Essity

Earnings Release • Oct 26, 2017

JANUARY 1 – SEPTEMBER 30, 2017

(compared with the corresponding period a year ago)

• Net sales increased 8.2% to SEK 80,601m (74,466)
• Operating profit before amortization of acquisition-related intangible assets (EBITA) rose 31% to SEK 8,953m (6,831)
• Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 11% to SEK 9,786m (8,797)
• Adjusted EBITA margin increased 0.3 percentage points to 12.1% (11.8)
• Adjusted profit before tax rose 5% to SEK 8,562m (8,119)
• Profit for the period increased 86% to SEK 5,719m (3,072)
• Earnings per share increased 86% to SEK 7.44 (4.01¹ )
• Adjusted earnings per share increased 32% to SEK 8.77 (6.66¹ )
• Cash flow from current operations declined 4% to SEK 6,055m (6,313)
• The acquisition of BSN medical, a leading medical solutions company, was consolidated as of April 3, 2017. Since the acquisition date, BSN medical has impacted consolidated net sales by SEK 4,162m and adjusted EBITA by SEK 756m.

1 Indicative earnings per share on the assumption that the number of issued shares in Essity as of September 30, 2016 corresponded to the number of issued shares in Essity on September 30, 2017 (702.3 million).

EARNINGS TREND

SEKm	1709	1609	%	2017:3	2016:3	%
Net sales	80,601	74,466	8	27,178	25,235	8
Adjusted operating profit before amortization of acquisition related intangible assets (EBITA)2	9,786	8,797	11	3,432	3,114	10
Operating profit before amortization of acquisition-related intangible assets (EBITA)	8,953	6,831	31	3,396	2,548	33
Amortization of acquisition-related intangible assets	-379	-108		-161	-38
2 Adjusted operating profil	9,407	8,689	8	3,271	3,076	6
Items affecting comparability	-919	-2,137		-34	-714
Operating profit	8,488	6,552	30	3,237	2,362	37
Financial items	-845	-570		-275	-156
Profit before tax	7,643	5,982	28	2,962	2,206	34
Adjusted profit before tax2	8,562	8,119	5	2,996	2,920	3
Tax	-1,924	-2,910		-740	-334
Profit for the period	5,719	3,072	86	2,222	1,872	19
Earnings per share, SEK	7.44	4.01		2.98	2.46
Adjusted earnings per share, SEK3	8.77	6.66		3.17	3.35

²Excluding items affecting comparability; for amounts see page 11.

³Excluding items affecting comparability and amortization of acquisition-related intangible assets.

SUMMARY OF THIRD QUARTER 2017

The Group's net sales for the third quarter of 2017 increased 7.7% compared with the corresponding period a year ago. Organic sales increased by 1.8%, of which volume accounted for 2.2% and price/mix for -0.4%. In emerging markets, which represented 34% of net sales, organic sales rose by 6.8%, while in mature markets organic sales declined by 0.8%. Organic sales were negatively impacted by a lower market growth due to such factors as price pressure and as a consequence of Essity's decision to discontinue certain underperforming market positions and contracts as part of the company's focus on profitable growth for increased value creation. During the quarter, 13 innovations were launched that strengthened Essity's customer and consumer offering in all categories.

The Group's adjusted EBITA in the third quarter of 2017 increased by 10% compared with the corresponding period a year ago. Excluding currency translation effects and the acquisition of BSN medical, the adjusted EBITA declined by 1% compared with the corresponding period a year ago. The decline was mainly the result of higher raw material costs and lower prices. Higher volumes, cost savings and other measures to improve profitability had a positive impact on earnings.

The Group's adjusted EBITA margin increased 0.3 percentage points to 12.6%. The adjusted return on capital employed was 13.8%.

For the third quarter of 2017, the acquired company BSN medical's organic sales rose by 1.7%. The adjusted EBITA margin for the acquired company was 19.2% and was negatively impacted by approximately 0.4 percentage points as a result of integration costs.

Excluding items affecting comparability; for amounts see page 11.

ADJUSTED EARNINGS TREND

SEKm	1709	1609	%	2017:3	2016:3	%
Net sales	80,601	74,466	8	27,178	25,235	8
Cost of goods sold1	-56,663	-53,307		-18,949	-17,881
Adjusted gross profit1	23,938	21,159	13	8,229	7,354	12
Sales, general and administration1	-14,152	-12,362		-4,797	-4,240
Adjusted operating profit before amortization of acquisition related intangible assets (EBITA)1	9,786	8,797	11	3,432	3,114	10
Amortization of acquisition related intangible assets1	-379	-108		-161	-38
Adjusted operating profit1	9,407	8,689	8	3,271	3,076	6
Financial items	-845	-570		-275	-156
Adjusted profit before tax1	8,562	8,119	5	2,996	2,920	3
Adjusted tax1	-2,165	-3,259		-745	-451
Adjusted profit for the period1 1Excluding items affecting comparability; for amounts see page 11.	6,397	4,860	32	2,251	2,469	-9
Adjusted Margins (%)
Gross margin1	29.7	28.4		30.3	29.1
EBITA margin1	12.1	11.8		12.6	12.3
Operating margin1	11.7	11.7		12.0	12.2
Financial net margin	-1.0	-0.8		-1.0	-0.6
Profit margin1	10.7	10.9		11.0	11.6
Tax1	-2.7	-4.4		-2.7	-1.8
Net margin1	8.0	6.5		8.3	9.8

¹Excluding items affecting comparability; for amounts see page 11.

ADJUSTED EBITA BY BUSINESS AREA

SEKm	1709	1609	%	2017:3	2016:3	%
Personal Care	4,398	3,122	41	1,556	1,072	45
Consumer Tissue	3,184	3,260	-2	1,023	1,110	-8
Professional Hygiene	2,660	2,777	-4	1,023	1,060	-3
Other	-456	-362		-170	-128
Total1	9,786	8,797	11	3,432	3,114	10

¹Excluding items affecting comparability; for amounts see page 11.

ADJUSTED OPERATING PROFIT BY BUSINESS AREA

SEKm	1709	1609	%	2017:3	2016:3	%
Personal Care	4,062	3,112	31	1,404	1,068	31
Consumer Tissue	3,179	3,209	-1	1,022	1,093	-6
Professional Hygiene	2,621	2,731	-4	1,014	1,044	-3
Other	-455	-363		-169	-129
Total1	9,407	8,689	8	3,271	3,076	6

¹Excluding items affecting comparability; for amounts see page 11.

OPERATING CASH FLOW BY BUSINESS AREA

SEKm	1709	1609	%	2017:3	2016:3	%
Personal Care	4,013	3,580	12	1,699	1,450	17
Consumer Tissue	2,756	3,891	-29	246	1,772	-86
Professional Hygiene	2,788	2,857	-2	1,539	1,492	3
Other	-722	-668		-147	9
Total	8,835	9,660	-9	3,337	4,723	-29

20,000 21,000 22,000 23,000 24,000 25,000 26,000 27,000 28,000 29,000 Net sales SEKm

Excluding items affecting comparability

Change in net sales (%)

	1709 vs 1609	17:3 vs 16:3
Total	8.2	7.7
Price/mix	0.1	-0.4
Volume	0.8	2.2
Currency	1.5	-2.3
Acquisitions	5.8	8.2
Divestments	0	0

Change in adjusted EBITA (%)

	1709 vs 1609	17:3 vs 16:3
Total	11	10
Price/mix	1	-4
Volume	3	5
Raw materials	-11	-15
Energy	-1	1
Currency	2	-2
Other	17	25

Adjusted profit before tax

Excluding items affecting comparability

GROUP

MARKET/EXTERNAL ENVIRONMENT

January-September 2017 compared with the corresponding period a year ago The global market for hygiene and health products was challenging in the first nine months of 2017.

