Good morning, and welcome to Hankoe Half Year 2020 Results Conference Call. With us today are Castan Knobu CEO, Markus Swoboda, CFO and the Investor Relations team. For the duration of the call, you will be on listen only. Please note that there will be a live webcast of today's conference call, including the Q and A session. In addition, a replay of the conference call in the Q and A session will be available on our website www.heankle.com /ir for a certain period of time.
By asking a question during the Q And A session, you agree to both the live broadcast casting as well as the recording of your question, including Salitation to be published on our website. Here, we will briefly mention your name, and the company you are representing. At this time, I'd like to turn the call over to Mr. Knobel. Please go ahead, sir.
The investors and analysts. Good morning from this field off and welcome to our conference call. On the first half year of twenty twenty. Thank you for joining us. I hope that you and your loved ones are really doing well, no matter where you are in the world.
I'm joined today by Marco, our Chief Financial Officer. Good morning. Before we start, Let me begin this call, reminding everyone that this presentation, which contains the usual former disclaimer to forward looking statements within the meaning of relevant U. S. Legislation, can be accessed via our website at hankl.com/ir.
The presentation and discussion are conducted subject to this disclaimer will not read the disclaimer, but we take it as read into the records for the purpose of this conference call. What's on our agenda today? 1st, I'm going to lead you through the key developments in the first half of this event full year and the progress update on where we stand in executing our purposeful growth agenda. Then, Marco will comment the detailed financials for the first half of the year. And after the presentation, we are looking forward to answering your questions.
The COVID-nineteen, the global COVID-nineteen pandemic and its implication on economies and societies across the globe have affected our businesses with full force. While we delivered an almost flat top line development in the first quarter of 2020, the impact of lockdown measures in key markets and at times sharp declines in industrial demand impacted our sales and earnings performance, especially in the second quarter. From the very beginning, the health, safety and the well-being of our employees was our highest priority. Thanks to our effective crisis management approach, the strong commitment of our teams and the breadth of our portfolio we could balance the overall effects on the group. All countries, business units and functions quickly adapted to new market realities and derived at new levels of speed and efficiency.
As one team, we realized group sales in the 1st 6 months that amounted to 1,000,000,000 despite the disruptive environment, nominally 6% below the prior year period. Organically minus 5.2 percent, with a differentiated development by business unit. Adhesive Technologies experienced strong headwinds from significant drops in industrial and automotive production and shutdowns of many customer production sites globally, especially in the second quarter. For Beauty Care, the Hair Professional business was hit by salon closures in key markets. The retail business experienced both positive and negative effects depending on the categories overall coming in almost stable in terms of top line.
And Laundry And Home Care sustained very strong broad based sales growth in the first half. Nevertheless, We are not blind of our weak market share development in North America. These are extremely challenging times. For our employees, our customers and consumers and our business partners. They require solidarity, team spirit, resilience and courage and not least entrepreneurial thinking.
I am convinced that the actions we have taken to respond to today's challenges will help us to emerge stronger from the crisis. We have a rock solid foundation to rely on including low debt levels and have shown resilience when it comes to cash flow performance. We did not ask for state support neither did we send our employees on short term work. We paid out a dividend on prior year level, and we can build on our purposeful growth agenda which is confirmed by the current environment. And I will give you a detailed run through that a little bit later.
Looking into the reminder of the year, Our business environment remains volatile and uncertain regarding the further development of the COVID-nineteen pandemic and its impact on global economy. In many parts of the world that already experienced the 1st wave of infections, we see numbers rising again. As per today, we cannot predict our full year performance with sufficient reliability. Thus, we continue to not provide a forecast for the full year 2020 at this point of time. Let me elaborate a little bit more on our business environment in light of the COVID-nineteen.
In the first quarter, governmental lockdown decisions in China caused production in many industries to stop and shops to close for some time. Demand dropped significantly in the region. Since March, the global spread of the pandemic affected us in most of our key markets with a more pronounced picture in the second quarter. The second quarter was thus clearly more demanding from a business environment perspective. As evidenced by the development of the global industrial production index, and the changes in consumer behavior triggered by the COVID-nineteen outbreak and governmental restrictions implemented in response.
COVID impacts on each country's economy and society differ in timing and intensity, as you can see on the governmental lockdown heat map, on the right side of this chart. However, all regions with a few country exceptions were strongly affected by the pandemic experiencing substantial declines in GDP and consumer demand. In addition, we observed sometimes significant changes in consumer behavior with different impacts from category to category. For us at Henkel, headwinds from COVID-nineteen on our businesses and sales peaked in April May. Hydrogen restrictions and lockdown measures are being lifted in many countries, and we are seeing gradual recovery trends in June and also in July.
Nevertheless, the overall situation remains uncertain and volatile. Thanks to our broad based portfolio and our immediate global crisis management, we mitigated overall impacts on our performance. Individual developments of our businesses, however, varied considerably, driven by disruptive industrial and consumer demand changes and the pandemic. This is why I would like to give you some additional insights focusing on developments in the second quarter, which provide a clearer picture on the COVID-nineteen impacts. Our industrial business was facing strong headwinds.
The automotive business area was hit hardest, as a consequence of production shutdowns in many countries. Also, the other adhesive businesses faced significant headwinds from pandemic related production shutdowns. The comparably smaller part of our overall Adhesive Technologies portfolio was largely unaffected such as our Adhesives for consumer goods business, that in parts even experienced higher demand such as for tissues. Our Hair Professional business has been confronted with very significant pressure from enforced hair salon closures in key regions and countries. In turn, we could capture increased demand for at home colorations.
Landry Care overall was influenced to a comparably lesser extent by the pandemic. Besides some pantry loading and de loading effects in certain weeks, we saw a strong performance in heavy duty detergents, while some other laundry care segments like battery detergents or laundry sheets have been negatively impacted by COVID-nineteen due to a shift in consumer focus. Our more hygiene related categories, on the other hand, experienced some tailwind from higher demand due to increased consumer awareness for health and hygiene. Particularly in the soap segment and for, automotive, this end examples for surface cleaners. Furthermore, with people staying and cooking more at home, categories such as automated dishwashing saw strong results.
