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Tissue maker Essity's profit drops as costs outweigh record sales, price hikes

FILE PHOTO: FILE PHOTO: Essity products are seen in Stockholm

STOCKHOLM (Reuters) -Swedish maker of hygiene products Essity reported a drop in third-quarter core profit on Thursday as record quarterly sales and big price hikes have not yet offset higher costs.

The world's second-biggest maker of consumer tissue said it would raise prices further and expected the hikes to offset costs.

"Our price increases are offsetting the high cost inflation with a delay of approximately two quarters," Chief Executive Magnus Groth said in a statement.

Shares in Essity, whose products range from toilet paper and napkins to incontinence and feminine care under brands such as Lotus, Tempo, Vinda and TORK, rose 5% in early trade, reducing a year-to-date fall to 20%.

Adjusted profit before interest, tax and amortisation fell 17% year-over-year to 2.99 billion crowns ($275 million) as rising costs for raw materials, energy and distribution shrank margins to 7.5% from 11.5%.

The profit roughly matched market expectations, Refinitiv data showed.

"Cost inflation worsened further in the third quarter," Groth added. "We are addressing this through comprehensive price increases and energy price surcharges that will have an additional effect in the fourth quarter and in 2023."

The company said it was also working on swift improvements to efficiency, energy-saving and rationalisation of raw material.

Net sales at the rival of Procter & Gamble and Kimberly-Clark jumped 29% in the quarter to 40.1 billion crowns, as sales volumes rose in all divisions.

Groh told analysts on a telephone call he expected raw materials to rise in the fourth quarter. ($1=10.8579 Swedish crowns)

(Reporting by Anna Ringstrom, Editing by Savio D'Souza and Clarence Fernandez)