The European and North American markets for incontinence products in the healthcare sector displayed higher demand, although with continued price pressure as a result of fierce competition, while the retail markets showed good growth but with a continued high level of competition. Emerging markets noted higher demand. The global market for medical solutions demonstrated stable growth but with continued price pressure. In Europe, demand for baby care and feminine care was stable. In emerging markets, demand rose for baby care and feminine care. The global market for baby care and several markets for feminine care were characterized by increased competition and campaign activity.

The European market for consumer tissue demonstrated low growth and increased competition. The Chinese consumer tissue market noted higher demand.

The European and North American markets for professional hygiene displayed low growth.

NET SALES AND EARNINGS

January-September 2017 compared with the corresponding period a year ago

Net sales increased 8.2% compared with the corresponding period a year ago to SEK 80,601m (74,466). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 0.9%, of which volume accounted for 0.8% and price/mix for 0.1%. Organic sales decreased 1.2% in mature markets and increased 5.0% in emerging markets. Emerging markets accounted for 35% of net sales. Exchange rate effects increased net sales by 1.5%. The acquisitions of BSN medical and Wausau Paper Corp. increased net sales by 5.8%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 11% (rose 1% excluding currency translation effects and acquisitions) to SEK 9,786m (8,797). Higher volumes, better price/mix, cost savings of SEK 872m, the acquisitions of BSN medical and Wausau Paper Corp. and the closures of the Baby Care business in Mexico and the hygiene business in India increased earnings. Investments were made in increased marketing activities. Higher raw material and energy costs had a negative earnings effect of SEK 1,031m. The acquisition of BSN medical increased profit by 9%.

Items affecting comparability amounted to SEK -919m (-2,137) and include costs of approximately SEK -525m related to the split of the SCA Group into two listed companies, which is mainly related to foreign tax of a non-recurring nature on non-current assets outside Sweden. Furthermore, the amount includes restructuring costs of about SEK -70m for the closure of a tissue machine in the UK, and approximately SEK -255m for the closure of a tissue production plant in the US. Items affecting comparability also include integration costs and transactions costs related to the acquisition of BSN medical and inventory valuation in connection with the acquisition balance totaling approximately SEK -310m, as well as other costs of SEK -24m. A release of a provision relating to a competition case in Poland had a positive impact of about SEK 265m.

Financial items increased to SEK -845m (-570). The increase is primarily due to higher average net debt. Lower interest had a positive impact on financial items during the period.

Adjusted profit before tax rose 5% (declined 6% excluding currency translation effects and acquisitions) to SEK 8,562m (8,119).

The tax expense, excluding effects of items affecting comparability, was SEK 2,165m (3,259). The decrease is primarily related to the tax provision of approximately SEK 1.3bn made in the first six months of 2016.

Adjusted profit for the period rose 32% (21% excluding currency translation effects and acquisitions) to SEK 6,397m (4,860).

Profit for the period rose 86% (75% excluding currency translation effects and acquisitions) to SEK 5,719m (3,072). Earnings per share, including items affecting comparability, were SEK 7.44 (4.01). The adjusted earnings per share were SEK 8.77 (6.66).

The adjusted return on capital employed was 15.3% (16.2).

Third quarter of 2017 compared with the corresponding period a year ago

Net sales increased 7.7% compared with the corresponding period a year ago to SEK 27,178m (25,235). Organic sales, which exclude exchange rate effects, acquisitions and divestments, rose 1.8%, of which volume accounted for 2.2% and price/mix for -0.4%. Organic sales decreased 0.8% in mature markets and increased 6.8% in emerging markets. Emerging markets accounted for 34% of net sales. Exchange rate effects reduced net sales by 2.3%. The acquisition of BSN medical increased net sales by 8.2%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 10% (declined 1% excluding currency translation effects and acquisition) to SEK 3,432m (3,114). Higher volumes, cost savings of SEK 342m, the acquisition of BSN medical and the closures of the Baby Care business in Mexico and the hygiene business in India increased earnings. Higher raw material costs and lower prices had a negative impact on earnings. The acquisition of BSN medical increased earnings by 13%.

Adjusted profit before tax rose 3% (declined 9% excluding currency translation effects and acquisition) to SEK 2,996m (2,920).

Profit for the period rose 19% (7% excluding currency translation effects and acquisition) to SEK 2,222m (1,872). Earnings per share, including items affecting comparability, were SEK 2.98 (2.46). The adjusted earnings per share were SEK 3.17 (3.35).

The adjusted return on capital employed was 13.8% (16.7).

CASH FLOW AND FINANCING

January-September 2017 compared with the corresponding period a year ago The operating cash surplus amounted to SEK 13,512m (12,308). The cash flow effect of

changes in working capital was SEK -1,150m (254). Working capital as a share of net sales increased. Current capital expenditures amounted to SEK -2,670m (-2,386). Operating cash flow was SEK 8,835m (9,659).

Financial items increased to SEK -845m (-570). The increase is primarily due to higher average net debt. Lower interest had a positive impact on financial items during the period. Income tax payments totaled SEK 2,110m (2,913). Cash flow from current operations amounted to SEK 6,055m (6,313) during the period. This decrease was mainly related to higher working capital.

Strategic capital expenditures amounted to SEK -1,383m (-1,398). The net sum of acquisitions and divestments was SEK -25,907m (-6,382). Net cash flow totaled SEK -20,590m (-3,810).

Net debt increased by SEK 17,939m during the period, to SEK 53,112m. Excluding pension liabilities, net debt amounted to SEK 49,638m. Net cash flow increased net debt by SEK 20,590m. Fair value measurement of pension assets and updated assumptions and assessments that affect measurement of the net pension liability, together with fair value measurement of financial instruments, reduced net debt by SEK 1,462m. Exchange rate movements reduced net debt by SEK 1,189m.

The debt/equity ratio was 1.17 (0.60). Excluding pension liabilities, the debt/equity ratio was 1.10 (0.42). The debt payment capacity was 24% (41).

EQUITY

January–September 2017

Consolidated equity increased by SEK 5,722m during the period, to SEK 45,302m. Net profit for the period increased equity by SEK 5,719m. Equity increased SEK 1,067m net after tax as a result of fair value measurement of pension assets and updated assumptions and assessments that affect the valuation of the pension liability. Fair value measurement of financial instruments, excluding acquired hedge reserves, reduced equity by SEK 79m after tax. Exchange rate movements, including the effect of hedges of net foreign investments, after tax, decreased equity by SEK 2,637m. Equity increased as a result of a private placement of SEK 969m to noncontrolling interests in Vinda. Transactions with former shareholders (SCA AB) increased equity by SEK 842m. Equity increased by SEK 80m related to the acquisition of non-controlling

interests in conjunction with the acquisition of BSN medical. Other items reduced equity by SEK 239m.

TAX

January–September 2017

A tax expense of SEK 2,165m was reported, excluding items affecting comparability. The reported tax expense corresponds to a tax rate of about 25.3% for the period.

The tax expense including items affecting comparability was SEK 1,924m, corresponding to a tax rate of 25.2% for the period.

