By Vera Dvorakova
-Swedish hygiene products maker Essity reported second-quarter earnings that were below market expectations on Thursday, citing a weak economy and an uncertain environment.
The maker of Libresse feminine products and Tena incontinence pads said its adjusted operating profit before amortisation (EBITA) fell to 4.7 billion Swedish crowns ($482.9 million) from 5.2 billion a year earlier. That was below the 4.9 billion crowns expected by analysts polled by LSEG.
Essity has been stabilising its prices, in common with other companies in the consumer goods sector, after a period of price hikes to offset the cost inflation that began with the COVID-19 pandemic. Premium brands had come under pressure from budget conscious shoppers trading down to cheaper private label goods.
“The quarter was dominated by a weak economy and an uncertain external environment, yielding limited volume growth,” CEO Ulrika Kolsrud said in the earnings report.
Shares in Essity were down 2.7% at 0907GMT.
Demand for Essity’s Professional Hygiene segment products in North America was lower, as shoppers limited their discretionary spending, Kolsrud said in a call with analysts.
The tissue maker raised its price/mix, a metric indicating the selling price of its products, by 1.7% in the second quarter compared to the same period a year earlier.
Higher sales prices offset the increased costs of goods sold (COGS), which was mainly driven by higher raw material and distribution costs, including trade tariffs, Essity said.
The company’s adjusted EBITA margin increased to 13.7% from 13.5% in the first quarter.
Essity expects its annual COGS savings will be at the lower end of its 0.5-1 billion crowns range, CFO Fredrik Rystedt said in investor call.
The company will need to reduce its costs, Kolsrud said, but will focus on cost saving measures that do not directly impact sales.
($1 = 9.7326 Swedish crowns)
(Reporting by Vera Dvorakova; Editing by Matt Scuffham)
