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Investing.com -- Shares of Essity fell by 2.8% as the company reported a notable miss in first quarter sales, with volumes leading the shortfall.
Despite a margin that met expectations at 13.5%, largely due to cost-saving measures, the underwhelming sales figures prompted concerns about future demand and price elasticity levels in consumer tissue (CT) heading into the second quarter.
The Swedish health and hygiene company reported organic sales growth of only 2.1%, falling short of the Visible Alpha consensus of 4.3% and Jefferies’ estimate of 4.6%.
The miss was primarily attributed to weaker performance in the consumer category, where volume growth was a mere 1.2%, compared to the consensus of 3.3% and Jefferies’ forecast of 3.2%.
Overall volume for the first quarter was flat, in contrast to the consensus estimate of a 2.4% increase and Jefferies’ expectation of a 2.0% rise.
The company’s earnings before interest, taxes, and amortization (EBITA) also missed projections, coming in at SEK 4,706 million, which is 3% below the consensus of SEK 4,867 million and Jefferies’ estimate of SEK 4,848 million.
This included a 30 basis point reduction in marketing costs as a percentage of sales, which was down to 5.2%.
In an effort to enhance shareholder value, Essity has initiated a share buyback program of SEK 3 billion, which had been previously announced.
Despite this, the first quarter results have clearly raised concerns among investors about the company’s ability to navigate market challenges and maintain growth in the upcoming quarter.
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