Essity, a Swedish company known for brands such as Libresse and TENA, announced plans to raise prices in the coming months to offset rising pulp costs. In a statement after revealing first-quarter earnings above expectations, CEO Magnus Groth noted that cellulose accounted for 11% of all costs in 2023. The manufacturer has been concentrating efforts on reducing its reliance on fiber, stating in March that it managed to halve its cellulose purchases.
“This (pulp and recycled fiber costs) will have an impact in the second quarter and beyond, but we are going to offset it through price increases,” the executive said.
Although Essity increased its margins over the last year at the expense of falling volumes, the company noted a reversal of this trend. With increased marketing activity, prices were reduced in the first quarter. Analysts warned that the planned increase could result in a loss of sales volume for the company. “Pricing in consumer goods should be a concern at a time of potentially rising costs,” JP Morgan noted.
Other companies in the sector are also responding to rising pulp costs. Portuguese tissue paper manufacturer Navigator announced that it will raise prices by 8% to 10% starting in May.
On expectations of a share buyback or target update following the sale of its stake in Asian hygiene products company Vinda, Groth said the company will provide an update in the second quarter on its financial targets and capital structure.
On the earnings front, Essity’s adjusted EBITDA in the quarter rose 12% year-on-year to SEK4.9 billion (€420 million), beating analysts’ expectations. Margin also increased to 14%, marking the sixth consecutive quarterly increase. Excluding restructurings and terminated contracts, volumes increased by 0.6% in the quarter.
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