Essity B stock holds firm as hygiene group leans on stable cash flow and dividend

Essity AB B (ISIN SE0009922164) delivered higher profitability in 2023, with adjusted EBITA rising to SEK 18.3 billion from SEK 10.1 billion in 2022, and Essity B stock reflects this stabilizing earnings profile on Nasdaq Stockholm as investors reassess the hygiene group’s long term cash generation according to the company’s annual reporting in early 2024.

EBITA up 81 percent in 2023

According to Essity’s published full year 2023 results, net sales increased to SEK 156.4 billion for 2023 compared with SEK 156.2 billion in 2022, supported by price increases that offset volume pressure in several categories according to the company’s investor information for 2023.

In the same 2023 report, Essity stated that adjusted EBITA before items affecting comparability rose to SEK 18.3 billion for 2023, up from SEK 10.1 billion in 2022, representing an improvement of roughly 81 percent year over year as the hygiene group benefited from easing input costs and earlier price adjustments.

The full year 2023 figures also show that Essity’s adjusted EBITA margin improved to 11.7 percent in 2023 from 6.5 percent in 2022, pointing to a clear margin recovery that management attributed to pricing, mix and cost savings measures.

Essity’s net profit attributable to shareholders for 2023 reached SEK 9.3 billion versus SEK 7.1 billion a year earlier, reflecting the stronger operating performance and lower restructuring charges, while earnings per share increased accordingly over the same period.

Dividend of SEK 7.25 per share for 2023

In connection with the 2023 results, Essity’s board proposed a dividend of SEK 7.25 per share for the 2023 financial year, compared with SEK 7.00 per share paid for 2022, signaling confidence in the company’s underlying cash flow and balance sheet.

The cash dividend of SEK 7.25 per share corresponds to an increase of 3.6 percent versus the prior year’s SEK 7.00 and was framed by the company as part of its long term policy of distributing at least one third of net profit to shareholders over a cycle.

Essity reported that operating cash flow remained solid in 2023, helped by the higher profitability and disciplined working capital management, which in turn underpins its ability to fund capital expenditure, acquisitions and shareholder distributions.

Essity also highlighted that investments in property, plant and equipment and intangible assets for 2023 were aligned with strategic projects in tissue, professional hygiene and health and medical solutions, even as the group continued to prioritize cash returns.

Restructuring and portfolio changes reshape Essity

Over the last reporting periods, Essity has implemented restructuring initiatives, including measures in the Consumer Tissue business and certain European operations, which were aimed at streamlining the portfolio and improving competitiveness.

The company’s disclosures describe how these initiatives, together with selective disposals and the earlier consolidation of some joint venture interests, have altered the group’s geographic and segment exposure while reinforcing focus on higher margin categories.

Essity’s management has repeatedly emphasized in its reporting that the portfolio actions are intended to support organic sales growth, higher margins and a stronger return on capital employed over time, even if short term restructuring charges weigh on headline earnings in specific quarters.

For investors following Essity B stock, the scale of the 2023 margin recovery, the increase in adjusted EBITA from SEK 10.1 billion to SEK 18.3 billion and the rise in the dividend to SEK 7.25 per share underline how the hygiene group is trying to translate restructuring work into tangible shareholder returns.

TENA anchors health and medical solutions

Essity’s TENA brand is one of the group’s flagship offerings in incontinence products, forming a core part of the health and medical solutions segment alongside other brands in wound care and compression therapy.

The company’s segment reporting highlights that health and medical solutions has been a growth engine, benefiting from demographic trends, rising awareness of incontinence products and an expanding presence in both institutional and retail channels.

Within this business, Essity continues to invest in product innovation, such as more discreet and performance oriented incontinence products under the TENA name, and in expanding its service offerings to healthcare institutions in Europe and other regions.

For Essity B stock, segment dynamics in health and medical solutions matter because this area typically carries higher margins than some tissue categories, meaning its growth contribution can have an outsized impact on group level profitability over time.

Essity B stock on Nasdaq Stockholm

Essity B stock is listed on Nasdaq Stockholm, where it trades in Swedish krona and reflects investor expectations for a combination of stable cash flow, gradual margin expansion and disciplined capital allocation in the hygiene and health products space.