July 19, 2018 / 5:46 AM / 3 months ago

Essity flags more price hikes after pulp costs weigh in Second quarter

STOCKHOLM (Reuters) - Swedish hygiene products group Essity (ESSITYb.ST) said on Thursday it hoped to raise prices again on consumer tissue after spiking pulp costs outweighed price hikes in the second quarter, sending core profit slightly lower.

Operating profit before amortization and one-off items shrank 3 percent from a year ago to 3.35 billion crowns ($378 million). Analysts’ mean forecast in a Reuters poll had been for a 1.5 percent drop.

“The price increases achieved in Consumer Tissue did not offset the higher raw material costs and the intention is therefore to implement further price increases,” Essity said.

Essity, a market leader in incontinence products with its TENA brand and in professional hygiene with Tork, was spun off from forest products group SCA (SCAb.ST) in 2017.

Hygiene products have strong long-term growth prospects because of ageing populations and growing emerging market wealth, but Essity’s listing coincided with rising pulp prices, while competition has intensified, making it harder to pass on costs to customers.

CEO Magnus Groth said in April that higher prices recently pushed through to customers would have some effect in the second quarter and their full effect in the second half of the year.

The rival to Kimberly-Clark (KMB.N) and Procter & Gamble (PG.N), which also makes baby diapers and feminine care products, said on Thursday higher raw material prices, mainly pulp, had a negative impact of 1.14 billion crowns in the second quarter.

Reporting by Anna Ringstrom; editing by Richard Pullin

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