Essity Earnings: Solid EBITA Margin Improvement Despite Pricing Turning Negative

No-moat Essity posted first-quarter 2024 results that were largely in line with our expectations for the full year and we’re leaving our fair value estimate unchanged at SEK 300. The company delivered an EBITA margin of 14% in the first quarter of 2024, up 220 basis points year over year and up 70 basis points compared with the fourth quarter of 2023. This was mainly attributed to lower costs for raw materials and energy, offset somewhat by lower pricing and increased advertising and promotional spending. Pricing turned negative in the first quarter, down 3%, primarily as a result of lower prices in the commoditized consumer tissue business. Still, according to management, this is the result of some carryover price declines from last year, which should be phased out in coming quarters. Further, pulp prices have been trending higher lately, which might result in further price increases for the consumer tissue business in the second half of the year.