Earnings Transcript for ESSITY-B.ST - Q4 Fiscal Year 2024

Sandra Åberg: Hi, and welcome. My name is Sandra Åberg, I'm Head of Investor Relations. On today’s agenda, we will summarize the full year of 2024. We will also take you through the highlights of the Q4 report and we will share our priorities for 2025 to enable accelerated profitable growth. In the end of the presentation, we will give you the opportunity to ask questions. We will also be road showing here in Stockholm this afternoon and next week in London. So if you would like to meet with us please reach out. Here to present are my colleagues, Magnus Groth; our CEO and Fredrik Rystedt, our CFO. I will now hand over to Magnus who will start by summarizing the full year 20204. Please Magnus, welcome.

Magnus Groth: Thank you, Sandra, and good morning, everyone. Resigning from this position at Essity. So, but I will continue to run the business with my full force and energy until a replacement is found. With that, let’s get straight into the numbers. So, and a record operating profit for 2024 and the first time we actually did over SEK 20 billion of operating profit in a year. Key achievements, as I mentioned highest profits ever and good volume growth, which has been a key focus. Strong cash flow generation, solid balance sheet, divestment of Vinda and results in a more attractive portfolio, new financial targets and the announcement of our share buyback program that we are in the middle of. And of course always impactful innovation [Audio Gap] growth and very important last year we started to see a turnaround in market shares and improving market shares year-over-year and actually towards the end of the year and we’ll talk more about that and into this year we see very high demand for many of our products. So that’s really, really encouraging that this a solid demand for most of our products and categories in 2024, but also going into 2025. So, Financial summary of the full year, net sales were slightly down. This is due to the divestment of Russia in ‘23, and the strengthening of the Swedish Kroner. Organic sales growth is slightly up and up 1.8%. and this regarding the restructuring in Professional Hygiene and 10%. EBITA, as I mentioned over SEK 20 billion and as we can see a very, very strong EBITA margin of 14% and the same with the return on capital employed at 17.6% and a big improvement year-over-year. And, we announced today a proposed dividend of SEK 8.25, increase with 50 or 6.5% on the back of this strong performance in 2024. Yes, talking about dividends, of course, this is behind that recommendation to the Annual Shareholders Meeting to raise the dividend SEK 8.25. A high EPS growth, starting with the – especially starting with the listing of Essity in ’27. The average growth has been 7% and in total 57% and the last year actually 10% year-over-year. This is the dividend development over the last number of years. So a solid positive development here. And also overall, the financial development, this is a slide I always like to show because Essity is very, very much about the long-term improvements and continuous development and I think it’s very well reflected here. And it’s good to see that, when it comes to EBITA, excluding IAC’s operating profit. We are fully back on track after the pandemic and showing now the record year and of course our ambition going forward is to continue to build on this very, very nice curve and over the last ten years, operating profit has improved with over 130% in sales and with over 80%. So a big step every year and this is what we aim to do also in the long-term going forward. We do this very much through impactful innovations. Here are some examples. So starting there at the left. We are turning more and more of our Tork, Professional Hygiene products into a compressed offering which has a better sustainability profile, logistics costs and it’s beneficial for those who are working with refilling our dispensers. So that’s an example that to the left, the Deluxe that you also see to the left is an example of a product where we are looking at catering to the needs of those who are down trading, who are looking more for value offerings which has been the case over the last couple of years. There is no change in this plan, but we still see that there is a demand for these types of products. So it’s a very attractive value offering under the Zewa brand. And then a number of other innovations in all of different categories as usual. We also have a very, very ambitious program in 2025. And what this leads to is product superiority and leading market positions and we took a big step up in 2024 when it comes to product superiority as regards to product, brand and price and we expect to take a similar big step or even bigger step up in 2025. And as we’ve seen now over many, many years we retain number one and number two positions in over 90% of branded sales, which is so important for being a number combinations and stable – including stable in 65, which is an improvement compared to 2023. And as you know, new product launches on average have a high gross margin than the product they replace of around 3%. So, very, very important part of what drives value creation and growth in Essity. We have ambitious targets also on sustainability. These