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A-Brands

Essity Beats Quarterly Forecasts As It Favours Profit Over Volumes

By Reuters
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Essity Beats Quarterly Forecasts As It Favours Profit Over Volumes

Hygiene products maker Essity has reported first-quarter earnings above market expectations, helped by continued price increases and better product mix across all of its business areas, but flagged lower volumes.

The Swedish firm's adjusted earnings before interest, taxes and amortisation (EBITA) rose year-on-year to SEK 4.36 billion (€380 million) in the quarter, beating the Refinitiv estimate of SEK 4.03 billion (€350 million)

"Volumes declined somewhat on account of the company's prioritisation of higher profitability ahead of volume," chief executive Magnus Groth said in an earnings statement.

Like other consumer goods companies, Essity has been raising its prices to brave the heightened energy costs coupled with high raw material prices.

In Essity's case, the price mix was more than sufficient to offset the raw material and energy costs, Jefferies said in a note.

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Read More: Essity Buys 80% Of Canada's Knix Wear For SEK 3.3bn

Strategic Review

On Wednesday, the world's second-biggest maker of consumer tissue said it had initiated a strategic review of its 51.59% stake in China-based Vinda and Consumer Tissue Private Label Europe business.

Credit Suisse views the strategic review as a chance for Essity to reduce volatility in earnings and increase its returns, as it can accelerate the tissue maker's strategy move towards higher value-added categories.

The review could help the group move away from the commoditised consumer tissue business that in China faces rising excess supply, which does not allow Essity to take strategic pricing action, Credit Suisse added.

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Read More: Essity Explores Sustainable Tissue Production With Voith

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