Dear investors and analysts, good morning from Düsseldorf and welcome to our conference call following our announcement this morning. Thank you very much for making yourself available on short notice. Today, Carsten and myself would like to talk to you about Henkel's sustainable profitable growth path to 2020 and beyond.
Good morning to everyone from my side as well.
As usual, I would like to remind everyone of the formal disclaimer to forward-looking statements within the meaning of relevant U.S. legislation. Today's presentation and discussion are conducted subject to the disclaimer. As always, we will not read the disclaimer but propose we take it as read into the records for the purpose of this call. Let me start with the key points you will hear from us today. At Henkel, we have a strong foundation based on a well-balanced portfolio with leading positions in key markets and categories. We have made strong progress in executing our strategy, Henkel 2020+, and in the implementation of our strategic priorities. This resulted in a good business performance in 2017 and 2018, despite significant headwinds from currencies and direct material prices. Looking ahead, we see attractive opportunities which we want to capture to reinforce our growth momentum.
We will achieve this by stepping up our investments as of 2019 in our leading brands and technologies, in innovation and in digitalization. This is also impacting our 2019 guidance. Today, we confirm our commitment to long-term sustainable value creation and attractive returns, which is also reflected in our mid to long-term financial ambition. In today's call, we will first present to you our progress in executing our strategic Henkel 2020+. After that, we will talk about the opportunities we want to realize strengthening our growth going forward. Lastly, we will present the outlook for 2019 and our mid to long-term ambition before summarizing and moving on to the Q&A. Henkel's success is based on a strong foundation and a consistent long-term performance on both top and bottom line.
We have achieved a step change in sales and profitability, adding EUR 5 billion to the top line and increasing the margin by 500 basis points since 2010. We have achieved this with our attractive portfolio of three business units and a strong operating performance complemented by compelling acquisitions. In Adhesive Technologies, we are the global market leader with scale and breadth. In Beauty Care, we have a focused portfolio with our core competence in hair retail and professionals. In Laundry & Home Care, we occupy leading positions with strong global and local brands. Building on this strong foundation, we are successfully executing our strategy, Henkel 2020+. We generate profitable growth and attractive returns. We continuously become more customer-focused, more innovative and more agile. We strive to lead digital transformation in all our business activities. We promote sustainability across the entire value chain.
Last but not least, we continuously advance our portfolio with value-adding acquisitions. To deliver on our ambitions, we are in full execution of our four strategic priorities: drive growth, accelerate digitalization, increase agility, and fund growth. We are making substantial progress in implementing these priorities with strong initiatives which we will have and will continue to report in our quarterly calls. Now hand over to Carsten.
Thank you, Hans. I would like to take the opportunity of today's calls to provide you with the preliminary results for 2018. We have achieved a good development despite significant headwinds from currencies and direct material prices. Overall, sales amounted to EUR 19.9 billion, nominally 0.6% below prior year. Throughout 2018, we faced extraordinary strong FX headwinds amounting to around EUR 1.1 billion, and by that, impacting our top line by about -5%. The good organic sales growth at 2.4% was driven by the strong performance of Adhesive Technologies with a 4% organic sales growth. In Beauty Care, we closed the year with slightly negative organic sales growth of -0.7%, and a good organic sales growth of 1.9% in Laundry & Home Care.
As you know, both business units were negatively affected by the delivery difficulties in North America in the beginning of the year, but accelerated their top-line performance towards the year-end and compared also to previous quarters. Our adjusted EBIT came in at EUR 3.5 billion. We continued on our profitable growth path, increasing the adjusted EBIT margin now to a level of 17.6%, being up 30 basis points. This was supported by our strong cost management focus, our Fund Growth initiatives, and as well of our synergies from the acquisition we realized. We grew the adjusted earnings per preferred share by 2.7% to EUR 6.01. The bottom line was negatively affected by the aforementioned FX headwinds, as well as increased direct material prices. Excluding FX, we delivered a strong operational EPS performance of around 7%.
We will provide the full set of final and audited results and financial details with the publication of our annual report on February 21st. Let me now illustrate the good progress we made regarding our financial ambitions that we announced two years ago in November 2016. We achieved 2.7% organic sales growth on average, with growth being driven by the strong momentum in Adhesive Technologies. Our consumer businesses also contributed, however, at a lower growth momentum. Our adjusted EPS growth was adversely impacted by substantial headwinds from key currencies. Here, the magnitude of the impact was much higher than expected. As a result, we achieved a CAGR of 5.9% in the first two years in nominal terms. Adjusted for FX, we continued to deliver a very strong performance with a CAGR of around 9%.
