Swedish hygiene products maker Essity reported fourth-quarter core profit below market expectations, as high raw material costs in its consumer tissue business and strong US dollar hurt margins.
Its shares fell more than 5% in early trading, among the biggest decliners on Europe's benchmark STOXX 600 index.
Essity's adjusted operating profit before amortisation (EBITA) rose 2%, to SEK 4.97 billion (€430 million) in the quarter, missing analysts' average estimate of SEK 5.26 billion (€460 million), LSEG's IBES data showed.
Quarterly adjusted EBITA margin fell to 13.1% from 13.3% a year earlier.
"The rapid and sharp strengthening of the USD increased costs, which has not yet been fully offset," CEO Magnus Groth said in the earnings statement.
Essity saw a raw material impact of SEK 880 million (€76.7 million) in the quarter, SEK 330 million (€28.8 million) of which was related to currency movements, finance chief Fredrik Rystedt added.
The sequential acceleration in cost of goods sold and the impact from stronger dollar are likely to be a concern into the first half of 2025, J.P.Morgan analyst Celine Pannuti said in a note to clients.
As usual, Essity did not provide financial outlook for the year.
Quarterly Highlights
The group, which sells toilet paper and napkins under brands such as Lotus, Velvet and Tempo, said it raised its selling prices by 2.2% in the quarter, compared to a year earlier.
Its volumes rose 1.7% in the same period, marking the first time since the third quarter of 2022 that its sales growth was driven by both positive price and volume growth.
Consumer goods companies have in recent quarters introduced promotions as budget-conscious shoppers began trading down from branded products, following a period of large price hikes to combat the cost surge that started with the pandemic.
Essity proposed a dividend of 8.25 crowns per share for 2024, a 6.5% increase from what it paid last year.
Essity on Wednesday said Groth would step down from his position in 2025, after nearly ten years in the role, during which he saw the company through its 2017 spin off from SCA, first as a CEO of the parent and then at Essity.
Trump Tariffs
Swedish hygiene product and tissue maker Essity could move more of its production into the US from Mexico and Canada if tariffs are introduced by President Donald Trump, but is not considering plant closures, CEO Magnus Groth said.
Essity generates some 14% of its sales in the US and 10% of the products sold there are imported, mainly from Mexico and Canada, Groth told Reuters in an interview.
"We're looking at ways, if needed, to move production even more into the US," he said.
Groth said, however, that the plants in Canada and Mexico would not be impacted by U.S. production becoming more local, as they would still cater to local needs.
