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A-Brands

Sweden's Essity Expects Business Demand To Rise, Q1 Profits Down

Swedish hygiene products maker Essity said that its first-quarter profits fell by a third due to lockdown measures, but the group added that it is expecting vaccination programmes to boost demand this year, particularly from business customers.

'Improved market conditions resulting from the ongoing vaccination programs are expected to result in increased demand for several of Essity’s product categories,' the company said in a statement.

'One example of this is the increase in demand in Professional Hygiene in North America in the first two weeks of April 2021. Another example is the recovery in China, where sales were significantly higher during the first quarter of 2021 compared with the first quarter of 2019.'

Essity is the global leader in business-related hygiene products with its Tork brand, and in incontinence products with its Tena brand. It is the world's second-biggest maker of consumer tissue toilet paper and handkerchiefs with brands such as Lotus, Edet, Tempo and Vinda.

Essity's first-quarter operating profit fell 32% from a year earlier to SEK 3.48 billion (€34 million) crowns as restrictions and lockdowns meant organic sales fell 10%. Analysts had expected a slightly higher profit of SEK 3.64 billion, based on Refinitiv data.

Professional Hygiene Division

Professional Hygiene, the Essity division that makes products for offices, restaurants, hotels and schools, took the biggest hit with a profit drop of 70% as people stayed more at home.

The unit's sales a year earlier were also unusually high as people hoarded toilet paper in the early stages of the pandemic, a period that saw the company enter into protective mask production.

The company said a significant pick-up in sales in China in the first quarter, and an increase in demand in North America at the professional hygiene division highlighted the impact of the vaccination programmes on market conditions.

Restructuring Programme

The company also provided more details about a previously announced restructuring programme that runs through 2025.

Essity said the programme would contribute to its total annual cost savings of SEK 500 million to SEK 1 billion through 'the optimisation of the production structure, productivity improvements and raw material and energy savings.'

The programme was also expected to lower working capital by more than SEK 1 billion through these measures.

News by Reuters, edited by ESM. For more A-Brands stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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