Essity Interim Report Quarter Three

Sales growth, including organic sales growth and acquisitions, amounted to 18.4 percent. Organic sales growth, excluding exchange rate effects, acquisitions and divestments, was 16.3 percent, of which volume accounted for 4.1 percent and price/mix for 12.2 percent.

Significant price increases were implemented, and further increases will be carried out

The company’s assets in Russia were impaired by approximately SEK 1.7bn. Furthermore, work is ongoing to exit the Russian market.

Operating profit before amortization of acquisition-related intangible assets (EBITA) amounted to SEK 7,097m (11,047)

Adjusted EBITA amounted to SEK 8,974m (10,603) and the adjusted EBITA margin amounted to 8.0 percent (12.1). Higher costs for raw materials, energy and distribution had a negative impact of 12.5 percentage points on the margin. The margin was positively impacted by higher selling prices, higher volumes and a better mix.

Return on capital employed amounted to 7.7 percent (13.8). Adjusted return on capital employed amounted to 9.2 percent (13.4).

Profit for the period was SEK 3,818m (7,592)

Earnings per share were SEK 4.78 (9.45) and adjusted earnings per share were SEK 8.50 (9.36)

Cash flow from current operations amounted to SEK 4,071m (4,744)

Acquisitions of Knix and Modibodi, two leading companies in leakproof apparel

CEO’S COMMENTS

Significant price increases offset cost inflation

Essity’s net sales reached new record levels in the third quarter. We raised prices for our leading hygiene and health solutions by an average of 14.5 percent compared to the same period a year ago at the same time as we reported higher volumes in all business areas. Our price increases are offsetting the high cost inflation with a delay of approximately two quarters. We are continuing to invest in innovation and expansion of our offerings to promote a higher quality of life for customers and consumers with more climate-smart offerings, strong brands and increased e-commerce sales.

During the third quarter of 2022, net sales increased 28.8 percent to approximately SEK 40.1bn. Sales growth, including organic sales growth and acquisitions, amounted to 17.3 percent, of which price/mix accounted for 14.8 percent, volume for 1.5 percent and acquisitions for 1.0 percent.

EBITA amounted to SEK 2,784m and adjusted EBITA to SEK 2,990m, down 17 percent compared to the same period a year ago. The adjusted EBITA margin declined 4.0 percentage points to 7.5 percent. Cost inflation worsened further in the third quarter. Costs for raw materials, energy and distribution had a negative impact of 12.7 percentage points on the adjusted EBITA margin. We are addressing this through comprehensive price increases and energy price surcharges that will have an additional effect in the fourth quarter and in 2023. Despite significant price increases, we noted higher volumes in all three business areas. We are continuing to work at a high pace with efficiency improvements, energy saving measures and raw material rationalizations. Sales and marketing costs were higher during the quarter but decreased as a share of net sales. The adjusted return on capital employed was 8.4 percent. Earnings per share were SEK 2.23.

The environmental footprint of our products is decreasing, and we are meeting consumer demands for solutions that are better for the user and the planet. During the quarter, we launched a climate-smart baby diaper under the leading brand Libero. Libero’s hybrid diaper consists of two parts: a washable textile diaper cover and an absorbent disposable insert. Online sales increased by nearly 20 percent in the third quarter and amounted to approximately SEK 5.7bn. Many initiatives are being implemented in the company to also increase our presence in the direct-to-consumer channel, including the acquisitions of Knix and Modibodi, two leading companies in leakproof apparel.

A new group organization will be effective from year-end 2022 entailing that the Group will have four business units in line with the company’s business areas. These four business units are Professional Hygiene, Health & Medical, Consumer Goods EMEA and Consumer Goods Americas. In parallel, a global unit, Digital & Business Services, will be established.

Through a focus on innovation, strong brands, efficiency improvements, digitalization and sustainability, we are strengthening Essity’s competitiveness in leading hygiene and health solutions in an attractive and growing market. We are managing cost inflation through price increases.

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