HEN3 Henkel AG & Co KGAA

By Nina Trentmann 

Companies that promote a finance chief to chief executive often do so in the name of caution, putting the reins in what can be seen as familiar and safe hands.

While such announcements rarely raise eyebrows, reaction this week to that very situation at consumer goods giant Henkel AG shows that investors and analysts don't always crave continuity.

The maker of Dial soap, Snuggle fabric softener and Right Guard deodorant said Thursday that CFO Carsten Knobel would be an "excellent successor" to Hans van Bylen, who will step down Jan. 1. "He knows Henkel very well and has many years of international management and leadership experience," the company said.

On Friday, analysts roasted the Düsseldorf, Germany-based company for the move -- the third consecutive time Henkel has elevated an internal executive to CEO.

Sanford C. Bernstein & Co. analysts said Mr. Knobel lacked commercial operating experience and pointed to the executive's involvement in a 2016 deal to acquire Sun Products Corp. for about $3.6 billion -- a transaction they described as disastrous.

"He is not an external, experienced hire that Henkel now requires to solve its fundamental strategic, operating and cultural problems," they wrote.

JPMorgan Chase & Co. analysts added that Mr. Knobel "is part of the same management board that failed to deliver on operational execution."

Henkel, whose stock price declined 1.8% Thursday and another 1.4% Friday, didn't immediately respond to a request for comment.

While many companies start looking internally for a new leader, most times they opt for an external candidate as CEO, said Mickey Matthews, international chairman at executive search firm Stanton Chase.

And often, the new CEO comes from an operations role. Promotions from CFO to CEO at Fortune 500 and S&P 500 companies are expected to be about 6.9% this year, the same as last year, according to Crist|Kolder Associates, a recruitment firm.

And while a CFO-to-CEO elevation might be intended to convey an aura of stability and confidence, such promotions run the risk of underwhelming the market. "The perception is that this a missed opportunity," Mr. Matthews said.

Outside observers could interpret such a move as a sign that the company is anticipating an economic slowdown and wants a person familiar with the financials at the helm during that time, he said.

Henkel's adhesives business has been struggling in recent months, and sales in its beauty care also have been lagging. Net income declined 7.3% to EUR558 million ($618.2 million) in the second quarter, down from EUR602 million in the prior-year quarter.

The choice of Mr. Knobel, who joined Henkel in 1995 and has been leading the company's finance department since 2012, could cast doubt among observers over Henkel's willingness to alter the structure of the company, either through mergers and acquisitions or through a breakup, JPMorgan analysts wrote.

Write to Nina Trentmann at nina.trentmann@wsj.com

(END) Dow Jones Newswires

October 25, 2019 19:02 ET (23:02 GMT)

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