are two of the most in TRI, so total recordable injuries in the year but also over the last couple of years and we are approaching world-class when it comes to health and safety, which is so important. We have 16,000 blue collar colleagues working in our factories and it’s so important that they feel safe and taken care of going to work every day and that goes for all our 36,000 employees, of course. When it comes to greenhouse gas emissions, where we have a target to reduce our science based target Scope 1 and 2 by 35%. we also are progressing according to plan and we are now at minus 27% after 2024, compared to the base year 2016. So, that was a very successful summarize adding to the numbers I just showed. We self-financed the divestment of Vinda. We started a share buyback program and we also raised our financial targets. But let's look now at the last quarter of the 2024. So to summarize, strong organic sales growth. All business areas contributing. Higher volumes, sales, prices and positive mix and higher profit, but lower margin in the fourth quarter. Basically to summarize, Health & Medical, Professional Hygiene continue to deliver in a very, very impressive way when it comes to margin. We saw lower margins - by the strong appreciation of the dollar during the second half after the US election of the fourth quarter. This was partly offset by another strong quarter of cost savings but not entirely resulting in the numbers you see there to the right. So, organic sales growth, which is of course way above our long-term targets. We are very happy about that. I already mentioned that we see very strong demand for most of our categories. EBITA slightly up year-over-year, but margin slightly down and ROCE on a stable level. Then, then you're looking now at the split after 2024, it has the meticulous accounting for 20% of sales, Consumer Goods, 54% and then 26% from Professional Hygiene. Starting with Health & Medical, really strong number across the board here. Organic sales growth 5.6%, volumes 4.9%, higher prices and positive mix. And what I would really like to point out is the growth you see there in Medical, which is to a large extent, volume-driven. So we have really good momentum in the Medical business. I am always reminded by our business unit President here that we have been growing the medical business now for 15 or 16 consecutive quarters, but it’s really accelerated in the quarter. Maybe also some end of the year effects where maybe some customers were actually building some stocks in this area, but still a very nice development. And profitability, as you can see there, EBITA up 21% and the margin at 18.3%. So a very, very solid performance here. Consumer Goods, strong growth. Cost pressures. Organic sales growth 4.5%. High volumes in all categories. Exactly according to our plan because we know that high volumes means that we get operating leverage. It also indicates that we are growing market share which we are doing in the highest margin parts of our business. This is such a competitive category even though the underlying growth is nice. So I mean, this is the reason why it’s really growing also or why we have strong competition. But look at that 11.2%, fantastic numbers which shows that we really are competitive here now when it comes to product offering and the brand positioning. And also now winning after several years as you know, when we have been very much under pressure from private label and from other big competitors really back here as the market leader and as we should be growing very, very quickly. But also feminine care and other very strong development. Baby care, this is an event some product recalls, which are referable to this quarter and this will move to a positive development going forward. And Consumer Tissue very strong at 4.3% organic sales growth. Profitability down as I mentioned and margins and primarily related to the stronger dollar that we saw in the second half of the quarter. Even though we also saw higher costs in some other areas distribution. We saw that distribution costs or energy cost did not decreased.to the amount - to the extent that we had expected due to the shutdown of the last gas pipeline from Russia during the quarter. And of course, we are now working very, very hard to manage this margin development and as you know, in the mid to long-term we always compensate in different ways as we are doing this time, as well. Professional Hygiene, finally strong growth of premium products, higher profits, as you can see here, organic sales was up 5.1% excluding restructuring. Volumes were down 6%, but with a very, very positive price and mix. These two numbers actually goes together. So we had a few large customers in the US that did not buy as much from us as they usually do and we believe that this is a temporary impact, that means that volume rebates that we have the accrued for where released during the fourth quarter. . So the negative volume actually accounts also for parts of the higher prices that you see there and positive mix 7.4%. Nevertheless, profitability also on extremely good levels. EBITA margin up on levels that we’ve seen over the last couple of quarters, but historically. So with that, I'd like to hand over to Fredrik to dig into some financials more in detail.

