Strong sales growth and focus on price increases
» Our sustainability work contributes to a better environment while increasing Essity’s competitiveness. What’s best for customers, consumers and the planet is also best for Essity and our shareholders. «
In 2021, solar panels were installed on Essity’s office roof in Gothenburg to produce climate-smart electricity.
Sales growth was strong during the year and net sales amounted to approximately SEK 122bn. The constant drive of our employees to change and do things better every day has helped to positively impact hygiene and health standards around the world and has strengthened Essity for the future.
We continued to capture market shares and reported strong e-commerce growth. Six acquisitions were completed, of which four in Medical Solutions, one of our most profitable categories. In parallel, 2021 entailed significant challenges in our operating environment, which we addressed through strong actions. We implemented price increases and further price increases will be implemented in 2022 to offset the strong cost inflation.
Strong sales growth
Sales growth, including organic sales growth and acquisitions, was 4.5%, of which organic sales growth amounted to 3.3%. Net sales amounted to approximately SEK 122bn. All business areas demonstrated organic sales growth. Medical Solutions and Feminine Care had strong organic sales growth of 10.8% and 10.0%, respectively. Sales were negatively impacted by the COVID-19 pandemic and the related lockdowns and restrictions, primarily within Professional Hygiene. At the same time, our hygiene and health solutions are more important than ever, and we see a rapid increase in sales when societies re-open and restrictions are lifted.
Earnings of SEK 13.7bn and higher dividend
Due to the significant cost inflation, primarily for raw materials, energy and distribution, adjusted EBITA fell 22% to SEK 13,680m and the adjusted EBITA margin was 11.2%. We implemented price increases in all business areas and further increases will be implemented in 2022 to offset the strong cost inflation. We delivered higher volumes, a better mix and efficiency improvements that offset some of the cost inflation. The adjusted return on capital employed was 12.0%. Earnings per share were SEK 12.27. The Board of Directors proposes an 4% increase in the dividend to SEK 7.00 per share for the 2021 fiscal year.
»Further price increases will be implemented in 2022 to offset the strong cost inflation.«
We had a high acquisition pace. Six acquisitions were completed during the year. We now own 100% of the Australian hygiene company Asaleo Care and we have increased our shareholding by 45.8% to 95.8% in the Latin American hygiene company Familia.
In Medical Solutions, we strengthened our presence in advanced wound care and orthopedics in the USA through the acquisitions of Hydrofera as well as AquaCast Liner and the sports tape brands Coach, Elastikon and Zonas. In addition, we finalized the acquisition of the remaining shares in ABIGO Medical AB in advanced wound care.
Higher market shares, increased e-commerce and innovation
Successful product launches, appreciated brands and a leading position in e-commerce have helped us to increase our market shares for approximately 70% of branded sales in the retail trade. We also grew our market shares in the healthcare sector and in our Professional Hygiene operations.
E-commerce sales increased sharply during the year to approximately SEK 17bn, corresponding to about 14% of net sales.
During the year, we launched innovations with a focus on greater well-being, sustainability and digitalization under leading brands such as TENA, Tork, JOBST, Leukoplast, Libero, Libresse, Plenty, Saba, Tempo and Zewa. Demand for sustainable solutions and the willingness to pay more for these is increasing among customers and consumers. Our launches of reusable products with a lower environmental impact, such as washable absorbent underwear, were a success. We also launched a number of digital solutions during the year to improve everyday life for customers and consumers, such as Cutimed Wound Navigator, a digital solution for wound care.
Profitable growth in Asia, Latin America and Eastern Europe
We are growing in emerging markets where market penetration of hygiene and health solutions is significantly lower than in mature markets. Growth is prioritized in markets where Essity already holds strong market positions, such as Asia, Latin America and Eastern Europe. Emerging markets’ share of Essity’s net sales and profitability has risen over time, supported by favorable market trends, a higher share of premium products, strong brands and broadening of our offerings. In 2021, emerging markets accounted for 38% of net sales and organic sales growth was 8.8%.
Sustainability, a competitive advantage
Sustainability is a strategic priority for long-term profitable growth. Our initiatives contribute to a better environment while increasing Essity’s competitiveness.
During the year, we raised our ambitions and have, for example, committed to achieving net-zero emissions of greenhouse gases by 2050. The most important areas have been identified and a plan for target fulfillment drawn up for Science Based Targets 2030 and net-zero emissions by 2050. Actions will be taken throughout the value chain, from raw materials, production and distribution to used products. Fossil fuel is being replaced at several of Essity’s production facilities with, for example, hydrogen from renewable sources, biogas and geothermal steam, which have a lower environmental impact. Between 2016 and 2021, we reduced our carbon emissions under Science Based Targets, Scope 1 and 2, by 15%.
We will continue to lead in sustainability and during the year, Essity was awarded a place on the global non-profit environmental organization CDP’s A List for our work in combating deforestation, and was also recognized for our leadership in relation to climate change. One of the ways Essity works to combat deforestation is through the Consumer Goods Forum and its Forest Positive Coalition of Action, in which we, together with other companies and organizations, work to address deforestation and promote biodiversity.
Diversity, equity and inclusion
As part of our corporate culture, we value and work to increase diversity, equity and inclusion as this deepens and broadens our knowledge and experiences, which benefits customers and consumers. A new Group target for increased diversity was presented during the year.
We have continued to follow the daily priorities we established at the start of the COVID-19 pandemic: care for our people, contribute to society and secure business success.
Essity is a UN Global Compact signatory and once again was a convening partner to the United Nations Foundation’s annual Global Dialogue, on how we can work together with our customers to contribute to the UN Sustainable Development Goals.
As of 2022, Essity’s business areas are Health & Medical, Consumer Goods and Professional Hygiene. Based on the needs of our customers and consumers, we will expand our offering and increase the service content in each business area.
In 2022, our price increases will have a further effect and as the COVID-19 pandemic becomes endemic, I look forward to the easing of restrictions and an increase in our sales.
Together with my 46,000 colleagues, we will continue to develop Essity to improve quality of life, achieve our Group targets for growth, profitability and sustainability, and deliver increased shareholder value.
President and CEO