to 34.2%. Let me conclude with the guidance for 2020. We expect a continuously challenging market environment that is difficult to predict, particularly with regard to industrial demand. In the consumer goods markets, good growth continues to be mainly driven by emerging markets. The competitive intensity and ongoing price and promotion pressure, especially in key mature markets, are expected to persist. At the same time, we are stepping up our growth investments in advertising, digital and IT to EUR 350 million in 2020 compared to the base year 2018. This equals a year-over-year increase of about EUR 200 million.The translation of sales and foreign currencies is expected to have a negative effect in the low to mid-single-digit percentage range. And prices for direct materials are expected to increase by a low single-digit percentage compared to the previous year. Taking all this into account, we expect group organic sales growth to reach 0% to 2% and an adjusted EBIT margin of around 15%. Compared to prior year, we expect a decrease in adjusted earnings per preferred share at constant exchange rates in the mid- to high single-digit percentage range. Clearly, the additional pressures and uncertainties related to the COVID-19 outbreak. Let me briefly comment on this. We are monitoring the development very closely. Our first priority is the health of our employees and their families, and we have taken respective measures. Let me take the opportunity to sincerely thank all our teams for their support. While all our sites are operational, challenges do exist, especially in logistics and customer demand, both in the industrial and consumer businesses. Because of this, we expect significant impacts from the coronavirus outbreak on our financial performance in the first quarter of 2020. Based on our current assumptions, we estimate the negative impact on our first quarter sales to amount to circa EUR 100 million. Please note, this is a very rough number. The situation overall is highly uncertain and unpredictable. And we ask for your understanding that we cannot be more precise at this point in time. The final number can be higher, but also can be lower than the EUR 100 million I just mentioned. With this, back to Carsten.
Thanks, Marco. In summary, we faced a difficult year in '19, ending up below our expectations. But despite the challenging business environment and some operational setbacks, we started to step up investments in our brands, technologies, innovations and digitalization, and we generated a strong cash flow improvement and a significant improvement of our financial position. Our dividend payment for '19 will be stable on a high level. And after careful consideration, we expect 2020 to be another transition year, with the coronavirus adding an element of uncertainty and unpredictability. As I mentioned in my introduction, we believe we are at an inflection point. We are convinced that we need to open up new avenues for growth and performance. In the spirit of transparency, I'd like to share the outcomes of group review we conducted as a Management Board. I'll start with our foundation, provide our perspective on our financial performance, and I will end with an overview of the key areas of change we see. We are proud to have strong, long-standing customer relationships and high-quality brands, innovations and technologies across all business units. We are a global leader in Adhesive Technologies, 2.5x bigger than #2, a clear worldwide #3 with Laundry & Home Care and globally positioned as #3 with our Beauty Care professional business. Our dedicated, passionate and loyal teams drive impressive initiatives across the globe. All 52,000 people are committed sustainability ambassadors to anchor sustainability in everything we do. The execution power of our global shared service center landscape is second to none, driving efficiency through automation and artificial intelligence in 7 shared service centers across the world. M&A has been an important driver of our growth agenda for decades. We spent more than EUR 12 billion, and we integrated 73 deals in the period between 2008 and 2019. Our strong foundation is a great opportunity and an obligation at the same time, an obligation to leverage it and to safeguard our long-term success. So why do we believe we need a new growth agenda? Let's deep dive into the fundamental analysis of Henkel's long-term performance over the last decade, including where we stand today. We come from a period of strong long-term sales growth driven by all 3 business units. However, as I highlighted at the beginning of the presentation, our current approach to drive performance is no longer sustainable. Instead of continuing our long-term growth story, we experienced a slowdown recently. We evaluated mainly 3 underlying causes. First, we suffered from execution setbacks, especially in our consumer businesses in the U.S. and in China. Our consumer businesses missed growth opportunities due to a lack of impactful innovations, especially true for our Beauty Care business on the one hand, and we underinvested in brands on the other hand. Finally, our industrial business was exposed to the challenging industrial environment over the last 15 months, especially in the segments of automotive and Electronics. Also here, at the cost of growth.The results are not satisfying and a clear call for action. Despite our long-term profitability improvement, we had to face a notable decline recently. Over the years, we improved our margin over the long term, thanks to a combined -- combination of strong cost management, mix effects and efficiency gains. Our gross margin at the point did not contribute to this development. Our recent profitability, however, declined.So what are the drivers behind? We suffered from margin pressure. Our gross margin decreased by roughly 80 basis points. At the same time, we decided to step up our growth investments because just driving efficiency is not a sustainable long-term solution. And declining volumes also left the marks as well.Despite some difficulties, we managed to continuously improve our balance sheet and our strong cash position in the long and the short term, which is indeed an excellent result, especially based on our efficient net working capital management, which is also a clear door opener. With our cash-generating capabilities and our low debt levels, we have the optionality, and we are committed to reinvest in growth and performance. Our conclusion is that our approach to performance is not sustainable, and therefore, we have identified new avenues to drive performance and growth. In the following, I will take a step back to understand the key areas for change and the must-win battles to reignite growth. Let's start outside in. I'm not telling you anything new now when I say that we live in a volatile, unpredictable and a challenging world. I already illustrated some of the environmental headwinds we face. But every challenge comes also with an opportunity. Growth of emerging markets, new digital business models, diverse customer requirements and collaboration as a new imperative, new ways to innovate and excite our consumers, to name only just a few. And there is a new era when it comes to sustainability, a key competitive advantage in the future and a topic every single one of us is responsible for. None of these opportunities are completely new for us, but we need to accelerate. Let's look at our businesses in that context. Beauty Care. True beauty were the key competitors in here. As an industry, beauty is one of the biggest FMCG markets in absolute terms and a very attractive growth market, our strong professional business and our powerhouse in hair and our deep category expertise with a really strong foundation. Schwarzkopf, our iconic brand, creates EUR 2 billion of turnover in a year, yet our Beauty Care portfolio is currently not lined up good enough against the industry growth opportunities. It includes too many diluting subscale brands, and we're even losing market shares in some of our key categories. To unlock our full potential in beauty, we finally have to fundamentally review our portfolio, act on underperforming brands, invest more in innovation and marketing and find ways, new ways to drive growth, be it online, via new database business models or via advanced analytics. Laundry & Home Care, creating clean living based on an impressive research and development expertise. Thanks to our trusted brands and strong innovations, we are the global #3 with more than 70 #1 positions in an attractive growth market. For generations, our consumers trust in our brands like Persil, and we are winning in a very attractive segment like the heavy-duty detergents, but also in terms of like Toilet Care. Yet, we have not delivered on our aspiration to win in North America and to close some white spots in the emerging markets. And also here, we have created a long tail of subscale brands. We did not support our strong brand sufficiently, and we see the results of inconsistent marketing investments. Despite our strong innovation pipeline, we don't leverage our full potential yet. And Adhesive Technologies, driving high-impact solutions in adhesives, in sealants and functional coatings worldwide. We have a very robust and balanced portfolio second to none. We excite our customers with innovative, high-impact solutions, and we own the broadest technology footprint in our industry. Yet also here, we have to adapt to capture new opportunities in new technologies and in adjacent businesses. We have a clear strategy to transform the business into that leverages growth trends, such as mobility, connectivity and sustainability, and especially on sustainability. We have only begun to fully size our opportunities. Sustainability. Sustainability is not just the core value, it's a part of our DNA. For more than 140 years, we have been taking a visionary approach to supporting an environmental and social progress. We recognize the potential impact we can have by developing sustainable