E4. Financial liabilities

AP Accounting principles

The main principle for recognition of Essity’s financial liabilities is that they are initially measured at fair value, net after transaction costs, and subsequently at amortized cost according to the effective interest method.

In cases where loans with fixed interest rates are hedged using derivatives, both the loan and the derivative are measured at fair value through a fair value hedge. Non-current loans that are subject to hedge accounting are discounted to the market interest rate without a credit spread. The cash flows from the interest rate derivatives are discounted to the market interest rate and the changes in value are recognized in profit or loss.

Borrowing

Essity has a Euro Medium Term Note (EMTN) program with a program amount of EUR 6,000m (SEK 61,376m) for issuing bonds in the European capital market. As of December 31, 2021, a nominal EUR 3,930m (3,440; 3,134) was outstanding in public and bilateral issues with a remaining maturity of 5.2 years (3.4; 3.8).

Essity has a Swedish and a Belgian commercial paper program that can be utilized for current borrowing.

Essity has syndicated bank facilities to limit the refinancing risk and maintain a liquidity reserve. Contracted bilateral credit facilities with banks are used to supplement these syndicated bank facilities.

Maturity profile of gross debt¹⁾

1) Gross debt includes accrued interest in the amount of SEK 265m.

After additions for net pension provisions and lease liabilities and with deductions for cash and cash equivalents, interest-bearing receivables and equity instruments, the net debt was SEK 55,433m (42,688; 50,940). For a description of the methods used by Essity to manage its refinancing risk, refer to the Risks and risk management section.