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This is Ashish Sinha with Gabelli Funds and today I am going to talk about Essity AB, listed and headquartered in Stockholm, Sweden.
Essity is a global Health & Hygiene company formed in 2017 when SCA AB spun off its personal care and tissue business. They have leading positions in almost all of their end-markets. Personal Care includes categories like incontinence care, femcare, medical solutions and baby care with brands like TENA, JOBST, Leukoplast. Consumer Tissue includes brands like Lotus, Tempo, Vinda and Zewa while nearly a third of this segment is retailer brands. Professional Hygiene is the final segment, where Essity is a global leader with the Tork brand.
Essity has 702.3 million shares outstanding, stock is at SEK 304 for a SEK 213 billion market cap. Including SEK 51 billion net debt and Vinda minorities, total capitalisation is SEK 282 billion.
On April 14, 2020, Essity pre-announced strong 1Q 2020 sales and adj. EBITA with 1Q sales +10% y/y to SEK 33.7 Billion, and adjusted EBITA +67% to SEK 5.3 billion.
Organic growth for the group was 7.8% y/y organic on the back of consumers and distributors hoarding their products as a result of Covid-19 with volumes +5.9% y/y and price/mix +1.9% y/y. Growth was more pronounced in March at 20%, ahead of lockdowns in various countries. By segment Personal Care sales grew +8.8% y/y organic and 17% in March. Consumer tissue was +4.3% organic for the quarter and 19.5% for March while Professional Hygiene grew 12$ for the quarter and 24.5% for March.
Coupled with favourable raw material costs and strong organic growth margins surged 540 bps y/y to 15.8%.
While the company acknowledges this strong march buying may impact future sales and professional hygiene to be impacted by reduced travel, fewer restaurant visits and more people working from home, we note the professional hygiene segment is ~20%+ of group sales. We also note the company is commencing the production of surgical masks for healthcare use in Sweden and other countries. Given the Covid-19 experience, longer term, we feel health and hygiene is likely to gain more focus from consumers worldwide and Essity is likely to be a key player in that segment. Once again, this is Ashish Sinha and thank you for watching Gabelli TV.