innovations because our products and technologies are used millions of times around the world every day. For example, we've integrated environmental and social criteria into our innovation process so that every new product or formulation we launch contributes to sustainability. However, despite our great initiatives, we did not catch the momentum to position sustainability as a competitive edge. Despite our expertise, our sustainable approaches are not fully tangible for our consumers yet and for that to be a real differentiator. Digitalization. We clearly see a big potential in digital. We have a good foundation. We can build on our ERP harmonization. We have a state-of-the art chat service organization, as I mentioned before, and we have strong progress made in Industry 4.0 activities. However, our digital function is not lined up to be a real strategic differentiator yet. We have to transform here further. We must leverage our data and analytics capability to opening up new growth opportunities. We have to drive a holistic approach with adequate digital in-house expertise to respond to new market realities, and we have to seek new digital business models. Finally, we have to increase efficiency to manage the digital cost trap. We cannot create impactful change without engaged people. While we have a strong foundation with our loyal and committed people at the core and our new leadership commitment launched last year, we see a clear need for change. We need to accelerate our cultural journey to foster collaboration, empowerment and to strengthen the sense of belonging. We have to create a culture for entrepreneurial minds and start with our leaders, who must live up to our leadership commitments. Change is key to win the war for talents, increased diversity and meet the fast-changing expectations of tomorrow's workforce. The need for change is crystal clear. Our approach to drive growth and performance has been over-relying on efficiency and cost reductions in the recent years. We must build on our strong foundation and revive our unique DNA. And we have to start prioritizing and acting on our areas for change to open up the new avenues for growth and performance, and we have to carefully design a new growth agenda in thoughtful steps.This is our aspiration: to win the '20s through purposeful growth. Purposeful growth means that we commit to growth to a growth aspiration that goes well beyond financials, which, in all transparency, has been our primary focus in the recent years. We aspire to outgrow our markets through superior customer and consumer value. We aspire to differentiate ourselves through positive impact on the planet as a leader in sustainability and to develop our people and give them a sense of belonging. This is a bold aspiration, which we feel very excited about. And at the same time, this aspiration reflects our commitment to continue Henkel's long-term success as a family-owned company in a sustainable way.To win the '20s, we have to tackle 6 strategic focus topics. First, we will rigorously optimize and shape our portfolio. Our aspiration is very clear, a winning portfolio with a particular focus on optimizing our consumer businesses. Second, we will accelerate with impactful innovations to shape the market. With increased investments, we strive for a competitive edge. Third, we will double down on sustainability and turn it into a true competitive differentiator. Fourth, we will transform digital into a customer and consumer value creator. And fifth, we will reshape our operating models to be lean, fast, simple in every single operation across the company. And sixth, we really believe culture is not an enabler, it's the ultimate competitive advantage. It starts with leaders who make others grow. We have structured these 6 strategic priorities into our strategic framework, which will reshape how we drive performance and deliver on our aspiration on purposeful growth, both in the short and in the long term. This framework is an important frame, and, of course, the pillars and the strategy behind will evolve over time. But we want to provide you a bit more color on each of the 6 imperatives in terms of the aspiration, what will be different as well as the early steps we have taken. Rigorously shaping a winning portfolio implies shifting from protecting what we have to playing to win. This requires a very different aspiration and rigor, both in terms of divestments as well as M&A to build a winning portfolio across all business units. So Marco will deep dive into the first key steps towards a winning portfolio. Please.
Thanks, Carsten. We see 3 key levers to shape a winning portfolio, and in the following, I will elaborate on them. Active portfolio management. Active portfolio management has a strong track record of impact in Adhesives for more than 8 years. Now we want to have a specific focus also on the brands and categories in our consumer businesses. We have taken criteria, like market attractiveness, ability to win organic sales growth, gross margin into account in order to analyze the portfolio and have categorized our portfolio measures into areas of turnaround, continue divestment and exit. And we have reviewed our consumer portfolio in detail. Based on this approach, we have reviewed our consumer portfolio, and based on that first analysis, we have identified so far more than EUR 1 billion of sales volume, predominantly in consumer. This equals more than 10% of our consumer portfolio and an even higher number in our Beauty Care business. Around 50% of the identified sales volume is marked for divestment or discontinuation by the end of 2021.But portfolio management alone will not be enough to create a winning portfolio. That's why we see high-impact M&A as an integral part of our portfolio strategy. Let's not forget that we have invested EUR 12.5 billion in M&A since 2008, 100% of which was through our strong cash flow and finance budget. Thanks to our strong free cash flow generation, we could deliver the company typically over a short period of time. We subsequently integrated around 70 deals successfully. We utilized our strong balance sheet to pursue high-impact acquisitions, for example, to expand technology leadership in Adhesives or build winning positions in our consumer businesses.With that, I hand over to Carsten.
So thank you, Marco. We can only achieve our growth ambition if we enhance our competitive edge. Innovation, digitalization and sustainability are our 3 must-win battles. Let's first understand how we can accelerate innovation into a true competitive differentiator. We will accelerate impactful innovations, shifting from playing to safe to shaping the market. This will require acceleration of new innovation approaches, both impactful and focused innovation pipelines and increased investments in order to turn innovation into a competitive edge. Turning innovation into a true competitive edge will require us to renew our approach with significantly better consumer and customer insights to move decision-making closer to the market and to intensify co-creation, open innovations and also idea crowdsourcing. We will scale our agile approaches and invest in incubators and innovation centers. Our new Adhesive Technologies center -- innovation center is the first example and will be completed by the end of this year. None of this is new to Henkel, and we have great pockets of excellence. But the reality is that we need to significantly step up scaling these innovation models and approaches, and we will. Let me spend a couple of minutes on the topic of innovation. Innovation was a strong driver of our performance in the past and will be key for our success in the future. Therefore, I'd like to share some exciting examples from our innovation pipeline. Accelerating innovation will be a bolder impact with bolder impactful innovations to shape categories instead of driving only incremental innovations. We will shape our innovation strategy further in the coming months. In Adhesive Technologies, we are a front-runner in innovative solutions leveraging the mega trends I mentioned before, with mobility, connectivity and sustainability. We aspire to accelerate the automotive industry transformation. The value of Henkel's solutions in future cars will more than double versus the value in a conventional car. We built on our broad technology know-how to develop innovative and high-impact solutions that really will shape the car of the future. Our adhesives expert will further drive application emerging from the mega trend of connectivity. Internet of Things and mobile communication drive double-digit growth rates of 5G devices. We are well positioned as material solution provider for the connected future. We co-create innovations with our customers to provide high-impact solutions, for example, used in the 5G mobile devices, antennas and the 5G base stations. In Beauty Care, we aspire to grow our hair powerhouse with impactful innovations. We revolutionize the hair salon business by stepping into leading-edge hair and IoT science. We just started to offer our customers and consumers a unique experience. Our smart SalonLab hair analyzer enables us to support consumers in a complete journey from salon to home. In the salon, the hair structure is scanned, which delivers insights for customized solutions. We used these insights to develop in-salon and take-home solutions. The Fibre Clinix customized hair repair. Schwarzkopf Professional is most advanced in repair technology, an impactful innovation that shows how we will sustain our strong growth momentum in professional, and we will continue to build on that. But we also capture future trends with innovations, like our Nature Box shampoo bars. It is a great example of how we capture trends here the strongly growing Nature trend. We aspire to address new target groups with a Nature Box clear sustainability proposition. Launched at the end of last year, the product already became the best-selling SKU in Nature Box brand hair portfolio above the liquids. Just 4 weeks