Essity invests in German plant to make pulp from agricultural waste

Invests SEK 400 mln in new German pulp plant

Plant to be in operation in H2, 2020

Sees hygiene and health market growing 3%/yr through 2023

Adds detail, background

STOCKHOLM, May 23 (Reuters) - Swedish hygiene products maker Essity ESSITYb.STsaid on Thursday it planned to build a new plant in Germany for the production of pulp from wheat straw and other plant-based agricultural by-products.

Tough market conditions and rising costs for raw materials such as pulp has put pressure on Essity, the world's biggest maker of incontinence products and hygiene solutions for businesses, since its 2017 listing.

"Essity has signed a license agreement securing exclusive rights to a new proprietary technology to produce pulp from alternative fibre that will have the same quality as conventional wood-based pulp at a competitive cost," it said.

The company said in a statement the plant would be built at its existing factory complex in Mannheim, Germany, at a cost of 400 million crowns ($41.5 million) and that it would be up and running in the second half of 2020.

Essity produces pulp from recovered and fresh wood-based fibre, mainly in Mannheim, but buys the bulk of pulp externally.

This year shares in the group, which is also the second-largest supplier of consumer tissue such as wet wipes and toilet paper, have jumped 32% on the back of cost cuts and price hikes.

In a separate statement issued ahead of investor presentations in Stockholm on Wednesday, the group said its strategy and financial targets remained unchanged and forecast annual growth of around 3% percent for the global hygiene and health market through 2023.

Essity, spun off from forestry group SCA SCAb.ST in 2017, targets organic sales growth above 3% and adjusted return on capital employed of above 15 percent. In 2018, the outcome was 2.6% and 12.0%, respectively.

($1 = 9.6346 Swedish crowns)

(Reporting by Anna Ringstrom; Editing by Simon Johnson and Niklas Pollard)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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