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Essity Misses Profit Forecasts On Staff, Marketing Costs

By Reuters
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Essity Misses Profit Forecasts On Staff, Marketing Costs

Swedish hygiene products maker Essity's second-quarter core earnings missed market expectations, hit by wage inflation and higher marketing costs, even as it continued to hike prices.

Like many consumer goods companies, Essity has been raising its prices to brave the heightened energy and raw material costs since last year.

It reported adjusted earnings before interest, taxes and amortisation (EBITA) of SEK 4.70 billion (€410 million) for the quarter, up 49% from SEK 3.16 billion (€270 million) a year earlier but below the Refinitiv estimate of SEK 4.89 billion (€420 million).

The tissue maker said it had focused on margin improvement, which resulted in lower volumes as it exited products and markets with unsatisfactory profitability.

Its adjusted EBITA margin rose to 10.7% from 8.3% in the second quarter of 2022.

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'High Sales Growth'

"Essity performed well in the second quarter with continued high sales growth and higher margins," commented chief executive Magnus Groth.

"We are following our plan to achieve our target of a return on capital employed of above 17% by 2025."

The period also saw the business complete its exit from the Russian market, a process it commenced in April 2022.

Strategic Review

During the quarter, Essity launched a strategic review of its ownership in both the Asian hygiene company Vinda and Consumer Tissue Private Label Europe. The main goal is to decrease Consumer Tissue's portion of the overall company sales, the company noted.

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According to the company, the review is progressing as intended, and it is actively exploring various options that could potentially lead to divestments. However, it stressed that no definitive decisions have been made at this point.

"The ongoing strategic review of ownership in Vinda and Consumer Tissue Private Label Europe is proceeding according to plan," Groth added. [Additional reporting by ESM]

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