on shelf, Nature Box shampoo bar became the #1 solid shampoo manufacturers brand in Germany. So going forward, we will further premiumize our hair portfolio by building on the strong proposition of Nature Box. In Laundry & Home Care, we leverage our iconic brands to win in fast-growing segments. Let me share 2 lighthouse examples that illustrate how we accelerate innovations to advance technologies. In the U.S., we are currently launching Persil ProClean 4-in-1 Discs and liquids plus OXI, combining the innovative 4-in-1 Discs with a unique and boosted enzyme mix significantly improving the performance. OXI is amongst the fastest-growing segment in the U.S., with double-digit growth rates. We are very excited about this impactful launch. Another Laundry Care innovation are our Persil 4-in-1 Malodor Discs. They come with a new patented odor neutralization technology. Malodor Control is a highly relevant consumer benefit. The rollout is planned for Europe and North America in this year to leverage the potential of the strategic caps segment. We will further leverage state-of-the art technologies to improve our value proposition on that. We also have a strong innovation pipeline in Home Care, focusing again on improved performance and enhanced consumer benefits. Pril 5+ is the new high-performing dishwashing detergent with a self-degreasing technology that works up 5 -- up to 5x faster in lifting the grease, thanks to an innovative surfactant systems. The rollout of the Pril Power & Pearls series is a compelling example of how we continuously improve meeting consumer needs with impactful innovations. The mineral pearls are made of a new sustainability technology using 99% natural original ingredients without compromising performance.However, reality is that we need to accelerate on such market-shaping innovations and cut the tail off incremental projects. An important driver of our new innovation strategy is to consistently support our innovations and our brands with targeted investments in core categories and regions. We have compromised in recent years on innovation support, and we started to turn the corner in 2019. And we are committed to further step up growth investments in advertising, in digital and in IT. Compared to the base year 2018, we will increase growth investments by EUR 350 million to drive impactful innovations supported with sharp communication of brand purpose to radiate our aspiration. Compared to 2019, this represents a further increase of EUR 200 million.Third, we will boost and double down on sustainability as a competitive edge. Over the years, we built an amazing foundation to build on what we have highlighted -- what I've highlighted before, our social engagement, for instance. Our corporate citizenship has always been an integral part of our sense of responsibility as a company. But we need to shift from being the silent, modest, best student hiding behind his report card to claim the space, to raise the bar and to monetize the assets for Henkel. While we are working with the determination to deliver on the targets we defined for 2020, we are, today, stepping up our goals for the future with new milestones to actively contribute to climate protection, to circular economy and social progress. We aspire to anchor sustainability in all we do. Therefore, we raise the bar, and we are committed to becoming a climate-positive company by 2040, and we strive to accelerate our sustainability mission towards 2025. We target to reduce the carbon footprint of our production by 65% by continuously improving energy efficiency and by using electricity from renewable sources. In addition, we want to leverage our brands and technologies to help customers, consumers and suppliers to save 100 million tonnes of CO2 also until 2025. We can build on great progress and activities in sustainable packaging. However, we want to go a step further and even being more ambitious with targets until 2025. We will promote circular economy by: using 100% recyclable or reusable plastic packaging; second, by reducing the amount of virgin plastics from fossil sources in our consumer products by 50%; and third, helping to prevent waste from being disposed in the environment, zero plastic waste into nature. As a multinational company, we have a role model function. We decided to raise the bar to further enhance our positive social impact. By 2025, we aim at 100% responsible sourcing. We maintain intense and -- maintain an intense dialogue with our suppliers, to promote sustainable practices and to respect for human rights along our value chain. We have also completed our Sustainability Ambassador program. After having trained more than 50,000 Henkel employees, now it's time to kick off the Sustainability Ambassador Program 2.0. And we just started to plan a next wave of initiatives. We support social engagement activities of our employees across the world to improve the lives of 20 million people.Let's go into the business. We want to firmly anchor sustainability in all our activities. We will leverage our deep understanding of key sustainability trends as a central pillar in our innovation strategies, and we will strengthen the sustainability positioning and the purpose of our brands. With our Rethink Fashion campaign, for example, Perwoll is motivating people to rethink their fashion consumption. At the same time, our Perwoll renew detergent helps the clothes last longer, a fantastic example of a purposeful brand. Packaging also plays a key role in making our commitment to make sustainability tangible. We are moving to packaging made of 100% recycled plastic, with up to 50% social plastic or even zero plastic packaging solutions. In our Adhesives business, the circular economy is a key priority. We will leverage the potential of our products and technologies, enable breakthrough industry solutions and set industry standards. Let's give you one example. Together with key players from e-commerce, we have developed a fully recyclable mailer to replace bubble wrap mailers.Finally, to grow and evolve at the same time, today's business world, we must digitally transform in both new and incremental ways. We will transform digital into a customer and consumer value creator. Here, we need to catch up to some extent and shift from digital as a function to digital as an integral business driver. And to this end, we are completely overhauling our digital setup, our key priorities to leverage digital, to boost revenue streams, to drive end-to-end customer-centric digitalization in industrial, to generate new business and to continuously drive efficiency and speed. We can only outgrow the markets if we boost one-to-one engagement and digital sales in consumer. First, we have to scale up our IoT projects and step up direct-to-consumer channels. We acquired the majority stake in a personalized hair color B2C platform called eSalon, which gives us great insights on portfolio and media. Only one of potential digital use cases. Second, in the light of rapidly changing consumer needs and demands, engagement is key. Schwarzkopf CRM allows us to engage with our consumers, build relationship and provide tailored content and hair solutions. Through consumer data, we are gaining deep insights, which we will translate into the most productive innovations. And finally, the importance of digital sales growth increased drastically, not just as of today. We started here to step up unique e-innovations and recently launched a pilot with our Persil Power Bars sold via online marketplace. A dedicated agility team launched the Super Compact product with a new plastic-free packaging solution in less than 6 months from idea to shelf. End-to-end customer-centric digitalization industrial will further enhance our customer value creation strategy. We aspire to digitize our customer experience across all touch points. We started the rollout of a fully integrated CRM with a new user-friendly web presence in more than 50 countries and launched data-driven marketplaces for specific verticals. For instance, the maintenance, repair and overhaul business that resonated extremely well. We will further pursue our end-to-end data integration. This will enable us, for instance, to create artificial intelligence-driven, innovative and especially customized solutions and significantly strengthen our competitive advantage.And finally, we will invest in digital talent, especially data scientists and engineers with future capabilities and deep technological industry expertise.As mentioned, we are completely overhauling our digital setup as we speak. We are setting up the future unit called digital business, which will allow us to deliver on our strategic aspirations. To stay laser-focused in the execution of our growth agenda, we have established a new CDIO position at the end of the last year, which will now combine the digital and the IT teams across Henkel, and they will directly report to me. The new unit digital business is built on 2 pillars. First, business technology, our vehicle to drive efficiency across our value chain through continuously optimizing our business processes and IT systems. Second, Henkel Digital, our new dedicated unit for market-oriented incubation and innovation, leveraging the digital ecosystem. We will accelerate through hubs in Berlin, Silicon Valley in Asia, digital innovation hotspots with the access to digital talent pools. Digital will be a strategic core competence with strengthened internal capabilities in software, in data and in analytics, dedicated efforts into new business building ideas for additional revenue streams, with digital ecosystem with strategic partnerships on top.Digital business will be a key lever to create value for Henkel. We are also reshaping our operating models to be lean, fast, simple, future-ready organizations. We aspire to intensify our efforts to enable new business models, to step up customer and consumer proximity with faster decision-making mechanisms and to continuously increase efficiency and realize important savings. Marco?
