Essity's Q2 net profit down 19% to SEK1.7M, impacted by higher costs for raw materials, energy and distribution; sales up 30.9% to SEK37.93B on significant price increases and higher volumes in all business areas, with further price increases set for H2

Sample article from our Tissue & Hygiene

July 21, 2022 (press release) –

JANUARY 1 – JUNE 30, 2022 (compared with the corresponding period a year ago)

  • Net sales increased 27.8% to SEK 72,230m (56,496)
  • Sales growth, including organic sales growth and acquisitions, amounted to 19.0%. Organic sales growth, excluding exchange rate effects, acquisitions and divestments, was 16.3%, of which volume accounted for 5.5% and price/mix for 10.8%.
  • Price increases were implemented and further increases will be carried out in the second half of 2022
  • The company’s assets in Russia have been impaired by approximately SEK 1.6bn. Furthermore, work has been initiated to exit the Russian market.
  • Operating profit before amortization of acquisition-related intangible assets (EBITA) amounted to SEK 4,313m
    (6,937)
  • Adjusted EBITA amounted to SEK 5,984m (7,017) and the adjusted EBITA margin amounted to 8.3% (12.4). Higher costs for raw materials, energy and distribution had a negative impact of 12.4 percentage points on the margin. The margin was positively impacted by higher volumes, higher selling prices and a better mix.
  • Return on capital employed amounted to 9.2% (14.0). Adjusted return on capital employed amounted to 10.2% (14.1).
  • Profit for the period was SEK 2,194m (4,627)
  • Earnings per share were SEK 2.55 (5.56) and adjusted earnings per share were SEK 5.69 (6.03)
  • Cash flow from current operations increased to SEK 2,295m (1,741)
  • On July 7 and 8, 2022, the acquisitions of Knix and Modibodi were announced, two leading companies in leakproof apparel
     

CEO’S COMMENTS

Record growth and higher sequential profit

In a turbulent world, Essity stands strong. We have further strengthened the company through significant price increases, successful product launches, increased productivity and leading sustainability work. In July, we announced the acquisition of two companies in leakproof apparel to become the fastest growing company in Intimate Hygiene.

During the second quarter of 2022, net sales increased 31% to approximately SEK 38bn. Sales growth, including organic sales growth and acquisitions, amounted to 20.6%. We implemented significant price increases, while we had higher volumes in all business areas. Price elasticity in our categories is low and our brands are strong. Essity’s market shares increased for approximately 50% of branded sales in the retail trade over the past 12 months. This was the result of long-term investments in innovation, digitalization and marketing. E-commerce sales increased organically by 25% to about 15% of net sales. Organic sales growth for the Group was 17.8%, of which price/mix accounted for 14.1% and volume for 3.7%. Further price increases will be carried out in the second half of 2022.

Adjusted EBITA decreased 7% compared with the corresponding period of 2021 but increased 12% compared with the first quarter of 2022. Adjusted EBITA amounted to SEK 3,158m and EBITA to SEK 2,650m. The adjusted EBITA margin decreased 3.5 percentage points to 8.3%, which was an improvement compared with the first quarter of 2022. Raw material, energy and distribution costs continued to rise in the second quarter, negatively impacting the adjusted EBITA margin by 12.8 percentage points. We offset a large share of this through significantly higher selling prices, a better mix and higher volumes. We also continued to improve productivity through increased efficiency in our production facilities, material rationalizations and digitalization of processes. Our efficiency efforts are continuing at a high pace but the reported cost savings were negatively impacted by high cost inflation and the net outcome for the quarter is therefore negative. Sales and marketing costs were higher during the quarter but decreased as a share of net sales. The adjusted return on capital employed was 9.6%. Adjusted earnings per share increased to SEK 2.97 and earnings per share amounted to SEK 2.11. Cash flow from current operations amounted to SEK 1,225m.

In July, we announced the acquisition of two companies. Knix and Modibodi are leading companies in leakproof apparel, which is the fastest growing product segment in Intimate Hygiene as consumers choose more comfortable, discrete, reliable and sustainable solutions for periods and incontinence. Through the acquisitions, Essity will become the global market leader within leakproof apparel* and builds the fastest growing company in Intimate Hygiene.

Magnus Groth

President and CEO
   
 
FUTURE REPORTS
In 2022, an interim report will be published on October 27. The Year-end report for 2022 will be published on January 26, 2023.
 
INVITATION TO PRESENTATION OF THE HALF-YEAR REPORT FOR 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: Thursday, July 21, 2022
Time: 09:00 a.m. CET
Link to web presentation: https://essity.videosync.fi/2022-07-21

To participate by telephone, call: +44 330 165 36 41, +1 646 828 80 82 or +46 8 566 427 54. Please call well in advance of the start of the presentation. State pin code 275669.
The presentation of the half-year report will also be available on LinkedIn and Twitter.

 
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 information is such information that Essity Aktiebolag (publ) is obligated to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. 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 a.m. CET on July 21, 2022.   

Karl Stoltz, Media Relations Director, +46 70 942 63 38

 

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. To view  Essity Aktiebolag 's full quarterly report (pdf) directly, click here 

 

* 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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