By Agata Rybska
(Reuters) - Swedish hygiene products maker Essity on Thursday said it expects input costs to ease after reporting forecast-beating first-quarter earnings, helped by price hikes and better product mix across its business areas though volumes fell.
Like several other consumer goods companies, Essity has been raising its prices to cope with high energy costs and raw material prices.
The world's second-biggest maker of consumer tissue expects raw material, energy and distribution costs to fall sequentially in the second quarter, finance chief Fredrik Rystedt told analysts.
Rystedt highlighted the importance of Essity's ongoing price increases, especially in South America, for the company to keep delivering margin expansion in coming quarters.
On Wednesday, Essity said it had initiated a strategic review of its 51.59% stake in China-based Vinda and its Consumer Tissue Private Label Europe business.
"We would like to continue to cooperate with Vinda also in the hypothetical future where we are no longer the owner," CEO Magnus Groth said, adding Essity wanted to stay in the Chinese market.
Credit Suisse (SIX:CSGN) views the strategic review as a chance for Essity to reduce earnings volatility and increase its returns, as it can accelerate the company's move towards higher value-added categories.
The review could help the group move away from the commoditised consumer tissue business that in China faces rising excess supply, which does not allow Essity to take strategic pricing action, Credit Suisse added.
Removing the two businesses under review would reduce consumer tissue's share in Essity's sales to 29% from the current 41%, Groth said, adding the rest of the consumer tissue business was not under review.
Essity's adjusted earnings before interest, taxes and amortisation rose to 4.36 billion Swedish crowns ($423.00 million) in the quarter, beating the Refinitiv estimate of 4.03 billion crowns.
Its shares were largely steady.
($1 = 10.3073 Swedish crowns)