Hygiene and healthcare company Essity released its results for the third quarter of 2022. In the period, net sales increased by 28.8% to approximately SEK 40.1 billion – reaching new record levels. The sales growth, including organic sales growth and acquisitions, amounted to 17.3%, of which price/mix accounted for 14.8%, volume for 1.5% and acquisitions for 1.0%.
Ebita (Earnings before interest, taxes and amortization) totaled SEK 2,784 million and Adjusted Ebita was SEK 2,990 million, down 17% compared to the same period a year ago. The adjusted EBITA margin declined 4.0 percentage points to 7.5%.
In its report, Essity highlighted raw material, energy and distribution cost inflation, which “has worsened further in the third quarter”, having a negative impact of 12.7 percentage points on the adjusted Ebita margin.
“We are addressing this through comprehensive price increases and energy price surcharges that will have an additional effect in the fourth quarter and in 2023,” said CEO and President Magnus Groth. “We are continuing to work at a high pace with efficiency improvements, energy saving measures and raw material rationalizations.”
The company increased prices on its core hygiene and health solutions by an average of 14.5% compared to the same period a year ago, which are offsetting high-cost inflation with a delay of approximately two quarters.
Sales and marketing costs were higher during the quarter but decreased as a share of net sales. The adjusted return on capital employed was 8.4% and earnings per share was SEK 2.23.
FOCUS ON INNOVATION
Despite the adverse scenario, the company reported higher volumes in all three business areas (Consumer Goods, Professional Hygiene and Health & Medical). “We are continuing to invest in innovation and expansion of our offerings to promote a higher quality of life for customers and consumers with more climate-smart offerings, strong brands and increased e-commerce sales.”
Online sales increased by almost 20% in the third quarter and totaled approximately SEK 5.7 billion. “Many initiatives are being implemented in the company to also increase our presence in the direct-to-consumer channel, including the acquisitions of Knix and Modibodi, two leading companies in leakproof apparel,” said Groth.
The CEO pointed out that the environmental footprint of products is shrinking and Essity has been meeting consumer demands for better solutions for users and the planet, such as the Libero smart baby diapers, launched in the third quarter. “Libero’s hybrid diaper consists of two parts: a washable textile diaper cover and an absorbent disposable insert,” he said.
A new group organization will take effect from year-end 2022, which will have four business units aligned with the company’s business areas: Professional Hygiene, Health and Medical, Consumer Goods EMEA and Consumer Goods Americas. At the same time, a global unit, Digital & Business Services, will be established.
“Through a focus on innovation, strong brands, efficiency improvements, digitalization and sustainability, we are strengthening Essity’s competitiveness in leading hygiene and health solutions in an attractive and growing market. We are managing cost inflation through price increases,” concluded Groth.