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Essity Releases Interim Report First Quarter 2022

“In the short term, however, our highest priority is to continue implementing significant price increases to improve profitability” – Magnus Growth

The hygiene and health company Essity published its interim report for the first quarter of 2022. The data is from January 1 to March 31, 2022, compared to the corresponding period of the previous year.

Essity’s CEO, Magnus Growth commented on the company’s 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 Growth, President and CEO, Essity

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