This is also reflected in the continuous increase of the adjusted EBIT margin by 40 basis points in 2017 and by additional 30 basis points in the year of 2018. We continued our strong focus on free cash flow expansion, and based on the preliminary figures, we have achieved an increase to at least EUR 1.8 billion in 2018. Summing up, we are proud of the progress we made towards our ambition, especially in the light of the higher than anticipated currency headwinds in the first two years, strongly affecting our adjusted EPS performance.
Thank you, Carsten. Let us now look ahead and illustrate how we want to realize opportunities and strengthen our top-line growth going forward. In order to realize attractive opportunities we see across our businesses, we have decided to step up our P&L investments as of 2019, capturing opportunities and strengthening our top-line growth. We will increase investments in our brands and innovations, strengthening our marketing investments and driving digitalization even further. With this, we want to continue to outperform in Adhesive Technologies, leveraging the scale and breadth of our portfolio. We will accelerate growth in our Beauty Care retail business and continue our growth momentum in Professional. In Laundry & Home Care, we focus on winning market share and execute our innovation strategy. Lastly, we will advance to the next level in digitalization. Today, we want to explain to you in detail how we will achieve this.
In Adhesive Technologies, Henkel is the global market leader and well-positioned for further growth, thanks to its unparalleled breadth of technologies, its global reach, and a broad customer base across a wide range of industries. We have a proven track record to adapt our resources to capture the best opportunities in changing market environments. Our attractive solution-oriented business model offers high impact solutions, delivering superior value to our customers. Our high touch business is driven by customer insights and our deep technology and application expertise. We will create value through our transformative solutions, leveraging mega trends such as connectivity, e-mobility, and sustainability. We will use our unique scalable platform to expand into new segments. Going forward, we will leverage growth opportunities, expanding our positions in attractive markets and technologies by driving emerging applications, for example, in lightweight and electrification.
We will continue to strengthen our portfolio through built-on acquisitions of selected new technologies to complement our portfolio. We have a clear focus on capturing the full innovation potential by co-creating innovations with market leaders in the industries we serve, building on our strong know-how and expertise from external partners. For this, we will also leverage our state-of-the-art innovation centers we're currently building. In order to create unique digital customer experiences, Adhesive Technologies is working with companies like Palantir to develop an integrated data foundation to better service its customers. With sales of more than EUR 1.5 billion through digital channels already today, we will expand our customer base through digital demand generation and its conversion. Summing up, we are well positioned to outperform with Adhesive Technologies in an increasingly challenging environment. Moving on to Beauty Care. We see good growth opportunities for both businesses, retail and professional.
We have a strong brand portfolio with a key competence in hair. Our compelling portfolio of global and local brands delivers structurally high growth margins. In retail, we show a strong performance expanding our market shares in both coloration and styling. Our professional business keeps on demonstrating a strong growth momentum. On the other side, we face challenges in other Beauty Care retail categories. The volume-driven hair care category is especially affected by intense price and promotion pressure. Our North American retail business, in particular body care, has not yet regained the market share losses following the meanwhile solved delivery difficulties beginning of 2018. We see attractive growth opportunities and will accelerate growth by exploiting mega trends like naturality and increase our focus on consumer groups like men or millennials. We will complement this with an intensified focus on the e-commerce channel, which is already today growing double digits.
To drive superior growth in hair retail going forward, we have developed a holistic innovation plan across segments. We will relaunch the entire hair care portfolio. This will include new formulations of successful brands such as Schauma, Syoss, and Gliss, addressing the nature trends. To accelerate the strong growth momentum in hair coloration, we will build on strong innovations both under the Schwarzkopf and Palette brands. In hair styling, we occupy leading market positions in Europe and want to boost the success with our flagship brand, Taft. In addition, the fast-growing brand got2b will be relaunched and expanded with targeted innovations, for example, for men. In North America, we have a targeted growth plan with strong initiatives. We will build on the strong brand equity of Dial in body care with new formulations addressing the trend of healthier skin, for example, with new Silk Moisture variants.
