Essity’s Year End Report – Sales Increased and Highest Profit Recorded

Net sales increased 12.1 percent to SEK 147,147m (131,320). Sales growth, including organic sales growth and acquisitions, amounted to 6.7 percent, of which volume accounted for -3.7 percent, price/mix for 9.5 percent and acquisitions for 0.9 percent.
Operating profit before amortization of acquisition-related intangible assets (EBITA) increased 68 percent to SEK 16,607m (9,876)
Adjusted EBITA increased 57 percent to SEK 18,898m (12,047) and the adjusted EBITA margin increased 3.6 percentage points to 12.8 percent (9.2)
Profit for the period continuing operations increased 84 percent to SEK 9,517m (5,165)
Earnings per share continuing operations increased to SEK 13.44 (7.28) and adjusted earnings per share continuing operations increased 51 percent to SEK 17.56 (11.60)
Operating cash flow increased 130 percent to SEK 17,685m (7,680)
Return on capital employed increased to 14.4 percent (8.9) and the adjusted return on capital employed increased 5.5 percentage points to 16.4 percent (10.9)
Isola Castle Ltd, a company indirectly wholly owned by Asia Pacific Resources International Limited (APRIL), has announced that it will make a pre-conditional public offer to the shareholders of Vinda International Holdings Limited (Vinda) to acquire 100 percent of the shares in Vinda for a price per share of HKD 23.50. Essity supports the offer and has signed an irrevocable undertaking to accept the offer in respect of all of its 51.59 percent shareholding in Vinda.
The board of directors proposes an increase in the dividend of 7 percent to SEK 7.75 (7.25) per share

CEO’S COMMENTS

Highest profit ever and strong platform for growth

Essity reached a net sale in 2023 of SEK 147bn and adjusted EBITA of SEK 18.9bn, excluding Vinda. Having offset cost inflation through price increases and improved the structural profitability, we increased focus during the fourth quarter on volume growth and market shares. The company Isola Castle Ltd has announced that it will make a pre-conditional public offer for the shares in Vinda, entailing a shift for Essity toward a product portfolio with a higher margin and lower volatility.

Structurally improved profitability

We can look back at a year with high sales growth and a significantly higher EBITA margin, where all business areas made positive contributions through profitable growth and margin improvements. Measures aimed at structurally improving profitability have had an effect. In Health & Medical, decisive price increases have led to a sharp increase in the margin. For Professional Hygiene, restructuring measures in North America and Europe increased the structural margin by approximately 2 percentage points. In Consumer Goods, the strong volume growth for Incontinence Products Retail and Feminine Care continued. Moreover, in 2023 we successfully reversed the trend for Baby Care, which is now demonstrating a strong improvement. For Consumer Tissue, price increases have yielded higher and more stable margins.

The adjusted return on capital employed improved in 2023 by 5.5 percentage points to 16.4 percent. Adjusted earnings per share were SEK 17.56, an increase of 51 percent. For the 2023 fiscal year, the Board of Directors proposes an increase in the dividend of 7 percent to SEK 7.75 per share.

Strong fourth quarter

For the fourth quarter, sales growth, including organic sales growth and acquisitions, was -0.7 percent. Volumes were lower, mainly due to the focus on profitable growth and decisions earlier in the year to carry out restructuring measures and exit contracts with insufficient profitability. These decisions have long-term improved Essity’s structural margin and, excluding these measures, volumes increased by 1.2 percent. Adjusted EBITA increased 18 percent and the margin by 2.1 percentage points to 13.3 percent. Our efforts to increase productivity and achieve a more efficient use of resources have led to savings in cost of goods sold of SEK 377m in the fourth quarter. Meanwhile, we have invested for future volume growth and higher market shares by intensifying sales and marketing activities. We have launched innovations in all business areas that improved customer and consumer offerings and increased our market shares during the quarter.

Portfolio shift

We have continued to grow in the categories and sales channels with the highest market growth and returns. The earlier acquisitions of, for example, Knix, Hydrofera and Legacy, have strengthened our offerings and contributed with high growth.

We have undertaken to accept the offer from Isola Castle Ltd in respect of all shares in Vinda. It represents a very attractive offer for Essity and our shareholders, and also provides a product portfolio with higher and more stable returns. Consumer Tissue’s share of net sales in 2023 will decrease from 41 percent to 33 percent.

An even more sustainable Essity

By providing hygiene and health solutions to a billion people every day across the globe, Essity has a substantial opportunity to influence people and the environment. We have taken further steps toward net zero emissions of greenhouse gas emissions by 2050 and for Science Based Targets, Scope 1 and 2, the decrease is -26 percent for the 2016-2023 period. Essity has been named one of the world’s most sustainable companies by Corporate Knights by its inclusion in the Global 100 list representing the top 1 percent of companies in the world in terms of sustainability performance. For the third consecutive year, we were designated a Diversity Leader by the Financial Times and were included in the S&P Global Sustainability Yearbook for the second consecutive year.

Focus on profitable growth in 2024

Following many measures in 2023 and a structurally improved profitability, we have a strong platform for future growth.

Magnus Groth
President and CEO

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