Essity reports increased profits in Q2 despite slight sales decline
Operating profit surges by 27%, driven by higher EBITDA margins and strategic cost savings
Essity, a hygiene and health company, has announced its financial results for the second quarter, showing a notable increase in profits despite a slight decline in sales. Net sales fell by 1.2%, amounting to SEK 36 million compared to SEK 37 million in the same period last year. Organic growth was recorded at -0.9%, with volume contributing 0.4% and price/mix -1.3%. Excluding restructuring and terminated contracts, volumes saw a rise of 2.9%.
Operating profit (EBITDA) experienced a significant increase of 27%, reaching SEK 5 million, up from SEK 4 million the previous year. EBITDA, excluding non-recurring items (IAC), grew by 17% to SEK 5 million, with the EBITDA margin excluding IAC rising by 2.2 percentage points to 14.7%.
The return on capital employed (ROCE) also saw improvement, rising to 17.9% compared to 14.2% in the same period last year. ROCE excluding IAC increased by 2.7 percentage points, reaching 18.5%. Operational cash flow grew by 14%, totaling SEK 3 million, compared to SEK 2 million the previous year.
The profit for the period, considering all operations, totaled SEK 3 million, compared to SEK 2 million last year. Earnings per share from continuing operations increased to SEK 4.72, up from SEK 3.46. Earnings per share from total operations also rose to SEK 4.72, compared to SEK 3.53.
Following the authorization granted by the Annual General Meeting, the Board of Directors decided to repurchase SEK 3 billion worth of Class B shares starting from June 17, 2024. Essity also introduced new, more ambitious financial targets, including annual organic sales growth exceeding 3% and an EBITDA margin excluding IAC above 15%.
Magnus Groth, president and CEO of Essity, commented on the results: “Essity is in better shape than ever, delivering strong earnings in the second quarter with solid underlying growth and its highest operating profit (EBITDA) to date. All business areas achieved higher EBITDA margins compared to the previous year. We presented new ambitious financial targets during the quarter and initiated a share repurchase program”.
Groth also highlighted that all categories reported higher volumes, excluding restructuring in Professional Hygiene, and that in several categories, the company outperformed the market in terms of growth. “The quarter shows the results of our increased focus on profitable volume growth based on attractive product offerings, increased investments in sales and marketing, and cost savings”, he said.
The CEO also mentioned the company’s strong pricing discipline and the positive development of the product mix, especially in Professional Hygiene, where premium product sales increased. Cost savings remained high in the quarter, with contributions from the entire value chain.
In conclusion, Groth stated: “We closed another strong quarter, in which all business areas contributed to profitable growth and continued healthy cash flow. Favorable long-term market trends, combined with Essity’s successful innovations, strong brands, and efficiency efforts, provide us with a platform to continue increasing the company’s value creation in the future”.
