Essity: Interim Report First Quarter 2021

Rhea-AI Summary

Essity reported a net sales decline of 18.3% to SEK 27,528m for Q1 2021, primarily due to the COVID-19 pandemic and stockpiling effects from the previous year. Organic net sales fell 9.9%, with e-commerce increasing 14%. Operating profit (EBITA) dropped 31% to SEK 3,664m. Despite challenges, market shares rose in several sectors, and the company announced acquisitions to boost growth, including a USD 1,540m deal for control of Productos Familia S.A.. Future price increases are planned to counteract higher raw material costs.

Positive

• Market shares increased in many markets over the last 12 months.
• E-commerce sales grew organically by 14%, comprising about 13% of net sales.
• Organic net sales in emerging markets rose by 4.2%, accounting for 39% of net sales.
• Entered into an agreement to acquire 44% of Productos Familia to strengthen presence in Latin America.

Negative

• Net sales declined 18.3% compared to the same period last year.
• Organic net sales decreased by 9.9%, affected by COVID-19 and stockpiling effects.
• Operating profit (EBITA) decreased by 31% to SEK 3,664m.
• Adjusted EBITA decreased 32%, with an EBITA margin drop of 2.7 percentage points to 13.1%.
• Cash flow from operations fell to SEK 695m from SEK 3,044m.

STOCKHOLM, April 23, 2021 /PRNewswire/ --

JANUARY 1 – MARCH 31, 2021

(compared with the corresponding period a year ago)

• Net sales declined 18.3% to SEK 27,528m (33,712)

• Organic net sales declined 9.9% and was negatively impacted by the COVID-19 pandemic and related restrictions and lockdowns, and in comparison the stockpiling in the first quarter of the preceding year.

• Market shares increased in many markets for the most recent 12-month period

• E-commerce sales increased organically by 14% and accounted for approximately 13% of net sales

• In emerging markets, which accounted for 39% of net sales, organic net sales increased 4.2%.

• Operating profit before amortization of acquisition-related intangible assets (EBITA) decreased 31% to SEK 3,664m (5,316)

• Adjusted EBITA decreased 32% to SEK 3,608m (5,333)

• Adjusted EBITA margin decreased 2.7 percentage points to 13.1% (15.8)

• Adjusted return on capital employed decreased 4.9 percentage points to 13.5% (18.4)

• Profit for the period was SEK 2,552m (3,610)

• Earnings per share were SEK 3.04 (4.61)

• Adjusted earnings per share were SEK 3.14 (4.83)

• Cash flow from current operations was SEK 695m (3,044)

• Entered into agreement with Australian hygiene company Asaleo Care to acquire remaining shares

• After the end of the quarter, Essity entered into agreement to acquire approximately 44% of the Colombian hygiene company Productos Familia S.A. Essity has also announced price increases due to higher raw material costs.

SUMMARY OF FIRST QUARTER OF 2021

Improved market conditions resulting from the ongoing vaccination programs are expected to result in increased demand for several of Essity's product categories. One example of this is the increase in demand in Professional Hygiene in North America in the first two weeks of April 2021. Another example is the recovery in China, where sales were significantly higher during the first quarter of 2021 compared with the first quarter of 2019.

During the first quarter, Essity has continued to position the company for future profitable growth, for example, by:

• Entered into an agreement with the Australian hygiene company Asaleo Care to acquire the remaining 63.8% of the shares in the company. Essity is the largest shareholder with a holding of 36.2% of the shares. The acquisition of Asaleo Care will enable profitable growth in Australia, New Zealand and the Pacific region.
• Expanded the offering of reusable products through the launch of TENA Silhouette washable absorbent underwear within Incontinence Products, the Libresse^® V-Cup menstrual cup within Feminine Care and the Tork microfiber cleaning cloth within Professional Hygiene.
• Increased market shares in many markets over the most recent 12-month period.
• E-commerce sales increased organically by 14% and accounted for about 13% of net sales.

After the end of the first quarter:

• Entered into an agreement to acquire approximately 44% of the Colombian hygiene company Productos Familia S.A. After closing of the transaction Essity's ownership in Familia will amount to at least 94%. Essity has been an owner in Familia since 1985, and currently owns 50% of the company. The purchase price amounts to USD 1,540m (approximately SEK 13bn) for 100% of the company on a debt free basis. With the acquisition Essity is building a stronger platform in Latin America.
• Essity has also acquired the distribution rights to the wound care technology Sorbact^® in Australia and New Zealand.
• The Manufacturing Roadmap program extends until 2025 and is expected to contribute to Essity's total annual cost savings of SEK 500-1,000m through the optimization of the production structure, productivity improvements and raw material and energy savings. These measures facilitate growth without investments increasing at the same pace. Working capital is expected to decrease by more than SEK 1,000m. The objective is to also utilize new production methods to reduce exposure to wood-based fresh-fiber pulp by approximately 10%, which will result in reduced volatility for the company's profitability. The program will also lead to that the company's sustainability targets within the Science Based Targets will be achieved faster.
• Announcement of price increases within Consumer Tissue due to higher raw material costs. These were announced in Essity's key markets and the percentage increases are on average in the mid to high single digits. Some effect from the price increases is expected already at the end of the second quarter of 2021 but with the main impact in the second half of 2021. Essity is preparing price increases in other product categories impacted by higher raw material costs.

