Essity's net sales increased 16.1% to SEK 130,372 million ($11.9 billion) in January–September 2023. Sales growth, including organic sales growth and acquisitions, amounted to 9.8%, of which volume accounted for -3.2%, price/mix for 11.9% and acquisitions for 1.1%. Selling prices were higher and the mix better in all business areas. The lower volumes were mainly a result of the company’s focus on profitable growth and thereby decisions to implement restructuring measures in Professional Hygiene and to exit contracts with insufficient profitability in Incontinence Products Health Care and Baby Care. Furthermore, volumes were negatively impacted by lower volumes in Russia and the discontinuation of the baby diaper business in Latin America. Organic sales growth in mature markets amounted to 7.7% and in emerging markets to 10.4%. Emerging markets accounted for 37% of net sales. Exchange rate effects increased net sales by 7.0%. Divestments reduced net sales by 0.7% and were largely attributable to the divestment of Russian operations.
The Group’s gross margin increased to 27.1%. The Group’s adjusted gross margin increased 3.4 percentage points to 28.1%. The margin was positively impacted by higher selling prices and a better mix in all business areas, as well as cost savings. Higher costs for raw materials and energy reduced the margin by 3.9 percentage points. The margin was also negatively impacted by higher salary inflation and lower volumes.
The Group’s EBITA margin increased to 9.5% in January–September 2023. The Group’s adjusted EBITA margin increased 3.0 percentage points to 11.0%. Sales costs were higher, mainly due to salary inflation and higher marketing costs. Sales costs were also higher as a share of net sales.
Operating profit before amortization of acquisition-related intangible assets (EBITA) increased to SEK 12,323 million ($1.1 billion). Adjusted operating profit before amortization of acquisition-related intangible assets (adjusted EBITA) increased 60% (47% excluding currency translation effects, acquisitions and divestments) to SEK 14,372 million ($1.3 billion).
Profit for the period increased 81% (67% excluding currency translation effects, acquisitions and divestments) to SEK 6,905 million ($633 million). Adjusted profit for the period increased 52% (38% excluding currency translation effects, acquisitions and divestments) to SEK 8,856 million ($812 million).
Q3 2023 results
Net sales increased 8.5% to SEK 43,516 million ($4 billion). The Group’s gross margin increased to 27.6%. The Group’s adjusted gross margin increased 6.3 percentage points to 29.9%. Higher selling prices, better mix, cost savings as well as lower costs for raw materials, energy and distribution had a positive impact on the margin. The cost savings amounted to approximately SEK 224 million ($20.5 million). The margin was negatively impacted by higher salary inflation and lower volumes.
The Group’s EBITA margin increased to 8.4%. The Group’s adjusted EBITA margin increased 4.7 percentage points to 12.2%. Sales costs were higher, mainly due to salary inflation and higher marketing costs in Consumer Goods. Sales costs also increased as a share of net sales.
Profit for the period increased by 2% (9% decrease excluding currency translation effects, acquisitions and divestments) to SEK 1,651million ($151 million). Adjusted profit for the period increased 82% to SEK 3,320 million ($304 million).
Magnus Groth, President and CEO, said: “Essity delivered strong earnings for the Q3 2023. Net sales continued to increase and adjusted EBITA increased by 78% to SEK 5.3 billion. The adjusted EBITA margin was higher for the fourth consecutive quarter and amounted to 12.2%. As leading in the growing global hygiene and health market, we are taking further steps toward achieving our Group targets concerning sales growth, return and a reduced environmental footprint.
Higher selling prices, a positive product mix, cost savings and lower costs for raw materials, energy and distribution had a positive impact on earnings. All three business areas developed well with higher sales and higher adjusted EBITA margin. Operating cash flow increased 182% to SEK 7.5 billion. Adjusted earnings per share increased to SEK 4.90. The adjusted return on capital employed increased to 14.6%, which means we are well on our way to achieving the return target of >17%.
Our strategic review of ownership in Vinda and Consumer Tissue Private Label Europe, with the aim of reducing Consumer Tissue’s share of the company’s total sales, is proceeding according to plan.”
Essity is a global, leading hygiene and health company.