Thanks, Carsten. For purposeful growth, we need to intensify our efforts to step up customer and consumer proximity with faster decision-making mechanisms and to continuously increase efficiency by constantly reshaping our operating models. We are already implementing operating model changes across our businesses that are delivering first impact. Let me illustrate these, but bear in mind that this is an ongoing effort.In Adhesive Technologies, we decided in 2012 to further verticalize our business to focus on most attractive customers and markets. Since then, we are consistently executing an active portfolio management. From the former 26 steering units, we now moved to 11 strategic business units organized in 4 divisions. These are aligned with megatrends, like Carsten pointed out earlier, especially mobility, connectivity and sustainability. The new 11 strategic business units have an end-to-end responsibility that enables fast customer responsiveness. At the same time, it will allow us to drive synergies and competitive advantage through scale and know-how across our portfolio. From 2020 onwards, we will report Adhesive Technologies as one segment within our group segment reporting, and we'll comment on the development of the 4 divisions. Let's move on to Beauty Care. In Beauty Care, we launched our transformation program designed to support our growth ambition. First, we empower the front line. We implement new regional structures, increasing focus on must-win strongholds and key growth markets. We rebalance our global versus regional organizations for faster decision-making and to better serve our customers and consumers.Second, we design and develop the NT side more in the region for the region. Marketing, R&D, supply organizations are reorganized to mirror the regional clustering, and new product development shifted from global level to regional strategic market units.Third, we invest in growth capabilities via a new growth office, a dedicated growth unit to identify pockets of future growth across customers, consumers and channels.And fourth, we increased organizational agility by streamlined structures and reduced complexity.Also for our Laundry & Home Care business, we are stepping up customer proximity and increasing efficiency. We drive enhanced regional focus for more synergies and empowerment of our frontline. The focus is on the following 3: high-growth regions, Europe and North America. Further, we have a new digital and game-changer unit in place, focusing on future growth fields.And finally, new process and agile methods for more agility and customer and consumer proximity will enhance our innovation power. This includes project management methods, such as scrum, cooperation -- co-creation with external partners and fast trend detection and testing. With this, back to you, Carsten.
Good, Marco. Thank you. So finally, our aspiration of a collaborative culture and empowered people are at the heart of our strategic framework and will be a key enabler of purposeful growth. Without our people, we cannot win the '20s. Thus, it is imperative to accelerate our cultural journey, putting our leadership commitment at the center of everything what we do. We will strengthen a culture of empowerment and collaboration to enable our people to drive new ways of performance and growth. We will develop them and create a sense of belonging for our employees and attract top talent. We believe that leadership is everyone's business. Therefore, we decided to introduce our 4 leadership commitments at the beginning of 2019 that articulate our high expectation when it comes to leadership, agility and collaboration. What's new is that our leadership commitments are the guiding principle for everybody at Henkel. Everybody in the company, not just our leaders, is responsible to define how we work together and, therefore, must be committed to act as entrepreneurs, collaborate as strong teams, develop people with passion and own our results. We will be measured against our behavior and are asked to actively shape our culture by bringing them to life. Our people are key. We are in the middle of designing and launching a comprehensive multiyear cultural transformation, starting at the top, starting with me and my management team. We decided to start with a new level of transparency, and we decided on the first very important step. We want to engage with more than 10,000 people, employees in a cultural head survey to create a baseline on our culture. You have heard about many new performance and growth drivers, new business model, agile innovation, database service proposition, new customer and consumer insight generation, open-source partnerships, cultural change. To enable all these, we will need to significantly invest in upscaling our workforce. To this, and we have already launched a cloud-based learning platform, digital upscaling initiatives, and started to step up our digital workforce transformation. Every day, since 25 years, I'm impressed, and I'm inspired by the diversity of our employees. Their backgrounds, experiences, their talent, their knowledge and their creativity. Henkel is a place for those who stand up, and we will continuously build on new opportunities to collaborate, to stay curious, to rule the change and to make a difference. Looking at our 6 strategic pillars, our new strategic framework, I am convinced that we have found the right answers for purposeful growth. We will outgrow the markets, creating a winning portfolio, regaining competitive edge through impactful innovation, sustainability and digitalization with future-ready operating models with mindful leaders, empowered people and a collaborative culture. We already identified a first set of key actions along the strategic framework. Let me summarize that. First, we will shape our portfolio. We have more than EUR 1 billion of sales, 50% of that is marked for divest or exit by end of 2021. Second, we will step up the investments in 2020 by EUR 350 million more versus 2018, to succeed with impactful innovations. Third, we will reduce CO2 by 65% and move to 100% recyclable and reusable plastics by 2025, and we will immediately start. Fourth, we will implement our new digital business set up starting in 2020. We will complete the execution of our operating models in all our businesses within this year. And we will finalize the rollout of our leadership commitments we began last year. We will execute this distinct set of actions to regain momentum and credibility, but only as a first step. At the same time, we will use the next month to underpin our aspiration with further actions to shape our midterm performance. Our journey continues. We will accelerate our initiatives, further evolve our growth agenda and continue the open dialogue with our customers, consumers, our employees and with you. Therefore, I am convinced that we will achieve our organic sales growth target of 2% to 4%, aspiring even the higher end of our corridor, that we will deliver mid- to high single-digit adjusted EPS growth at constant currencies, and that we will continue successfully generating and utilizing cash combined with pursuing compelling growth opportunities while maintaining the cost discipline, which is a muscle we have trained very well over the last decade with clear and real results. Also going forward, I would like to continue improving the way we interact and communicate with the capital market. From today onwards, it is our ambition to foster a more open and transparent communication and increase the face time to me as CEO, aspects which have been criticized by investors we have been talking to. And I hear you. We used the new momentum and decided to focus on top line developments in our first and third quarter reporting from now on. That means more focus on organic sales growth, a crucial KPI for capital markets to measure our performance. At the same time, we will ensure that we provide a deep understanding of quarterly top line drivers. And as you are well aware of that, this is in line with the approaches used by most of our European peers. This step will help us to foster a more long-term and the less short-term orientation to focus on the topics that meant the most, both in our businesses and in capital market communication. Of course, we will continue the detailed presentation of full year results in the more meaningful 6 months and full year periods.Ladies and gentlemen, I would like now to open up for the Q&A. Thank you.
[Operator Instructions] Our first question comes from the line of Christian Faitz.
Yes. I hope everybody can hear me. There's lots of background noise though. Hello?
Excuse me. We can't hear you currently.
Can you hear me now? Hello? Hello? Hello?
Yes.
Now it's better.
Try it again.
All right. Christian here. Sorry. I hope you can hear me. There's lots of background noise in the line. Anyway, 2 questions, please. I know this is difficult to judge, but aside from corona -- so leaving corona aside, how would you assess the current demand situation in Adhesives in key customer industries, obviously, predominantly automotive and electronics? And then second question, can you please elucidate measures that led to an improved working capital at the end of the year and, obviously, also in Q4? And how sustainable are those measures to be forward-looking at free cash flow?
Christian, the second question of net working capital, we clearly got. But can you do me a favor and repeat what you said to the first question because you were not really -- we could not really understand you completely?
Okay. I'll try my very best. I'm almost in the mic at the moment. So I know this is difficult to touch, but aside from corona, how would you assess the current demand situation in Adhesives in key customer industries?
Yes. Marco, you take it?
Yes. So what we assumed in our outlook for 2020 was that we have a very gradual improvement of key markets over the course of 2020. So quarter-by-quarter, we assumed an improvement in line with the forecast we had for industrial markets. For the year as a whole, we assumed an IPX development of plus 1%, but, as I said, starting from a lower level and then gradually moving up. And we have to now wait and see how that will further be updated once the corona impact is more clear, but that is basically the assumption or forecast.
Net working capital?
Second, net working capital improvement. Question was whether -- how much that is sustainable or not, what the measures were. We have improved by a couple of efficiency improvement measures. And we have made improvement as I elaborated in the business unit section, for example, in the beauty retail China business, where we could really drive efficiencies by all the measures we have implemented. And also, we have seen improvement, especially in the U.S. in our consumer business. And from that point of view, it is my expectation that, that level is sustainable. That is not a onetime development that we have seen.
Christian, to build on that, I think we have -- I have been reporting on that over the last, I would say, 4 to 6 quarters. And also here, we have implemented measures in all the 3 business divisions in order to improve, and we are getting the fruits and nothing more than to comment what Marco said. What we did is sustainable, and we also expect that going forward.
Okay. Do you still have on that -- still have a working capital issue in North America in Laundry? Because there still seems to be, obviously, some problems, I guess, including inventories?
No. In the Laundry & Home Care business in North America, we do not face issues related to net working capital. If you may refer to our logistical issues, everything of that has been solved within -- already within 2018. So net working capital-wise, no issues.
Our next question comes from the line of Iain Simpson.
