Essity is a leading company in the hygiene and health industry, specializing in products made from pulp, such as diapers, toilet paper, and incontinence pads. With an annual usage of approximately 1.8 million tons of pulp, Essity buys over 90% of its supply from the market.
The company’s stock price is at 303 kr, with 697.5 million shares and a market value of 211,353 Mkr. Essity’s net debt is 29,122 Mkr, with Magnus Groth serving as the CEO and Jan Gurander as the Chairman.
Essity’s products are sold under consumer brands in supermarkets and to corporate clients in healthcare, hospitality, and more. Well-known brands like Tork, Tena, and Libero are part of Essity’s portfolio.
The largest shareholder in Essity is Industrivärden, holding 10.4% of the capital and 29.5% of the votes. With a new chairman, Jan Gurander, since spring 2024 and Magnus Groth as CEO since 2017, the company has shown steady growth.
Essity’s operations evolved from SCA, a forest company, through numerous acquisitions since the mid-1970s. While the majority of its business is in Europe, Essity has a significant presence in Mexico and the US. The Lilla Edet mill in Sweden is the largest facility, with other major units in Germany, France, Spain, Austria, and the US.
A pivotal moment was the acquisition of BSN Medical in 2016, expanding Essity into wound care products. This non-pulp-based transaction, valued at 2.9 billion euros, diversified Essity’s Health & Medical segment, which now constitutes 45% of the business.
Following the divestment of its stake in Vinda, Essity redirected its focus to high-margin products, reduced exposure to pulp prices, and significantly lowered its debt. The company initiated its first-ever share buyback program, signaling confidence in its financial position.
Essity’s financial goals include organic growth of over 3% annually and achieving a 15% operating margin. The company’s current EBITA margin stands at 14.0%, with a cautious approach to future investments and acquisitions.
Despite challenges in the consumer goods segment, Essity has implemented cost-saving measures, resulting in improved profitability. The company aims to maintain stable dividends while navigating volatile raw material prices and market dynamics.
In comparison to industry peers like Kimberly-Clark and Procter & Gamble, Essity’s valuation multiples have contracted post-pandemic but remain competitive. The company’s focus on margins over volume and strategic divestments contribute to its solid financial position.
In conclusion, Essity’s progress in streamlining operations, optimizing costs, and enhancing profitability underscores its resilience in a competitive market. While the upside potential may be moderate, Essity’s prudent financial strategy and market position warrant a neutral outlook.