Transforming for Sustainable Profitable Growth

Analyst and Investor Meeting St. PetersburgNovember 8, 2006

Alois Linder

Consumer and CraftsmenAdhesives

This information contains forward-looking statements which are based on current estimates and assumptions made by the corporate management of Henkel KGaA. Statements with respect to the future are characterized by the use of words such as “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, and similar terms. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and results actually achieved by Henkel KGaA and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel's control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace. Henkel neither plans nor undertakes to update any forward-looking statements.

Disclaimer

1. Business Status

2. Business Transformation

3. Market and Competition

4. Strategy: Sustainable Profitable Growth

Quality with Brands & Technologies

HomeCare

Adhesives, Sealants &Surface Treatment

PersonalCare

Consumer& Craftsmen

Industry

Consumer and Craftsmen Adhesiveswithin Henkel

Sales share 2005 EBIT share 2005

15%

85%

Otherbusinesssectors

Consumerand CraftsmenAdhesives

14%

86%

Otherbusinesssectors

Consumerand CraftsmenAdhesives

Consumer and Craftsmen Adhesiveswithin Henkel

66

DIY ProfessionalHousehold/Office

Renovation

Repairing, Mounting

Professional skills and education

Intensive usage

Small repair jobs

Handcrafts

8% of Market22% of Sales

14% of Market26% of Sales

78% of Market 52% of Sales

User Groups

Cyanoacrylates

Adhesive Tapes(Mounting tapes, repair tapes, masking tapes, film tapes, packaging tapes)

Paper Glues/ Correction(Glue sticks & rollers,all-purpose glues,correction products,handcraft products)

(Super glues,special glues,repairing products)

Product Categories: Household/Office

Renovation/Decoration(Wallpaper paste,wall covering adhesives,fillers, paint strippers)

(Construction adhesives,contact adhesives,wood glues,pipe adhesives)

(Sealants,PU-foams)

Sealants

Strong Bonding Adhesives

Product Categories: DIY

Product Categories: ProfessionalBuilding Adhesives

TlLE LAYINGSYSTEMS

WATERPROOFINGSYSTEMS

Product Categories: ProfessionalBuilding Adhesives

EXTERNAL INSULATIONFACADE SYSTEMS

FLOOR LAYINGSYSTEMS

International Power Brands

Biggest brands: Ceresit (215 mill. €) and Pritt (130 mill. €)Fastest growing brands: Ceresit, Pattex

For Household/Office

For DIY

We provide all relevant adhesives and sealants solutions

used in and around the house.

For Professional

Unique Selling Proposition

Central Train Station Berlin

Major Building Projects: Germany

Major Building Projects: UAE

Burj Al Arab Hotel Dubai

Major Building Projects: Russia

Winter Palace St. Petersburg

1. Business Status

2. Business Transformation

3. Market and Competition

4. Strategy: Sustainable Profitable Growth

Exploit growth potential in Professional

Participate in market consolidation

Participate in growth of emerging markets

Benefit from growth in bigger categories

Growth Opportunities

Transformation for Profitable Growth started

Status 2002

Transformation Progress

Focus on product groups with big market & growth potential

Sealants

Innovation and rollout new markets

Sales doubled in 2002-2006 period (primarily organic)

Strong Bonding Adhesives

Building Adhesives

World no. 1 branded sealants

1. Intensify Growth: Product Groups

Western Europe

North America

Asia/Pacific

Latin America

Africa/MEEastern Europe

Western Europe

North America

Asia/Pacific

Latin America

Africa/MEEastern Europe10%

53%

2%

4%8%8%

23%

15%

43%6%

9%9%

24%

3%

Sales 2001: 1.3 bn. € Sales 2005: 1.7 bn. €

Transformation Progress

Emerging markets sales share significantly increased

1. Intensify Growth: Regions

Enter & invest in growth regions

Transformation Progress

Share of Professional as core target group significantly increased

Household/Office

52%

22%22%

26%

Professional

Household/Office

31%

35%35%

34%

DIY Professional DIY

1. Intensify Growth: User Groups

Focus on most important user group: Professional

Sales 2001: 1.3 bn. € Sales 2005: 1.7 bn. €

2. Broaden Solutions Offer

Broader product offer for DIY and Professional

Continuous stream of innovations with technological superiority

Focus on system solutions for Professional

Transformation Progress

Become preferred supplier of all relevant adhesives & sealants solutions

Various add-on acquisitions(covering regional white spots and new technologies)

3. Dual Growth Strategy

Accelerated organic growth (4% in 2002 and 2003, 5% in 2004 and 2005, 8% in 1-9/2006)

Transformation Progress

Business growth from 1.3 bn. € in 2002 towards ~ 2 bn. € in 2006

1,742

2001

EBIT Margin 10.6% 10.7% 12.0% 11.7% 10.6%

Sales mill. €

EBIT mill. €

185169

158

140135

1,317 1,3131,275

2002 2003 2004 2005

Financial Achievements: Sales and EBIT

1,446

CAGR = 8.1%

CAGR = 8.2%

Strong sales and EBIT development

Business transformation in progress

Product portfolio: Better balanced & positioned in growing market segments

Regional portfolio:Better balanced & positioned in growth regions

Professional user focus: More consequent with dedicated local organizations

Overproportional growth and strategic positions in big markets

New business platforms established for sustainable profitable growth

Achievements Business Transformation

1. Business Status

2. Business Transformation

3. Market and Competition

4. Strategy: Sustainable Profitable Growth

World Markets Adhesives, Sealants andSurface Treatment

Consumer and Craftsmen Adhesives

15 bn. €

Industrial Adhesives

22 bn. €

World Core Market: 37 bn. €

Consumer and Craftsmen Adhesives

New business orientation increases market scope to an extended Relevant World Market of 28 bn. €