Share of Group, adjusted EBITA 1709

0 2 4 6 8 10 12 14 16 0 200 400 600 800 1,000 1,200 1,400 1,600 Adjusted EBITA and margin SEKm %

Change in net sales (%)

	1709 vs 1609	17:3 vs 16:3
Total	19.3	24.9
Price/mix	-0.6	-1.9
Volume	1.9	4.9
Currency	1.3	-2.8
Acquisitions	16.7	24.7
Divestments	0	0

Change in adjusted EBITA (%)

	1709 vs 1609	17:3 vs 16:3
Total	41	45
Price/mix	-4	-15
Volume	7	13
Raw materials	-4	-5
Energy	0	0
Currency	1	-2
Other	41	54

PERSONAL CARE

SEKm	1709	1609	%	2017:3	2016:3	%
Net sales	29,755	24,940	19	10,449	8,362	25
Adjusted EBITA*	4,398	3,122	41	1,556	1,072	45
Adjusted EBITA margin, %*	14.8	12.5		14.9	12.8
Adjusted operating profit*	4,062	3,112	31	1,404	1,068	31
Adjusted operating margin, %*	13.7	12.5		13.4	12.8
Adjusted return on capital employed, %*	23.6	31.7		16.0	32.7
Operating cash flow	4,013	3,580		1,699	1,450

*) Excluding restructuring costs, which are reported as items affecting comparability outside of the business area.

January-September 2017 compared with the corresponding period a year ago

Net sales increased 19.3% to SEK 29,755m (24,940). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 1.3%, of which volume accounted for 1.9% and price/mix for -0.6%. The closures of the Baby Care business in Mexico and the hygiene business in India negatively impacted organic sales by approximately 1%. Organic sales in mature markets increased by 0.9%. In emerging markets, which accounted for 38% of net sales, organic sales rose 2.0%. The acquisition of BSN medical increased net sales by 16.7%. Exchange rate effects increased net sales by 1.3%.

For Incontinence Products, under the globally leading TENA brand, organic sales increased 2.1%. Growth is related to emerging markets and North America. In Europe, sales were in line with the corresponding period a year ago. The European retail sector reported good growth, while lower sales to the healthcare sector had a negative effect on growth. For Baby Care, organic sales decreased 3.0%. The decline was mainly the result of the closures of the Baby Care businesses in Mexico and India, as well as lower sales in Russia. In Europe, organic sales increased for Baby Care. For Feminine Care, organic sales increased by 3.9%, related to Latin America and Asia.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 41% (15% excluding currency translation effects and acquisition) to SEK 4,398m (3,122). The increase was mainly related to the acquisition of BSN medical, higher volumes, cost savings, increased profitability for Incontinence Products in North America and the closures of the Baby Care business in Mexico and the hygiene business in India. Higher raw material costs, lower prices and investments in increased marketing activities negatively impacted earnings. The acquisition of BSN medical increased profit by 24%. The operating cash surplus amounted to SEK 5,290m (3,881).

Third quarter of 2017 compared with the corresponding period a year ago

Net sales increased 24.9% to SEK 10,449m (8,362). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 3.0%, of which volume accounted for 4.9% and price/mix for -1.9%. The closures of the Baby Care business in Mexico and the hygiene business in India negatively impacted organic sales by approximately 1%. Organic sales in mature markets increased by 1.9%. In emerging markets, which accounted for 36% of net sales, organic sales increased by 4.6%. The acquisition of BSN medical increased net sales by 24.7%. Exchange rate effects reduced net sales by 2.8%.

-6 For Incontinence Products, under the globally leading TENA brand, organic sales increased 2.9%. Growth is mainly related to emerging markets and North America. In Europe, sales grew driven by favorable growth in the retail sector, while sales to the healthcare sector were in line with the preceding year. For Baby Care, sales increased by 0.1%. The increase was mainly the result of higher sales in Europe. The closures of the Baby Care businesses in Mexico and India had a negative impact on sales. For Feminine Care, organic sales increased by 5.2%, mainly related to Latin America.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) rose 45% (11% excluding currency translation effects and acquisition) to SEK 1,556m (1,072). The increase was mainly related to the acquisition of BSN medical, higher volumes, cost savings, increased profitability for Incontinence Products in North America and the closures of the Baby Care business in Mexico and the hygiene business in India. Higher raw material costs and lower prices had a negative impact on earnings. The lower prices are mainly related to Incontinence Products as a result of price pressure in the healthcare sector and increased marketing activities in the retail sector. The acquisition of BSN medical increased profit by 37%. Share of Group, net sales 1709

Change in net sales (%)

	1709 vs 1609	17:3 vs. 16:3
Total	1.8	-1.0
Price/mix	-0.3	-0.7
Volume	0.8	1.4
Currency	1.3	-1.7
Acquisitions	0	0
Divestments	0	0

Change in adjusted EBITA (%)

	1709 vs 1609	17:3 vs 16:3
Total	-2	-8
Price/mix	-2	-4
Volume	2	3
Raw materials	-13	-27
Energy	-2	2
Currency	1	-2
Other	12	20

CONSUMER TISSUE

SEKm	1709	1609	%	2017:3	2016:3	%
Net sales	30,988	30,445	2	10,066	10,164	-1
Adjusted EBITA*	3,184	3,260	-2	1,023	1,110	-8
Adjusted EBITA margin, %*	10.3	10.7		10.2	10.9
Adjusted operating profit*	3,179	3,209	-1	1,022	1,093	-6
Adjusted operating margin, %*	10.3	10.5		10.2	10.8
Adjusted return on capital employed, %*	10.6	10.5		9.8	10.8
Operating cash flow	2,756	3,891		246	1,772

*) Excluding restructuring costs, which are reported as items affecting comparability outside of the business area.

January-September 2017 compared with the corresponding period a year ago

Net sales increased 1.8% to SEK 30,988m (30,445). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 0.5%, of which volume accounted for 0.8% and price/mix for -0.3%. Organic sales decreased 3.0% in mature markets. The decline was mainly related to lower prices and volumes of products sold under retailers' brand. In emerging markets, which accounted for 43% of net sales, organic sales increased by 5.3%. The increase was related to Asia, Latin America and Russia. Exchange rate effects increased net sales by 1.3%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) declined 2% (4% excluding currency translation effects) to SEK 3,184m (3,260). This decrease was related to higher raw material and energy costs in addition to lower prices. Higher volumes and cost savings had a positive impact on earnings. The operating cash surplus decreased to SEK 4,720m (4,744).

Third quarter of 2017 compared with the corresponding period a year ago

Net sales declined 1.0% to SEK 10,066m (10,164). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 0.7%, of which volume accounted for 1.4% and price/mix for -0.7%. Organic sales decreased 3.6% in mature markets. The decline was mainly related to lower prices and lower volumes. In emerging markets, which accounted for 43% of net sales, organic sales increased by 6.9%. The increase was mainly related to Asia. Exchange rate effects reduced net sales by 1.7%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) declined 8% (6% excluding currency translation effects) to SEK 1,023m (1,110). This decline was primarily related to higher raw material costs, mainly on account of significantly higher pulp prices. Lower prices in Europe had a negative impact on earnings. Profit was positively affected by higher volumes, cost savings and lower energy prices.