The Group's organic net sales in the first quarter of 2021 declined by 9.9% compared with the corresponding period a year ago, of which volume accounted for -8.9% and price mix for -1.0%. The COVID-19 pandemic with the extensive restrictions and lockdowns had a negative impact on sales, primarily within Professional Hygiene and Medical Solutions. Furthermore, the comparative figures were affected by the strong sales growth that resulted from stockpiling in the first quarter of the preceding year by consumers and distributors. Stockpiling in the first quarter of the preceding year explains approximately half of the reduction in organic net sales. Organic net sales in mature markets declined 18.3%. In emerging markets, which accounted for 39% of net sales, organic net sales increased 4.2%.

The Group's adjusted gross margin for the first quarter of 2021 decreased by 0.6 of a percentage point year on year to 32.2%. The gross margin was positively impacted by lower raw material costs and an improved mix. Lower prices, lower volumes and higher distribution costs had a negative impact on the gross margin.

The Group's adjusted EBITA margin decreased 2.7 percentage points to 13.1%. The margin was negatively impacted by lower absorption of fixed costs as a result of lower sales. Sales costs decreased in absolute terms but increased as a share of net sales. Investments in growth increased marketing costs in absolute terms and as a percentage of net sales. Adjusted EBITA, excluding exchange rate effects, decreased 24%. Adjusted return on capital employed decreased 4.9 percentage points to 13.5%. Earnings per share amounted to SEK 3.04.FUTURE REPORTSIn 2021, interim reports will be published on July 16 and October 22. The 2021 Year-end report will be published on January 26, 2022.

INVITATION TO PRESENTATION OF THE INTERIM REPORT FOR THE FIRST QUARTER OF 2021

In conjunction with publication, a telephone and web presentation will be held where President and CEO Magnus Groth will present the report and answer questions.

Presentation

Date: Friday, April 23, 2021

Time: 9:00 a.m. CET

Link to web presentation: https://essity.videosync.fi/2021-04-23-q1

To participate by telephone, call: +44 (0)207 192 80 00, +1 631 510 74 95 or +46 (0)8 506 921 80. Please call well in advance of the start of the presentation. Specify "Essity" or conference ID no. 8865436.Stockholm, April 23, 2021

Essity Aktiebolag (publ)
Magnus GrothPresident and CEO

For further information, please contact:

Fredrik Rystedt, CFO and Executive Vice President, +46 (0)8 788 51 31

Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 (0)8 788 51 30

Joséphine Edwall Björklund, Senior Vice President, Group Function Communications, +46 (0)8 788 52 34

Per Lorentz, Vice President Corporate Communications, Group Function Communications, +46 (0)8 788 52 51 

NB:

This information is such that Essity Aktiebolag (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. This report has been prepared in both Swedish and English versions. In case of variations in the content between the two versions, the Swedish version shall govern. The information was submitted for publication, through the agency of the contact person set out below, at 7:00 a.m. CET on April 23, 2021.  Karl Stoltz, Media Relations Manager, +46 (0)8 788 51 55karl.stoltz@essity.com  

This information was brought to you by Cision http://news.cision.com

https://news.cision.com/essity/r/interim-report-first-quarter-2021,c3331986

The following files are available for download:

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The full report (PDF)

 

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SOURCE Essity

FAQ

What were Essity's Q1 2021 net sales figures?

Essity reported net sales of SEK 27,528m for Q1 2021, an 18.3% decline compared to the same period last year.

How did Essity's e-commerce performance compare in Q1 2021?

E-commerce sales grew organically by 14%, accounting for approximately 13% of net sales.

What impacts did the COVID-19 pandemic have on Essity's sales?

The pandemic contributed to a 9.9% decline in organic net sales, primarily affecting Professional Hygiene and Medical Solutions.

What acquisitions did Essity announce in April 2021?

Essity announced agreements to acquire the remaining shares of Asaleo Care and approximately 44% of Productos Familia S.A.

What are the expected impacts of price increases announced by Essity?

Essity announced price increases in key markets due to higher raw material costs, expected to contribute to improved margins in the second half of 2021.