In contrast, social distancing negatively affected the styling category. From a channel perspective, COVID-nineteen for sure accelerated the shift to e Commerce. And it is offering emerging opportunities from stronger hygiene demand which we are capturing with targeted offerings and a step up in communication. And I will get to that into more detail later. I would look like to use this opportunity to thank all our 52,000 Henkel honors for their dedication and commitment.
And I would like to thank my board colleagues and the global and regional crisis teams for their tiles efforts to protect the health the safety and the well-being of every single employee. Thanks to their strong commitment, we managed to safeguard jobs and compensation launched an extensive global solidarity program and navigated our businesses successfully through this crisis. I am proud to see Our people are in home office, which is working extraordinarily well, supported by a strong digital workplace concept. Depending on the situation in individual countries, they are gradually returning on-site. Under the highest hygiene and safety measures, operations continued worldwide to supply our customers and consumers.
As already outlined in our Q1 call, Most of our sites remained operational through the first quarter. By the end of March, 90% of our production sites were running. Since the teams managed to reopen the remaining production sites with the last ones resuming production by Mitchell. As a company as a company with a longstanding tradition as a family business, it is our responsibility to make a contribution to fighting this global crisis. With the launch of our global solidarity program, we engaged in financial aid product donations and the production of disinfectants at our sites.
So far, we supported 470 COVID-nineteen related projects in 40 three countries benefiting almost 5,000,000 affected people. This did not come for free. We incurred about 1,000,000 additional costs to manage the situation, for example, for protective equipment or donations. While we are managing short term challenges exceptionally well, we have kept side of the medium and the long term shaping the company to build on our purposeful growth framework. The last 5 months have shown that we set the right priorities with our new strategic framework.
And we started to successfully drive future oriented initiatives along the 6 pillars. For the winning portfolio, competitive edge, future ready operating models and a collaborative culture with empowered people at the heart, we want to build on differentiate ourselves as a leader in sustainability and develop our people to grow So our commitments stay unchanged, including our first set of actions we defined as a starting point of our journey. Overall, we are well on track in executing the targeted measures. In summary, we have to adapt to the current situation, but at the same time, we are also able to leverage emerging opportunities to drive on our key milestones and the achievements. Regularly shape a winning portfolio, we identified brands and categories with a total sales volume of more than 1,000,000,000, predominantly in our consumer businesses and marked half of this amount for divestment or discontinuation by the end of 2021.
We are fully committed to execute the announced portfolio measures with a sales volume of around 1,000,000 in the first half of the year. The majority of these sales were coming from Adhesive Technologies with businesses that were not part of There are small discontinuations up to now. In the current environment, we have mostly focused on setting up divestment processes to be ready when markets come back. M and A is an integral part of our portfolio strategy. In the past days, we signed 2 compelling acquisitions, In total, we invest about 1,000,000,000 utilizing our strong balance sheet.
We signed an agreement to acquire a 75% stake in a Beauty Care business comprising 3 fast growing premium direct to consumer brands. Hello, buddy, well known for premium skin, body and hair care products, Mermaid and me, strongly positioned with its premium hair care products and banana beauty, a front runner for decorative cosmetics such as lipsticks and eyeliners. All three brands excite more than 1,500,000 active consumers and in the last 12 months, the business has generated sales of around 1,000,000. Adding strong digital capabilities and unique brand building expertise, the acquisition is a clear strategic fit. We increased the scale of our D2C activities and advanced our 1 to 1 consumer interactions.
Hence, we strengthened our competitive edge in the Beauty Care market. We signed a second agreement to acquire a portfolio of attractive consumer sealant products highly complementary to our existing portfolio to strategically strengthen our Adhesive Technologies business. The businesses market under the iconic GE Brand with focus on the North American market. It has an excellent and diversified distribution network, via home improvement centers, major retailers, hardware stores as well as professional outlets. In 2019, the business generated sales of around 1,000,000.
With this acquisition, adhesive technologies will broaden its position in the region expanding into silicon sealants. Today, as relevant as ever, it is critical to accelerate with impactful innovations to gain competitive edge. Let me deep dive into all three business units. In Adhesive Technologies, with a broad industry portfolio for ceiling and Imprison Technology Solutions. The joint collaboration was 1 of the major smartphone brands.
We launched a new product line to increase the water assistance high end smartphones. This is supporting a consumer trend where Henkel is best positioned to leverage innovative materials and processes across end markets and develop new market solutions for true wireless headphones, tablets and laptops. In Beauty Care, we continuously strive to leverage the key trends such as Nature And Sustainability. The recent launch of SIMPLE Color is a perfect example. The teams developed an innovation based on the natural trends in the more technological category of hair coloration for the U.
S. Market. Simply color does not contain ammonia, silicons or alcohol and comes with 100% recyclable packaging. And was awarded brand of the year 2020, helping accelerate market share gains in the U. S.
In Laundry And Home Care, I have highlighted in March how we intend to leverage the strategic CAP segment with targeted innovations. Under our iconic mega brand Persil we have introduced our breakthrough 4 in one disc in 2019. To build on their impact, we extended the successful range with targeted variance For example, Priscilla disc against bad or doors or our Oxy Disc variant in the U. S. Our strategy is proving successful.
Pursil disc are by now making up almost 10% of our overall Persil sales and have been winning global market share of roughly 500 basis points year over year, especially in our active markets market since. And we are confident that we will continue our growth story winning with consumer relevant innovations. To cater the needs of our consumers during the pandemic, we put increased focus on hygiene related products, across our consumer portfolios. Here, we were able to step up speed and agility to offer fast track innovations and convince with targeted communication campaigns. Let me stress 2 impressive beauty care examples: 1st, building On a strong brand equity promoting hand hygiene, our Beauty Care Brand Dial generated more than 25% organic sales growth in the first half year, and increasing penetration, reaching around 10,000,000 new household buyers.
For sure, we had a tailwind from increased consumer awareness for hand washing and hygiene, while we could also grow distribution and gain market shares. The new hand sanitizers from our brand far were born within 8 weeks from idea to launch. They are also solid, sold via new channels such as vending machines at the Dubai Airport and public places in the Middle East Africa region. Our laundry and home care teams quickly replied to the increased demand for hygiene, health and safety as well with the development, launch and the rollout of a strong power product pipeline covering disinfection, antibacterial and hygiene products. For example, the old purpose cleaner general disinfection in Egypt and Lebanon.
