Essity Earnings: Organic Growth Pressured by Pricing Challenges and Restructuring Efforts

No-moat Essity delivered modest results for the third quarter of 2024, with organic sales growth of 1.9% driven by positive volume contribution, slightly negative price and mix effect, and a temporary negative restructuring impact in hygiene products that reduced sales growth by 1.5%. A slight EBITA margin expansion of 20 basis points and strong cash flow generation led to an improved balance sheet, with the net debt/EBITDA ratio dropping to 1.1 times from the 2.0 times reported at the end of 2023. Essity's performance is in line with our expectations, and once restructuring pressure is alleviated, we believe it can return to targeted sales growth of more than 3%. We maintain our fair value estimate of SEK 300.