Essity has reported higher sales, price increases and a completed acquisition in its first quarter results, as it announces that work has been initiated to exit the Russian market.
Net sales increased 24.6% to SEK34,301m, up from SEK 27,528m a year earlier.
Sales growth, including organic sales growth and acquisitions, amounted to 17.3%, while EBITA decreased 55% to SEK1,663m, down from SEK3,664m in 2021.
Price increases were implemented, and further increases will be carried out in 2022.
The business said that higher costs for raw materials, energy and distribution had a negative impact of 12.1% on margins.
In line with its aim to grow in cleaning and wiping products in its Professional Hygiene division, the business also completed the acquisition of US-based cleaning and wiping company Legacy Converting during the quarter.
President and Chief Executive Magnus Groth said that all business areas “demonstrated high organic sales growth” during the period. He said: “Many countries have eased Covid-19 restrictions, which has rapidly led to increased demand for our leading hygiene and health solutions.
“We have implemented significant price increases and further increases will be carried out in coming quarters. In addition, we have negotiated price increases with customers in Europe to offset the drastic increase in energy costs.”
He added that the business will continue to invest in innovation, which has resulted in the company’s market shares increasing for 55% of its branded sales in the retail trade over the past 12 months, “despite significant price increases”.
“The positive trend also continued for e-commerce sales, with organic sales growth of 12.6%. E-commerce sales amounted to approximately SEK 4.5bn in the first quarter, corresponding to about 13% of net sales.”
Groth added that raw material, energy and distribution costs continued to rise in the quarter, negatively impacting the adjusted EBITA margin by 12.%. “We offset a large share of this through higher volumes, higher selling prices, a better mix and cost savings,” he said.
“We continued to improve the efficiency of our production facilities, work with material rationalisations and digitalise processes. However, increased inflation had a negative impact on cost savings.”
Exit of Russian market initiated
Groth said that Essity’s conditions to pursue business in Russia “have worsened”.
As a result, the company’s assets in Russia were impaired by approximately SEK 1.4bn.
He said: “Furthermore, work has been initiated to exit the Russian market.
“In 2021, Essity’s net sales in Russia amounted to approximately SEK 2.8bn, corresponding to about 2% of total consolidated net sales in 2021.
“Our work to strengthen the company through innovation, leading brands and efficiency improvements is continuing. “In the short term, however, our highest priority is to continue implementing significant price increases to improve profitability.”