Or pril antibacterial that we will roll out in the Middle East Africa region in the third quarter. We are underlining our product performance stepping up our hygiene cleanness communication across the portfolio and relevant channels, including consumer education and support. An important element of our innovation strategy is to consistently support our innovations and brands with targeted investments in core categories and regions. For the year 2020, we aim to further step up our growth investments by 1,000,000 compared to 2019 or 1,000,000 compared to 2018. The 1st 6 months, despite the macroeconomic challenges, we kept this commitment and stepped up our growth investment in marketing digital and IT according to plan by a high double digit €1,000,000 amount, especially in Laundry And Home Care.
We decided to invest in impactful innovations such as the Persil 4 in one disc as well as our breath deluxe series with targeted campaigns. This translated into market share gains and an overall significant organic sales growth. In Beauty Care, we increased, for example, media support for iconic brand dial, which I mentioned already before. As part of a new campaign, we strengthened the core brand equity of caring for hands for over 70 years. In digital, we allocated additional investments among others to further enhance our digital infrastructure and the cyber security also in light of requirements from the COVID-nineteen pandemic.
Moving to sustainability to reinforce, our leadership in sustainability, we aspire to boost sustainability as a true differentiator. And we are making good progress. For example, in anchoring our new plastic strategy, all pre bottles in Europe are made of 100% recycled plastic and our new PREAL 5 plus actively contributes to less water and energy consumption with its innovative self degreasing action formula developed to replace the presoaking phase of dish washing. We further build on our pronator range by launching so mad and breath pronator. Available in 30 countries, all pronator products include up to 99.9% natural ingredients and up to 100% recycled plastic packaging.
The hand dishwash and trigger bottles are even made of 50% sotaglastic. Whilst on our Beauty Care business, Sustainability is a key part of the innovation strategy. The teams launched solid shampoo, body and face bars under both brands, NatureBox and NAR with 0 plastic. One shampoo bar, for example, equals the washing performance of 2 bottles of liquid at 250 milliliter each. A strong potential to have a lasting impact in the fight against plastic, which is highly valued by our customers.
In the first half year of twenty twenty, our Nature Brands were achieving mid double digit sales growth. Going forward, we will accelerate our activities to promote a circular economy with clear initiatives. We test iterate and scale future shaping projects such as refill stations for selected product categories to reduce packaging waste. We are not only doubling down on sustainability and operations and innovation, we are setting a benchmark also in financing. I am proud to say that has the 1st company globally Henkel concluded plastic waste reduction once.
The proceeds will be allocated specifically to projects and expenditures related to our activities to reduce plastic waste. Following the syndicated green loan, another proof of our ability to combine attractive corporate financing instrument with progress in sustainability. Adhesive Technology Sustainability is developing into a key differentiator in global competition. As a leader in adhesive sealants and functional coatings We are setting benchmarks and enable our industrial customers to achieve their sustainability targets with high impact solutions. Being a partner of choice for the packaging industry, we are actively supporting a circular economy by working closely with partners to develop sustainable yet functional solutions.
With Loctite Leofold, we introduced a certified recyclable heat and cold seal coating into the market which enables the replacement of polyethylene with paper suitable for a wide range of food and non food packaging. Here, we are setting new standards in terms of recyclability, food safety and flexibility and actively contribute to circular economy by enabling new packaging designs with our solutions. With our consumer centric co development approach, we successfully combined material expertise and engineering support and helped to shape the world's transition to a low carbon economy. The mass production of electrical vehicles is one of the biggest transformations for the automotive industry in this regard. As a strategic supplier and partner, we developed a silicon free liquid gap filler for battery packs.
Our solution is facilitating larger battery pack designs, improving reach, battery pack recycling and waste reduction. Finally, we launched our high impact bonderite hot ceiling additives, the cost effective anodizing solution, which enables doubling of the standard lifespan of sealed parts, an increase in the productivity of single step hot ceiling by more than 20% and the reduction of the makeup of the bath by 50% or more reducing the CO2 footprint. Moving on now to digital, where we are shifting up gears in the current environment, in the first half year, we recorded a strong increase in digital sales of more than 60% in Beauty Care And Laundry And Home Care Combined. For the group, the digital sale in overall sales is approaching now the mid teens, a strong progress. What are some of the driving forces?
Beauty Care, we are further leveraging EsoLONG. With consumers often unable to go to the hairdressers, orders of personalized hair coloration for home use significantly increased. 1st orders grew more than three times year over year. 1st plus repeated orders led to high double digit growth In June, the team extended Eso longed to male collaboration addressing a promising complementary target group. In a test and learn approach, we have also launched our 1st in house developed D2C retail platform, Swazgove and Friends, in only a few weeks from IDEA to launch.
Also in Laundry And Home Care, we achieved a very strong double digit e commerce growth. Accelerated by COVID, but also driven by increased investments. Our expanding e commerce ready product portfolio paired with our agile management and targeted channel investments with the right formula at the right time. Finally, We stepped up our activities in ECRM Consumer Relationship Management, boosting our 1 to 1 consumer relationships and realizing notable cross and upselling potential. ARC team, clean, is the 1st community on all laundry care and home care related topics in Germany and now also present in 7 additional markets in Eastern Europe via social media.
Let me also highlight that our new digital business setup is live, a real step change for us and a strategic game changer in the future. It is compromising our IT organization, business process experts and our former CDO organization. With this joint forces and unity of effort approach, combining our businesses functions and digital, we strive for a new level of digital expertise and exceptional impact in the future. I spent some time on our central 3 pillars of our strategic framework. Because in order to win the 20s through purposeful growth, we have to establish a unique position in our target markets and develop a competitive edge.
Nevertheless, future rating operating models across the company are ease of equal importance because they will determine our ability to execute what we intend to do. We successfully completed the operational model changes for Adhesive Technology business. In Laundry And Home Care And Beauty Care, we are well on track with a focus to empower the frontline and enhance regional focus to drive customer and consumer proximity and to benefit from leaner structures. And we completed the reorganization of our purchasing organization in order to enable an even successful transformation begins with a cultural transformation. And since the beginning of this year, we really accelerated our cultural journey with our leadership commitments at the core.
They were designed from employees for employees. This year, we took action, finalize the rollout and started to live up to them in a challenging environment. The crisis created a moment of truth for a greedy company culture. From the very beginning, Me, my board colleagues and our top leaders took actions. We stepped up our communication to our employees, for example, are video messages and virtual town halls and encouraged grassroots initiatives across the entire company.