Carsten, congratulations on the new role, and thank you for your honesty in outlining the scale of the challenge. It's much appreciated. Quick question for me, I guess, which is your guidance is unchanged from December 2019, but the macro outlook for this year has changed quite a lot in the last 3 months given the impact of COVID-19 on industrial demand, especially in China, but increasingly, globally. And now you're setting out a strategy that sounds like it will require further incremental investment to address the challenges we identified. So how should we think about this unchanged guidance in the context of weaker end market and the need for more investment? And just sticking with that investment with that guidance theme, you talked about your midterm financial ambition of 2% to 4% organic sales growth and mid-single-digit to high single-digit EPS growth. Is that something you hope to start delivering in 2021? Or will 2021 also be a sort of transitional investment year, and this is more of a medium-term aspiration?
Thank you, Iain, for the questions. So the guidance what we have given today, as you said, is in line with what we have called out in December. And we have called 2020 as a transition year. And within that transition year, all what we said today, what we want to execute in terms of measures, the first actions is integrated in that. What Marco alluded to is, for sure, the coronavirus is not integrated in that guidance. So the situation is very highly uncertain and unpredictable. So Marco alluded to that, roughly EUR 100 million, what we currently see for the quarter 1, plus/minus. But so far, what we see with this level of uncertainty and unpredictability, we are confirming also with that, the guidance we just launched today for 2020. The second part of your question, when it comes to -- what I also said, with the activities, with the change, with the new strategic framework, we are doing -- we -- our clear point is that with that, we will, in the midterm, confirm what we said already last year, the 2% to 4% in organic sales growth even to the higher end of the corridor, the mid- to high single-digit EPS and the improvement of our cash flow situation, free cash flow situation. And we will go into that, but we will not, Iain, I hope you understand, give a guidance today for the year 2021. We have a guidance for the year 2020.
Our next question comes from the line of Richard Taylor from Morgan Stanley. .
I suppose I want to take a little step back just to understand a little bit more about your strategic thinking about the business as a whole. Just the -- how did the discussion go in terms of when you started with a blank sheet of paper, do the 2 businesses, consumer and leases, fit together? And why do they fit together? So that's my first question, please.
So Richard, we believe that the group has an attractive and a balanced portfolio with strong brands and technologies. We have several leading positions in the different categories in the markets worldwide where we are operating, and we offer attractive growth potentials within that. To repeat it, in Adhesives, the Global #1; in Laundry & Home Care, the Global #3, even in the active markets, a global #2; and in Professional, Retail and Beauty -- sorry, in Professional, a clear #3; and strong positions in color and styling, be it #2 or #3. So that's the part. You have seen within the framework, we are focusing on 1 pillar, which is portfolio, portfolio measures and the portfolio measures announced today. And based the ongoing active portfolio management we will undertake, we will improve the quality of our business units portfolio and their potential to generate profitable growth in attractive market segments, which I pointed out before.
Understood. Again, sort of reflecting bigger picture, it seems like the business as a whole has got a hangover from pushing margins too far over a long period of time. And in this hangover period, we're having to try and make investments to get rid of the headache. But the investments, particularly in consumer, there's not a great deal of evidence that they're working, whether or not that's on M&A, all the investments, particularly in the U.S. behind the brand. So I'm just trying to understand why you think more investment is going to get a better result than the investment that has been put in, in the past.
Richard, we have developed and presented today the strategic framework, which we believe is the right framework to further build on our businesses and further develop our businesses. And there are these 3 -- these 6 pillars, which I outlined together with Marco before. The changes in portfolio we're undertaking, we need to become a competitive edge in the areas of sustainability, of digital and innovations with significantly more investments, very clear on that what we want to do. We are reshaping the operating models or have already reshaped them. And based on everything is the culture below the collaborative culture and the empowered people. And with these pillars and with these measures, we clearly believe that we can unlock the potential, which is related to Adhesives, Beauty and Laundry within the markets. And to overcome the situation, what I also described before, that we overstretched the cost and the margin situation in contrast to the growth agenda, which we today have outlined.
Okay. And then just maybe one last one. I don't think you disclosed this, but can you just give us a sense in the Adhesives business, which has obviously been a strength? Are you actually losing market share in Adhesives, please? That's my last question.
To be very short on that, we are not losing market shares. As I outlined before, we have a very clear, robust portfolio in all the segments which we are in. We are leading in these segments. We are leading in the regions what we're having. And with that, there are no market share losses at this time.
Our next question comes from the line of James Edward Jones from RBC.
Just 2 for me, please. First, what sort of buy-in have you had from the Henkel family? And it's clearly quite radical what you're planning to do, what indications of support have you had from your largest shareholder? And secondly, on remuneration, it looks like there have been changes to the drivers of variable remuneration. What behaviors is to encourage?
So James, to your first question related to the Henkel family. So our shareholders committee as well as our Supervisory Board, which also consists out of members of the Henkel family share pooling agreement, they are very supportive of the presented strategic framework. Otherwise, I wouldn't, together with Marco, be here today. And all the changes, which we have envisaged, which we believe are the necessary step to make Henkel fit for the future and to deliver on the full aspiration for purposeful growth are supported and committed. And related to your compensation question, can you repeat it again? I didn't hear everything well enough.
Yes. So it's very simple, really. It looks like you changed the variables that are driving your variable compensation. What behaviors is that meant to encourage? And what previous behaviors is that meant to discourage?
I don't see that this is changing behavior. But what we have done, we have put ROCE within the LTI part, especially of the compensation for the Board members. And by that, we want to drive the long-term value creation. And we believe that ROCE is a very good indicator to have that.
Yes. That's very helpful. If you'll just indulge me for one more as well. You talked about greater focus on cash flow. How big is the opportunity there? Your cash conversion has been lower than many others in the sector. And what -- specifically, what -- how will you go about this?
Good. Marco, I think that's a question for you.
So we have been driving cash flow quite successfully in the past, and we will continue to do so. So one key driver besides EBITDA that we generate is, of course, the net working capital performance. And you have seen that we are quite at very competitive levels here, and that will remain. So we will also take opportunity wherever we have that in that area. But we feel that the level we have now reached, if you look at 2019 numbers, is already on a very competitive level. So that's a band, 2% to 3% -- 3% to 4% that also we find is a very good one. Apart from that, please do understand that we do not guide on free cash flow per se. We have a midterm ambition out, and that's basically what we can comment on that.
Our next question comes from the line of Namita Samtani from Bank of America.
Got 2 questions, please. The first one, given Church & Dwight's comments in their fourth quarter earnings call of wanting to be the #2 supplier of laundry detergent in the U.S. at some point, what can you highlight within your plants which ensures that Henkel will not be knocked off the #2 spot? And my second question is, there seems to be a big drop in organic sales growth performance in the fourth quarter for both Eastern Europe and Africa, and Middle East. Could you please provide further color on this and, in particular, which divisions contributed to the slowdown?
So I take the first one, Namita, and Marco will elaborate on the quarter performance or the quarter 4 performance in the markets you mentioned. So coming to your question of North America in Laundry & Home Care, we are not satisfied with the current situation. As I explained during the presentation, we have done a detailed review. We identified the areas for change. And in mainly asking for what we are changing in 2 areas, the first part is strong innovations. I have given some examples on that, the best oxy in the U.S. market with Persil 4 in 1 disc and really also then behind that to support these innovations with consistent investments. That's the 1 part. And the other part, as outlined by Marco in more detail, the review of our portfolio, which is the EUR 1 billion, which he mentioned, with roughly 50% being marked for exit or discontinuation. And you can assume 1/3 of the business of Laundry & Home Care is coming out of North America. So also here, that region -- that business has been integrated in that portfolio review. But please understand that I, based on more details, will not give that today in order not to harm the businesses which we're having on that. Marco?
