By Agata Rybska
(Reuters) -Swedish hygiene products maker Essity reported fourth-quarter core profit below expectations on Thursday, sending its shares down more than 4%, as price hikes slowed and volumes kept declining.
Adjusted earnings before interest, taxes and amortisation (EBITA) rose to 4.86 billion Swedish crowns ($465.3 million) in the final quarter of 2023, but missed an LSEG estimate of 5.22 billion.
Easing input and energy costs were offset by softening pricing and re-investments, J.P.Morgan said in a note to clients.
Essity’s price hikes decelerated to 0.7% in the quarter, below the broker’s 2% estimate.
The group has been growing its margins over the past year at the expense of volumes, a trend the management has said it wants to start reversing, though Red Sea shipping disruptions might force companies to again pass higher input costs onto consumers.
Essity in December said the impact on its business from the attacks on ships by Houthi militia in the Red Sea was limited.
It did not comment on the situation in the earnings statement.
Its adjusted EBITA margin rose to 13.3% from 11.2% in the fourth quarter of 2022, its fifth consecutive quarterly margin increase.
Volumes fell by 1.4% in the same period.
Essity had in October warned that cancellations of contracts in the third quarter would also have a negative effect on volumes in the fourth.
“We have invested for future volume growth and higher market shares by intensifying sales and marketing activities,” CEO Magnus Groth said in a statement.
Essity proposed a dividend of 7.75 crowns per share for 2023, a 7% increase from 7.25 crowns it paid for 2022.
In the two years prior, it had increased dividends by 4% per year.
($1 = 10.4444 Swedish crowns)
(Reporting by Agata Rybska in Gdansk; editing by Milla Nissi and Emelia Sithole-Matarise)
