Product and Service

Companies included in consumer tissue sector in personal care industry primarily are manufacturers of bulk tissue paper, paper towels, bathroom tissues, and paper napkins.


Demand for Product and Service

As indicated by typical sales data, the demand for products of companies in this sector seems to have been weak in the past several years due probably to increasing competition in price as a result of increasing capacity in sector.

The Sector

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend
  1. The demand for consumer tissues products seems to have been weak in the past three years as indicated by the declining sales volume of those typical companies in this sector while selling price has been declining as well during the same period.
  2. Lower priced products seem to have been more impacted than premium and brand products in the unfavourable market environment in the past two years and the sales seem to be picking up in the first quarter of 2018 from brand products as well.
Causes behind the trend
  1. Demand for products in this sector should have been driven by factors such as population growth and household income.
  2. Increasing capacity and shifting of product mix to premium products may cause increasing competition in price and decreasing sale volume among private label products.
Industry Future
  1. Demand and supply cycle may be the major driver behind fluctuation of sales and price of products in this sector. However, growth in demand for higher quality and larger volume tissues products, as a natural result of changes in demography, life-style, and income, provides a solid base for existing companies in sector to earn stable cash flow.


General Financial Performance of Companies In the Sector

It seems that demand for consumer tissue products of companies in this sector has been weak since 2015 as indicated by continuing decrease in both sales volume and price for the typical companies ( sales volume growth rate in 2017 and 2016 : -1.5% and -1%). The demand, as reflected by first quarter sales of companies, seems to bounce back again after entering 2018.
Sales decline has resulted in increasing pressure on margins according to some typical company’s data. The typical companies’ gross margin is about 25% in 2017.  With a about 13% SG&A as percentage of sales, the typical operating margin went down to about 13% in 2017.
The typical average stock price/cash flow ratio is about 26.

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