Change in net sales (%)

	1709 vs 1609	17:3 vs 16:3
Total	4.3	-1.4
Price/mix	1.8	1.6
Volume	-0.4	-0.4
Currency	2.1	-2.6
Acquisitions	0.8	0
Divestments	0	0

Change in adjusted EBITA (%)

	1709 vs 1609	17:3 vs 16:3
Total	-4	-3
Price/mix	10	8
Volume	-1	-1
Raw materials	-15	-10
Energy	-1	1
Currency	3	-1
Other	0	0

PROFESSIONAL HYGIENE

SEKm	1709	1609	%	2017:3	2016:3	%
Net sales	19,884	19,072	4	6,635	6,725	-1
Adjusted EBITA*	2,660	2,777	-4	1,023	1,060	-3
Adjusted EBITA margin, %*	13.4	14.6		15.4	15.8
Adjusted operating profit*	2,621	2,731	-4	1,014	1,044	-3
Adjusted operating margin, %*	13.2	14.3		15.3	15.5
Adjusted return on capital employed, %*	18.1	20.3		20.7	20.3
Operating cash flow	2,788	2,857		1,539	1,492

*) Excluding restructuring costs, which are reported as items affecting comparability outside of the business area.

January-September 2017 compared with the corresponding period a year ago

Net sales increased 4.3% to SEK 19,884m (19,072). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 1.4%, of which volume accounted for -0.4% and price/mix for 1.8%. Price/mix was positively impacted by higher prices in North America and a better mix in Europe and North America. The acquisition of Wausau Paper Corp. increased net sales by 0.8%. Organic sales decreased 1.0% in mature markets on account of lower volumes. These lower volumes are mainly the result of the decision to discontinue contracts with unsatisfactory profitability. In emerging markets, which accounted for 17% of net sales, organic sales increased by 13.8%. The increase was mainly related to Asia and Latin America. Exchange rate effects increased net sales by 2.1%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) declined 4% (8% excluding currency translation effects and acquisitions) to SEK 2,660m (2,777). The decline was primarily related to higher raw material costs mainly due to significantly higher recovered paper prices. Earnings were also negatively impacted by lower volumes and higher energy costs. Better price/mix, cost savings and the acquisition of Wausau Paper Corp. had a positive impact on earnings. The operating cash surplus declined to SEK 3,904m (4,010).

Third quarter of 2017 compared with the corresponding period a year ago

Net sales declined 1.4% to SEK 6,635m (6,725). Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased 1.2%, of which volume accounted for -0.4% and price/mix for 1.6%. The price/mix was positively impacted by higher prices in North America and better mix in Europe and North America. Organic sales declined 1.1% in mature markets as a result of lower volumes. These lower volumes are mainly the result of the decision to discontinue contracts with unsatisfactory profitability and the effects of hurricanes in the US. In emerging markets, which accounted for 18% of net sales, organic sales increased by 13.2%. The increase was mainly related to Asia, Latin America and Eastern Europe. Exchange rate effects reduced net sales by 2.6%.

Adjusted operating profit before amortization of acquisition-related intangible assets (EBITA) declined 3% (3% excluding currency translation effects) to SEK 1,023m (1,060). The decline was primarily related to higher raw material costs mainly due to significantly higher recovered paper and pulp prices. Earnings were also negatively impacted by lower volumes. Profit was positively affected by a better price/mix and cost savings.

DISTRIBUTION OF SHARES

September 30, 2017	Class A	Class B	Total
Registered number of shares	64,461,518	637,880,971	702,342,489

At the end of the reporting period, the proportion of Class A shares was 9.2%. During the third quarter, 132,421 Class A shares were converted into Class B shares at the request of shareholders. The total number of votes in the company thereafter amounts to 1,282,496,151.

FUTURE REPORTS

The year-end report for 2017 will be published on January 25, 2018. Essity's 2017 Annual Report is scheduled for publication during the week beginning March 19.

In 2018, interim reports will be published on April 27, July 19 and October 26.

ANNUAL GENERAL MEETING

The Annual General Meeting for Essity will be held on April 12, 2018 at 15:00 CET at the Stockholm Waterfront Congress Centre in Stockholm, Sweden.

INVITATION TO PRESS CONFERENCE ON Q3 2017 INTERIM REPORT

Media and analysts are invited to a press conference, where this interim report will be presented by Magnus Groth, President and CEO.

Time: 10:00 CET, Thursday, October 26, 2017 Location: Essity's headquarters, Waterfront Building, Klarabergsviadukten 63, Stockholm, Sweden

The presentation will be webcasted at www.essity.com. To participate, call: +44 (0)20 7162 0077, +1 646 851 2407 or +46 8 5052 0110. Specify "Essity" or conference ID no. 962907.

Stockholm, October 26, 2017 Essity Aktiebolag (publ)

Magnus Groth President and CEO

For further information, please contact:

Fredrik Rystedt, CFO and Executive Vice President, +46 8 788 51 31 Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 8 788 51 30 Joséphine Edwall-Björklund, Senior Vice President, Group Function Communications, +46 8 788 52 34 Media Relations, Group Function Communications, +46 8 788 52 20

NB:

This information is such information that Essity Aktiebolag (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. This report has been prepared in both Swedish and English versions. In case of variations in the content between the two versions, the Swedish version shall govern. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CET on October 26, 2017. This interim report has not been reviewed by the company's auditors.

Karl Stoltz, Media Relations Manager, +46 8 788 51 55

CONDENSED STATEMENT OF PROFIT OR LOSS

Net sales 27,178 25,235 28,155 80,601 74,466 Cost of goods sold1,2 -18,949 -17,881 -19,664 -56,663 -53,307 Items affecting comparability1,2 28 -353 -360 -544 -483 Gross profit 8,257 7,001 8,131 23,394 20,676 Sales, general and administration1,2 -4,835 -4,283 -5,109 -14,274 -12,470 Items affecting comparability1,2 -64 -213 -116 -289 -1,483 Share of profits of associates and joint ventures 38 43 55 122 108 Operating profit before amortization of acquisition related intangible assets 3,396 2,548 2,961 8,953 6,831 Amortization of acquisition related intangible assets1 -161 -38 -197 -379 -108 Items affecting comparability1,2 2 -148 0 -86 -171 Operating profit 3,237 2,362 2,764 8,488 6,552 Financial items -275 -156 -304 -845 -570 Profit before tax 2,962 2,206 2,460 7,643 5,982 Tax -740 -334 -619 -1,924 -2,910 Profit for the period 2,222 1,872 1,841 5,719 3,072 Earnings attributable to: Owners of the parent 2,090 1,731 1,677 5,227 2,815 Non-controlling interests 132 141 164 492 257 702.33 702.33 Average no. of shares before dilution, millions 702.3 702.3 702.3 702.33 702.33 Average no. of shares after dilution, millions 702.3 702.3 702.3 Earnings per share, SEK - owners of the parent - before dilution effects 2.98 2.46 2.39 7.44 4.01 - after dilution effects 2.98 2.46 2.39 7.44 4.01 1Of which, depreciation -1,417 -1,279 -1,510 -4,197 -3,757 2Of which, impairment 18 -309 -201 -369 -448 3Number of shares corresponds to the number of issued shares in SCA Gross margin 30.4 27.7 28.9 29.0 27.8 EBITA margin 12.5 10.1 10.5 11.1 9.2 Operating margin 11.9 9.4 9.8 10.5 8.8 Financial net margin -1.0 -0.6 -1.1 -1.0 -0.8 Profit margin 10.9 8.8 8.7 9.5 8.0 Tax -2.7 -1.3 -2.2 -2.4 -3.9 Net margin 8.2 7.5 6.5 7.1 4.1 Excluding items affecting comparability: Gross margin 30.3 29.1 30.2 29.7 28.4 EBITA margin 12.6 12.3 12.2 12.1 11.8 Operating margin 12.0 12.2 11.5 11.7 11.7 Financial net margin -1.0 -0.6 -1.1 -1.0 -0.8 Profit margin 11.0 11.6 10.4 10.7 10.9 Tax -2.7 -1.8 -2.7 -2.7 -4.4	SEKm	2017:3	2016:3	2017:2	1709	1609
	Net margin	8.3	9.8	7.7	8.0	6.5