Good. So a question on the development, especially in the fourth quarter. Understood that you have seen overall Laundry & Home Care for the year achieved double-digit organic sales growth in the Middle East, Africa region in 2019. This was driven by both pricing and volume gains. And we were also able to increase market shares in main categories and markets. Towards the end of the year, the pricing component was not as strong as at the beginning. So that also led to a different picture that we had towards the end of the year. But overall, the year was finished very strongly.
Our next question comes from the line of David Hayes from SG.
I'd like to take the liberty of 3 as well, if I can. Just on the innovation, obviously, you're talking about the decentralization and the empowerment of the region and the markets. We saw one of your peers, Unilever, go down this route the last few years, and they talked recently about that was leading to too much fragmentation of innovation at the center wasn't really providing enough support to make them differentiate the demand. So the question is how are you ensuring that you don't have that same issue, that you end up with very fragmented innovation that isn't really benefiting from the scale of the business? The second question, I guess, is for cost and if I can. You talked a lot about the underinvestment in the last few years, and that's what you're catching up on. But I guess you were at the table for those discussions over the last few years. Can you talk about whether -- during that time, you knew and felt that a lot of the decisions were leading to this underinvestment and getting behind in competitiveness or whether this is something that's changed, the market is changing so much that it's a retrospective realization? And then finally, very quickly, just in terms of the medium-term guidance of 2% to 4% you talked about getting towards the top end. If you were doing around about 4% growth, can you just talk about how that would look to you in your budgets for your planning? Is that kind of the Adhesives doing 6% and Consumer, 2%? Or would it be that both units are doing around 4% in the medium term?
Thank you, David. So starting with your innovation question. So there is not a one-fits-all innovation approach, which consistently produces the desired results. So we will apply and combine various approaches. So firstly, as I pointed out, we are enhancing a faster decision-making and the empowerment of local activities in the region for the region. Marco pointed that out when he was talking about the future-ready operating business models, especially in Laundry & Home Care, to have it more in the region, for the regions and localize that. This is, for us, an important element of the described changes and the operating models in our consumer businesses. And secondly, we're increasing leverage, digital tools and the huge amount of data we collect. So we apply agile approaches and incubators to fastly detect the trends, test and learn.Third, we strongly believe that in open innovation and idea crowdsourcing that we will also have here opportunities going forward, and we will continue. We have large R&D and innovation centers at our hand in all 3 divisions, not only in Düsseldorf but also in the region that we focus here on these parts. And we're still ensuring efficiency despite the regional innovations. So that was your first question.The second one was related to...
Underinvestment.
The underinvestment. And I'm here to present to you, and what we presented to you is the framework going forward. And I clearly pointed out that by analyzing the areas of change, what we undertook, we have -- we came to the conclusion, and we analyzed that we did not invest probably enough, especially in Laundry & Home Care in the last couple of years. Yes. And I was at the table, as you're pointing out. But the learnings are there to be implemented to the future, and that's the reason why we have defined the framework -- the strategic framework we just presented. And with that, we will overcome the topics we were maybe passed in the past.And then your question was -- I think the final one was, how does the composition between the 2% to 4%, well, respectively, to the higher end of the targets are. We believe that with the 2% to 4%, first of all, we have ambitious targets out. I pointed out that we are even having -- striving to the higher end of that in the midterm, and we are not disclosing today the details between the divisions. On the other hand, if you look at the markets where we are currently in, the markets are between 2% to 3% in terms of growth, independent, if you look at industry or consumer. And as we defined, that is the long-term average of that growth path. And when we define the purposeful growth, one element is to outgrow, and that is relevant for all the 3 divisions we aim.
Our next question comes from the line of Andrew Noel from Bloomberg.
Two, please. If you could elaborate first on -- so you've earmarked EUR 1 billion of products and categories. I get that they need attention because you've only stated that EUR 500 million will be divested or discontinued. So I'm just wondering what are the options for the other EUR 500 million in that EUR 1 billion figure, and if possible, to get a little bit -- if it's possible to get a little bit of color on what those businesses that you are discontinuing or selling are.And just the second, in your introductory comments, you did -- you yourself brought up the theme that there might be a bit of skepticism about appointing an insider to the CEO role. And I just wondered what was the feedback from the investors in terms of, were they looking for an external appointment? Or what kind of requests were they making on the investor side on that front? And does that add to pressure if they were looking for external appointment there?
Marco, you start with the portfolio question.
On the portfolio question, you again also elaborated on the EUR 1 billion that we had identified in our portfolio analysis. And we said that out of that EUR 1 billion, roughly 50% is what we marked for portfolio actions in terms of divestment or exit. The other portfolio categories are, therefore, positions that we put into the turnaround category or into the mill category, businesses we do not intend or cannot sell because they're closely related, for example, to larger brands that we have. But on the piece where it is about divestment or exit, that's roughly the 50%. And as I also said, I mean, we are working through that. And over time, we will then also take further decisions. In terms of scope of these divestments, basically, the majority of that, as we said, is situated in the consumer part of our business. And while we move on, we will give you more color to that. But at the moment, that's what basically we can share.
So your question, Andrew, regarding how did investors talk or gave feedback, 3 topics I've heard. Do not more of the same, be honest, be transparent and have more face time to the CEO in terms of discussions. And what we presented today is from my point, exactly what you -- what I listened and what we do. We have a strategic framework. We have a clear point where we are not doing more of the same, where we're significantly changing, be it on portfolio, be it on how we treat innovation, sustainability and digitalization, different set of operating models and on the base to change the culture and the people, to empower the people and to have a collaborative culture behind. That's why I clearly believe that this is the right strategy or the strategic framework in order to drive the company to the next level. So therefore, what investors said, I believe, is incorporated in that -- what you have heard today.I mean, to add on that, we started today a journey. It's not something -- the strategic framework is not something which will be stable over the next couple of years. It is a journey. That's the first step. We have also seen at the end of my presentation also first actions to be executed. And we will continue the journey on strategic topics to be continued and worked out.
And just on the EUR 1 billion, is that the result of a sort of a first look through the portfolio? Or will there be a wider bottom slicing approach over the next few years, if that's what we can expect?
Now we analyzed our portfolio in different categories, basically, and looked at our ability to win at the attractiveness of markets and basically concentrating on the consumer portfolio, applying the active portfolio management that we also successfully applied in adhesive technologies. And of course, that is something that we also intend on an ongoing basis, not something that as a hard start and a hard stop. That is something that we think we have to do on an ongoing basis to also develop the business healthy for a longer period of time.
And please keep in mind -- but keep -- please keep in mind, portfolio -- active portfolio management does not only mean divest or analyze. We also have highlighted that we have M&A as an integral part in our strategy that, as Marco alluded to that, a great balance sheet with really firepower that we will also use to support our 3 businesses, Laundry, Beauty, Adhesives, going forward. It's a combination of both.
Our next question comes from the line of James Targett from Berenberg.
Yes. Actually, Carsten, just your last comment was my first question, actually, in terms of -- you mentioned M&A being a critical part of your strategy going forward and the strong balance sheet. So maybe you could elaborate a little bit on the scale of M&A that you would like to do, and particularly if you're rolling out moving into new segments, and particularly in the consumer business?And then my second question is on digitalization or digital strategy. I think this was a material part of your kind of last strategic period when you increased CapEx by 50% to GBP 3 billion, and a large part of that was on digital spend. So I'm just trying to understand was that spend just too low? What was the -- were you spending on the wrong things? Or was that problems of execution? Just trying to understand what happened to all those investments you were making in digital sort of over the last 3 or 4 years. And actually, if I can ask one final one, just on restructuring. You're flagging EUR 250 million to EUR 300 million this year. I wondered if you could comment where you see restructuring charges being as part of your midterm guidance?
