Much has happened since the last post. Over the past three years, Essity has diversified by making numerous acquisitions:
2021
-Full acquisition of ABIGO Medical and Asaleo Care (previously partial ownership).
-Ownership stake in Productos Familia S.A. was increased to 95.8%.
-Acquired sports tape brands Coach, Elastikon, and Zonas from Johnson & Johnson.
-Acquisition of AquaCast Liner, a manufacturer of waterproof cast liners.
-Acquisition of wound care company Hydrofera.
2022
-Acquisition of Legacy Converting, Inc., a wiping products company.
-Acquisition of Modibodi, a leakproof apparel company.
-Acquisition of Knix Wear Inc., a leakproof apparel company.
There have also been divestments. Essity sold its Russian operations in 2023. I wonder if peers KMB and PG have done so yet? The most recent divestment is the sale of the Hong Kong-listed subsidiary Vinda. Essity has owned approximately 50% of Vinda. As I understand it, the tender offer is still awaiting final approval, but if completed, it will bring 19bn SEK into the company’s coffers.
The image of Essity is still easily associated with Lotus, Tena, or Libero. The company’s strategy has been to reduce the share of the toilet paper and diaper business and increase higher-margin new products, mainly through acquisitions. If you consider Kimberly-Clark or P&G too expensive at the moment, Essity is starting to be a noteworthy “hold” stock with significantly more attractive valuation multiples and a reasonable debt profile. ROCE according to the 2023 financial statements was 14.4%. The dividend was increased and is 7.75 SEK.
2023
• Net sales increased 12.1% to SEK 147,147m (131,320). Sales growth, including organic sales growth and
acquisitions, amounted to 6.7%, of which volume accounted for -3.7%, price/mix for 9.5% and acquisitions
for 0.9%.
• Operating profit before amortization of acquisition-related intangible assets (EBITA) increased 68% to SEK 16,607m (9,876)
• Adjusted EBITA increased 57% to SEK 18,898m (12,047) and the adjusted EBITA margin increased 3.6 percentage points to 12.8% (9.2)
• Profit for the period continuing operations increased 84% to SEK 9,517m (5,165)
• Earnings per share continuing operations increased to SEK 13.44 (7.28) and adjusted earnings per share continuing operations increased 51% to SEK 17.56 (11.60)
• Operating cash flow increased 130% to SEK 17,685m (7,680)
• Return on capital employed increased to 14.4% (8.9) and the adjusted return on capital employed increased 5.5 percentage points to 16.4% (10.9)