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

SEKm	2017:3	2016:3	2017:2	1709	1609
Profit for the period	2,222	1,872	1,841	5,719	3,072
Other comprehensive income for the period:
Items that may not be reclassified to the income statement
Actuarial gains/losses on defined benefit pension plans	-74	-1,939	755	1,460	-5,070
Income tax attributable to components of other comprehensive income	21	410	-178	-393	1,216
	-53	-1,529	577	1,067	-3,854
Items that have been or may be reclassified subsequently to the income statement
Available-for-sale financial assets	0	2	0	1	2
Cash flow hedges	112	58	-32	-107	298
Translation differences in foreign operations	-1,169	1,230	-837	-1,563	2,504
Gains/losses from hedges of net investments in foreign operations	-346	-436	-856	-1,379	-1,085
Other comprehensive income from associated companies	-14	-4	23	-20	-6
Income tax attributable to components of other comprehensive income	54	77	187	332	167
	-1,363	927	-1,515	-2,736	1,880
Other comprehensive income for the period, net of tax	-1,416	-602	-938	-1,669	-1,974
Total comprehensive income for the period	806	1,270	903	4,050	1,098
Total comprehensive income attributable to:
Owners of the parent	860	1,022	1,079	4,106	672
Non-controlling interests	-54	248	-176	-56	426

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEKm	1709	1609
Attributable to owners of the parent
Opening balance, January 1	33,204	42,986
Total comprehensive income for the period	4,106	672
Transaction with owner (Svenksa Cellulosa Aktiebolaget SCA)1	842	-2,878
Private placement to non-controlling interest	504	233
Private placement to non-controlling interest, dilution	-290	-110
Issue costs private placement	0	-4
Acquisition of non-controlling interests	0	-693
Acquisition of non-controlling interests, dilution	0	348
Closing balance	38,366	40,554
Non-controlling interests
Opening balance, January 1	6,376	5,289
Total comprehensive income for the period	-56	426
Dividend	-219	-138
Private placement to non-controlling interest	465	194
Private placement to non-controlling interest, dilution	290	110
Issue costs private placement	0	-4
Acquisition of non-controlling interests	80	643
Acquisition of non-controlling interests, dilution	0	-348
Closing balance	6,936	6,172
Total equity, closing balance	45,302	46,726
1Specification of transaction with owner (Svenska Cellulosa Aktiebolaget SCA)
Received contribution/given contribution	793	-3,204
Tax effects	49	326
Total	842	-2,878

CONSOLIDATED OPERATING CASH FLOW STATEMENT

SEKm	1709	1609
Operating cash surplus	13,512	12,308
Change in working capital	-1,150	254
Current capital expenditures, net	-2,670	-2,386
Restructuring costs, etc.	-857	-517
Operating cash flow	8,835	9,659
Financial items	-845	-570
Income taxes paid	-2,110	-2,913
Other	175	137
Cash flow from current operations	6,055	6,313
Acquisitions	-25,932	-6,547
Strategic capital expenditures in non-current assets	-1,383	-1,398
Divestments	25	165
Cash flow before dividend	-21,235	-1,467
Private placement to non-controlling interest	27	420
Dividend to non-controllling interests	-220	-138
Transactions with shareholders	838	-2,625
Net cash flow	-20,590	-3,810
Net debt at the start of the period	-35,173	-19,058
Net cash flow	-20,590	-3,810
Remeasurement to equity	1,462	-5,069
Translation differences	1,189	-199
Net debt at the end of the period	-53,112	-28,136
Debt/equity ratio	1.17	0.60
Debt payment capacity, %	24	41

CONSOLIDATED CASH FLOW STATEMENT

SEKm	1709	1609
Operating activities
Profit before tax	7,643	5,982
Adjustment for non-cash items1	4,414	5,368
	12,057	11,350
Paid tax	-2,110	-2,913
Cash flow from operating activities
before changes in working capital	9,947	8,437
Cash flow from changes in working capital
Change in inventories	-1,509	612
Change in operating receivables	1,407	-236
Change in operating liabilities	-1,048	-122
Cash flow from operating activities	8,797	8,691
Investing activities
Company qcquisitions	-12,951	-4,411
Divestments	25	165
Investments in intangible assets and property, plant and equipment	-4,172	-3,835
Sale of property, plant and equipment	123	51
Loans granted to external parties	-221	-109
Cash flow from investing activities	-17,196	-8,139
Financing activities
Private placement to non-controlling interests	26	420
Change, receivable from Group companies	952	-1,308
Loans raised	30,975	15,773
Amortization of debt	-23,815	-13,780
Dividend to non-controlling interests	-220	-138
Transactions with shareholders	838	-2,625
Cash flow from financing activities	8,756	-1,658
Cash flow for the period	357	-1,106
Cash and cash equivalents at the beginning of the period	4,244	4,828
Exchange differences in cash and cash equivalents	-172	117
Cash and cash equivalents at the end of the period	4,429	3,839
Cash flow from operating activities per share, SEK	12.53	12.37
Reconciliation with consolidated operating cash flow statement
Cash flow for the period	357	-1,106
Amortization of debt	23,815	13,780
Loans raised	-30,975	-15,773
Loans granted to external parties	221	109
Investment through financial lease	-4	0
Change, receivable from Group companies	-952	1,308
Net debt in acquired and divested operations	-12,981	-2,136
Accrued interest	-71	8
Net cash flow according to consolidated operating cash flow statement	-20,590	-3,810
1Depreciation/amortization and impairment of non-current assets	4,566	4,205
Gains/loss on assets sales and swaps	0	31
Reversal of provision related to antitrust cases	-266	0
Gain/loss on divestments	-1	-122
Unpaid relating to efficiency program	7	311
Payments related to efficiency progam already recoqnized	-389	-154
Provision related to one-time foreign tax on non-curent assets	450	0
Provision for ongoing competition case	0	1,075
Other	47	22
Total	4,414	5,368

CONSOLIDATED BALANCE SHEET

SEKm	September 30, 2017	December 31, 2016
Assets
Goodwill	31,018	19,253
Other intangible assets	20,871	7,665
Buildings, land, machinery and equipment	46,814	47,494
Participation in joint ventures and associates	1,004	1,096
Shares and participation	36	32
Surplus in funded pension plans	876	335
Non-current financial receivables, Group companies	0	3
Non-current financial assets	653	714
Deferred tax assets	1,884	1,457
Other non-current assets	359	241
Total non-current assets	103,515	78,290
Inventories	13,211	10,944
Trade receivables	16,966	15,843
Current tax assets	688	740
Current receivables, Group companies	0	57
Current financial receivables, Group companies	0	1,433
Other current receivables	2,668	2,333
Current financial assets	809	244
Non-current assets held for sale	90	156
Cash and cash equivalents	4,429	4,244
Total current assets	38,861	35,994
Total assets	142,376	114,284
Equity
Share capital	2,350	0
Reserves	1,900	4,061
Retained earnings	34,116	29,143
Attributable to owner of the Parent	38,366	33,204
Non-controlling interests	6,936	6,376
Total equity	45,302	39,580
Liabilities
Non-current financial liabilities	49,302	31,299
Non-current liabilities, Group companies	0	48
Provisions for pensions	4,349	5,273
Deferred tax liabilities	7,653	3,872
Other non-current provisions	1,233	1,407
Other non-current liabilities	71	72
Total non-current liabilities	62,608	41,971
Current financial liabilities	6,228	5,089
Current liabilities, Group companies	0	259
Current financial liabilities, Group companies	0	485
Trade payables	13,375	12,972
Current tax liabilities	784	915
Current provisions	1,370	1,409
Other current liabilities	12,709	11,604
Total current liabilities	34,466	32,733
Total liabilities	97,074	74,704
Total equity and liabilities	142,376	114,284

CONSOLIDATED BALANCE SHEET (cont.)

