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Consumer tissue group Essity hit by rising pulp and energy costs

[STOCKHOLM] Swedish hygiene products group Essity reported on Monday a bigger fall than expected in core profit, saying rising pulp and energy costs had outweighed higher selling prices and cost savings.

Other major consumer product companies such as Procter & Gamble and Kimberly-Clark have also reported soaring costs of pulp, a major ingredient for tissues, diapers and sanitary towels.

Essity, the world's biggest maker of incontinence and professional tissue products with its Tena and Tork brands, said operating profit before amortisation and one-off items shrank 12 per cent from a year ago to 3.0 billion crowns (S$457 million), against a Reuters poll forecast for a 3 per cent drop.

The group's profit took a 1.4 billion crown hit from higher raw material prices. Profit at the Consumer Tissue division tumbled 38 per cent, more than twice as much as expected.

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Essity, which is also a big producer of baby diapers, feminine care products and napkins, had warned in July that raw material costs would rise significantly.

It said on Monday it was intensifying a savings programme announced in September and expected it to deliver annual savings of about 900 million crowns, up from the 800 million crowns seen earlier.

The company repeated guidance from July that it expected the effect of planned price hikes to customers of its Consumer Tissue division to be felt primarily in 2019.

"For some contracts in Europe, additional price increases have already been implemented with gradual effect in the fourth quarter of 2018. Activities to increase prices are also ongoing in Personal Care and Professional Hygiene," it added.

Essity, which was spun off from forestry firm SCA in 2017, also said on Monday it was making changes to its organisation structure to increase efficiency.

REUTERS