Henkel will also expand its product portfolio in the attractive hair coloration category, exploiting the fashion trend with the premium color ULTÎME brand and the new KERATÎME color variants addressing specific hair types. We will further accelerate the success of got2b by expanding our trend hair color offerings and extending our hair care line targeting men. In professional, our initiatives aim at sustaining our strong growth momentum, outperforming markets. We will expand some of our successfully newly acquired brands in North America to new geographies. We will also advance in digitalization our business, launching a new state-of-the-art interactive B2B e-platform to drive sales and provide superior customer service. Growth will be supported by an innovation offensive in all categories, including high-potential color and care initiatives and by expanding our strong Bonacure and Joico haircare offerings.
Looking at our Laundry & Home Care business, we occupy with our global and local brands more than 70 number one positions and have a unique market coverage. Our strength is the attractive combination of global mega brands like Persil and local jewels, which are well-known and have a strong brand equity. Overall, our business shows good growth dynamics, even though at a slightly lower pace than in the past. We have a strong momentum with our premium detergents, toilet care, and auto dishwashing. Our North American business, however, showed negative organic sales growth and lower market share levels. Also, the value for money laundry business is under strong price and promotion pressure. In this environment, we see attractive growth opportunities. We want to strengthen our position in the fast-growing single-unit dose segment. Further, we want to capitalize on trends such as naturality, convenience, and the growing importance of e-commerce.
Lastly, we see potential to expand our high-margin Home Care business by utilizing our strong brand portfolio and innovations. Let's now take a closer look how we want to realize these opportunities. In 2019, we plan the biggest innovation offensive for our top detergent brand, Persil, and will launch both new premium technologies and formulations. For instance, our all-new deep clean formula. This is complemented by the expansion of our e-commerce business with highly concentrated formulas and fully e-commerce-ready packaging. With the new premium technologies, we will provide superior consumer experience and convenience. We will introduce the first -to- market four-chamber disc in the fast-growing cap segment and new breakthrough variants with our malodor -fighting technology. To upgrade our value for money brands, we will relaunch our complete brand portfolio globally, introducing our unique +50% freshness formula and extend our product line with exclusive perfume technologies.
With the U.S. being our single biggest market, North America is crucial to our success. Our clear focus is there to turn around North America, relaunching our entire portfolio and introducing strong innovations for new growth momentum. We will reinvent our brand all, relaunching the product portfolio across categories with improved formulas, leveraging our global technology expertise. To win in the growing cap segment, we will launch the innovative Persil ProClean disc concept in North America and expand our value for money caps portfolio of Purex 4in1. With a leading fabric finisher brand, Snuggle, we will enter the premium fragment segments, introducing the new Scent Shake product range, offering consumers an unparalleled scent experience. In the Home Care segment, we aim to strengthen growth and expand market shares by leveraging our blockbuster brand, Somat, Pril, Bref, and Sidolin, and key consumer trends.
We will relaunch the entire Somat range in 2019, including new tabs and gel generations. Our new innovative Pril Pearls improve the cleaning performance in hand dishwashing. Successful offerings in the toilet care segment will be expanded, introducing new Deluxe scents complemented with premium colors and designs. In addition, we will fully capture the health and sustainability trend by launching pro-nature products with new eco-certified formulas and sustainable packaging. The digital transformation of Henkel will be further accelerated by significant expansion of investments in digital businesses, analytics, and infrastructure. We will strengthen the digital businesses with the development of specific e-commerce-ready formats and new digital services. This also includes an accelerated expansion of cooperations with major e-commerce partners. The direct interaction with customers and consumers via digital channels will be further expanded. Investments into new analytic tools, eCRM systems, and e-shopper category management applications are also planned.
We will further roll out Industry 4.0 solutions, including advanced automation and robotic solutions. The company's digital infrastructure will be strengthened with new digital workspaces, investments in cybersecurity, and an upgrade of network capacities and site infrastructure. Summing up, we see plenty of growth opportunities which we aim to realize. With sustainably higher growth investments of around EUR 300 million in our leading brands and technologies in innovation and key markets and digitalization, we are reinforcing our commitment to sustainable profitable growth. Our clear target is to accelerate our top-line growth with focus on our consumer goods businesses. We will use about 1/3 of this amount to step up investments in digitalization, advancing to the next level.
Thank you, Hans. Let us now continue with the outlook 2019 and our mid-to-long-term ambition. We continue to operate in a challenging environment characterized by high uncertainty and volatility with mixed market dynamics and headwinds from currencies and commodities. The momentum of industrial production growth has been slowing in the course of the second half of 2018. In 2019, we anticipate a good but overall reduced industrial and economic growth momentum. The consumer goods market remain mixed and growth continues to be mainly driven by emerging markets. The high competitive intensity and the ongoing price and promotion pressure, especially in key markets of mature markets, will persist. While we overall expect lower currency effects in 2019 compared to the previous year, they will remain a headwind on our top and our bottom line.
