Jan 25 (Reuters) - Swedish hygiene products maker Essity reported fourth-quarter core earnings below market expectations on Thursday, but said it was able to improve margins year-on-year despite lower volumes in the quarter.

Essity reported adjusted earnings before interest, taxes and amortisation (EBITA) of 4.86 billion Swedish crowns ($465.32 million) for the last three months of 2023, missing an LSEG poll estimate of 5.22 billion crowns. This was up from 4.11 billion a year earlier, restated after the agreed sale of its Vinda stake.

Adjusted EBITA margin rose to 13.3% from 11.2% in the fourth quarter of 2022, its fifth consecutive margin increase.

Essity has been growing its margins over the past year at the expense of falling volumes, a trend the management has said it wants to start reversing, though shipping disruptions at the Red Sea might again force companies to pass higher input costs onto consumers to protect margins.

The company had in October flagged that cancellations of contracts in the third quarter would also have a negative effect on volumes in the fourth.

"Meanwhile, we have invested for future volume growth and higher market shares by intensifying sales and marketing activities," Chief Executive Magnus Groth said in an earnings statement.

Essity proposed a dividend of 7.75 crowns per share for 2023, a 7% increase from 7.25 crowns it paid for 2022. In the two years prior, it had increased dividends by 4% per year. ($1 = 10.4444 Swedish crowns) (Reporting by Agata Rybska in Gdansk; editing by Milla Nissi)