Essity plants to increase its prices over the coming months to offset rising pulp costs, the hygiene products group said on Thursday.
It announced the price hikes after posting first-quarter earnings above analysts’ expectations.
Pulp represents 11% of all costs for the company in 2023 and Essity has focused its efforts on reducing its reliance on fibre.
It said in March that it had cut its purchase of pulp by approximately half.
The chief executive of the company Magnus Groth said, “It (costs of pulp and recycled fibre) will have an impact in the second quarter and beyond, but we will compensate through price increases.”
Increasing Margins
Essity has been growing its margins in recent months at the expense of falling volumes.
It added that the trend has started to reverse.
As it increased marketing activity, Essity cut prices in the first quarter.
Analysts warned that planned price increases could hurt sales volumes.
JP Morgan said, “Pricing in consumer foods should be a worry at a time of potential rebound in costs.”
Competitors have also responded to the increased price in pulp, with Portuguese tissue maker Navigator said on Wednesday it would hike prices by 8%-10% from May.
Essity’s shares traded close to flat after gaining 3.4% at the market opening.
Groth told Reuters that the company would provide an update on its financial targets in the second quarter.
The company’s adjusted quarterly earnings before interest, tax and amortisation (EBITA) rose 12% from a year earlier.
The EBITA increased to 4.9 billion Swedish crowns (€419 billion), passing the 4.45 billion crowns expected by analysts polled by the London Stock Exchange Group.
Margins rose 14%, marking the company’s sixth consecutive margin increase.
Volumes increased 0.6% in the quarter, excluding restricting and exited contracts.
Read More: Sweden’s Essity Misses Profit Forecast As Price Hikes Ease