James, thanks for your questions and good that at least 1 question I anticipated. So regarding M&A, the situation is not significantly changing compared to that what you have heard us talking in the past. So M&A is an integral strategy, yes. We differentiate when it comes to Adhesive Technology. It's more about technological oriented M&A. And when it comes to our Consumer businesses, it's strengthening the category, country expertise we are having because this is where we clearly believe you can make the difference. And most probably, white spots where we are not currently in the businesses. So that's the overall part. The criteria, which we are evaluating when it comes to M&A, has not changed. It is about the attractiveness. It is about financial attractiveness. It is about the availability, and it is about the strategic fit. So that's how we see the situation on M&A. Capex, Marco, you want to do?
Yes. So on the CapEx question was that we -- or you commented that we increased by 50%, much on digital. I would like to clarify. I mean, the increase in CapEx that we have seen over the last 3 years, that was contributing to a lot of investments we did into the business, and that was not entirely just on digital projects. What we have done in terms of digital also that led to CapEx was our ERP harmonization project that we have run over the last couple of years. And here, also, we have seen CapEx coming through that. And as you have seen in the presentation of Carsten in the digital part. And we are very proud on our digital backbone that we have here. That will enable us also to then run the business in a much more digital way in the future. So we worked on that backbone, and we are almost complete on that one. And that also had a CapEx impact. For the full year '20, we expect to spend EUR 700 million to EUR 800 million of CapEx. And also in the medium, long term, we anticipate the ratio of CapEx to stay roughly between the 3% and 4%, what you also basically have seen. On restructuring, that was the other part of your question, and you basically also refer to the 2020 guidance, and we have given that guidance that we come out that year for between EUR 250 million to EUR 300 million. We will continue to adopt our structures, and you have seen a couple of initiatives we basically anticipated in the presentation that we had given today. So that's a range that we see for 2020.In the midterm, we do not guide on that number, kind of your understanding. But for sure, also we will adopt structures wherever we see the need coming from changing market environments or where we see opportunities.
And James, maybe to allude, again, a little bit on the digital question, what I presented when we said one of the key pillars within that strategic framework is also the change within digital, there are 2 areas. The one area is really to support the digital activities with investments, with new products to be closer to our consumers and customers using the data, the analytics and in these kind of areas. And second, to rebuild and reorganize also the way how we do digital in terms of bringing together all our departments, all our people in terms of digital, working in a new way together, which we will -- as you have seen from the first steps, which we will do within 2020 as a first step, also from the base in order to set up these IT and digital parts to support the businesses better and to be closer to our customers and consumers at the end.
We now have a question from the line of [ Rica Dawa ] from Dow Jones.
Yes. You've had a goal of annual efficiency gains of more than EUR 500 million from 2020. Does it still exist? Or has it been postponed under the new plans? And the second one, also about the portfolio restructuring, can you give an example of what brand might be -- might not be surviving under the review?
So I take -- [ Rica ], I take the second question, which is related to, again, portfolio. But please understand that at the time, it is difficult for us to mention concrete examples because the businesses are operative, are running and bringing us top line and bottom line, and we don't want to interfere into that. As we said, we have done a thorough analysis. We have made decisions already for parts of that, and we will then start the processes to get these parts of the business either divested or exited, but I need to ask for your understanding. Marco, you do -- comment on the EUR 500 million.
So the first question was on the efficiency gains that we had targeted in our last strategic cycle to reach roughly EUR 500 million of efficiency gains, and that continues to execute efficiently, and we are on that ballpark of number. So we also reached it, and they are well on track. So all the measures we had laid out, I think, beginning of 2016, basically, that is what we also executed.
From this year onward, EUR 500 million is lower or efficiency gains annually, that's in place?
I didn't fully get it. Can you repeat it.
Because the target was with all measures to finally come up with a number of EUR 500 million annual efficiency gains as of this year. Does it -- you see that, right?
Yes. We think, looking back, I'm -- together with the new management team, we are in since 60 days. You also need to give us a little bit time. And therefore, we don't quantify that at this point.
Our next question comes from the line of Celine Pannuti from JPMorgan.
Yes. Two questions for me. Digging a bit into Beauty, and it seems that this is where you have seen maybe probably some of the brands you want to dispose or discontinue. But excluding those, what kind of growth rate do you see in your Beauty business? Because it seems to me that you have seen a slowdown in some of the health care category, hair coloring, even Professional has not really picked up in the market. So where are we going in terms of what is the fundamental opportunity that you see in the Beauty Care category?And my second question is I would like to come back on the outlook for the year. So you are getting for a margin of about 15%, which seems to encompass the EUR 200 million step-up in costs that you are guiding to for 2020. At the same time last year, your margin, excluding the step-up in cost, was very down. So why is it this year, the margin, excluding the step-up will be flat? And could you as well -- I'm not so sure I understood, so is COVID-19 impact included or not in your guidance, the EUR 100 million, is it included in your guidance? And what should we expect on the margin front or the EBIT front against that impact?
So Celine, I take your first question, and Marco will then come back to the second one. So regarding Beauty. Our performance in Beauty is clearly below the expectations. We are not satisfied, and we have clearly pointed that out, and we need to change that. We have defined the purposeful growth agenda, and this also relates also for our Beauty Care business. And by that, let me give you some examples on that. So the portfolio part is the first part. We have parts in our portfolio where we had operational issues, such as in the China retail part last year, which we have solved. There are parts of the business where we have not been growing, also not growing for a long time. This is what we addressed by reshaping our portfolio. And by that, a part or a significant part of the EUR 1 billion we have identified also related to the 50% mark for divestment in continuation is also related to Beauty Care. The second part is that our innovations have not been strong enough in all means, and we will change that with more impactful innovations and with the increased support we have mentioned today. And I have also shown examples, especially when it comes to sustainability and also digital, where we see clear opportunities to participate in trends, but also in changes of the market in order to grow that.At the end, you are interested in numbers. So for the full year 2020, the guidance is out, and it is clear, it's 1% to 3% OSG, organic sales growth. And for the mid- to long term, it's the 2% to 4% and the 2% to 4%, when I said to the higher end is valid for all 3 businesses. Marco?
So then to your question in terms of margin, why does the margin not go up again after taking out the EUR 200 million investments. What we have done in the year 2019, we have started to stepping up growth investments. And basically, that is what is going to persist, and we want to step that up further -- by further EUR 200 million, and we need to keep supporting our innovations and brands, and we want to do that also in the year 2020.So from that viewpoint, we did also not guide on the lower margin, stripping out the EUR 200 million in 2020. And if you look at the market environment, then also, you will see that the industrial environment is highly uncertain. So at the moment, we feel we're positioned with that guidance.
Yes. Sorry, that wasn't my question. The question was, last year, in 2019, excluding the growth investment, your margin went down. So this year, you are guiding, excluding the growth investment, at flat margin. My question is why would margin even be flat? Why that will not continue to go down?
We have seen certain developments last year like also rising transportation costs or distribution warehouse costs that we are not assuming to go up further. So all the effects we had basically eroding the margin last year. We do not assume that will continue. And for sure, we have also seen that we have a clear program in place and what we want to do in 2020 to also improve the business. And with that, we came to the guidance, basically, you have seen.Then the other third question was basically, you were not clear on -- in how far the coronavirus effects were now included in the guidance we have put out for the full year. And I've elaborated on what we currently see in very, very rough numbers in the first quarter. And that's basically the best knowledge we have at that point in time. And at the moment, nobody knows how long that price, let's call it, continues to persist, what the magnitude will be, what the impacts outside of China finally will be. And with the ranges that we also have set up for 2020 in terms of guidance, we do not see the need, at that point in time, to also revise the guidance we have defined.
So the guidance reflects the best knowledge we have at this point.
Our next question comes from the line of Faham Baig from Crédit Suisse.
I will stick to one. Just a question around the broader use of cash. Clearly, you mentioned that M&A will be integral going forward, but you'll be focused on high-growth markets, high growth categories, et cetera, where there will be a competition for those assets. And therefore, the valuation multiple for that asset might not be favorable. So in light of that, where do you stand? And also with other uses of cash with regards to potentially increasing the payout ratio, which is probably at the lower end of consumer companies and share buybacks, where would you stand on those 3 potentials?