SEKm	September 30, 2017	December 31, 2016
Debt/equity ratio	1.17	0.89
Equity/assets ratio	27%	29%
Equity	45,302	39,580
Equity per share	65	56
Return on equity	15.7%	9.3%
Return on equity excluding items affecting comparability	18.7%	14.5%
Capital employed	98,414	74,753
- of which working capital	6,269	4,143
Return on capital employed*	13.5%	12.8%
Return on capital employed*, excluding items affecting comparability	15.3%	16.4%
Net debt	53,112	35,173
Provisions for restructuring costs are included in the balance sheet as follows -Other provisions -Operating liabilities ) of which, provision for tax risks	1,233 580 603	1,407 866 516

*) rolling 12 months

NET SALES (business area reporting)

SEKm	1709	1609	2017:3	2017:2	2017:1	2016:4	2016:3	2016:2
Personal Care	29,755	24,940	10,449	10,851	8,455	8,711	8,362	8,427
Consumer Tissue	30,988	30,445	10,066	10,449	10,473	11,115	10,164	10,043
Professional Hygiene	19,884	19,072	6,635	6,866	6,383	6,929	6,725	6,471
Other	-26	9	28	-11	-43	17	-16	42
Total net sales	80,601	74,466	27,178	28,155	25,268	26,772	25,235	24,983

ADJUSTED EBITA (business area reporting)

SEKm	1709	1609	2017:3	2017:2	2017:1	2016:4	2016:3	2016:2
Personal Care	4,398	3,122	1,556	1,614	1,228	1,161	1,072	1,073
Consumer Tissue	3,184	3,260	1,023	1,010	1,151	1,190	1,110	1,072
Professional Hygiene	2,660	2,777	1,023	917	720	1,059	1,060	940
Other	-456	-362	-170	-104	-182	-215	-128	-146
Total adjusted EBITA	9,786	8,797	3,432	3,437	2,917	3,195	3,114	2,939

ADJUSTED OPERATING PROFIT (business area reporting)

SEKm	1709	1609	2017:3	2017:2	2017:1	2016:4	2016:3	2016:2
Personal Care	4,062	3,112	1,404	1,434	1,224	1,143	1,068	1,070
Consumer Tissue	3,179	3,209	1,022	1,008	1,149	1,173	1,093	1,055
Professional Hygiene	2,621	2,731	1,014	902	705	1,042	1,044	922
Other	-455	-363	-169	-104	-182	-214	-129	-147
Total adjusted operating profit1	9,407	8,689	3,271	3,240	2,896	3,144	3,076	2,900
Financial items	-845	-570	-275	-304	-266	-265	-156	-111
Profit before tax1	8,562	8,119	2,996	2,936	2,630	2,879	2,920	2,789
Tax	-2,165	-3,259	-745	-761	-659	-1,096	-451	-2,174
Net profit for the period2	6,397	4,860	2,251	2,175	1,971	1,783	2,469	615
1Excluding items affecting comparability before tax amounting to:	-919	-2,137	-34	-476	-409	-688	-714	-1,232
2Excluding items affecting comparability after tax amounting to:	-678	-1,788	-29	-334	-315	-613	-597	-1,040

ADJUSTED EBITA MARGIN (business area reporting)

%	1709	1609	2017:3	2017:2	2017:1	2016:4	2016:3	2016:2
Personal Care	14.8	12.5	14.9	14.9	14.5	13.3	12.8	12.7
Consumer Tissue	10.3	10.7	10.2	9.7	11.0	10.7	10.9	10.7
Professional Hygiene	13.4	14.6	15.4	13.4	11.3	15.3	15.8	14.5

STATEMENT OF PROFIT OR LOSS

SEKm	2017:3	2017:2	2017:1	2016:4	2016:3
Net sales	27,178	28,155	25,268	26,772	25,235
Cost of goods sold	-18,949	-19,664	-18,050	-19,131	-17,881
Items affecting comparability	28	-360	-212	-49	-353
Gross profit	8,257	8,131	7,006	7,592	7,001
Sales, general and administration	-4,835	-5,109	-4,330	-4,495	-4,283
Items affecting comparability	-64	-116	-109	-630	-213
Share of profits of associates and joint ventures	38	55	29	49	43
Operating profit before amortization of acquisition related intangible
assets (EBITA)	3,396	2,961	2,596	2,516	2,548
Amortization of acquisition related intangible assets	-161	-197	-21	-51	-38
Items affecting comparability	2	0	-88	-9	-148
Operating profit	3,237	2,764	2,487	2,456	2,362
Financial items	-275	-304	-266	-265	-156
Profit before tax	2,962	2,460	2,221	2,191	2,206
Taxes	-740	-619	-565	-1,021	-334
Net profit for the period	2,222	1,841	1,656	1,170	1,872

INCOME STATEMENT PARENT COMPANY

SEKm	1709	1609
Other operating income	-732	0
Other operating expenses	197	0
Operating profit	-535	0
Financial items	2,409	0
Profit before tax	1,874	0
Untaxed reserve and Tax	234	0
Net profit for the period	2,108	0

BALANCE SHEET PARENT COMPANY

SEKm	September 30, 2017	December 31, 2016
Intangible assets	0	0
Tangible assets	6	7
Financial assets	167,894	167,852
Total non-current assets	167,900	167,859
Total current assets	1,118	149
Total assets	169,018	168,008
Restricted equity	2,350	0
Unrestricted equity	75,347	74,986
Total equity	77,697	74,986
Untaxed reserves	0	0
Provisions	865	839
Non-current liabilities	43,596	23,006
Current liabilities	46,860	69,177
Total equity, provisions and liabilities	169,018	168,008

NOTES

1 ACCOUNTING PRINCIPLES

This interim report has been prepared in accordance with IAS 34 and recommendation RFR 1 of the Swedish Financial Reporting Board (RFR), and with regards to the Parent Company, RFR 2.

Effective January 1, 2017, Essity applies the following new or amended International Financial Reporting Standards (IFRS):

• Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses
• Amendments to IAS 7: Disclosure Initiative

These amendments are not judged to have any material impact on the Group's or Parent Company's result of operations or financial position.

In other respects, the accounting principles and calculation methods applied correspond to those described in the 2016 Annual Report for SCA Hygiene AB.

At SCA's Annual General Meeting on April 5, 2017, it was decided to distribute the hygiene business. Accordingly, a review has been conducted in accordance with IFRS 8 Operating Segments. SCA Hygiene AB decided to divide operations into three segments, with Tissue being split into Consumer Tissue and Professional Hygiene. In addition, Personal Care will continue to form a separate segment and will also include, as of the second quarter 2017, the acquisition BSN medical, Medical Solutions, which is in line with how the new organization will be developed and managed in the future. Comparative periods have been restated in the corresponding manner.

SCA Hygiene AB has also decided to continue to present a function-based income statement, but increase the number of lines in the income statement by reporting amortization for acquisition-related intangible assets on a separate line, thereby making it easier to compare results with other companies irrespective of whether business activities are based on acquisitions or organic growth. In addition, the company has decided to introduce EBITA as a subtotal in the consolidated income statement, refer to Note 5 for further information.

