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Essity B 241 (-2.2 SEK) on 15-Dec-2017 16:39

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GDP trend and economic conditions

Essity’s volume development is linked to the development of GDP and related factors, including industrial production, in countries representing Essity’s main markets.

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Environmental impact and climate change

Essity’s operations have an impact on air, water, land and biological processes. These effects could lead to costs for restoring the environment or other kinds of negative effects. The matter of the economic impact of climate change is also growing in significance.

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Impact of political decisions

Essity is affected by political decisions and administrative regulations in the approximately 100 countries in which the Group conducts operations. These relate to general regulations, such as taxation and financial reporting. Essity is also impacted by more specific regulations, such as the granting of permits in accordance with the Environmental Code and reimbursement of expenses in the healthcare system.

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Impact of substitutes

Other product solutions (substitutes) can replace products that are included in Essity’s offering and thereby reduce sales. By offering competitive products, Essity can also capture market shares from the substitute. The issue of substitutes is also linked to changes in the patterns and attitudes of customers and consumers that affect demand for certain products and thus profitability.

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Dependence on major customers and distributors

The retail trade is Essity’s single largest customer group and thus exercises considerable influence. Around 55% of Essity’s net sales are made to the retail trade, under both Essity’s brands and the retailer’s own brands. Essity also uses other distributors or retailers, which could impact the Group.

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Occurrence of unethical business practices

Essity works in some 100 countries and in environments where unethical business practices and violations of human rights may occur. If Essity becomes involved in these business practices, the company’s reputation in the market may be damaged.

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Movements in the market price for Essity’s products

Movements in the market price of Essity’s products could create major fluctuations in the profitability of the product in question when these movements are not linked to changes in costs for Essity.

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Risks at plants

Essity has around 100 production facilities in some 30 countries. Many of them conduct continuous production.

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Suppliers

Essity is dependent on a large number of suppliers. The loss of key suppliers could result in costs for Essity and problems in manufacturing.

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Energy price risk

Energy price risk is the risk that increased energy prices could adversely impact Essity’s operating profit.

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Currency risk

Transaction exposure is the risk that exchange rate movements in export revenues and import expenses could negatively impact the companies operating profit and the cost of non-current assets.

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Credit risk

Credit risk refers to the risk of losses due to a failure to meet payment obligations by Essity’s counterparties in financial agreements or by customers.

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Liquidity and refinancing risk

Liquidity and refinancing risk is the risk that Essity is unable to meet its payment obligations as a result of insufficient liquidity or difficulty in raising new loans.

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Interest rate risk

Interest rate risk relates to the risk that movements in the interest rates could have a negative impact on Essity.

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Employee-related risks

Essity must have access to skilled and motivated employees and safeguard the availability of competent managers to achieve established strategic and operational objectives.

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Cost of input goods

The market price of many of the input goods used in the manufacture of Essity’s products fluctuates over time and this could influence Essity’s earnings.

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