So Marco will take that.
So on the first one, in terms of M&A, we have very clear principles in place that we deploy for M&A projects. There is to be a very clear strategic fit. The targets have to be available for sure. And thirdly, they need to be financially attractive. And just a high multiple is not something that doesn't make a target unattractive from a financial perspective, it really depends on the potential the target has and what that means for the financial figures. And we have a very clear process in place and, basically, we'll respect that, and that's how we select the targets. So that won't change to what we have done in the past.In terms of share buyback, that was your other question, we haven't changed our position to that. We think we have sufficient opportunities to basically invest in the company. And we already elaborated on M&A as one driver of that, and we have not changed our position. So share buyback at that point in time is not an option for us.
Dividend? Dividend ratio?
And dividend ratio, if you see the long-term trend of our dividend evolution, we have increased the ratio also over time. The absolute number has grown substantially. And the current corridor that we have is that we have a dividend payout between 30% and 40%. And as we have seen in 2019, we have also moved up within that range. But the range continues to be applied.
Our next question comes from the line of Olaf Storbeck from the Financial Times.
And so can you hear me?
Yes.
Yes. I have 2 questions, if I may. One is with regard to -- is linked to the EUR 500 million of the brand you've earmarked as problematic but want to keep. I'm not -- it's not quite clear to me what you are supposed to -- going to do with them. So you said you're going to restructure or milk them. What does this milking mean? Basically running them off over time? Could you please elaborate on that?And my second question is related to the EUR 300 million investment program you announced last year. In the press release, it says only half of the money was actually spent in 2019. Could you please elaborate why you failed to fully implement this program? And what does this mean for this year and why you increased the comp for the investments?
So for the first question, again, the EUR 1 billion we have -- which we came from is the analysis out of the portfolio analysis. We aim with that to regularly shape the portfolio with a focus on optimizing predominantly our consumer business. Of the around EUR 500 million marked for divestment or discontinuation, the vast majority out of that is brands with our consumer businesses, which has a split between beauty and laundry. And in general, the other EUR 500 million are currently seen as the turnaround in terms of that we need to change then in order to be in line with our strategic framework by supporting our growth agenda. If that doesn't change over time, then they could also become a divestment or discontinued part.And to explain the milk part, it's a definition out of portfolio management. So milk means, on the one side, we can't or we don't want to divest that business, but we -- it stays in the portfolio, but maybe not with the same investment patterns as before. And by that, we take profits out of that until the part of the brand is within the portfolio. Olaf, that's for your first question. And the second one, Marco will take over.
So why didn't we spend the full amount of the EUR 300 million that we basically announced a year ago? Firstly, key initiatives started only step-by-step from the end of the first quarter. We have not been able to catch up this backlog in the remainder of the year, essentially. And also, we have to compensate for certain unexpected developments in our markets and the environment. And also, for example, in our Chinese beauty retail business that we faced over the year, and in that respect in total, we didn't realize the full amount of the EUR 300 million. But basically, that is still on our agenda, as explained earlier. And we'll continue, of course, to support the brands in line with the strategy which is basically outlined.
The next question we have is from Gian Marco Werro from MainFirst.
Three questions from my side, please. So the first one is also on the portfolio management, on the consumer disposal side. So the -- just a question in relation to the dependency between different beauty categories. Is this dependency really sizable or meaningful? Or can you then also imagine to probably also dispose whole beauty categories, for example, like skin care or oral care, for example? Then the second question is just in relation to Beauty Care in general. How is the negotiation with retailers in Western Europe going on? And -- meaning that you have now solved the China issue, do you expect no more destocking, therefore, in 2020? And then just the third question is for the midterm, we got a precise organic sales growth guidance and also an EPS guidance. But can you also give us just some sense of in what direction your adjusted EBIT margin could go in the midterm?
So I take your second and your third question. Marco will then come back to the portfolio part. So your question was related to Beauty Care, retailer negotiations and China. The situation is -- you're asking for Beauty Care, but the situation between beauty and laundry when it comes to retailers is not very different. We have -- on the one side, what we have seen over the last couple of years is a quite significant concentration. Also on the retailer side, and the consequence out of that is that it is getting tougher in terms of negotiations and more difficult to do the business. To your China question, the China retail business continued to be dilutive also in the fourth quarter, as we talked about, and expect that negatively affected also by the continued destocking. On the full year basis, we pointed out that there is a margin decline of roughly 370 basis points and that these developments -- and to measure our China retail business will also be continued. So the go-to-market approach, we have changed, and we will expect already positive effects on the start and the quality of the business in this year. The destocking part is, I would say, to 90% over. That was -- sorry, that was the beauty.And then you had a question to mid and long term. Our guidance for the midterm is very clear. We have a 2% to 4% OSG. We have the high -- the mid- to high term -- mid- to high single-digit growth expectations when it comes to the EPS and the free cash flow expansion, but we are not guiding on the adjusted EBITDA margin on the midterm. We are doing that on a yearly basis. So therefore, I have -- please understand that we will not give you a mid- to long-term financial ambition on the margin side. Marco?
So on portfolio management, we basically communicated at that point in time the levels that we see for certain portfolio measures. Now all brands, regions or categories are basically included in that review, and there is no limitation at that point in time. But also, please understand we cannot be more specific at that moment.
Our next question comes from Molly Wylenzek from Jefferies.
Carsten, Marco, you've outlined significant change for the business this morning. I know you changed your operating models, pushing more sensibilities into the regions. And certainly, under the portfolio review, you're going to have some Henkel employees out there wondering if they have a place in the future Henkel portfolio. So how are you supporting your people to focus on execution while all of this change is going on around them and within the organization?
I mean there's a lot of change that we want to drive for sure. But also, we stand for open communication. We basically have a clear plan that we'll outline, and I think the plan is very compelling. And as Carsten pointed out earlier, we also want to take a cultural transformation. And with that and the strong team that we have, we are pretty confident we will get that across.
So you asked specifically Marco, so therefore, I'll let Marco first answer. But the answer is very clear. In order to have these 5 -- these 2 topics combined, execution and also concentrating on the current business, it is the leadership commitments at the core of our heart when it comes to culture and people development. And with leaders who are able to execute that, then we will be able also to have these things in parallel than -- and that's the cultural journey which we are starting -- which we have already last year because the leadership commitments have been our heart in 2019, but we need to roll them out. That was also one of the measures we have put in terms of what are the first activities we are doing. So culture, collaboration, empowerment and strong execution. And it starts at the top with Marco, with me and the Board colleagues in order to bring that into our organization. And that's what we are standing for.
Thank you. That was our last question, so I will now hand over to Mr. Knobel for his closing remarks. Thank you.
So first of all, thank you for participating. So I strongly believe in Henkel, and I'm totally committed and engaged to shape Henkel's future together with the management team and our employees at Henkel. Today, I've outlined a 2-horizon approach towards our mid- to long-term ambition and purposeful growth. So first, 2020 is a transition year to change the way we drive performance, reinvest in the businesses and increase trust. And there is no long term without a short term. Second, we strive for purposeful growth with our new strategic framework. With our 6 strategic pillars, we will create a new momentum. We will build a winning portfolio, and we excel in innovation, sustainability and digitalization with future-ready operating models, committed leaders and empowered people. These are the first steps of our purposeful growth agenda. We kickstart our journey, and I highlighted our first concrete actions. Of course, we will come back to you with the next steps of our journey in due time. But let me summarize by emphasizing once more, purposeful growth is not just a noble goal. It is an opportunity for us to outgrow the markets and an obligation to create customer and consumer value to reinforce our leadership in sustainability and to shape a culture that enables our people to grow with a sense of belonging. So we are a great company with fantastic products and a successful future. So thanks for joining us. See you soon.