Essity sales hit by lockdowns and March hoarding

By Anna Ringstrom

STOCKHOLM (Reuters) - Hygiene products maker Essity suffered an 11% drop in second-quarter sales, hit by coronavirus lockdowns and adverse effects of bulk-buying in the early stages of the crisis, the Swedish company reported on Monday.

Essity had warned in April of slower sales ahead as distributors and households use up hoarded stocks of toilet paper and other products, with demand from businesses also slowing as people travel less and work more from home.

"Sales were negatively affected by the COVID-19 pandemic and related lockdowns as well as inventory adjustments following the stockpiling that took place among consumers and distributors in March," it said in its second-quarter report.

Though sales dropped to 28.4 billion crowns ($3.1 billion), operating profit grew slightly more than expected, rising 13% to 3.64 billion on the back of efficiency measures and lower pulp and energy costs. First-quarter profit had spiked 82%, helped by the bulk-buying.

Essity is the world's second-biggest maker of consumer tissue toilet paper and handkerchiefs with brands such as Lotus, Edet, Tempo and Vinda. It is the global leader in hygiene products for businesses under the Tork brand and in incontinence products with TENA.

CEO Magnus Groth told analysts and media in a conference call that de-stocking would hit sales to businesses in the third quarter. The recovery of consumer sales would depend on the pace at which economies reopen, he added.

The rival to Procter & Gamble and Kimberly-Clark said it had increased market share in several markets across Asia, Europe and North America, primarily within consumer tissue but also in feminine care and professional hygiene.

Essity cited delivery reliability, successful product launches and strengthened presence in digital sales channels.

"Eventually, the COVID-19 pandemic may lead to increased demand for the company's leading hygiene and health products as a result of increased awareness of the importance of hygiene and health," Essity said.

Shares in the company were unchanged at 0900 GMT and are down 2% this year.

Essity started a limited production of surgical face masks this year and said in April that it would install new machinery with capacity of up to 30 million masks a month.

Groth told Reuters on Monday that he expects a broader commercial launch to consumers and businesses in the fourth quarter after the two new machines are installed.

(Reporting by Anna Ringstrom; Editing by Sherry Jacob-Phillips and David Goodman)