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More Henkel Corporate Reporting 2014
Henkel is well equipped for the challenges of the year ahead, and we are confident that we will reach our goals.
In a difficult environment characterized by high volatility in our markets, the conflict between Russia and Ukraine, and continued political unrest in the Middle East, the company ended fiscal 2014 in an encouraging position. All of our business units recorded organic sales growth and contributed to the significant increase in our earnings.
On behalf of the Supervisory Board, I would like to thank all of our employees for their exceptional commitment. Thanks are equally due to the members of the Management Board who have steered the company successfully through these challenging times. We are also grateful to our employee representatives and Works Councils for their continuous and constructive support in moving our company forward.
Finally, I would like to thank you, our shareholders, for your continued confidence in our company this past fiscal year.
Again in fiscal 2014, we diligently discharged our duties as the Supervisory Board in accordance with the legal statutes, Articles of Association and rules of procedure governing our actions. In particular, we carefully and regularly monitored the work of the Management Board, advising and supporting it in its stewardship, in the strategic further development of the company, and in decisions relating to matters of major importance.
The Management Board and the Supervisory Board continued to cooperate in 2014 through extensive dialog founded on mutual trust and confidence. The Management Board kept us regularly and extensively informed of all major issues affecting the corporation’s business and our Group companies with prompt written and oral reports. Specifically, the Management Board reported on the business situation, operational development, business policy, profitability issues, our short-term and long-term corporate, financial and personnel plans, as well as capital expenditures and organizational measures. Quarterly reports focused on the sales and profits of Henkel Group as a whole, with further analysis by business unit and region. All members of the Supervisory Board had sufficient opportunity to critically review and address the issues raised by each of these reports.
Outside of Supervisory Board meetings, the Chairman of the Audit Committee and I, as Chairwoman of the Supervisory Board, remained in regular contact with the Chairman of the Management Board. This procedure ensured that we were constantly aware of current business developments and significant events at all times. The other members were informed of major issues by no later than the next Supervisory Board or committee meeting.
The Supervisory Board and the Audit Committee each held four regular meetings in fiscal 2014. Attendance at the Supervisory Board and committee meetings averaged 97 percent and 88 percent respectively in the year under review. No member took part in fewer than half of the Supervisory Board and committee meetings.
There were no indications of conflicts of interest involving Management Board or Supervisory Board members which had to be disclosed to the Supervisory Board and reported to the Annual General Meeting.
In each of our meetings, we discussed the reports submitted by the Management Board, conferring with it on the development of the corporation and on strategic issues. We also discussed the overall economic situation and Henkel’s business performance.
In our meeting on February 28, 2014, we focused on approving the annual and consolidated financial statements for 2013, including the risk report and corporate governance report, the 2014 Declaration of Compliance, and our proposals for resolution by the 2014 Annual General Meeting. We also discussed the results of the Supervisory Board’s efficiency audit. A detailed report of this was included in our last Annual Report. The establishment of an independent supply chain company was also addressed at this meeting.
In addition to the general business performance in the first months of the year and the development of our businesses in North America, our meeting on April 4, 2014 focused on the performance of our business units in the Africa/Middle East region. We extensively discussed the priorities and initiatives of the business units based on our four strategic priorities: Outperform, Globalize, Simplify and Inspire.
Our meeting on September 19, 2014 focused on future projects and their implementation in our new unit, Integrated Business Solutions, which combines our IT organization and our shared services. These projects are aimed at further improving process quality and transparency through ongoing standardization of technologies, strategies, and processes. For example, we discussed master data and supplier management and reviewed IT system standardization that will result in a substantial simplification of our system architecture. We also discussed business performance at this meeting and the priorities and measures being taken by our business units in Eastern Europe. The political developments in Ukraine and Russia and their impact were an important part of these discussions.
Our meeting on December 12, 2014 focused on the expected figures for 2014 and on our assets and financial planning for fiscal 2015, including the associated budgets of our business units, which we discussed in detail based on comprehensive documentation. We also reviewed our sustainability strategy and progress with our three strategic principles: products, partners, and people.
In order to efficiently comply with the duties incumbent upon us according to legal statute and our Articles of Association, we have established an Audit Committee and a Nominations Committee. The Audit Committee was chaired in the year under review by Prof. Dr. Theo Siegert, who complies with the statutory requirements of impartiality and expertise in the fields of accounting or auditing. For more details on the responsibilities and composition of these committees, please refer to the corporate governance report and the membership lists.
Pursuant to its appointment by the 2014 Annual General Meeting, the Audit Committee mandated the external auditor to audit the annual financial statements and the consolidated financial statements, and to review the interim financial reports for 2014. The audit fee and focus areas of the audit were also established. The Audit Committee obtained the necessary validation of auditor independence for the performance of these tasks. The auditor has informed the Audit Committee that there are no circumstances that might give rise to a conflict of interest in the execution of its duties.
The Audit Committee met four times in the year under review. The meetings and resolutions were prepared through the provision of reports and other information by the Management Board. The Chair of the Committee reported promptly and in full to the plenary Supervisory Board on the content and results of each of the Committee meetings.
All Audit Committee meetings focused on the company and Group accounts, including the interim (quarterly and half-year) financial reports, with all matters arising being duly discussed with the Management Board. The three meetings at which we discussed and approved the interim financial reports were attended by the auditor. The latter reported on the results of the reviews and on all the main issues and occurrences relevant to the work of the Audit Committee. There were no objections raised in response to these reports.