Fredrik Rystedt: Thank you, Magnus. I will do exactly that. And I'll, I'll start with summing up the net sales bridge for few and what Magnus alluded to as we continue to have a very strong organic sales growth and underlying if we adjust for restructuring in Professional Hygiene, we reached almost 5% of growth. So, volume was positive for all the categories with the exception of Professional Hygiene. So a very, very strong quarter from a volume perspective and especially so for the medical part in Health & Medical and Magnus you alluded to it earlier also for Inco Retail with double-digit growth. Turning in Professional Hygiene, is still there in the fourth quarter, and the impact was 1% on Group sales and actually 3.5%, if you look at isolated business area Professional Hygiene. Now most of that impact is now gone. There is a small impact that will be there also in Q1 of 2025 from that restructuring, but it's not really material. So, most of that impact is now gone. Price and mix quite positive as you can see, 2.2% out of which 1.9% relates to price and 0.3% to mix and we also saw in the fourth quarter sequentially a strong developments of price, 1.2% and this is mainly related to Consumer Tissue, but also partly to that volume provision release that Magnus was alluding to in Professional Hygiene. But just generally, a strong Professional or pricing performance in Consumer Tissue on the back of higher cost and mix was mainly related to Professional Hygiene. But we also saw good mix development in Health & Medical. So overall, growth, very, very good. EBIT bridge, you can see that we’re slightly down, if you compare to the same period of 2023. And this is all gross margin related. So we saw 20 basis points decline in gross margin and we saw that despite a very good pricing performance that I was alluding to before. Very strong volume and also mix and of course the impact was caused entirely by a quite strong increase of cost of goods sold. And if you decompose that, actually the net impat of cost of goods sold for comparable products was roughly about SEK 760 million or 2% and this is mainly related to raw material, actually all of it. So we had a very, very significant raw material impact of SEK 880 million and part of that actually a big part, SEK 330 million related to currency movement and of course this is mainly a result of the very strong appreciation of the dollar that took place in November and onwards as you already know. So, it occurred in the quarter so to speak. So currency was quite negative. We also saw a bit of negative impact from distribution. But all of that compensated to some extent by the cost savings that we continue to execute on. So we are quite happy with the execution during the quarter but all in all, COGS increased a bit more than we actually expected at the beginning of the quarter. A&P, you see flat developments here. So no real impacts on the margin, but in absolute terms, both of them were actually growing. When you look at SG&A, excluding A&P, this is you can say largely related just to normal salary inflation and a bit of added investments into sales, our sales network and digital – digitalization. And when it comes to A&P, same thing there. We have invested more into A&P and of course clearly, you can see this is working as we also have that strong growth in net sales. So, overall, we think this is quite profitable investments into SG&A and A&P. Turning a bit to cash flow. We continued in the quarter, Q4 actually having a good operating cash flow. But it was a bit lower than what you would typically expect from a fourth quarter. And so, for those of you that knows us really well, you would know that we typically consume working capital or increase our working capital in the first two quarters of any given year. And verse of every given year. So if you look at Q4 specifically, we actually had flat working capital. So no real change there and normally, we would have expected to actually have a slight positive working capital contribution in terms of cash flow and that didn't happen. The reason was quite simple. In the last parts of sales, so basically, you can say November and December, very, very strong growth overall. And this of course means that we built up our accounts receivables and we get paid for those more in the beginning of the first quarter. So you can say the relatively lower operating cash flow is all attributable to accounts receivables being a bit higher. And so this more a temporary timing impact. If you look at it in terms of credit days and accounts receivables, we are actually improving and we're also improving in our inventory in terms of cover days. So, also look at net cash flow, we also there had a bit of temporary impacts. Our overall tax rate in terms of effective tax rate for the year is roughly about 25 as it should be. But tax payment was a bit elevated in Q4 and that will also come back during 2025. So, all in all, a bit of temporary impact from a cash flow perspective but if you look at the year as a whole, very strong cash flow and that is both on an operating level and on a free cash flow level. So after finance net and pay taxes. So as a consequence of the strong cash flow generation that we have, you can see that we have a net debt of just under SEK 31 billion and leverage ratio of 1.2. So a very strong balance sheet. And we continue during the quarter to execute our share buyback program. We have now in per point 2 million shares and as we have communicated a few times before, we expect to cancel that at the upcoming AGM. So all shares that we have in possession we will ask for a cancellation at the AGM. And with those words, I'll turn over to you Magnus.