We took important steps to support our community and affected business partners. We reconnected with our values and looked with pride at how every single employee responded. I was impressed to see that across all countries, levels, business units and functions, we revived our entrepreneurial spirit collaborated a strong teams with passion and owned our results. We aspire to shape a new and better normal and will leverage our learnings. This means to discover new ways to connect, understand the value of our ecosystem, and reach new levels of speed and efficiency.
Culture always mattered, but now it matters more than ever. We will continue our cultural journey with passion and commitment. Wrapping up. We have the right strategic framework in place. Successfully started our purposeful growth journey.
We started shaping our portfolio with divestments accounting for 1,000,000 sales and 2 value enhancing acquisitions for 1,000,000,000. We stepped up innovation with new approaches and impactful launches supported by increased investments. We understood the importance of catering, the increased hygiene and cleaning needs of consumers and will closely monitor and respond to market dynamics. We started to reinforce our leadership in sustainability, which is deeply rooted in our DNA and must become a strategic differentiator in the future. We achieved a strong increase in digital sales of more than 60% in our consumer businesses and on group level, a digital sales approach, a share in the mid teens.
Our new digital business set up is live and the execution of our operating model changes is completed or well on track. We finalized the rollout of our successful leadership commitments equipped to tackle arising challenges and realize cultural opportunities. Today, we are only 5 months in execution and we are already made strong progress. While I'm proud to see a powerful start to our journey, relentless execution of our defined measures incorporating our market realities remains key. This is our aspiration.
I'd now like to hand over to Marco, who will lead you through our financial performance in the 1st 6 months of the year in more detail.
Thank you very much, Carsten, and good morning, everyone. So good morning, everyone, also from my side. Let's, dive straight into the financials for the first half year. Organic sales development was negative at minus 5.2 percent over the 1st 6 months. This was, in particular, due to declining volumes at minus 4 point 4%.
Both adhesive Technologies and Beauty Care were heavily affected by the COVID-nineteen pandemic, and recorded volume reductions in the low double digit and high single digit percentage respectively. Longer And Home Care in contrast achieved a significant increase in volumes. Pricing was slightly negative at minus 0.8% on group level. This was driven by lower average pricing in our consumer goods business units. Adhesive Technologies showed a very resilient pricing performance and kept prices stable in a high demanding market environment.
The net effect of our acquisitions divestments had a positive impact on sales of plus 0.3%. Currency has had a negative effect of minus 1.1% and in total, Henkel recorded a decrease of 6% in nominal sales, to 1,000,000,000 in the first half of twenty twenty. Moving on now to the organic sales development by region. Overall, mature markets were negative with an organic sales development of minus 6.9%. Our businesses in the emerging markets at -2 point 6 percent were also lower than the prior year period.
Both North America and Western Europe were lower year on year by mid to high single digit percentage. This was due to a substantial decline in industrial demand and widespread shop closures. Caused by the governmental lockdown decisions in almost all countries of the regions, in particular, in the second quarter. Performance in Asia Pacific overall was negative at minus 6.4% due to significant and broad based decline in the region's emerging markets. In most countries outside China, the situation materially worsened in the second quarter.
In China though, we recorded good organic sales growth in Q2 after very weak Q1 triggered by the COVID-nineteen outbreak early in the year. The mature markets of Asia Pacific overall achieved positive organic sales growth in the first half of the year. Q2, however, was negative. At minus 11.4%, Latin America recorded the strongest region decline in Half Year 1, given the significant headwinds from COVID-nineteen and a relatively high share of adhesives and professional hair. In the Africa, Middle East and Eastern Europe regions, we achieved overall strong sales growth but also here, the development in the second quarter was much weaker compared to the first quarter.
Let's have a closer look at the quarterly sales trend. And that also gives you more color on the development over the two quarters. On Hanger Group level, sales declined organically by minus 9.4% in the 2nd quarter compared to normal table development of minus 0.9% in the first quarter. Both adhesive technologies and beauty care professional experienced unprecedented pressures on volumes as most countries were mandating public lockdowns as well as shop and production closures triggered by the COVID pandemic. In many cases, the restrictions were kept during or were only gradually lifted over the course of the second quarter.
As a result, adhesive technologies and Beauty Care posted a substantially more pronounced decline of minus 17.4% and minus 12.8% respectively in Q2 compared to Q1. Nevertheless, it is worth noting that those businesses affect it most by the pandemic, we recorded gradual recovery trends towards the end of the second quarter. Adhesive Technologies ended the quarter with a decline of around minus 10% in June. And professional hair closed the quarter down in the mid teens percent strongly improved compared to high and mid double digit declines in April and May. This gradual recovery continued in July.
Laundry And Home Care, on the other hand, sustained a very strong gain sales growth in the first half of twenty twenty. As long as this health crisis persists we will continue to constantly readjust and respond flexibly and swiftly to developments in our markets. We have been implementing concise operational measures and adapted to the local needs with high agility and supply chain and production. At the same time, and Carsten elaborated on this, We also focused on capturing opportunities triggered by changing market dynamics as well as demand and usage patterns. We also put strong focus on costs, and network and capital management.
In the first half, we realized short term savings of about EUR 70,000,000 while not compromising on our future growth. We can build on a strong financial foundation with continued low debt levels and our strong A rating, which was just reconfirmed We have sufficient financial flexibility and fast access to cable markets at attractive conditions. This is evidenced by our most recent bond placements, including our innovative plastic waste reduction bond, as mentioned by Carsten earlier. In addition, we have substantial short term flexibility in our financing in case we need it. With cash and cash equivalents of 1,000,000,000 undrawn credit lines and commercial paper facilities of about another 1000000000 and further headroom in our debt issuance program.
Also, our bulk maturity profile is very balanced. Let me provide more color on the half year performance of our business units now starting with Adhesive Technologies. Adhesive Technologies was strongly impacted by the COVID-nineteen pandemic, driven by significant declines in industrial and automotive reduction in the first half, the business unit recorded a negative organic sales growth of minus 10.9%. We faced an overall negative development of demand with sequential declines from the first to the second quarter. Within adhesive technologies, business areas were affected in different ways.
