January 31, 2019 / 8:05 AM / 22 days ago

Sweden's Essity rides price hikes, cost cuts to Q4 profit beat

STOCKHOLM (Reuters) - Swedish hygiene products group Essity reported quarterly core earnings above market forecasts on Thursday on the back of a bigger-than-expected boost from costs savings and price hikes, more of which were on tap for later this year.

Adjusted operating profit before amortization at Essity, which rivals Procter & Gamble and Kimberly-Clark, dipped to 3.45 billion crowns ($383 million) in the fourth quarter from 3.62 billion a year ago, but easily topped the mean forecast 3.07 billion in a poll of analysts.

“Earnings were positively impacted by higher prices in all business areas, higher volumes and cost savings,” Essity said in a statement. “Further price increases are expected in 2019”.

Essity, the world’s second largest supplier of consumer tissue and a market leader in incontinence products with its TENA brand, also reported higher than expected quarterly sales at 31.1 billion crowns versus the 30.4 billion seen by analysts.

“Overall a pleasing beat on top line and margins ... We expect today’s release to be well received,” JP Morgan said in a research note.

Essity has been under pressure from sharply higher input costs for raw materials such as pulp, a major ingredient in tissues and diapers.

The company embarked on a cost-saving program late last year, which it said it still expected to generate annual cost savings of around 900 million crowns, with full effect at the end of 2019.

Reporting by Johannes Hellstrom, editing by Niklas Pollard

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