Lastly, we expect the high volatility and the uncertainty on commodity markets and the ongoing input cost pressure to prevail. Prices for direct materials are expected to increase by a low single-digit percentage. Based on the key strengths of our businesses, the opportunities we see in the markets, and our increased investments to accelerate our growth momentum, we have set clear business priorities for 2019. We want to continue our momentum of Adhesive Technologies in a lower growth environment, leveraging our key competencies as well as the scale and the breadth of our portfolio. We will execute on our strong innovation strategy with higher investments in our consumer goods businesses, and we will advance to the next level of digitalization. At the same time, we will continue our strong focus on cost discipline, further driving efficiency and adapting our structures.
We will put a strong focus on our net working capital improvement and on the free cash flow expansion. Finally, we will enhance the value proposition of our portfolio organically, but also via acquisitions. With that, looking at the guidance for 2019. The outlook takes this environment into account and reflects the increased investments in brands and technologies and in innovation and digitalization. While we expect to realize first benefits from our initiatives on the top line already in 2019, both the adjusted EBIT as well as the adjusted EPS will be affected by the increased spending levels. Considering the high volatility in the currency markets, going forward, we will focus on our operating performance, guiding for adjusted EPS at constant currencies. For 2019, our guidance is as follows. We aim to generate organic sales growth of between 2%-4%.
We expect an adjusted EBIT margin between 16% and 17%. We expect the adjusted EPS a mid-single digit percentage below prior year in constant currencies.
Thank you, Carsten. We are strongly committed to continue executing our strategy, Henkel 2020+, and to deliver on our ambitions, thus generating sustainable, profitable growth and attractive returns. This is also reflected in our expanded mid-to long-term financial ambition for 2020 and beyond. We target an organic sales growth of between 2% and 4%. We aim to deliver mid-to high single digit adjusted EPS growth at constant currencies. We will continue to focus on a further expansion of our free cash flow. This is complemented by our ambition to pursue compelling growth opportunities with superior execution. At the same time, we remain strongly focused on margin and on keeping our rigorous cost discipline. Based on our strong balance sheet and our strong free cash flow generation, we will continue to strengthen our businesses with comprehensive CapEx investments. Acquisitions will remain an integral part of our growth strategy.
At the same time, we will continue to focus on offering our shareholders attractive returns and let them participate in the financial performance. We will thus improve our dividend policy and will increase the target dividend payout ratio from currently 25% to 35%, to 30% to 40% from fiscal year 2019 onwards. Let me now summarize before we move on to the Q&A. We are well underway with the implementation of our strategy, Henkel 2020+. We have reached and achieved a good performance in 2018 despite significant headwinds. We are sustainably stepping up our investments in brands and technologies, innovation and digitalization by around EUR 300 million. Our outlook for 2019 is reflecting the higher growth investments, while at the same time, we will maintain our high cost discipline. Our mid-to long-term financial ambition for 2020 and beyond is reinforcing our commitment to delivering sustainable, profitable growth.
With this, by increasing our target dividend payout range, we are committed to deliver attractive returns to our shareholders. Let's now move on to the Q&A.
Thank you. Ladies and gentlemen, the question and answer session will be conducted electronically. If you would like to ask a question, please press star one on your telephone keypad. If you change your mind about asking a question, please press star two. We will take questions in the order received and will take as many as time permits. Please limit your questions to a maximum of two questions at a time. Again, please press star one to ask a question. The first question comes from the line of Alain Oberhuber from MainFirst. Please go ahead.
Good morning, Hans and Carsten. Alain Oberhuber, MainFirst. I have two questions. Could you give us a little bit a timeframe regarding top line and bottom line improvement in 2019? As I understood is that we will see already immediately a good improvement in the top line, but obviously most of the costs will be in H1 and then there should be an improvement in H2 on EBIT. Is that a fair assumption? My second question is regarding acquisition. Where does Henkel see its highest priority for acquisition, in which categories?
