Essity's Q1 profit down 80% from year ago to SEK521M, with net sales up 24.6% to SEK34.3B, boosted by Legacy Converting acquisition; company to add further price increases in 2022, negotiate increases in Europe to offset energy costs, exit Russian market

Sample article from our Tissue & Hygiene

April 22, 2022 (press release) –

JANUARY 1 – MARCH 31, 2022 (compared with the corresponding period a year ago)

  • Net sales increased 24.6% to SEK 34,301m (27,528)
  • Sales growth, including organic sales growth and acquisitions, amounted to 17.3%. Organic sales growth was 14.6%, of which volume accounted for 7.2% and price/mix for 7.4%.
  • Price increases were implemented and further increases will be carried out in 2022
  • Acquisition of US-based cleaning and wiping company Legacy Converting, Inc.
  • The company’s assets in Russia have been impaired by approximately SEK 1.4bn.  Furthermore, work has been initiated to exit the Russian market.
  • Operating profit before amortization of acquisition-related intangible assets (EBITA) decreased 55% to SEK 1,663m (3,664)
  • Adjusted EBITA amounted to SEK 2,826m (3,608) and the adjusted EBITA margin amounted to 8.2% (13.1). Higher costs for raw materials, energy and distribution had a negative impact of 12.1 percentage points on the margin. The margin was positively impacted by higher volumes, higher selling prices, a better mix and cost savings.
  • Adjusted return on capital employed amounted to 9.0% (13.5)
  • Profit for the period was SEK 521m (2,552)
  • Earnings per share were SEK 0.44 (3.04) and adjusted earnings per share were SEK 2.72 (3.14)
  • Cash flow from current operations increased to SEK 1,070m (695)

 

CEO’S COMMENTS

Higher sales, price increases and acquisition

During the first quarter of 2022, net sales increased 24.6% to approximately SEK 34.3bn. Sales growth, including organic sales growth and acquisitions, amounted to 17.3%. In line with our strategy to grow in cleaning and wiping products in Professional Hygiene, we acquired the US company Legacy Converting during the quarter.

Organic sales growth amounted to 14.6%, of which volume accounted for 7.2% and the price/mix for 7.4%. All business areas demonstrated high organic sales growth. Many countries have eased COVID-19 restrictions, which has rapidly led to increased demand for our leading hygiene and health solutions.

We have implemented significant price increases and further increases will be carried out in coming quarters. In addition, we have negotiated price increases with customers in Europe to offset the drastic increase in energy costs.

We continued to invest in innovation and increased customer and consumer value, which resulted in our market shares increasing for 55% of our branded sales in the retail trade over the past 12 months despite significant price increases. The positive trend also continued for e-commerce sales, with organic sales growth of 12.6%.
E-commerce sales amounted to approximately SEK 4.5bn in the first quarter, corresponding to about 13% of net sales.

Essity has been included in S&P Global’s Sustainability Yearbook 2022. In its review of more than 7,000 companies, Essity was ranked among the 150 most sustainable. During the quarter, we were also recognized by CDP for our supplier engagement in the fight against climate change.

Adjusted EBITA amounted to SEK 2,826m, a decrease of 22% compared with the corresponding period of 2021. Raw material, energy and distribution costs continued to rise in the first quarter, negatively impacting the adjusted EBITA margin by 12.1 percentage points. We offset a large share of this through higher volumes, higher selling prices, a better mix and cost savings. The adjusted EBITA margin declined by 4.9 percentage points to 8.2%. Continuous cost savings amounted to SEK 34m. We continued to improve the efficiency of our production facilities, work with material rationalizations and digitalize processes. However, increased inflation had a negative impact on cost savings. Sales and marketing costs were higher during the quarter but decreased as a share of net sales. The adjusted return on capital employed was 9.0%. Adjusted earnings per share were SEK 2.72. Cash flow from current operations increased to SEK 1,070m.

Essity’s conditions to pursue business in Russia have worsened. As a result, the company’s assets in Russia were impaired by approximately SEK 1.4bn. Furthermore, work has been initiated to exit the Russian market. In 2021, Essity’s net sales in Russia amounted to approximately SEK 2.8bn, corresponding to about 2% of total consolidated net sales in 2021.

Our work to strengthen the company through innovation, leading brands and efficiency improvements is continuing. In the short term, however, our highest priority is to continue implementing significant price increases to improve profitability.

Magnus Groth
President and CEO

 

FUTURE REPORTS
In 2022, interim reports will be published on July 21 and October 27. The Year-end report for 2022 will be published on January 26, 2023.

INVITATION TO PRESENTATION OF THE INTERIM REPORT FOR QUARTER 1, 2022
In conjunction with publication, a telephone and web presentation will be held where President and CEO Magnus Groth will present the report and answer questions.

Presentation
Date: Friday, April 22, 2022
Time: 09:00, CET
Link to web presentation: https://essity.videosync.fi/2022-04-22
To participate by telephone, call: +44 333 300 08 04, +1 631 913 14 22 or +46 8 566 426 51. State pin code 70624732#.
Please call well in advance of the start of the presentation.
The presentation can also be followed on LinkedIn and Twitter.

Stockholm, April 22, 2022
Essity Aktiebolag (publ)

Magnus Groth
President and CEO

For further information, please contact:
Fredrik Rystedt, CFO and Executive Vice President, +46 8 788 51 31
Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 70 511 15 81
Joséphine Edwall Björklund, Senior Vice President, Group Function Communications, +46 8 788 52 34
Per Lorentz, Vice President Corporate Communications, Group Function Communications, +46 73 313 30 55

NB:

This report has not been reviewed by the company’s auditors.

This information is such information that Essity Aktiebolag (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. This report has been prepared in both Swedish and English versions. In case of variations in the content between the two versions, the Swedish version shall govern. The information was submitted for publication, through the agency of the contact person set out below, at 07:00 CET on April 22, 2022.   

Karl Stoltz, Media Relations Director, +46 709 426 338

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. Click here to view the full report.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.

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