Automotive And Metals showed the strongest impact resulting from global production closures in the automotive industry. The crisis peaked at the end of March until end of April. While a slow recovery started thereafter. In China, however, our automotive end markets and metals business stabilized during the second quarter. Our business area packaging and consumer goods recorded an only modest impact from COVID-nineteen.
Within the business area, the consumer goods business developed positively, driven by organic growth in the second quarter. Within our electronics and industrials business area, the industrious business was particular impact by pandemic related production stops. Our electronics business in contrast recorded a positive development as a result of strong sales initiatives and pandemic related inventory buildup. Craftsman, construction and professional had an overall negative development in the first half year. In particular, our construction business could not continue its strong growth from the first quarter.
As a consequence of these trends, the business unit's organic sales development was driven significantly lower volumes at -11.1percent. Pricing was flat in the period under review with similar developments in the individual quarters. Given the current market environment, there's a very strong achievement. Thanks to the robust pricing and cost efficiency measures combined with a roughly neutral direct materials impact in the first half We were able to almost maintain our gross margin despite transactional currency headwinds. The adjusted EBIT margin of Adhesive Technologies nevertheless came in 500 basis points lower, closing the first half twenty twenty at 13.1%.
This was due to lower sales volume and a negative fixed cost absorption related to this. Networking capital increased slightly by 80 basis points to 14.4%, a very competitive level given the current market dynamics. The increase was to a large extent driven by low demand and subsequently high inventories in percent of sales. Beauty Care recorded 8.5% in the first half, in particular, driven by declining volumes. Average prices were slightly negative.
This development was driven by the Hair Professional business, which was significantly affected by governmentally enforced selling closures especially from March onwards. After the trough in April, we have seen the business recovering since May as more and more sell ins reopened and businesses and consumers got accustomed to the new hunch in restrictions. In retail, we recorded mixed developments. More than half of our relevant retail markets were negatively affected by the spread of the covered pandemic especially styling, deodorants, as well as skin and hair care. Despite these headwinds, organic sales development in our retail business was almost flat thanks to a strong performance in hair coloration and body care.
This was in particular due to an increased demand for at home coloration and hygiene related products as well as strong product launches and communication, which resulted in global market share gains in both categories. Our U. S. Brand dial with its antibacterial positioning recorded an exceptionally strong performance with organic sales growth of more than 25 percent in the first half year. Our retail business was able to gain market shares in North America Millis Africa and Eastern Europe.
Nevertheless, organic sales development in retail was negatively negative in Middle East, Africa, Eastern Europe and Western Europe in the first half. In contrast, we recorded double digit percent growth in North America and positive organic sales growth in Asia Pacific, mainly driven by China. Driven by online and direct consumer businesses, Beauty Care achieved a strong boost in digital sales by more than 70% with initiatives across both retail and professional. The adjusted EBIT margin came in at 9.4 percent, 4 ten basis points below the prior year period. The key driver of this development was a lower sales volume in professional hair.
With both gross margin and the share of fixed costs in this business structurally higher than in the retail business, the effect from lower sales volumes on profitability has been disproportionate. Some headwinds in direct material prices, unfavorable transactional currency effects and negative sales mix resulted in a declining gross margin. Networking capital improved to a level of 3.9 percent, 210 basis points lower compared to the end of Q2 2019. A good development, driven largely by improved accounts receivables, for example, in the Chinese retail business. The significant decline in Hair Professional sales volumes had a counteracting effect resulting in higher inventories in percent of lower sales.
Let's move to Laundry And Home Care now. The business unit achieved an overall very strong organic sales growth of 4.9 percent in the first half twenty twenty, predominantly driven by higher volumes, while pricing was negative. From a category point of view, Homecare was a key driver of this performance, showing a double digit organic sales growth. This was thanks to strong product launches, but for sure also benefiting from the increased demand for hygiene products. Worth noting that our core brands Pill, Breath, Somat, each recorded double digit growth.
LaundryCare recorded good organic sales growth. In particular driven by strong performance in heavy duty detergents. This was to a large extent due to the continued success of our mega brand, Persil, achieved a double digit organic sales growth, also thanks to strong demand for our new four in one discs. Laundryant Homecare has been growing organically in each region. Middle East Africa, Eastern Europe and Asia Pacific, We even recorded double digit organic sales growth.
Importantly, we were able to grow our market share in high growth regions as well as in Western Europe, within the especially strong performance in Eastern Europe. In North America, we recorded a positive organic sales growth in the first half. However, we continue to underperform and lose market share. While demand for our products was strong throughout the period, our regional product offering in home care and especially in bleaches, which is a key driver of market growth is low. In addition, we faced significant challenges in our US production network, and missed out growth opportunities.
We experienced extraordinary production downtime due in earthquake at our production site in Salt Lake City, as well as an extraordinary outage of our St. Louis plant. Availability of production capacity was also impacted by effects related to the intensified spread of the COVID-nineteen pandemic in the region, in particular, at our largest U. S. Production facility Bowling Green.
Meanwhile, production is almost back to normal levels. On a more positive note, London And Home Care delivered a very strong performance in the strategically important e commerce channel, with digital sales up in the mid double digit percent range. The business unit's adjusted EBIT margin came in at 15.3%, 160 basis points below the prior year period. Our gross margin improved slightly year over year. Here our continued focus on cost management compensated for still persisting headwinds from high direct material prices, transactional currency effects and negative pricing.
The main driver behind the decline in the margin were the high investments in marketing supporting the continued launch of our impactful innovations. Net working capital in percent of sales improved significantly by 350 basis points a level of minus 6.2 percent, a very strong performance, mainly driven by investments improvements in accounts receivables and accounts payable. Back to the Henkel Group, taking a closer look at the adjusted income statement. Henkel recorded an adjusted EBIT margin of 12.6 percent in the first half of twenty twenty, minus 3 seventy basis points year over year. Group adjusted gross margin at 46.4 percent was almost flat compared to prior year.
Most significant driver of the decline in the adjusted EBIT margin was an increase in marketing, selling and distribution expenses, both in absolute and relative terms. In percent of sales, they increased by 280 basis points to a level of 26.7%. About half of the relative increase is due to the lower sales level. The absolute increase is amongst others, a result of the step up of growth investments in marketing, digital NRT by high double digit €1,000,000 amount in the first half as well as higher transportation costs. R and D and administrative expenses in percent of sales also increased in the first half year, but 20.50 basis points, respectively.