The Audit Committee also closely examined the accounting process and the efficacy and further development of the internal Group-wide control and risk management system. In addition, the Audit Committee received the status reports of the General Counsel & Chief Compliance Officer and the Head of Internal Audit, and approved the audit plan put forward by Internal Audit, which extends to examining the functional efficiency and efficacy of the internal control system and our compliance organization.
At its meeting on March 2, 2015, attended by the auditor, the Audit Committee discussed the annual and consolidated financial statements for fiscal 2014, including the audit reports, the associated proposal for appropriation of profits, and the risk report. It submitted to the Supervisory Board corresponding proposals for resolution by the Annual General Meeting. The Committee further made its recommendation to the Supervisory Board regarding the latter’s proposal for resolution by the Annual General Meeting relating to the appointment of the external auditor for fiscal 2015. A declaration from the auditor asserting its independence was again duly received, accompanied by details pertaining to non-audit services rendered in fiscal 2014 and those envisioned for fiscal 2015. There was no evidence of any bias or partiality on the part of the auditor. As in previous years, other members of the Supervisory Board also took part as guests in this specifically accounting-related meeting of the Audit Committee.
The Supervisory Board again dealt with questions of corporate governance in fiscal 2014. Details on Henkel’s corporate governance can be found in the corporate governance report, with which we fully acquiesce.
At our meeting on March 2, 2015, we discussed and approved the joint Declaration of Compliance of the Management Board, the Shareholders’ Committee and the Supervisory Board with respect to the German Corporate Governance Code (DCGK) for 2015. The full wording of the current and previous declarations of compliance can be found on the company website.
The annual financial statements and management report of Henkel AG & Co. KGaA have been prepared by the Management Board in accordance with the provisions of the German Commercial Code [HGB]. The consolidated financial statements and the Group management report have been prepared by the Management Board in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU), and in accordance with the supplementary German statutory provisions pursuant to Section 315a (1) HGB. The consolidated financial statements in their present form exempt us from the requirement to prepare consolidated financial statements in accordance with German law.
The auditor appointed for 2014 by the last Annual General Meeting – KPMG – has examined the 2014 annual financial statements of Henkel AG & Co. KGaA and the 2014 consolidated financial statements, including the management reports. KPMG conducted the audit in accordance with Section 317 HGB and the German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany), and in supplementary compliance with International Standards on Auditing (ISA). The annual financial statements and the consolidated financial statements were certified without qualification.
KPMG reports that the annual financial statements give a true and fair view of the net assets and financial position of Henkel AG & Co. KGaA on December 31, 2014, as well as the results of operations for the fiscal year ended on this date, in accordance with German generally accepted accounting principles. The consolidated financial statements give a true and fair view of the net assets and financial position of Henkel Group on December 31, 2014, as well as the results of operations for the fiscal year ended on this date, in compliance with International Financial Reporting Standards as endorsed by the EU and the supplementary German statutes pursuant to Section 315a (1) HGB.
The annual financial statements and management report, consolidated financial statements and Group management report, the audit reports of KPMG and the recommendations by the Management Board for the appropriation of the profit made by Henkel AG & Co. KGaA were presented in good time to all members of the Supervisory Board. We examined these documents and discussed them at our meeting of March 2, 2015. This was attended by the auditor, which reported on its main audit findings. We received the audit reports and declared our acquiescence therewith. The Chair of the Audit Committee provided the plenary session of the Supervisory Board with a detailed account of the treatment of the annual and the consolidated financial statements by the Audit Committee. Having received the final results of the review conducted by the Audit Committee and concluded our own examination, we see no reason for objection to the aforementioned documents. We have agreed to the results of the audit. The assessment by the Management Board of the position of the company and the Group coincides with our own appraisal. At our meeting of March 2, 2015, we concurred with the recommendations of the Audit Committee and therefore approved the annual financial statements, the consolidated financial statements and the management reports as prepared by the Management Board.
Additionally, we discussed and approved the proposal by the Management Board to pay out of the unappropriated profit of Henkel AG & Co. KGaA a dividend of 1.29 euros per ordinary share and of 1.31 euros per preferred share, and to carry the remainder and the amount attributable to the treasury shares held by the company at the time of the Annual General Meeting forward to the following year. This proposal takes into account the financial and earnings position of the company, its medium-term financial and investment planning, and the interests of our shareholders.
In our meeting on March 2, 2015, we also ratified our proposal for resolution by the Annual General Meeting relating to the appointment of the external auditor for the next fiscal year, based on the recommendations of the Audit Committee.
Risk management issues were examined not only by the Audit Committee but also the plenary Supervisory Board, with emphasis on the risk management system in place at Henkel and any major individual risks of which we needed to be notified. There were no identifiable risks that might jeopardize the continued existence of the corporation as a going concern. The structure and function of the risk early warning system were also integral to the audit performed by KPMG, which found no cause for reservation. It is our considered opinion that the risk management system corresponds to the statutory requirements and is fit for the purpose of early identification of developments that could endanger the continuation of the corporation as a going concern.
There were no changes in the Supervisory Board or Management Board in the year under review.
The year ahead will again present challenges to all of our employees and our management. Based on what we have achieved, Henkel is well equipped for these challenges, and we are confident that we will reach our goals.
We thank you for your ongoing trust and support.
Düsseldorf, March 2, 2015
On behalf of the Supervisory Board
Dr. Simone Bagel-Trah