Many thanks, Alain, for both questions. Your first question, I think in this one it is clear that investments we have as commented, strong launch plans with a lot of innovations. The assumption on which you can start is clearly that it will be more front-loaded, so that investments start very immediate and that indeed we support our full innovation plan as we have presented it. For sure, I think you will understand we will give no exact quarterly guidance, but I think the front-loaded versus end-loaded statement, I think makes this balance. Also in acquisitions, of course, important is that acquisition as we stated will remain a substantial part of our growth strategy going forward. Strategically, nothing has changed there in the way that we differentiate between the different business units, in the way that in Adhesive Technologies, we focus a lot on technologies.
Which we so-called can plug in our global reach and in our customer base, on which, as you know, we as being a global market leader, we have quite successful also experience with that and we will continue this strategy going forward. In Beauty and both Laundry, our thinking is clearly in both category country positions, we will always look at opportunities in which we can indeed achieve to reach leading positions, be it in a category, be it in a country, by doing so, expanding both our growth momentum and our profitability structure.
Maybe to add on, Alain, it is also the point that the criteria has not changed. It is the strategic fit to the three businesses, as Hans has pointed out, is unchanged. It is the financial attractiveness. You know we are not doing acquisitions for the sake of the acquisition. I think the path shows that our track record is very good on that. The third one is the availability. You have heard by the preliminary numbers that we have reached a very good free cash flow in the year 2018, continuously also doing on that at least at EUR 1.8 billion, by that also financial availability is there in order to support the three businesses with acquisition.
Thank you very much, Hans and Carsten.
Welcome.
The next question comes from the line of Christian Faitz from Kepler. Please go ahead.
Good morning, Hans. Good morning, Carsten. Christian Faitz here from Kepler Cheuvreux. Two questions, if I may. First of all, on the adhesives, can you talk about current demand trends in some of your key industries, such as automotive, construction, and electro electronics? Second of all, on your remarks that you see the raw material baskets increasing. If I look at for example, polyurethane prices, but also lots of other plastics prices, which are also important for you, I actually see them going down year on year versus 2018. Can you comment on that as well? Thank you.
Many thanks, Christian, for both questions. I will answer the question Adhesives and then Carsten will give more light on your question concerning both impacts. Concerning Adhesives, I think it's clear that we see some volatility increasing, and if we see the total year 2018, we reported had a very good year with 4% growth, whereas in Q4, we saw in certain segments some weakening. I think no surprise that this was both electronics and transportation. In transportation, especially automobile. Electronics, you saw and I think we all witnessed some warnings out of the smartphone technology sector, and of course this is a important customer base for us. On the other end, we saw quite strong developments in our packaging business. It means also as we see in also general industry was quite good in the year-end. Very strong even.
It's somewhere, as we indicated going forward, we have a quite breadth portfolio. We also assume that in general, industrial production, if we take the IPX index, we expect some slowing down there. On the other end, within our portfolio, we will focus also on those segments where we see further growth opportunities.
Good. Christian, to your question of raw materials. For sure, that's not an easy question because of the volatility and the uncertainty what we currently see. What we see is that, for sure you have named specific raw materials, but there are a lot. Therefore, we see there is still an ongoing price pressure, which will also continue in 2019. We factor in prices from the direct materials to increase in the low single-digit range compared to the previous year. With that, also providing a further headwind. For sure, as you know, oil price has changed significantly over the last couple of weeks, up and down, but that's our general assumption of a low single-digit increase.
Okay. Many thanks.
My pleasure.
The next question comes from the line of James Targett from Berenberg. Please go ahead.
Good morning, everyone. Couple of questions from me. Coming back to the investment phasing and margin guidance. I take a comment that it is front-end loaded, but are you still expecting a return to positive margin development in 2020? I am trying to get an idea if some of these investment costs are still going to be affecting 2020. Maybe on a divisional level, where we should look at the margin movements within the 16%-17% guidance for 2019. Secondly, just on the portfolio. I suppose as part of the update of Henkel 2020+ and guidance, you did a thorough portfolio review. I am just wondering whether you have sort of concluded that you are happy with the current Henkel portfolio as it stands, the three business areas and the subcategories within that. Thanks.
Thank you very much James for both questions. Concerning portfolio. Indeed, for sure, we continuously of course assess our strengths and also our potential challenges. We are indeed convinced that the setup of Henkel with our three different business units is a structure which we see a lot of opportunity for sustainable growth. Meaning that we see our position in the three businesses, both Adhesive Technologies and both consumer businesses, as competitive and as having attraction for future profitable growth. In adhesives, clearly there we have our global markets leading position, and as we presented today with a strong breadth. Also looking at the economic situation, enough potential to outweigh certain risks and other opportunities. In Beauty Care, as we are very targeted on our hair portfolio. There as you know in consumer, we always look at regional country positions and categories.
