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Essity third-quarter profit tops estimates, company lowers savings target

Essity third-quarter profit tops estimates, company lowers savings target
FILE PHOTO: Essity products are seen on display at the venue of a presentation to investors by the hygiene product company in Stockholm, Sweden May 23, 2019. REUTERS/Anna Ringstrom/File Photo -
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Anna Ringstrom(Reuters)
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STOCKHOLM (Reuters) – Swedish hygiene products maker Essity <ESSITYb.ST> on Friday reported a bigger-than-expected jump in its core third-quarter profit, underpinned by higher sales volumes and easing raw material and energy costs.

Essity is the world’s biggest maker of hygiene products for businesses and incontinence products with its Tork and TENA brands. The company is the world’s second-largest seller of consumer tissue products such as toilet paper and handkerchiefs.

Operating profit before amortisation and items affecting comparability jumped 38% to 4.2 billion crowns ($433 million) from a year ago, with the margin widening by 2.6 percentage points to 12.8%. Analysts had forecast a profit of 3.8 billion crowns, according to Refinitiv.

“Earnings were positively impacted by higher prices, a better mix, higher volumes, lower raw material and energy costs and cost savings,” the company said.

Tough market conditions and a sharp rise in prices for raw materials such as pulp put pressure on Essity after its 2017 listing, but pulp prices have now started to drop.

Company’s shares climbed 32% so far this year on cost-cutting measures, higher product prices and hopes it will start benefiting from the drop in pulp prices.

The savings programme helped boost group profit, but production and distribution costs rose due to problems related to new production capacity.

Essity now expects ongoing savings outside the cost-cutting programme to stand at 600 million-700 million crowns this year, down from initially planned savings of 1 billion crowns, a company spokesman said.

Under the programme, Essity would still save around 600 million crowns this year, he said.

Rival Procter & Gamble Co <PG.N>, whose products range from detergent and shampoo to diapers, on Tuesday raised its full-year forecast after a better-than-expected quarter.

Kimberly-Clark <KMB.N> on Tuesday also raised its outlook after the company beat analsysts’ expectations.

($1 = 9.6652 Swedish crowns)

(Reporting by Anna Ringstrom; editing by Johannes Hellstrom and Sherry Jacob-Phillips)

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