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Interim Report Q2 2017

2017-07-18

JANUARY 1 – JUNE 30, 2017 (compared with the corresponding period a year ago)

  • Net sales increased 9% to SEK 53,423m (49,231)
  • Organic sales, excluding exchange rate effects, acquisitions and divestments, increased 0.4%
  • Operating profit before amortization of acquisition-related intangible assets (EBITA) rose 30% to SEK 5,557m (4,283)
  • Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 12% to SEK 6,354m (5,683)
  • Adjusted EBITA margin increased 0.4 percentage points to 11.9% (11.5)
  • Adjusted profit before tax rose 7% to SEK 5,566m (5,199)
  • Profit for the period increased 191% to SEK 3,497m (1,200)
  • Earnings per share amounted to SEK 4.47 (1.54 [1])
  • Adjusted earnings per share increased 69% to SEK 5.60 (3.311)
  • Cash flow from current operations increased 7% to SEK 3,487m (3,262)
  • The acquisition of BSN medical, a leading medical solutions company, was consolidated as of April 3, 2017. Reported net sales for the second quarter of 2017 amounted to SEK 2,096m and adjusted EBITA to SEK 359m.

1 Indicative earnings per share on the assumption that the number of issued shares in Essity as of June 30, 2016 corresponded to the number of issued shares in Essity on June 30, 2017 (702.3 million).

SUMMARY OF SECOND QUARTER 2017 

Following the split of SCA, the leading global hygiene and health company Essity was listed on Nasdaq Stockholm on June 15, 2017.

In the second quarter of 2017, 18 innovations were launched that strengthened Essity’s customer and consumer offerings in all categories.

To further improve efficiency and strengthen competitiveness in Professional Hygiene in North America, a production plant in the US was closed during the quarter. The measure is part of Essity’s Tissue Roadmap and is aligned with the company’s strategy to optimize the geographic production footprint to increase cost and capital efficiency for improved profitability.

The Group’s net sales for the second quarter of 2017 increased 12.7% compared with the corresponding period a year ago. Organic sales declined by 0.1%. As part of Essity’s focus on profitable growth for increased value creation, the company has discontinued certain underperforming market positions and contracts with unsatisfactory profitability. This has had a negative impact on organic sales. In emerging markets, which accounted for 35% of net sales, organic sales increased 2.9%. Mature markets decreased by 1.5%.

The Group’s adjusted EBITA in the second quarter of 2017 increased by 17% compared with the corresponding period a year ago. Excluding currency translation effects and the acquisition of BSN medical the adjusted EBITA was in line with the corresponding period a year ago. A better price/mix, higher volumes, cost savings and other measures to improve profitability offset higher raw material and energy costs. Selling costs were lower. Investments were made in increased marketing activities. The Group’s adjusted EBITA margin increased 0.4 percentage points to 12.2%. Operating cash flow declined 20%. The adjusted return on capital employed was 13.7% (calculated as annualized adjusted EBITA for the second quarter of 2017/capital employed as of June 30, 2017).

On April 3, 2017, the Group completed the acquisition of BSN medical, a leading medical solutions company. In the second quarter of 2017, the acquired company’s organic sales declined by 0.7%. The adjusted EBITA margin was 17.1%. Organic sales were negatively impacted by a lower number of invoicing days. Integration costs and operations in Venezuela negatively impacted the EBITA margin by about 1.5 and 1.0 percentage points, respectively. Furthermore, the EBITA margin was negatively impacted by lower absorption of fixed costs as a result of the decline in sales.

For further information, please contact:

Fredrik Rystedt, CFO and Executive Vice President, +46 8 788 51 31
Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 8 788 51 30
Joséphine Edwall-Björklund, Senior Vice President, Group Function Communications, +46 8 788 52 34
Media Relations, Group Function Communications, +46 8 788 52 20

NB:
Essity discloses the information provided herein pursuant to the EU’s Market Abuse Regulation and the Swedish Securities Market Act. 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 12:00 CET on July 18, 2017. This interim report has been reviewed by the company's auditors
Karl Stoltz, Media Relations Manager, +46 8 788 51 55

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