Net sales and earnings

Net sales

Essity’s net sales for 2018 increased 8.5% compared with the corresponding period a year ago to SEK 118,500m (109,265). Organic net sales, which exclude exchange rate effects, acquisitions and divestments, increased 2.6%, of which volume accounted for 0.5% and price/mix for 2.1%. Organic net sales increased 0.9% in mature markets and increased 5.9% in emerging markets. Emerging markets accounted for 35% of net sales. Exchange rate effects increased net sales by 3.5%. Acquisitions increased net sales by 2.4%, of which the acquisition of BSN medical accounted for 1.8% and acquisitions relating to the increase in the shareholding in associates in Latin America accounted for 0.6%.

Earnings

Essity’s adjusted operating profit before amortization of acquisition-related intangible assets (adjusted EBITA)¹⁾ for 2018 declined 4% (11% excluding currency translation effects and acquisitions) to SEK 12,935m (13,405). Higher prices, a better mix, higher volumes, cost savings and the acquisition of BSN medical had a positive impact on earnings. Cost savings amounted to SEK 1,040m, of which SEK 18m was related to the Group-wide cost-savings program. Higher raw material and energy costs had a negative earnings effect of SEK –4,705m, which corresponds to a negative impact on the adjusted EBITA margin of –4.2 percentage points. Furthermore, higher distribution costs had a negative impact on earnings. The acquisition of BSN medical increased profit by 2%. Acquisitions relating to the increase in the shareholding in associates in Latin America increased profit by 1%.

Items affecting comparability amounted to SEK –1,444m (–940) and include costs of approximately SEK –1,230m related to restructuring measures at production facilities in Professional Hygiene and Consumer Tissue. Impairments in the associate Asaleo Care had an impact of SEK -280m on items affecting comparability. Restructuring costs related to the Group-wide cost-savings program had a negative impact of SEK –130m on items affecting comparability. Acquisitions relating to the increase in the shareholding in associates in Latin America positively impacted items affecting comparability by SEK 165m. A reversal of a provision for foreign tax of a non-recurring nature on non-current assets outside Sweden had a positive impact of SEK 290m on items affecting comparability. Other costs negatively impacted items affecting comparability by SEK –259m.

Financial items decreased to SEK –1,157m (–1,182). The decrease is primarily due to lower interest. Higher average net debt had a negative impact on financial items during the period.

Adjusted profit before tax¹⁾ decreased 5% (12% excluding currency translation effects and acquisitions) to SEK 11,046m (11,663).

The tax expense, excluding effects of items affecting comparability, was SEK 1,490m (2,191). The reported tax expense was reduced by about SEK 1.1bn due to a decision in a tax case in Sweden.

Adjusted profit for the period¹⁾ increased 1% (decreased 6% excluding currency translation effects and acquisitions) to SEK 9,556m (9,472).

Profit for the period decreased 3% (10% excluding currency translation effects and acquisitions) to SEK 8,552m (8,785). Earnings per share were SEK 11.23 (11.56). The adjusted earnings per share³⁾ were SEK 13.32 (13.09).

Key figures

The Group’s adjusted gross margin¹⁾ amounted to 28.2% (29.6) and the adjusted EBITA margin¹⁾ was 10.9% (12.3). Adjusted return on capital employed¹⁾ was 12.0% (14.9). Adjusted return on equity¹⁾ was 18.0% (21.3). The interest coverage ratio was 9.3 (10.1).

Adjusted earnings per share¹⁾

¹⁾ Excluding items affecting comparability and amortization of acquisition-related intangible assets.

²⁾ Indicative earnings per share on the assumption that the number of issued shares in Essity as of December 31, 2016, 2015 and 2014 corresponded to the number of issued shares in Essity on December 31, 2017 (702.3 million).