There we feel well positioned and professional. As you know with our acquisition strategy, we now have a EUR 1 billion business there, which has a fantastic growth momentum. In retail, as we described, we're doing well in shares also in color and styling and hair care. We want to catch up and step change, but we have some good leading positions there, especially in Europe, East and Eastern Europe. Laundry & Home Care is a market in which our conviction is also we have to be a number one or two in the regions to generate profitable growth. In the regions and countries where we are, we have that, and that's why we want also to further expand there. As commented also in the question before on acquisitions.
If we see acquisition potentials, which can strengthen country category positions, of course, these are add-ons and we will of course investigate to further strengthen. Your question of course was very to the point. We have been doing these analyses and our conviction is we are well-positioned with the three business units.
James, regarding your question back to investments. First of all, Hans mentioned the EUR 300 million additional investments, two thirds of that going into more marketing investments, especially in the consumer businesses, and the one third more dedicated to digitalization. Important to notice it is a sustainable level of investment, so it's not a one-timer. We will continue to have this higher investment level also beyond that. For sure, it's a little bit of front-loaded in terms of starting immediately, starting now. As I said, sustainable throughout the year. By that, for sure we want to see also first impact from a top-line perspective in 2019 and for sure also ongoing then into the next years. To be more specific, you know that we said from a margin perspective in 2019 for the total company, we expect the margin between 16%-17%.
For the three business divisions, that will mean for Adhesive Technologies, a margin between 18%-19%. For Beauty Care, between 15%-16%. For Laundry & Home Care, a margin between 16.5%-17.5%. Maybe to round the picture or to make the picture round. As you know, we have guided for 2019 an EPS of mid-single digit negative. We expect for 2020 that EPS will be back in positive territory and from the next year then on, so 2021, we will enter into the corridor, what we have mentioned as our midterm ambition from mid to high single digit EPS growth at constant currencies. I hope that gives you more clarity.
That's very helpful. Thank you.
Welcome.
The next question comes from the line of Richard Taylor from Morgan Stanley. Please go ahead.
Good morning. Two quick ones from me and then a more strategic one. For the adhesives business, can you give the split of pricing and volumes for the Q4, please? Secondly, I think in the past you pointed to the IPX index, which was growing around 3.5% at the middle of last year. I think you just said it was slowing down. Maybe you could tell us whereabouts it is now, and are you comfortable with the current 2019 consensus for adhesives of 3.3%? Lastly, last year we discussed perhaps you might need to reinvest significantly in the laundry and beauty businesses to get them to grow or whether or not it's more of a scale issue. You're clearly announcing a significant reinvestment in those businesses today.
Is there also a bigger scale issue in those businesses that you need to address, or is it a more fundamental category issue?
Thank you very much, Richard. I suggest I take your last question. Then Carsten will answer your questions on adhesives and IPX forecast. It's not a matter of scale. As we indicated in both Laundry and Beauty, global market positions are more global statistics to be competitive and to be able to generate sustainable growth, profitable growth. Our conviction, it's about having regional and even more country positions where you have in categories leading positions. That's why for us today, it was important to give you also more details in where we want to invest. I hope you could witness that our investments will be very well-focused, and the investments will be focused exactly on regions or on categories, in which we see growth opportunities. If you take Laundry, for example, we have a full investment program on top brand Persil with a full relaunch.
North America, we see as an investment opportunity and home care, there, as it is a high margin business also to have more category expansion in certain countries. In Beauty, it's about hair, and there color styling, where we have strong momentum, but especially haircare in Europe to catch up. Then also, of course, North America and together with professional to keep the momentum. It is clear about investing in priorities, and it's about regions and categories. The scale topic as positioned before, we feel well-positioned with both businesses.
Richard, your two quick ones. Starting with the IPX question, for 2018, we see a number of 3.1% for IPX growth, and for 2019, the forecasts are going into the direction, or we are calculating with around 2.5%. Your question for Q4 regarding pricing, let me state one topic. You know that we are quite early in the year, and we are still in preliminary mode what the details of our P&L are related to. We will provide you with all the details in our call on February 21st. Nevertheless, to give you a little bit more insight, in Q3, we had the pricing in adhesives of 3.6%, and what I currently see is that the Q4 number will not be lower.
Okay. Very clear. Thank you.
The next question comes from the line of Guillaume Delmas from Bank of America Merrill Lynch. Please go ahead.
