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Interim Report Third Quarter 2019

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JANUARY 1 – SEPTEMBER 30, 2019
(compared with the corresponding period a year ago)

  • Net sales increased 9.0% to SEK 95,289m (87,388)

  • Organic net sales increased 4.8%

  • In emerging markets, which accounted for 36% of net sales, organic net sales increased 9.8%

  • Operating profit before amortization of acquisition-related intangible assets (EBITA) increased 28% to SEK 10,387m (8,085)

  • Adjusted EBITA increased 17% to SEK 11,098m (9,484)

  • Adjusted EBITA margin increased 0.7 percentage points to 11.6% (10.9)

  • Profit for the period increased 45% to SEK 7,166m (4,935)

  • Earnings per share increased 45% to SEK 9.25 (6.38)

  • Adjusted earnings per share increased 27% to SEK 10.59 (8.35)

  • Cash flow from current operations increased to SEK 9,529m (3,968)

    
SUMMARY OF THE THIRD QUARTER OF 2019

The quarter was characterized by strong development in terms of growth and profitability. Organic net sales increased 5.9% and the adjusted EBITA margin rose 2.6 percentage points to 12.8%. All business areas reported higher margins. Earnings per share increased 150% to SEK 3.53.

All business areas demonstrated healthy growth due to implemented price increases, a better mix and higher volumes. Growth was strengthened by innovations and investments in sales and marketing activities.

Our online sales continued to perform favorably and totaled approximately SEK 9bn for the first nine months of 2019, corresponding to about 10% of total Group net sales.

We continued our successful innovation work to increase customer and consumer value and reduce the environmental footprint. During the quarter, Professional Hygiene launched Tork Xpressnap® Electronic Drive Thru Napkin Dispenser, including such benefits as increased efficiency for our customers. In Incontinence Products, we launched TENA ProSkinTM Protective Underwear, with different models for men and women. Essity, together with our brands Saba and Tork, has entered an agreement with UNICEF in Mexico to jointly spread awareness of the importance of good hand hygiene and to break the barriers surrounding menstruation. Furthermore, Professional Hygiene with the Tork brand launched a virtual reality app to provide education in the area of hand hygiene.

Total cost savings amounted to SEK 271m during the quarter, of which SEK 179m was related to the Group-wide cost-savings program. Ongoing cost savings in addition to this program amounted to SEK 92m. The lower rate was due to temporarily higher production and distribution costs, mainly attributable to disruptions in connection with the start-up of new production capacity, and a higher pace of product launches, combined with higher demand. On this basis, we have changed our ambition to achieve SEK 600-700m in ongoing savings and SEK 1.2-1.3bn in total cost savings for full-year 2019.

The Group’s net sales increased 9.8% in the third quarter of 2019 compared with the corresponding period a year ago. Organic net sales increased 5.9%, of which volume accounted for 3.8% and price/mix for 2.1%. In emerging markets, which accounted for 36% of net sales, organic net sales increased 9.8%, while the increase in mature markets was 3.8%.

The Group’s adjusted EBITA in the third quarter of 2019 increased 38% compared with the corresponding period a year ago. Earnings were positively impacted by higher prices, a better mix, higher volumes, lower raw material and energy costs and cost savings. Stock revaluations, due to lower raw material prices, and higher distribution costs had a negative impact on earnings. While the Group reported an increase in its sales and marketing costs, these were lower as a proportion of total net sales. The Group’s adjusted EBITA margin increased 2.6 percentage points to 12.8%. The adjusted return on capital employed was 14.3%. Operating cash flow increased 73%, primarily related to a higher operating cash surplus and changes in working capital.

INVITATION TO PRESENTATION OF INTERIM REPORT THIRD QUARTER 2019
Media and analysts are invited to participate in a telephone and web presentation at which President and CEO Magnus Groth will present the report and respond to questions.

Presentation
Date: Friday, October 25, 2019
Time: 9:00 a.m. CET
Link to Web presentation: https://essity.videosync.fi/2019-10-25-q3
Telephone: +44 (0)207 192 80 00, +1 631 510 74 95 or +46 (0)8 506 921 80. Please call in well in advance of the start of the presentation. Indicate “Essity” or conference ID 2985420. 

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 October 25, 2019. This interim report was not reviewed by the company’s auditors.
Karl Stoltz, Media Relations Manager, +46 (0)8 788 51 55

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Essity Q3 2019

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