Essity’s First Half Results Show Adjusted EBITA up 7 Percent from Year Ago

During the quarter the Group continued to report strong organic net sales growth and the adjusted EBITA margin rose. The implemented price increases had a positive impact on both organic net sales growth and profitability.

The company’s investments in sales and marketing, primarily in Asia and Latin America, contributed to higher growth. In addition, it launched innovations that strengthened its customer and consumer offering and improved the product mix. For example, in China it re-launched Feminine Care with Libresse V-Comfort and invested in local production. In incontinence products, Essity strengthened its product offering in the health care sector with TENA ProSkin.

Efficiency efforts are according to plan and the company has achieved significant cost savings. Its raw material and energy costs were higher during the quarter, although the market prices for such items as pulp are demonstrating a declining trend, albeit from a high level.

In terms of ongoing activities to contribute to a sustainable and circular society, Essity has established additional sustainability targets for packaging with a special focus on plastic packaging. It has also decided to invest in sustainable alternative fiber technology for tissue production.

The group’s net sales increased 7.9 percent in the second quarter of 2019 compared with the corresponding period a year ago. Organic net sales, excluding the lower sales of mother reels, increased 4.3 percent. Including the lower sales of mother reels, organic net sales increased 3.9 percent, of which volume accounted for 2.0 percent and price/mix for 1.9 percent. Organic net sales were positively impacted by a better price/mix and higher volumes in all business areas. In emerging markets, which accounted for 36 percent of net sales, organic net sales increased 9.9 percent, while the increase in mature markets was 0.7 percent.

The Group’s adjusted EBITA in the second quarter of 2019 increased 11 percent compared with the corresponding period a year ago. Earnings were positively impacted by higher prices and volumes as well as a better product mix and cost savings. Cost savings amounted to SEK 322 million, of which SEK 147 million was related to the Group-wide cost-savings program.

The Group-wide cost-savings program is proceeding according to plan and at the end of the second quarter of 2019, the annual rate of savings was approximately SEK 690 million. Higher raw material and energy costs had a negative impact of SEK -250 million on earnings, which corresponds to a negative impact on the adjusted EBITA margin of -0.8 percentage points.

Furthermore, stock revaluations, due to lower raw material prices, had a negative impact on earnings. Investments to increase growth entail higher sales and marketing costs, although these costs were lower as a proportion of net sales. Higher distribution costs had a negative impact on earnings. The Group’s adjusted EBITA margin increased 0.3 percentage points to 11.6 percent. The adjusted return on capital employed was 12.9 percent.

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