Good morning, Hans. Good morning, Carsten. Two questions for me. The first one is on your additional investments in digital infrastructures. Maybe could you help us understand what prompted this sudden need for an incremental EUR 100 million? Because I'm slightly surprised. In November 2016, when you unveiled your new four-year plan, you did put digitalization at the heart of your strategy, and I'm assuming you were already budgeting some significant investments. Why a need for more all of a sudden? The second question, it's more generally about the incremental EUR 300 million. Is it your way to acknowledge that the cost of doing business in consumer goods is rapidly increasing? Therefore my question would be, what kind of visibility do you have on the returns you will get on this incremental EUR 300 million?
Then if you can maybe help us reconcile the fact that this morning you're announcing more investments, but at the same time, you're lowering your long-term EPS growth from 7%-9% to roughly 4%-9%, for 2020 and beyond. Why lowering the bottom end of the range? Are you effectively signaling that EUR 300 million might not be enough in the long run, and that you might have to increase further your brand support and digital efforts past 2020? Thank you.
Guillaume, many thanks for your three questions. Starting with your first question, additional investments in digitalization. This has to do, as you know and you pointed out, accelerate digital is one of our top priorities in our strategy 2020+ . We are making quite significant progress in the way that we also have a quite strong momentum in our digitalization. We see also doing that a lot of opportunities. The market acceleration in digital and the technological opportunities which it is offering, is expanding day by day. We have, for example, I pointed that out in my presentation. If you look at the digital technologies, we have found a fantastic partner in Palantir to exploit all the data potential. If we look at today already we have quite strong base in an e-commerce platform. If we combine all that data with our supply chain, we see substantial potential.
That is one example. The same we see also with eCRM programs in consumer, and we want to capture at the moment by far bigger opportunities we see now, as we also feel well equipped for that. That's on digitalization. Your second question was on the visibility of the returns?
On the EUR 300 million in additional investments.
On that one, for sure, for the different initiatives which we have been presenting, the first ambition is to accelerate growth. Of course, our conviction is that top line and the organic top line performance will, in the long term and in midterm, drive also EPS. A stronger organic top line will also be a driver for, at the end, an absolute better bottom line, driving EPS. You can be sure that for each project which we presented, we also have defined targets, both in top line, both in market share, but also in returns. That's why, the Focus Program, we try to present to you the top priorities within that program. You can be sure also that internal, for all of these projects, we have defined clear KPIs. We will monitor in detail how these investments turn into also performance.
On top, I think, Hans, also the point of Guillaume is right that the cost of doing business has also increased in a way taking the classical business but also the online business into account. The mix of all of that is definitely a point which has been over the last couple of years been increasing and is also reflected a little bit besides the things what you have heard before, also in that EUR 300 million or 2/3 of that which is going into the market investments, especially in the consumer businesses.
Your last question was on the EPS target on the long term, which has changed in the way that we go to currency adjusted. This, of course, can go in both directions, both positive and negative. We now have defined as a mid to high single-digit. The time frame, of course, also has expanded. These are changes, but they all, if we put that in a competitive framework, these are competitive, ambitious targets, which we see as a good continuation of our ambition to continue to generate attractive returns and profitable growth.
Thank you very much.
[Thanks].
The next question comes from the line of James Edwardes Jones from RBC. Please go ahead.
We have a disconnect. James?
Apologies. Please bear with.
Hello.
Apologies for the delay. Please stand by for the next question.
We are back live. Okay. Good. Who wants to have the next question?
Please do stand by. Just experiencing a couple of technical issues here. Won't be a moment.
We wait.
Thank you. Apologies for the delay there. The next question comes from the line of Philipp Frey from Warburg Research. Please go ahead.
Hello, gentlemen. With all these measures that you have announced in consumer goods and the launches, can you comment a bit on what impact do you expect on your general average selling prices? Would you say that this is going to generally increase the average selling prices of your portfolio? Just some comments on, do you continue to expect all innovations to be gross margin accretive? Secondly, can you give us a split of the additional EUR 300 million in terms of marketing investments and R&D investments.
Thank you very much, Philipp, for both questions. The innovation power we put in the market has the ambition also for our top brands, of course, to try to generate higher growth margins by creating better value propositions. This is in a market, as we all know, consumer markets, where pricing is quite a big challenge. The lever to increase prices has to be the persuasive innovations, that's of course, in our program also what we try to implement with a strong focus also on the gross margin improvement. Concerning the split of investments, Carsten, you may give some highlight there?