Effects of new accounting policies

IFRS 15 Revenue from Contracts with Customers

The standard regulates revenue recognition and disclosure requirements relating to commercial agreements (contracts) in which the delivery of goods/services is divided up into separate identifiable performance obligations that are reported independently. The standard will come into effect on January 1, 2018. A project has been carried out that has examined the following areas: sales of services, variable and fixed discounts, inspection of agreements and when control has been transferred to the customer. In summary, the conclusion was drawn that the new standard will not have any material impact on the Essity Group's revenue recognition. Due to the non-material effects of the new standard, previous periods will not be restated. During the fourth quarter, the project will continue preparations for the expanded disclosure requirements.

IFRS 9 Financial Instruments

This is the new standard for financial instruments that will replace IAS 19. The standard will come into effect on January 1, 2018. A project has been carried out focusing on the following areas: classification and documentation of financial liabilities and assets, adaptation of documentation relating to hedge accounting to the new regulations and calculation of effects in connection with the transition to a new model for recognizing anticipated credit losses (expected loss model). In summary, the conclusion was drawn that the new standard will not have any material impact on the Essity Group's reporting. Due to the insignificant effects of the new standard, previous periods will not be restated. During the fourth quarter, the project will complete the preparations for the changes that will come into effect next year.

IFRS 16 Leasing

The new standard will be applied as of 1 January 2019 on condition that it is approved by the EU. Essity has commenced preparations for transition to the new standard on January 1, 2019, and intends to implement system support in order to comply with the new requirements. The initial assessment is that the new standard will impact Essity insofar as all rental contracts for premises, vehicles and other large leasing objects will be recognized in the balance sheet.

2 RISKS AND UNCERTAINTIES

Essity's risk exposure and risk management are described on pages 25-31 of the 2016 SCA Hygiene AB Annual Report. No significant changes have taken place that have affected the reported risks.

Risks in conjunction with company acquisitions are analyzed in the due diligence processes that Essity carries out prior to all acquisitions. In cases where acquisitions have been carried out that may affect the assessment of Essity's risk exposure, these are described under the heading "Other events" in the interim reports.

Processes for risk management

Essity's Board determines the Group's strategic direction based on recommendations from the Executive Management Team. Responsibility for the long-term, overall management of strategic risks corresponds to the company's delegation structure, from

the Board to the CEO and from the CEO to the business unit presidents. This means that most operational risks are managed by Essity's business units at the local level, but that they are coordinated when considered necessary. The tools used in this coordination consist primarily of the business units' regular reporting and the annual strategy process, where risks and risk management are a part of the process.

Essity's financial risk management is centralized, as is the Group's internal bank for the Group companies' financial transactions and management of the Group's energy risks. Financial risks are managed in accordance with the Group's finance policy, which is adopted by Essity's Board and which – together with Essity's energy risk policy – makes up a framework for risk management. Risks are aggregated and monitored on a regular basis to ensure compliance with these guidelines. Essity has also centralized other risk management.

Essity has a staff function for internal audit, which monitors compliance in the organization with the Group's policies.

3 FINANCIAL INSTRUMENTS PER CATEGORY

Distribution by level for measurement at fair value.

SEKm	Carrying amount in the balance sheet	Measured at fair value through profit or loss	Derivatives used for hedge accounting	Available for-sale financial assets	Financial liabilities measured at amortized cost	Of which fair value by level1
September 30, 2017						1	2
Derivatives	1,290	633	657	-	-	-	1,290
Non-current financial assets	84	-	-	84	-	84	-
Total assets	1,374	633	657	-	-	-	1,290
Derivatives	344	209	135	-	-	-	344
Financial liabilities Current financial liabilities	5,796	-	-	-	5,796	-	-
Non-current financial liabilities	49,274	15,850	-	-	33,424	-	15,850
Total liabilities	55,414	16,059	135	-	39,220	-	16,194
December 31, 2016
Derivatives	1,259	440	819	-	-	-	1,259
Non-current financial assets	82	-	-	82	-	82	-
Total assets	1,341	440	819	82	-	82	1,259
Derivatives Financial liabilities	705	576	129	-	-	-	705
Current financial liabilities Non-current financial	4,656	425	-	-	4,231	-	425
liabilities	31,338	16,021	-	-	15,317	-	16,021
Total liabilities	36,699	17,022	129	-	19,548	-	17,151

¹ No financial instruments have been classified to level 3

The total fair value of the above financial liabilities is SEK 55,272m (36,719). The fair value of trade receivables, other current and non-current receivables, cash and cash equivalents, trade payables and other current and non-current liabilities is estimated to be equal to their carrying amount.

No transfers between level 1 and 2 were made during the period.

The fair value of financial instruments is calculated based on current market quotations on the balance sheet date. The value of derivatives is based on published prices in an active market. The fair value of debt instruments is set using valuation models, such as discounting of future cash flows to quoted market interest rates for the respective durations.

4 ACQUISITIONS AND DIVESTMENTS

On December 19, 2016, it was announced that an agreement to acquire BSN medical, a leading medical solutions company, had been concluded. BSN medical develops, manufactures, markets and sells products within wound care, compression therapy and orthopedics. The purchase price for the shares was EUR 1,394m, and takeover of net debt amounted to

approximately EUR 1,322m. The acquisition is fully debt-funded. The transaction, which was subject to customary regulatory approvals, was closed on April 3, 2017.

A preliminary purchase price allocation is presented below specifying intangible assets in the form of customer relationships, brands, technologies and goodwill. The preliminary allocation may be adjusted after Essity has completed its valuation of BSN medical's brand strategy. Goodwill is justified by the synergies that arise as a result of BSN medical's leading market positions in attractive medical technology product categories, which create a shared future growth platform in combination with Essity's incontinence business, including the globally leading brand TENA. Furthermore, synergies are generated by being able to utilize a common customer base and sales channels for both businesses, enabling more rapid growth through cross selling.

Since the acquisition date, BSN medical affected consolidated net sales by SEK 4,162m, adjusted EBITDA by SEK 869m and adjusted EBITA by SEK 756m. Had the acquisition been consolidated from 1 January 2017, the estimated sales would have amounted to SEK 6,193m, adjusted EBITDA to SEK 1,278m and adjusted EBITA to SEK 1,117m.

Purchase price allocation, BSN medical	Preliminary
SEKm
Intangible assets	13,425
Non-current assets	1,280
Current assets	3,168
Cash and cash equivalents	471
Net debt	-13,043
Provisions and other non-current liabilities	-3,936
Operating liabilities	-1,258
Net identifiable assets and liabilities	107
Goodwill	13,233
Non-controlling interests	80
Consideration paid	13,260
Consideration paid	-13,260
Cash and cash equivalents in acquired operations	471
Effect on the Group's cash and cash equivalents (Consolidated cash flow statement)	-12,789
Acquired net debt excluding cash and cash equivalents	-13,043
Acquisition of operations including net debt taken over (Consolidated operating cash flow statement)	-25,832

5 Use of non-IFRS performance measures

During 2016, guidelines for Alternative Performance Measures (APMs) for companies with securities listed on a regulated market in the EU were issued by the European Securities and Markets Authority (ESMA). These guidelines are to be applied for APMs not supported under IFRS.

This quarterly report refers to a number of performance measures not defined in IFRS. These performance measures are used to help investors, management and other stakeholders analyze the company's operations. These IFRS measures may differ from similarly titled measures among other companies. SCA Hygiene's 2016 Annual Report describes the various IFRS performance measures that are used as a complement to the financial information that is presented in accordance with IFRS. A number of IFRS performance measures, such as EBITA, have been added since the Annual Report was published and these are described below. Tables are also presented that show how the performance measures have been calculated.

