Essity’s Interim Report for Q3 2023

Net sales increased 16.1 percent to SEK 130,372m (112,339). Sales growth, including organic sales growth and acquisitions, amounted to 9.8 percent, of which volume accounted for -3.2 percent, price/mix for 11.9 percent and acquisitions for 1.1 percent.
Operating profit before amortization of acquisition-related intangible assets (EBITA) increased 74 percent to SEK 12,323m (7,097)
Adjusted EBITA increased 60 percent to SEK 14,372m (8,974) and the adjusted EBITA margin increased 3.0 percentage points to 11.0 percent (8.0)
Profit for the period increased 81 percent to SEK 6,905m (3,818)
Earnings per share increased to SEK 9.58 (4.78) and adjusted earnings per share increased 55 percent to SEK 13.20 (8.50)
Operating cash flow increased 75 percent to SEK 11,755m (6,704)
Return on capital employed increased to 11.3 percent (7.7) and the adjusted return on capital employed increased 3.7 percentage points to 12.9 percent (9.2)

CEO’s Comments

Strong quarter with high profitable growth
Essity delivered strong earnings for the third quarter of 2023. Net sales continued to increase and adjusted EBITA increased by 78 percent to SEK 5.3bn. The adjusted EBITA margin was higher for the fourth consecutive quarter and amounted to 12.2 percent. As leading in the growing global hygiene and health market, we are taking further steps toward achieving our Group targets concerning sales growth, return and a reduced environmental footprint.

Higher selling prices, a positive product mix, cost savings and lower costs for raw materials, energy and distribution had a positive impact on earnings. All three business areas developed well with higher sales and higher adjusted EBITA margin. Operating cash flow increased 182 percent to SEK 7.5bn. Adjusted earnings per share increased to SEK 4.90. The adjusted return on capital employed increased to 14.6 percent, which means we are well on our way to achieving the return target of >17 percent.

Our strategic review of ownership in Vinda and Consumer Tissue Private Label Europe, with the aim of reducing Consumer Tissue’s share of the company’s total sales, is proceeding according to plan.

Higher sales and innovation
Sales growth, including organic sales growth and acquisitions, amounted to 4.6 percent. Selling prices were higher and the product mix was better. Volumes were lower, mainly due to the company’s focus on profitable growth and thereby decisions to implement restructuring measures in Professional Hygiene and to exit contracts with insufficient profitability in Incontinence Products Health Care and Baby Care. We reported very high organic sales growth for Incontinence Products Retail, Feminine Care and Medical Solutions. The earlier acquisitions of, for example, Knix and Hydrofera, have strengthened our offerings and market positions. With improved margins in all of the business areas, we are endeavouring to continue to increase the company’s profitable growth. The pace of innovation is high in all categories and we are investing in marketing and sales for higher growth and market shares. During the quarter, we launched value-creating innovations for customers and consumers under the TENA, JOBST, Actimove, Tempo and Plenty brands.

Sustainability at the core
We are striving to achieve our targets in ESG and for net zero emissions by 2050. In France, we have inaugurated the world’s first production line that manufactures tissue from used food and beverage cartons. This means Essity recycles more than half of all sorted and recycled food and beverage cartons in France. During the quarter, we began to use electricity from solar cells in the production at our site in the Netherlands.

Summary
We can look back on another quarter with high sales growth and higher EBITA margin, where all business areas made positive contributions through profitable growth and margin improvements. In line with our strategy, we continued to grow in the categories and sales channels with the fastest market growth and highest returns. At the same time, the decisions regarding restructuring in Professional Hygiene and exiting contracts with insufficient profitability in Incontinence Products Health Care and Baby Care, had a negative impact on the sales growth of approximately 2 percent during the quarter. However, these decisions have improved the structural margin long-term. Going forward, we expect the markets to normalize and through focus on innovation, leading brands, efficiency and sustainability increase the company’s profitable growth.

Magnus Groth
President and CEO

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