The expenses in absolute terms did not materially change. Looking at the detailed bridge from reported to adjusted EBIT now. Our reported EBIT came in at 1,000,000,094000000, 27% lower the previous year. We record 1 time gains of 1,000,000 in the first half, one time charges of 21 1,000,000 mainly relate to the termination of a long term IT service contract. Restructuring charges amounted to 1,000,000 1,000,000 below the prior year period.
The main focus areas were on optimizing our structures and administration operations as well as our go to market models. Let's move further down the P and L. Adjusted EBIT totaled 1,000,000,000, 27.5 percent below the prior year figure. The financial result amounted to minus 1,000,000 in the period under review compared to minus 1,000,000 in H1 2019. Adjusted taxes on income amounted to minus 1,000,000.
This corresponds to an adjusted tax rate of 25.5 percent, 1.2 percentage points higher year on year. Adjusted net income after minorities amounted to 847,000,000 and this translates into adjusted earnings per preferred share of 1,000,000, down 29.2% compared to the first half twenty nineteen or at constant exchange rates minus 28.2 percent. Cash flow performance, and financial position for the first half On group level, the ratio of net working capital to sales reached 4.4%. A strong improvement of 230 basis points year over year, driven by our consumer businesses. We recorded a free cash flow of 1,000,000,000, only million 1,000,000 below the prior year, which was the highest half year free cash flow in Hanger's history.
Here, the impact from lower operating results was largely compensated by better working capital cash flow compared to H1 2019. In addition, we recorded positive effects from changes in pension obligations, which were about 1,000,000 higher than in the prior year period. As a result of our strong free cash flow, our net financial position improved by about 1,000,000 ending the half year at minus 1,000,000,000. This includes the cash impact resulting from the dividend payout to our shareholders of in total 1,000,000 in the second quarter. Moving on now to the full year outlook.
The further development of the COVID-nineteen pandemic as and its implications on economies and societies remain highly uncertain and are impossible to predict. Operations in China have normalizing in the situation Western Europe is improving. Many customer production sites have been coming back to operations. Hairsulins are adapting to the hygiene regulations, approaching more normal business levels. And also consumer demand started to normal many categories while high unemployment rates are weighing on spend levels.
However, globally infection rates continue to rise. In many key regions, public lockdowns continue or are further tightened. In other regions, they are being reintroduced to counter a second wave of infections. Against this uncertain macro environment, we continue to not provide a forecast for the full year 2020 at this point in time. Nevertheless, based on current market dynamics and assuming a continued recovery of industrial production and customer demand, From today's perspective, we expect that Henkel sales will continue to gradually recover in the third quarter.
And of course, as soon as it's possible to make a sufficiently reliable evaluation of Henkel's financial development in 2020, we will publish an outlook. With this, let me hand back to Carlson.
Thank you, Marco. Before we move on to the Q And A, I'd like to outline our key business priorities for the second half of twenty twenty and beyond. In this unprecedented crisis, we as a management for care and we act. Protecting the health safety and well-being of our employees, their families, our customers and strategic partners remains our highest strategic priority. With a broad set of support measures and the clear transparent communication, we collaborate closely with our customers and our business partners to market the challenges together.
We are capturing emerging opportunities with agility and with a strong entrepreneurial spirit. We are accelerating our digital transformation, further enhancing our digital capabilities and expanding digital sales across our all business units. Last but not least, we retain our strong focus on liquidity, while we continue to monitor and adequately manage cost working capital and CapEx. And finally, we continue to execute our strategic framework and constantly evolve it to shape our purposeful growth agenda. Let us now move to the Q And A.
We can extend this call a bit to make sure your questions are covered, but I wanted together with Marcos take the time to lead you through the results and the framework where we are standing. So with that, ladies and gentlemen, the floor is yours.
Thank you. Mr. Knobe, ladies and gentlemen, the question and answer session will be conducted electronically. We will take questions in the order received and will take as many as time permit please limit your questions to a maximum of 2 questions at a time. Our first question is coming from the line of Ian Simpson from Barclays.
Please go ahead.
Good morning, everyone. A couple of questions for me, please. Firstly, could you expand a bit what's going on with your China beauty business? You're talking about a very strong performance there. So the destocking issues are clearly now well behind you.
It'd be great if you could talk a bit about drivers of your acceleration in that market? And then secondly, can we dig into U. S. Laundry manufacturing a little So you had a period where on shelf availability was very poor, I'm guessing, has this now been resolved? Any delistings or similar reach issues as a result.
Just trying to gauge the likely pace of recovery in that business. Thank you very much.
Thank you. Ian, for your question and good morning, to your first question, to your China beauty 1. The positive performance in China is fueled by continuous growth in key accounts and in the e commerce channel, the challenging development in the offline distributor, Charlie, continued in the light of relatively slow consumer traffic. You know, I also mentioned that in the consumer businesses also in Beauty Care, we have grown our digital sales by more than 60% combined. And for sure also here the situation, what I described just before is for sure positively impacted by that.
So Henkel's China business is operating on a healthy P and L structure. The trade inventory has mostly normalized with some further improvement infected by the end of the year or to the end of the year. And I think that's also in line what we told you in last year where we said we have, yeah, I would say, cleared up most of the things in the year 2019 and only a few topics were remaining in 2020. And here we are well on track and working accordingly. That's, to your China question.
And then for sure, the U. S. Laundry, definitely for sure, is on your attention. But maybe to give you some more grants on that, Marco already alluded a little bit to that. But we recorded a positive organic sales growth in the first half year of laundry in North America.
However, we continue to underperform and we lose we lost market shares for two main reasons. The first one in terms of portfolio, while the demand of our product was strong, throughout the period, our regional product offering in home care and especially in bleachers, which is the key driver of the overall market growth in the current environment is low. And in addition, we faced significant challenges in our UHUS production network as Marco alluded, but I can for sure also go again into that. We experienced extraordinary production downtime due to an earthquake at our production site in Salt Lake City. As well as an extraordinary production down time at our St.
Louis plants. And in addition, the intensified spread of the COVID pandemic in the region aggravated the situation and in particular at our largest U. S. Production facility in Bowling Green. All these incidents impacted service levels and the availability of product, particularly in April, where the service level in May and especially in June recovered, thanks to the past implementation of countermeasures.
