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Sweden’s Essity Misses Profit Forecast As Price Hikes Ease

By Reuters
Sweden’s Essity Misses Profit Forecast As Price Hikes Ease

Sweden's Essity missed fourth-quarter core profit expectations as price hikes slowed and volumes fell, it was announced on Thursday.

The hygiene products maker's shares fell by more than 4%.

Essity also warned that volumes in some business areas would be hurt in the first half of 2024.

Price Hikes Slowed

The missed forecast is due to contracts it had exited and  higher pulp prices, though it added that it did not plan to exit more contracts.

Essity's price hikes slowed to 0.7% in the quarter, below the brokerage's 2% estimate.


"Of course, where we can raise prices, we will still do that," chief executive of the company Magnus Groth told analysts on a call.

Easing input and energy costs were offset by softening pricing and re-investments, JPMorgan said in a note to clients.

Future Volume Growth

Essity’s fourth quarter adjusted earnings before interest, taxes and amortisation rose to 13.3%, up from 11.2% the previous year.

This reflects its fifth consecutive quarterly margin increase.

Adjusted earnings rose by 18% to 4.86 billion Swedish crowns (€429.5 million), but missed the London Stock Exchange Group estimate of 5.22 billion crowns (€459.5 million).


"We have invested for future volume growth and higher market shares by intensifying sales and marketing activities," Groth said in a statement.

Red Sea

The company has been growing its margins over the past year at the expense of volumes, a trend which management has said it wants to start reversing, though Red Sea shipping disruptions might force companies to again pass higher input costs on to consumers.

In December, Essity said the impact on its business from attacks on shipping in the Red Sea by Yemen-based Houthi militants was limited.

While only 1% of Essity's transports go through the Red Sea, transporters are adding a Red Sea surcharge.

Groth told Reuters that this would have a negative impact on Essity's freight costs, but he could not specify what that impact would amount to.

Read More: Essity Beats Q1 Forecasts As It Favours Profit Over Volumes

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