It is important that the Essity Group maintains an effective capital structure, while at the same time ensuring long-term access to loan financing. Cash flow in relation to net debt shall take into account the target to maintain a solid investment grade rating. A number of financial performance measures and how these are used to analyze the company's objective are described below.

CALCULATION OF FINANCIAL PERFORMANCE MEASURES NOT INCLUDED IN IFRS FRAMEWORK

Return measures – Return is a financial term that describes how much the value of an asset changes from an earlier point in time

Non-IFRS performance measure	Description	Reason for use of the measure
Return on capital employed, ROCE Adjusted return on capital employed, ROCE	Accumulated return on capital employed is calculated as 12- month rolling operating profit before amortization of acquisition related intangible assets (EBITA) as a percentage of an average of capital employed during the five most recent quarters. The corresponding key figure for a single quarter is calculated as operating profit before amortization of acquisition-related intangible assets (EBITA) for the quarter multiplied by four as a percentage of capital employed for the two most recent quarters. Accumulated return on capital employed is calculated as 12- month rolling operating profit	This is the central ratio for measuring return on capital tied up in operations. This is the central ratio for measuring return on capital tied up in operations.
	before amortization of acquisition related intangible assets (EBITA), excluding items affecting comparability, as a percentage of an average of capital employed during the five most recent quarters. The corresponding key figure for a single quarter is calculated as operating profit before amortization of acquisition related intangible assets (EBITA) for the quarter, excluding items affecting comparability, multiplied by four as a percentage of capital employed for the two most recent quarters.
Operating profit before amortization of acquisition related intangible assets, EBITA	Calculated as operating profit after depreciation of tangible assets but before amortization of acquisition related intangible assets.	The measure is a good complement to enable earnings comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth.
Adjusted operating profit before amortization of acquisition related intangible assets, EBITA	Calculated as operating profit after depreciation of tangible assets but before amortization of acquisition related intangible assets, excluding items affecting comparability.	The measure is a good complement to enable earnings comparisons with other companies, regardless of whether business activities were based on acquisitions or organic growth, and even adjusted for the impact of items affecting comparability.
EBITA margin	Operating profit before amortization of acquisition-related intangible assets as a percentage of net sales for the period.	The measure is a good complement to enable margin comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth.

Non-IFRS performance measure	Description	Reason for use of the measure
Adjusted EBITA margin	Operating profit before amortization of acquisition-related intangible assets, excluding items affecting comparability, as a percentage of net sales for the period.	The measure is a good complement to enable margin comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth.
Adjusted operating margin	Operating profit, excluding items affecting comparability, as a percentage of net sales for the period.	Adjusted operating margin is a key measure together with sales growth and capital turnover ratio for monitoring value creation.
Adjusted operating profit	Adjusted operating profit is calculated as operating profit before financial items and tax and excluding items affecting comparability.	Adjusted operating profit is a key ratio for control of the Group's profit centers and provides a better understanding of earnings performance of the operations than the non-adjusted operating profit.
Adjusted tax	Tax expenses for the period adjusted for tax expenses relating to items affecting comparability.	A useful measure to show the total tax expense for the period, adjusted for taxes related to items affecting comparability.
Earnings per share	Earnings for the period attributable to owners of the parent divided by number of shares	Earnings per share is a good measure of the company's profitability and is used to determine the value of a company's outstanding shares
Adjusted earnings per share	Adjusted earnings for the period attributable to owners of the parent, excluding amortization of acquisition-related intangible assets after tax divided by number of shares	Adjusted earnings per share is a good measure of the company's profitability and is used to determine the value of a company's outstanding shares
Debt payment capacity	Debt payment capacity is expressed as cash earnings in relation to closing net debt.	A financial measure that shows the company's capacity to pay its debts.

Capital employed

SEKm	1709	1612
Total assets	142,376	114,284
-Financial receivables	-6,767	-6,973
-Non-current non-interest bearing liabilities	-8,957	-5,399
-Current non-interest bearing liabilities	-28,238	-27,159
Capital employed	98,414	74,753

SEKm	2017:3	2017:2	2017:1	2016:4	2016:3
Personal Care	38,219	39,363	14,051	13,665	12,680
Consumer Tissue	41,945	41,439	40,898	40,082	41,160
Professional Hygiene	19,274	20,272	20,915	21,253	20,858
Other	-1,024	-671	-634	-247	163
Total Capital employed	98,414	100,403	75,230	74,753	74,861

Working capital

SEKm	1709	1612
Inventories	13,211	10,944
Accounts receivables	16,966	15,843
Other current receivables	2,668	2,390
Accounts payables	-13,375	-12,972
Other current liabilities	-12,709	-11,863
Adjustments	-492	-199
Working capital	6,269	4,143

Net debt

SEKm	1709	1612
Surplus in funded pension plans	876	335
Non-current financial assets	653	717
Current financial assets	809	1,677
Cash and cash equivalents	4,429	4,244
Financial receivables	6,767	6,973
Non-current financial liabilities	49,302	31,299
Provisions for pensions	4,349	5,273
Current financial liabilities	6,228	5,574
Financial liabilities	59,879	42,146
Net debt	53,112	35,173

EBITA

SEKm	1709	1609	2017:3	2016:3
Operating profit	8,488	6,552	3,237	2,362
-Amortization of acquisition related intangible assets	379	108	161	38
-Items affecting comparability amortization of acquisition related intangible
assets	86	171	-2	148
-Operating profit before amortization of acquisition related intangible assets
(EBITA)	8,953	6,831	3,396	2,548
EBITA margin (%)	11.1	9.2	12.5	10.1
Items affecting comparability cost of goods sold	544	483	-28	353
Items affecting comparability sales- and administration costs	289	1,483	64	213
Adjusted EBITA	9,786	8,797	3,432	3,114
Adjusted EBITA margin (%)	12.1	11.8	12.6	12.3

Operating cash flow

SEKm	1709	1609	2017:3	2016:3
Personal Care
Operating cash surplus	5,290	3,882	1,869	1,332
Change in working capital	-318	169	228	255
Current capital expenditures, net	-726	-474	-361	-154
Restructuring costs, etc	-233	3	-37	17
Operating cash flow	4,013	3,580	1,699	1,450
Consumer Tissue
Operating cash surplus	4,720	4,744	1,527	1,610
Change in working capital	-540	269	-904	382
Current capital expenditures, net	-1,292	-974	-390	-350
Restructuring costs, etc	-132	-148	13	130
Operating cash flow	2,756	3,891	246	1,772
Professional Hygiene
Operating cash surplus	3,904	4,010	1,428	1,487
Change in working capital	-116	-291	492	495
Current capital expenditures, net	-552	-773	-227	-291
Restructuring costs, etc	-448	-89	-154	-199
Operating cash flow	2,788	2,857	1,539	1,492

Organic sales

SEKm	1709	2017:3
Personal Care
Organic sales	323	253
Currency effect*	331	-231
Acquisition/Disposals	4,162	2,066
Reported change	4,816	2,088
Consumer Tissue
Organic sales	137	73
Currency effect*	407	-170
Acquisition/Disposals	0	0
Reported change	544	-97
Professional Hygiene
Organic sales	257	82
Currency effect*	407	-172
Acquisition/Disposals	148	0
Reported change	812	-90
Essity
Organic sales	681	451
Currency effect*	1,145	-573
Acquisition/Disposals	4,310	2,066
Reported change	6,136	1,944

*Consists only of currency translation effects