So today production is back more or less to normal. And it is worth highlighting that despite these effects, we have seen the situation that we could grow our market shares the strategic growth segment of the single unit doses product, which I also alluded, you know, I said about around 500 points of market share gains in that category. And with this, we are confident that we will be able to return to a more competitive development and now that these extraordinary production issues are behind us. And in June July, we have seen also first recoveries also on that.
Hope that's very clear. Glad to hear it's back on track. Thank you.
Thank you, Ian.
The next question is coming from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead.
Thank you. Good morning, Karsten. Good morning, Marco and good morning, Lars and team. Two questions please from my side. First of all, in Athesives, How has demand trended substantially through the quarter?
I know that Marco alluded to that, but also how has it trended into Q3? And can you also maybe highlight that per customer segment, I. E, automotive, construction, etcetera? And then in PewD, Is the hair salon business back on track, or are people still hesitant to see hair cut out due to hygiene reasons?
Christian, first, to the adhesive situation. As you said, I think, Michael, already gave some detailed explanations, but what we have seen is a gradual improvement. So the, as I said it in general, the peaks, the negative peaks were in April and in May, and we covered in June. And, also, as I said, it's, and AdelMarco repeated it also, also in July, we have seen, a recovery and a broad based recovery. That means in the segment in all the segments in which we are in which we are working.
And, I think that it's more in terms of trading, we can't give you for sure. We have not due to the fact that we run, we are not still able to make an outlook. Therefore, we said something also to July in order to give you more insights in terms of that July is regarding to all three businesses improving and that leads me to your second question where you wanted to have some more insights in the professional business. Also here, Marco told it that we had a minus 30% overall in a professional in the first half and after the tough situation in April, We have seen that the business was recovering since May and closing the quarter with the organic sales growth in the mid teens. However, the reopened Zalong often don't work at full capacity due to the hygiene restrictions.
We support they're come back with decisive measures such as hiding articles, products for speed services and targeted salon communication, but also here in July, we have seen a continuous improving situation in comparison to the situation in quarter and therefore an improving trend.
The next question is coming from the line of Richard Taylor from Morgan Stanley. Please go ahead.
Good morning, everyone. Thanks for the questions. It sounds like you're making some good progress. I was particularly interested to hear your comments, on cultural change. And I'd like to press you to be a little bit more specific on that.
I know you've admitted to some mistakes in the past. But what specifically needed to change culturally as an organization is this about getting away from a cost savings mindset to a growth mindset? That's my first question. I've got a really quick one, a housekeeping one. You often call out the IPX index for adhesives.
If you could give us your current reading on that, that would be great. And then finally, I'd like to hear a little bit more about what you're doing differently in digital. We've heard quite a lot over the last 5 years about investments in at all. But any details you could give us, that you're doing differently, not so much on commerce, but sort of digital end to end would be really helpful. Thank you.
Yes, Richard. Let me start with your last question with the digital part. I think, the digital part has different areas which we are touching. The first thing I think you see that from an innovation point of view and tackling consumer changes and consumer behavior, I think at the end, the numbers speak for themselves, yes, we know that we need to accelerate in the area of digital in all our areas. I think in adhesives, we have built a great e commerce platform in order to distribute our products and in laundry and beauty, we are accelerating.
And I think this you can see, if you look at the first half year results with more than 60% increasing sales growth in both dimensions, which is definitely and therefore I tried also to be a little bit more specific. In example, it's, during the presentation, which we have given. And this also leads then in total that, for the Henkel Group, we are approaching really total in relation to total sales, the mid teens area, which I think is a clear sign of, yeah, further improving, but also that our measures are getting also into execution. And the other part is also related with the launch of our digital business set up DX creating the next. I think combining the different areas in business in IT in business process, owner organization.
These are the things, which will definitely help us to further improve. And, yeah, I would say that for the digital part, I will now let Marco explain a little bit the IPX part before I then come back to your question of the well, your first question of the Keiser. Michael?
Sure. Richard, to your question on IPX. IPX is obviously the industrial production index that we also use as a macro indicator, that is particularly relevant for our thesis business. And what has been recorded on the IPX, in the first quarter, more the beginning of the year was a decline of 3.4% And in Q2, that decline has substantially intensified with minus 13% for the full quarter too. Now what we also have seen over the course of the second quarter is that all the forecasts on the quarter and also the full year has periodically been taken down.
So also here. The trend in the overall market, here, we have also seen in the IPX development, each update came in lower. However, we have seen now since the last, updates that also here on the IP exit downturn trend has stopped actually and we saw even a slight upward revision of full year outlook on the indicated. So now what the latest version actually says is that the Q3 is forecasted with a minus 6.9% and the Q4 with a minus 3.8%. So that on the full year, the industrial production is declining by 7.7%.
Now that's the latest version. In particular importance. Also, our, light, our automotive segment and here, the light vehicle production index is of importance here. The index recorded, a decline of 47% in the second quarter. And also here, like overall, improvements are forecasted.
So Q3 minus 12%, Q4 minus 9.8%. So you see all the forecasts assume recovery over the quarters through end of the year.
Thank you, Marco. And, Richard, to your first one, the cultural, that is for sure something which could take now, some minutes, but, I tried to be, condensed on that. You know, the cultural part is for sure highly linked also with our purposeful growth agenda. So putting growth into the focus means that we are striving really to have an innovation focus versus a pure cost focus. I think that's something the efficiency part has been driven over the last couple of years quite positively in our organization and in our company, but to find the balance and putting now the innovation focus more is something which we would like also to incorporate in our culture.
And that means also empowering more the front line is also reflected in changes in our business models, which we have described also last time when it comes to in the region for the region and empower that, but also more entrepreneurial thinking, really that trial and error is something which we need because for sure not every project which you will do will be a success but we need also to have a cultural approach which is also I would say fostering that instead of the safe bets, which you can always do. And transparency and communication internally, but also to you externally into the capital markets. Therefore, I think it also took a little bit longer today because we want to share openly what is going well and what is not going. In the right direction. And this is something which definitely will impact our culture.
This will not change from today to tomorrow. That will take time. We take and we have this time, to develop that and especially also within that COVID crisis. And I was alluding to that that has also tremendously helped in terms of bonding the organization, bonding our people together and creating really a new spirit which is helping us to maneuver through this crisis, but even to get stronger out of this crisis.
