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Essity reports sales increase despite higher raw material and energy costs

Essity has reported a net sales increase of 8.5% to SEK118,500m for the full-year 2018 compared with the preceding year.

Operating profit before EBITA declined 8% to SEK 11,560m while adjusted EBITA was SEK12,935m.

Higher raw material and energy costs had a negative impact of SEK4,705m on earnings, and profit for the period decreased 3% to SEK 8,552m.

Net sales for the fourth quarter of 2018 increased 8.5% compared with the corresponding period a year ago to SEK31,112m.

Higher prices in all business areas had a positive impact on organic net sales.

In Consumer Tissue, volumes declined due to restructuring measures within the scope of “Tissue Roadmap”, entailing lower sales of mother reels.

The division reported a net sales increase of 7.4% to SEK45,125m while organic net sales increased 0.7% in mature markets.

In emerging markets, which accounted for 44% of net sales, organic net sales increased by 5.0%.

Higher raw material and energy costs as well as higher distribution costs negatively impacted earnings.

During the year, the company said it worked with all parts of the business to increase profitability and “counteract the negative effect that significantly higher raw material and energy costs” had on earnings.

Measures implemented included:
• Investment in brands and launching 29 innovations;
• Price increase implemented in all business areas in 2018. Further price increases are expected in 2019;
• Intensified the company’s efficiency improvements and restructuring of the business;
• Further restructuring measures planned as part of “Tissue Roadmap” and continuing its work with “Cure or Kill”;
• A group-wide cost-savings programme was launched. It is expected to generate annual cost savings of approximately SEK900m, with full effect at the end of 2019. The programme is proceeding as planned and for the fourth quarter of 2018, cost savings amounted to SEK18m. At the end of 2018, the annual rate amounted to about SEK150m;
• To strengthen competitiveness and increase efficiency the company made changes to its organisational structure and executive management team.

The group said the European and North American retail markets showed “good growth” but with a continued high level of competition while emerging markets noted higher demand.

The European market for consumer tissue demonstrated low growth while the Chinese consumer tissue market noted higher demand.

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