Half-year Report 2020

JANUARY 1 – JUNE 30, 2020
(compared with the corresponding period a year ago)

• Net sales declined 1.0% to SEK 62,119m (62,724)
• Organic net sales declined 0.9%
• Essity has increased market shares in many markets and increased online sales
• Sales were negatively impacted by the COVID-19 pandemic and related lockdowns
• In emerging markets, which accounted for 36% of net sales, organic net sales increased 2.3%
• Operating profit before amortization of acquisition-related intangible assets (EBITA) increased 43% to SEK 9,159m (6,412)
• Adjusted EBITA increased 32% to SEK 9,115m (6,922)
• Adjusted EBITA margin increased 3.7 percentage points to 14.7% (11.0)
• Profit for the period increased 38% to SEK 6,118m (4,430)
• Earnings per share increased 32% to SEK 7.58 (5.73)
• Adjusted earnings per share increased 20% to SEK 7.95 (6.60)
• Cash flow from current operations increased 19% to SEK 6,361m (5,336)

 
SUMMARY OF THE SECOND QUARTER 2020
The Group’s net sales declined 11.4% in the second quarter of 2020 compared with the corresponding period a year ago. Organic net sales declined 9.3%, of which volume accounted for -9.8% and price/mix for 0.5%. In mature markets, organic net sales declined 14.7%. In emerging markets, which accounted for 39% of net sales, organic net sales increased 0.6%. Adjusted EBITA for the second quarter of 2020 increased 1% compared with the same period a year ago. The adjusted EBITA margin increased by 1.7 percentage points to 13.3%.

Essity has increased market shares in many markets through high delivery reliability and successful product launches as well as increased activity and strengthened presence in digital sales channels. The Group’s online sales grew by approximately 3.5 percentage points as a share of net sales and accounted for about 14%.

Sales were negatively affected by the COVID-19 pandemic and related lockdowns as well as inventory adjustments following  the stockpiling that took place among consumers and distributors in March 2020. The lockdowns mainly resulted in a temporary reduction in demand in Professional Hygiene and Medical Solutions. For Professional Hygiene, this is mainly the result of the negative effect of the lockdowns primarily in the customer segments of hotel, restaurant, catering, commercial buildings as well as schools and universities. Meanwhile, Professional Hygiene increased its sales of dispensers as a result of a greater focus on hygiene. In the product categories of Incontinence Products, Feminine Care and Baby Care there was a temporary negative impact on demand as consumption declined slightly as a result of the lockdowns as consumers spent more time in the home.

The Group’s adjusted gross margin for the second quarter of 2020 increased 3.2 percentage points to 32.2% compared with the corresponding period a year ago. The gross margin was positively impacted by a better mix, lower raw material and energy costs and costs savings. Lower raw materials and energy costs increased the gross margin by 5.1 percentage points. The lower raw material costs were primarily the result of lower pulp prices. Continuous cost savings amounted to SEK 127m. Lower volumes and higher distribution costs for the Group and lower prices for the business area Consumer Tissue had a negative impact on the gross margin. The Group’s adjusted EBITA margin rose 1.7 percentage points to 13.3%. Although sales and marketing cost declined somewhat during the quarter, they increased as a share of net sales due to lower sales. Adjusted return on capital employed rose 0.2 percentage points to 13.1 percent. Operating cash flow increased 17%. Earnings per share amounted to SEK 2.97.
 
Eventually, the COVID-19 pandemic may lead to increased demand for the company’s leading hygiene and health products as a result of increased awareness of the importance of hygiene and health. Essity is further developing the company’s offering to raise the hygiene standard in the world.
 
INVITATION TO PRESENTATION OF HALF-YEAR REPORT FOR 2020
In conjunction with publication, a telephone and web presentation will be held where President and CEO Magnus Groth will present the report and answer questions.

Presentation
Date: Monday, July 13, 2020
Time: 9:00 a.m. CET

Link to web presentation: https://essity.videosync.fi/2020-07-13
To participate by telephone, call: +44 (0)207 192 80 00, +1 631 510 74 95 or +46 (0)8 506 921 80. Please call well in advance of the start of the presentation.
Specify “Essity” or conference ID no. 6839227.
 

For further information, please contact:
 
Fredrik Rystedt, CFO and Executive Vice President, +46 (0)8 788 51 31
Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 (0)8 788 51 30
Joséphine Edwall Björklund, Senior Vice President, Group Function Communications, +46 (0)8 788 52 34
Per Lorentz, Vice President Corporate Communications, Group Function Communications, +46 (0)8 788 52 51

NB:
This information is such that Essity Aktiebolag (publ) is obligated to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets 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 07:00 a.m. CET on July 13, 2020. This interim report has been reviewed by the company’s auditors.

Karl Stoltz, Media Relations Manager, +46 (0)8 788 51 55