Weber Building Solutions

Sto

BASF Construction (PCI)

Henkel

Mapei

RPM (DAP, Tremco, Ilbruck)

Sika

3M

Bostik

Ardex (incl. Lugato)

1,742 mill. €

Market Size = 28 bn. € Annual Growth Rate = 3%

Top 10 Competitors

Fragmented and locally/regionally structured competition

No competitor with comparably broad portfolio(product, technology, regional)

International competitors only in selective segments*

Consolidation trend

Structure of Competition

*3M, Sika

No. 1 in Europe

No. 1 in Africa/ME

No. 5 in Asia/PacificNo. 1 in Latin America

No. 1 worldwide

No. 2 in North America

Leading Market Positions

1. Business Status

2. Business Transformation

3. Market and Competition

4. Strategy: Sustainable Profitable Growth

As a world market leader we are recognized to provide

all relevant adhesives and sealants solutionsused in and around the house.

Vision

Strengths & Capabilities

Sales Capabilities

TechnologyPlatforms

CompletePortfolio

Global Scale

International Power Brands

MarketingExpertise

Strengths

Active Portfolio Management

Innovation Leadership

Focused Regional Expansion

Focused User Group Expansion

Margin Improvement

Strategy: Sustainable Profitable Growth

Africa/ME: Intensified expansion in North Africa & Gulf Region

Latin America: Expand around two hubs Mexico and Brazil

Eastern Europe: Continue Go East-strategy

Asia/Pacific: Selective focus on local markets with high potential

Leverage existing strengths and exploit market opportunities

Focused Regional Expansion

Example Eastern Europe: Successful Go East-strategy since 2001

Focused Regional Expansion

Sales EBIT

CAGR: + 20%CAGR: + 21%

Lower dependence on international mega retailers

User group with biggest potential

Starting point to enter emerging markets

Basis for cascading to future DIY business

Source of technical innovations

Sustainable, healthy profit marginsMarket size 2005: 22 bn. €

Focused User Group Expansion: Professional

Solutions for Professional

Example: New Chemical Anchoring

Broader product offer/assortment for Professional

Safe, professional fixing solutions for heavy objects on any building substrate

Theoretical

Practical

Customer Bond!

Marketing/Sales Tools for Professional

Example: Trainings/Academy

Emerging Markets

Business Models for Professional

Early market entry

Build business with competent local partner

Focus on modern building adhesives from own local production

Convert local market to modern products/technologies

Extend to other categories

Standardized and repeatable

Successful Market Entry Model(Example Eastern Europe)

Mature Markets

Business Models for Professional

System Management for Advanced Building Projects(Example Germany)

Henkel is the only provider of all relevant adhesives & sealants solutions

- even for major building projects

Complete and harmonized system solutions

Modern Strong Bonding Adhesives

Sealants

Cyanoacrylates

Building Adhesives

Active Portfolio Management

Primary Resource Allocation on:

Active Portfolio Management

Strong Bonding Building AdhesivesSealants

MakroflexLucky SiliconeSoliplast

AlbaResistol

OSIChemofast

PolybitFester

Cimsec

…supported by targeted acquisitions of the last years

With already undisputed world market leadershipin Cyanoacrylates

New Innovation Strategy, Process & Tools

Focus on fewer & bigger projects

New structured innovation process

Cooperation with external partners (suppliers, universities)

User observations and Lead User initiative

Common platforms with Henkel Technologies

Innovation Leadership

Shock proof: Resists heavy impactand vibrations

Superior strength vs. competition

Loctite Super GlueControl Liquid

The strongest consumer super glue

in the market!

Innovation: Strength / Performance

Universal use on different materials

30% lower weightExcellent, flexible application

Up to 90% less dust Ceresit

CM 90 EasyFlex PLUSThe first dust-reduced

tile adhesive!

Innovation: Convenience

Pattex PL 700

Innovation: Universality / Multi-Purpose

Henkel Patented InnovationUniversal Adhesion (even on wet surfaces)High Initial Tack High and Flexible Final Strength

New Generation of High Performance

Construction Adhesives with Sealing Properties

Moisture and mould protectionCertified and modular system

Energy saving sealing system

Certified globalwindow insulation system solution!

WINTeQ System

Innovation: Environment / Energy

Margin Improvement

Further Cost of Goods improvement and complexity reduction

Saving potentials in purchasingProduct harmonization (packaging, formulation)

Production network focused on core competencies

Outsourcing of non-strategic activitiesPlant focus on core competencies

Ongoing improvement fixed cost structures

Optimization of processes and systemsStreamlining of central and local structures

Margin Improvement

Margin focused portfolio management

Focus on innovations with price premiumFocus on higher margin products

Economies of scale

Superior growth ratesGlobal presence

Continued price increases

Repeatable business models

Improved business steering based on three user groups: Household/Office, DIY, Professional

Portfolio reflecting market potential (user groups, products, and regions)

Innovative system solutions and concepts

Global scale: international presence with leading positions

Superior organic growth opportunities

Summary

Well prepared for further profitable growth