Philipp. First of all, important is, and I only make it for clarification, that today's announcement will not have an impact on our CapEx investments. The EUR 300 million investments are related to the market or to digitalization. As you have seen from our guidance for CapEx, EUR 750 million-EUR 850 million, that's continuously on a high level also in line with what we have communicated before. Regarding the marketing spend, we assume a double-digit % increase in 2019 versus the prior year. The R&D spending will likely be stable in relation to the sales development, and the other third will be used to step up P&L investments in digitalization, advancing that to the next level, as we have pointed that out before. Hope that helps.
Yeah. Thank you very much.
You're welcome.
The next question comes from the line of James Edwardes Jones from RBC. Please go ahead.
Hello, can you hear me this time?
We can hear you, yes. Very well, thank you.
Good. Two questions, please. I understand that the primary motivation for the EUR 300 million investment is to increase accelerate growth. Why is your guidance for sales growth after 2020 not increasing on that basis? Second, is the need to reinvest a function of Henkel having been over-earning historically, or is it really a more competitive market outlook, which means you have to invest more to deliver similar growth going forward?
Thanks for your two questions, James. Your first question, the range two to four, we saw also in 2018 that at the moment we're more positioned at the lower end of that range, and the ambition is clearly to move our performance within that range up and clearly supported by an acceleration, which you pointed out, by both consumer goods divisions. The background of the investments, as we have been commenting, is clear that both we see the opportunities, but of course also as the previous questions pointed out, there is a more competitive outlook and growth is more challenging to capture and reflecting that indeed. It's a combination of those drivers, which makes us convinced that this, at the moment, is the right strategy to implement.
Got it. Thank you.
Please.
The next question comes from the line of Robert Waldschmidt from Liberum. Please go ahead.
Good morning. Just three questions, if I may. In terms of Beauty Care, it seems that that took the brunt of the margin miss in the fourth quarter. I'm looking at something maybe around 75 basis points on my quick numbers. How do we think about that? What's the reason in particular? Is there any particular markets you can call out? Related to that, my second question, how much of the concerns you have about lower growth are North America centered, particularly since you called out that you have not recovered your market shares from the issues, in terms of execution there. Also, I guess somewhat related to that as well is in terms of P&G and promotions, is P&G leading the issue? Is it a wider issue? And how do you think about that in terms of the context of launching more premium innovations, et cetera?
Is that really the way out or are you going to have to fight market share battles across all of the price points going forward? Thank you.
First, your question on Beauty Care. Q4 visibility, we'll give this in more detail February 21st. I think Carsten
Yeah, nevertheless
First we can give some.
Nevertheless, your estimate is not so far away what we currently see. There is not a particular reason, the specific one, it's across the portfolio.
Okay.
More light for sure to come mid of February . As Carsten says, that's at the moment what we see with the preliminary results. Your second question concerning North America. It is for, as we presented for both businesses after last year, where we had a bad year start with our supply topics. The whole year long, the technical problems are solved. We are at the moment at fantastic service levels. Indeed, the catching up with the missed promotional slots has been a challenge. Now we start the year both by, of course, being extremely focused on catching up. Of course also by strengthening all the different parts of our portfolio. Of course, your question was we fight on all levels. We also have, if you take in laundry, we're in all price segments.
Of course there where it's needed, we're also aggressive in the segment where we need to be. On the other hand, we're convinced that with the initiative we take, we also create value, and we also try doing so strengthening our growth margin, enabling also us even to invest also more and strengthening our brands.
Okay, thank you.
Yeah.
We have no further questions coming through. I'll hand the call back to Mr. Van Bylen for his concluding remarks.
Many thanks to all participants, all investors and analysts. Let me indeed summarize the key points which you heard from us today. We have a strong foundation based on a well-balanced portfolio with leading positions in key markets and categories. We have made strong progress in executing our strategy Henkel 2020+, and in the implementation of our strategy priorities. This results in a good business performance in 2017 and 2018, despite significant headwinds from currencies and direct material prices. Looking ahead, we see attractive opportunities which we want to capture to reinforce our top -line growth momentum. We will achieve this by stepping up our investments as of 2019 in our leading brands and technologies in innovation and digitalization. We have reflected this in our 2019 guidance. With our expanded mid -to long-term ambition, we confirm our commitment to long-term sustainable value creation and attractive returns.
Thank you again for listening, your flexibility, and goodbye.