Swedish paper products and hygiene firm Essity said that its net sales increased 10.0% in the first quarter of its financial year, to SEK 33.7 billion (€3.08 billion), as shoppers stocked up on its products.
The company said that it saw a 'sharp increase in sales and earnings' in the month of March, due to stockpiling by both consumers and distributors.
Sales Performance
Organic net sales for the quarter to the end of March were up 7.8%, while EBITA was up 77% to SEK 5.3 billion (€490 million).
In terms of market breakdown, Essity said that in mature markets, organic net sales were up 10.2%, while in emerging markets, which account for 35% of net sales, organic net sales increased by 4.0%.
The group said that organic net sales in its Consumer Tissue segment increased by 19.5% in March alone, with Personal Care up by 17.0% and Professional Hygiene rising by 24.5%.
It did note, however, that it expects sales in future quarters to be 'adversely impacted' by the stockpiling experienced in March, while its Professional Hygiene division is also set to be impacted by the reduction in the HoReCa and travel business.
Thinking beyond COVID-19, the group said that the current situation may lead to increased demand for hygiene and health products due to, for example, a greater focus on hand hygiene.
It said that its production facilities outside of China did not experience any major disruptions to production, however distribution costs have increased.
Analyst Viewpoint
Commenting on its performance, Anubhav Malhotra of Liberum said, "Essity is one of the biggest short-term beneficiary of consumer hoarding, reflected in 1Q’20 LfL growth of +7.8% and EBITDA margin expansion of 540bps. A significant part of this incremental growth and margins is timing linked and will reverse in the short-term, particularly in the Professional Hygiene division.
"More importantly though, COVID-19 has led to a sharp increase in awareness of the need for good hand hygiene, something that the sector had been working hard to promote for many years. The changing consumer habits, both at home and in professional environments, are likely to stick to some extent and will lead to higher usage of Essity’s consumer and professional hygiene products in the long-term."
Malhotra added that Essity's strong brands and scale make it well positioned "to take advantage of this potentially structural shift in consumption of tissue".
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
