Swedish hygiene products maker Essity said it would refocus on growing its volumes in the near-term after reporting third-quarter core earnings above market expectations, helped by higher prices and lower input costs.
Essity has hiked its prices despite increased promotions in the last quarter, as the maker of brands such as Libresse and TENA joined its peers in trying to offset the effects of inflation and high raw material costs.
Essity flagged a drop in volumes in the third quarter as it implemented restructuring measures in its Professional Hygiene segment in the U.S. and Europe, and exited unprofitable contracts in the Incontinence Products Health Care and Baby Care divisions.
"This is a one-time clean-up," chief executive Magnus Groth said in a call with analysts, referring to the exited contracts.
Management highlighted in the analyst call an underlying focus on volumes in all divisions but added that the cancelled contracts will still have some negative effect on volumes in the fourth quarter.
The impact of the volume drop on the sales growth, which amounted to 4.6% for the quarter, was minus 3.1%.
The tissue maker posted adjusted EBITA of SEK 5.31 billion (€450 million) for the quarter, beating estimates of SEK 4.98 billion (€420 million), as per LSEG data, and its adjusted EBITA margin rose to 12.2% from 7.5% a year earlier, a fourth consecutive margin increase.
The good result was a "positive surprise", says DNB analyst Simen Aas, adding that the most important thing was that the Consumer Goods division had come in in line with consensus, while the Health and Medical and Professional Hygiene divisions produced the beat.
Essity's peers Kimberly-Clark and Procter & Gamble both recently reported profit beats and an increase in margins, helped by price hikes - of 5% and 7% respectively - while recording only a 1% drop in volumes.