Essity reported higher net sales but lower profitability in the third quarter of 2026, as rising input costs weighed on margins and weaker performance in Consumer Tissue offset growth in other business areas.

Adjusted earnings exceeded analyst expectations, while the company continued to implement price increases and assess the future structure of its Consumer Tissue operations.

The Swedish hygiene and health products group recorded net sales of SEK 36,060 million in the July–September period, up 4.1% from SEK 34,638 million a year earlier. Organic sales declined 0.3%, comprising a 0.1% decrease in volumes and a negative 0.2% price/mix effect.

EBITA fell 29.4% to SEK 3,636 million, compared with SEK 5,152 million in the third quarter of 2025. Excluding items affecting comparability, adjusted EBITA declined 6.5% to SEK 4,725 million, from SEK 5,056 million.

The adjusted EBITA margin narrowed to 13.1%, compared with 14.6% a year earlier. However, adjusted EBITA exceeded the FactSet analyst consensus of SEK 4,474 million, while the margin was approximately 70 basis points above the expected 12.4%.

Profit for the period decreased 30.1% to SEK 2,346 million, from SEK 3,358 million, and earnings per share fell to SEK 3.47 from SEK 4.86.

Operating cash flow increased 8.6% to SEK 5,783 million, from SEK 5,324 million, providing support amid weaker earnings.

Higher costs weigh on profitability

Essity's profitability was affected by higher raw-material, energy and distribution costs. Cost of goods sold increased by approximately SEK 658 million year on year, including SEK 420 million in higher raw-material costs, SEK 245 million in energy costs and SEK 75 million in distribution costs.

The gross profit margin declined by 170 basis points. Productivity savings partly offset the cost increases.

Essity continued to implement price increases across its business areas to compensate for higher costs. Selling prices were higher in the third quarter than in the second quarter across all four business areas.

The company expects cost of goods sold to increase significantly in the fourth quarter, both year on year and sequentially, primarily because of raw materials and energy. Management expects its cost-saving program to generate greater savings in Q4 than in Q3.

Consumer Tissue remains under pressure

Consumer Tissue was the main weak point in Essity's quarterly performance, with organic sales declining 3.0%. Lower volumes, a contracting European consumer tissue market and the effects of production-footprint optimization in Latin America contributed to the decline.

Volumes fell approximately 1.9% year on year, with 1.2 percentage points attributable to the Latin American restructuring. The business also continued to experience the impact of price reductions implemented in previous quarters, although selling prices improved sequentially.

Consumer Tissue generated adjusted EBITA of SEK 908 million, with an adjusted EBITA margin of 8.6%. The margin was the lowest among Essity's four business areas.

The performance highlights the challenge of balancing price competitiveness with profitability in a market exposed to lower-cost alternatives and persistent input-cost inflation.

Latin American restructuring targets efficiency gains

Essity is exiting two smaller production sites in Latin America and transferring production to a more efficient manufacturing footprint. The changes also involve withdrawing from some lower-value volumes.

The manufacturing optimization resulted in approximately SEK 500 million in items affecting comparability during the third quarter. Essity expects the initiative to generate annual savings of approximately SEK 150–160 million, with benefits already beginning to materialize.

Management said the program was largely finalized, limiting the likelihood of significant additional restructuring costs related to the initiative. However, the volume impact is expected to continue through the fourth quarter of 2026 and the first two quarters of 2027.

Essity's strategic review of Consumer Tissue, launched in May 2026, is also continuing. The review is evaluating alternatives for the business's future ownership, including a potential separation from the group. No final decision has been announced.

Consumer Tissue is a significant part of Essity's portfolio, with products including toilet paper, household towels, facial tissues, handkerchiefs and moist toilet tissue. The business operates through its own brands as well as retailer brands and private-label production.

Product development continues

Alongside restructuring and pricing measures, Essity continued to develop its consumer tissue portfolio. During the quarter, the company expanded its moist toilet paper range and upgraded the softness of its Regio tissue assortment.

Management also highlighted a new moist toilet paper product designed with a larger, thicker sheet that dissolves faster, aiming to provide a differentiated offering within the category.

Performance across other business areas

Personal Care recorded organic sales growth of 3.2%, supported by continued growth in incontinence and feminine care. Retail incontinence products increased 5.1%, while feminine care grew 5.6%. Baby care declined 3.9%.

Health & Medical posted organic sales growth of 1.2%, supported by wound care and incontinence products.

Professional Hygiene recorded a 1.1% decline in organic sales. Profitability remained solid, but volume development was weaker, particularly in the base assortment and among smaller distributors.

Reuters reported on October 22 that Essity was experiencing weaker demand from US restaurants than from European markets. The Professional Hygiene business, which supplies products including Tork paper towels to restaurants and other businesses, generates around 40% of its revenue in the United States. CEO Ulrika Kolsrud told Reuters that American consumers were dining out less frequently, putting pressure on the business's sales, volumes and prices.

The report points to broader demand pressures affecting Essity beyond the consumer tissue market, as households and businesses respond to higher costs.

Nine-month performance

For January–September 2026, Essity reported net sales of SEK 104,298 million, compared with SEK 103,799 million in the same period of 2025. Organic sales growth was 0.1%, down from 1.7%.

Adjusted EBITA declined 3.1% to SEK 14,010 million, while the adjusted EBITA margin decreased to 13.4% from 13.9%.

Net profit for the nine-month period was SEK 7,940 million, compared with SEK 9,494 million a year earlier. Earnings per share from continuing operations fell to SEK 11.65 from SEK 13.68.

During the quarter, Essity also entered into an agreement to acquire Kenvue's feminine care business in Brazil, including the Carefree, Sempre Livre and o.b. brands. The transaction is subject to regulatory approval and is expected to close in the second quarter of 2027.

Essity's third-quarter results reflect a mixed operating environment: adjusted earnings exceeded market expectations, but profitability declined as costs rose and Consumer Tissue remained under pressure. The group's pricing measures and cost-saving initiatives will be important in the fourth quarter, while the strategic review could shape the future structure of one of its largest businesses.