Coming from the line of Celine Panulty from JP Morgan. Please go ahead.
Good morning, everyone. So my first question is on Adhesives Technology. You said that gross margin was roughly flat and all of the margin pressure came from lower fixed cost absorption. Yet I see that your performance is much worse than some of your peers. So Could you try to explain why that is?
And should we expect some of those negative hedge to continue to weigh on the second half margin performance for you? And the second one is on gross margin and raw material outlook. If you could give us a bit of a still what happened in terms of raw material inflation in H1 and what you expect in H2?
Celine, before Marco gives you a somewhat glance on your question detailed question in terms of fixed costs and the gross margin, raw materials, I am not sharing, your view that, our adhesives performance is worse than competition because, I think it's related to the point We are, across all categories, in adhesives, existing. And if we compare our performance on a really category basis, is to individual peers who are working on that. I think we are well positioned and we are also performing from a top line perspective definitely okay. But maybe, Marco, you'll give some more
My question was more margin not on top line.
Ah, okay.
Good. So on the margin, very clear, I mean, we have seen mainly effects from lower fixed cost absorption and for sure also the business mix plays a certain role and that at the end was driving then also the margin reduction. We had some flight investments for sure also in IT that we had outlined in our strategy beginning of the year. So part of that also was anticipated also in our prior guidance beginning of the year. If you go back to what we published basically in March, But on top, it's really main effect coming from the lower volume and also mix that we have seen.
So on the raw materials, for the full year, we do expect raw materials market volatility to remain extremely high due to the significant uncertainty also related to COVID-nineteen. However, overall, we anticipate a tailwind in the second half of the year resulting finally in stable direct material prices for the full year 2020. We do not yet provide the guidance by business unit, but that's the overall trend that we see in the raw material markets and especially for the second half of the year.
Thank you. Just a follow-up. You mentioned that you made, I think, 1,000,000 of savings. Were those helping at all the adhesive margin?
To some part for sure, that also benefited the adhesive margin. Because we have seen that across the board.
We will now take our last question from Guillaume Perumas from UBS.
Good morning, Gaston, good morning, Mark. A couple of questions for me. The first one on Adhesive and particularly mobility, because mobility was 1 of the 3 megatrend you listed last year in Dusseldorf as providing a natural tailwind. To the Adhesive business. Now with COVID-nineteen, there's clearly a structural challenge to this megatrend for at least the next 12, maybe 24 months So wondering, how do you adapt to this from a cost standpoint, also trying to mitigate the negative mix effect you may see at the gross margin level?
And maybe also if you could remind us, how much of your adhesive business is affected by this constrained mobility. I mean, I would assume 20% to 25% of your adhesive business. And then my second question, going back to, U. S. Landry, I mean, I understand you had some supply issues in the quarter.
But what we're also hearing from your competitors this year is that particularly in the U. S. Leading brands seems to be disproportionately gaining shares. Driven by consumer preference, driven by retailers simplifying their assortment. So is it something you would agree with And if so, are you already seeing some signs of normalization?
Thank you.
To your first question, regarding the mobility topic. So overall, our automotive business faced impact for sure, of a slightly lower magnitude since our business with auto suppliers in Europe and North America was continuing in Q1. Slightly longer than the OEM business as suppliers partly shut down at a later point in time. On the other side, on a positive note, we have one business in the field of electrification of the powertrain of electrical vehicles So therefore, I think for sure we will also adapt our structures, which is your other part of the question for sure going forward if the things are not coming back or if the trends of change will accelerate. So over and overall, the part is the what is the impact?
The impact is a 20% of the Adhesives business is related to, to Automotive and this sector. And the second part of the question, Guido, maybe you need to repeat it because I'm not 100% clear how to understand it.
Well, the second question was on U. S. Landry because we're hearing that leading brands are gaining more shares than before. And that's down to consumer preference, but also retailers trying to simplify their assortments, the number of SKUs that got on shelves. So that would mean quite a uphill battle for you being a challenging brand in, in North America.
So are you seeing this? And do you think we might see some changes going forward with more SKUs putting back on the shelf
Nap, I think, you pointed it out before and we were also clear on that, that's especially the supply situation impacted I would say our market share situation in the U. S. In the first half year. On the other side, we are seeing that we need to have the right innovations. And, as I explained it, for example, the 4 in one disc, so this segment is over proportionally growing and we are gaining in this segment of caps significantly.
We see that as a strategic segment, which is in Europe the case, but also in the U. S. So for sure leading brands, I would say always important and also gaining in that setup. We have overcome our situation from a supply perspective and that's for me a point where we now need to really also be in the market with the persuading initiatives having the product there. And then by that persuading also to consumers or convincing the consumers that they should buy also with us.
You see and that therefore I was also pointing on that situation. Our investments which we are doing, the extra investments are paying off. We are gaining overall market shares across every region in Laundry And Home Care. So the initiatives are right and are to the point. We need to also bring that in terms of execution now to the U.
S, where we definitely are not good enough.
I will now hand over to Mr. Knobbe for his closing remarks.
The investors and analysts Thank you very much for your questions. Let me close today's presentation with a summary of our key takeaways. Henkel posted a robust first half year performance despite significant headwinds in an unprecedented highly demanding business environment. And with this, confirming the breadth and derobuseness of our balanced business portfolio, our financial strength, and not at least the resilience of our organization. We are supporting our employees, customers and consumers and business partners during the pandemic, ensuring business continuity, while having a strong focus on capturing emerging opportunities.
We are firmly committed to our purposeful growth agenda and we will continue to drive our strategic initiatives constantly adapting to evolving market dynamics and reality. Due to our solid financial foundation, our strong company culture and our dedicated employees at the heart and our new momentum, we are confident to emerge even stronger from the crisis. Our load left levels and the significant financial flexibility will give us room to maneuver. We cannot provide a full year 2020 outlook at this point in time given the high uncertainty triggered by the COVID pandemic, but we will publish a new forecast once sufficiently reliable and realistic evaluation of Henkel's financial performance in 2020 is possible. As always, please be reminded of our upcoming events.
Our next event will be the release of our Q3 sales performance on November 10, With this, I would like to thank you for joining
Thank you for joining today's call. You may now disconnect.