Year-end Report 2018

JANUARY 1 – DECEMBER 31, 2018
(compared with the corresponding period a year ago)
 

• Net sales increased 8.5% to SEK 118,500m (109,265)
• Organic net sales increased 2.6%
• Organic net sales increased 3.1%, excluding the lower sales of mother reels due to production closures
• Operating profit before amortization of acquisition-related intangible assets (EBITA) declined 8% to SEK 11,560m (12,550)
• Adjusted EBITA amounted to SEK 12,935m (13,405)
• Adjusted EBITA margin was 10.9 percent (12.3)
• Higher raw material and energy costs had a negative impact of SEK 4,705m on earnings
• Profit for the period decreased 3% to SEK 8,552m (8,785)
• Earnings per share amounted to SEK 11.23 (11.56)
• Adjusted earnings per share increased 2% to SEK 13.32 (13.09)
• Cash flow from current operations totaled SEK 8,787m (8,745)
• The Board of Directors proposes a dividend of SEK 5.75 (5.75) per share
• A Group-wide cost-savings program was launched. The expected annual cost savings amount to approximately SEK 900m, with full effect at the end of 2019.
• A decision in a tax case in Sweden reduced the reported tax expense by about SEK 1.1bn 

SUMMARY OF THE FULL YEAR AND FOURTH QUARTER OF 2018 
The Group’s net sales increased 8.5% in 2018 compared with the preceding year. Organic net sales, excluding the lower sales of mother reels due to production closures, increased 3.1%. Including the lower sales of mother reels, organic net sales increased 2.6%. The Group’s adjusted EBITA declined 4%. The adjusted EBITA margin declined 1.4 percentage points to 10.9%. Higher prices, better mix, higher volumes, cost savings and the acquisition of BSN medical had a positive impact on earnings. Higher raw material and energy costs had a negative impact of SEK -4,705m on earnings, which corresponds to a negative impact on the adjusted EBITA margin of -4.2 percentage points. The adjusted return on capital employed was 12.0%.

The Board of Directors proposes a dividend of SEK 5.75 per share.

During the year, we worked with all parts of the business to increase profitability and counteract the negative effect that significantly higher raw material and energy costs had on our earnings. We implemented measures in several areas:

• We continued to invest in our strong brands and launched 29 innovations during the year that have strengthened our customer and consumer offering and improved the product mix.
• We have implemented price increases in all business areas in 2018. Further price increases are expected in 2019.
• We intensified our efficiency improvements and restructuring of the business. During the year, we achieved SEK 1,040m in cost savings. We have decided on further restructuring measures as part of “Tissue Roadmap” and are continuing our work with “Cure or Kill”.
• During the year, we launched a Group-wide cost-savings program. The program is expected to generate annual cost savings of approximately SEK 900m, with full effect at the end of 2019. The program is proceeding as planned and for the fourth quarter of 2018, cost savings amounted to SEK 18m. At the end of 2018, the annual rate amounted to about SEK 150m.
• To strengthen competitiveness and increase efficiency, we also made changes to the company’s organizational structure and Executive Management Team.

Our work to contribute to a sustainable and circular society has been intensified and rewarded. During the year, we qualified for inclusion in the Dow Jones Sustainability Index, and were named industry leader in the Household Products sector.

The Group’s net sales increased 8.5% in the fourth quarter of 2018 compared with the corresponding period a year ago. Organic net sales, excluding the lower sales of mother reels, increased 4.0%. Including the lower sales of mother reels, organic net sales increased 3.3%, of which volume accounted for 0.5% and price/mix for 2.8%. Organic net sales was positively impacted by higher prices in all business areas. In emerging markets, which accounted for 36% of net sales, organic net sales increased 8.4%, while the increase in mature markets was 0.7%.

The Group’s adjusted EBITA in the fourth quarter of 2018 declined 5% compared with the corresponding period a year ago. Earnings were positively impacted by higher prices in all business areas, higher volumes and cost savings amounting to
SEK 273m, of which SEK 18m was related to the Group-wide cost-savings program. Higher raw material and energy costs had a negative impact of SEK -1,433m on earnings, which corresponds to a negative impact on the adjusted EBITA margin of -4.8 percentage points. The market price for pulp is about 20% higher compared with the corresponding period a year ago. The market price of oil-based raw materials also increased significantly. Furthermore, higher distribution costs had a negative impact on earnings. The Group’s adjusted EBITA margin decreased 1.5 percentage points to 11.1%. The adjusted return on capital employed was 12.7%. Operating cash flow increased 1%.

FUTURE REPORTS
Essity’s Annual Report for 2018 is intended to be published in the week beginning March 11, 2019.

In 2019, interim reports will be published on April 25, July 18 and October 25.

INVESTOR DAY
Essity will arrange an Investor Day in Stockholm, Sweden, on May 23, 2019.

ANNUAL GENERAL MEETING
Essity’s Annual General Meeting will be held in Stockholm, Sweden, on April 4, 2019.

INVITATION TO PRESS CONFERENCE ON YEAR-END REPORT 2018
Media and analysts are invited to a press conference, where this year-end report will be presented by Magnus Groth, President and CEO.

Time: 9:00 a.m. CET, Thursday, January 31, 2019
Location: Essity’s headquarters, Waterfront Building, Klarabergsviadukten 63, Stockholm, Sweden

The presentation will be webcast at www.essity.com. To participate by telephone, call: +44 (0) 207 192 85 01, +1 917 720 01 81 or +46 (0) 8 566 184 30. Please call well in advance of the start of the conference. Specify “Essity”
or conference ID no. 3475605.
Link to webcast: https://essity.videosync.fi/2019-01-31-q4

Stockholm, January 31, 2019
Essity Aktiebolag (publ)

Magnus Groth
President and CEO

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. 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 CET on January 31, 2019.

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