Magnus Groth: Thanks, Fredrik. Good that the cash flow remains strong and we just have some temporary cut-off effects. Okay. So to summarize 2024, highest profit ever, strong cash flow, solid balance sheet, a more attractive product portfolio and we can see that even when we have in spite of the dollar appreciation that we saw now in the quarter, we still have a very solid margin and profit development. Health & Medical, a record year, record high profits. Margin improvement of the 470 basis points. Consumer Goods, high volume growth, margin slightly down, but from a high level and Professional Hygiene, again very, very strong 2024 with a margin improvement of 200 basis points. Looking forward and into 2025, accelerating profitable growth. Our focus remains to grow in high yielding segments. You know which they are. It’s Professional Hygiene, it’s Health & Medical, it’s Inco Retail and in segments of the other categories. We also have an ambition to grow further in North America where we have very, very good momentum in several areas and also in Latin America that continues to develop very strongly. Innovation Brand, market share gains that have contributed so much to our long-term development is a key focus and we have a very exciting program ahead of us here. Operational efficiencies, digitalization remains a key focus area and of course, we continue to progress on ESG. So, thank you so much for listening. It's time for questions. And Fredrik, you want to join me? And operator let’s open up them for the Q&A session.

Operator: Thank you.. [Operator Instructions] We will now take our first question from Celine Pannuti of JP Morgan. Your line is open. Please go ahead.

Celine Pannuti: Thank you very much and good morning, everyone. And good morning, Magnus to you. Sorry to hear that you are leaving. But I wanted to congratulate for your tenure at Essity and for having too many [Indiscernible] in the parent company and wish you all the best for your next chapters. My first question is on the need for price increases. Obviously, you were mentioning the sudden rise in USD hitting your cost inflation. Can you talk about the pricing negotiation with – or in Europe? And maybe a follow-up on that, my second question is on how your market share performance is doing in private label and brand in the Consumer Tissue division in Europe? Thank you.

Magnus Groth: We don’t follow specifically market share in private label and brands. But both are doing quite well. So we saw volume growth in both areas. Even though it’s slightly skewed in this last quarter to the private label part of Consumer Tissue. When it comes to pricing, so, when we went into the fourth quarter, we went in with raised prices in Consumer Tissue actually in most geographies that we at that time believed to be sufficient because what we saw was that even though pulp prices starting – turning down. The pulp prices that you read about, since we have a time lag we would see higher pulp prices also in the fourth quarter and this was what we were aiming to compensate for and not taking into account than the dollar impact. These higher pulp - underlying pulp prices stay actually turnaround in the first quarter, so we’ll have some benefits in our books from lower pulp prices. So how we now manage pricing, I mean, it was easy to talk about this three or four years ago during the pandemic when it was everyone raised prices. It’s very much now delegated to the individual businesses and to individual geographies to manage the price cost gap and then the margins in the best possible way and of course always with a aim of increasing restoring and increasing margins. So, there is a lot of work going on in that area now in various parts of the business and they were, Celine.

Celine Pannuti: Thank you. Maybe I can ask a question on to Fredrik. Could you please help us with – I mean, you are mentioning for instance, dividends are not to be expected for Q4. So as we look into Q1, could you please help us with the different component on cost please?

Fredrik Rystedt: Yeah, I mean, generally, when you look at cost or COGS as a total for Q1, we expect it to be somewhat lower. And part of that story is as Magnus just alluded to actually pulp becoming a bit lower there. So, overall, we expect to have, or pulp is expected to be down. Energy actually expected to be higher. This is partly seasonal, also partly from a pricing perspective. So, they are moving parts, but we prefer to give you an overall estimate of COGS as sequential comparison, Celine. And so, we will see hopefully somewhat lower GOGS than in Q4.

Celine Pannuti: Thank you.

Operator: Thank you. And we will now move on to our next question from Patrick Folan of Barclays. Your line is open. Please go ahead.

Patrick Folan : Hi. Thanks for taking my question Magnus, Fredrik. And comment on the cost inflation. And just in terms of the agile pricing structure you guys talked about last year, it didn’t seem like that maybe came through. I understand the FX impacts and as well, you had yield that positive cost savings coming through in Q4. Can you just maybe highlight maybe what is the pricing environment just a bit more difficult to get that through. And second of all, just on the kind of offices looking at sequential kind of cost into Q1- pulp I think of that EBITA bridge. What was the kind of headwind there? The impact on the baby care number, and just double checking, would there be any impact in Q1 to think about? Thanks.

Magnus Groth: Yeah. So pricing, no, actually we did achieve the price increases, we are talking specifically Consumer Tissue, now that we plan for, but then actually costs increased even further and within that quarter it’s – I mean, we are much more agile than we were before. And of course, the overall impact on us is much less since we don't have Vinda anymore. But when there's such a drastic change within a quarter, I mean, there's nothing you can do in that short time horizon. And as I mentioned, we are more agile and our organization is looking for ways of, of course, restoring margins also in Consumer Tissue and margins are very, very good in most parts of our business, but also in Consumer Tissue. And then when it comes to baby, yeah, what I wanted to say with the recall with one specific customer is that this was temporary and we expect to see growth in the Baby Care category in 2025, going forward, specifically in individual quarters very difficult for me to comment. But the, the recall was specifically happening in the fourth quarter of last year.

Fredrik Rystedt: Maybe just a comment Patrick, on on SG&A, but just before that, the kind of negative things that happened and you said it minor but just to emphasize that the negative have a very significant. So when you talk about currency, it was very, very significant. You know, roughly what our exposure is to the US dollar mainly relating to pulp purchases and of course, that's very significant. And if you add the energy, that was clearly elevated during parts of the quarter. You can clearly see that had that not happened, our margin would have been considerably better. So, I think we have that agility. There's no doubt about it. You asked about Patrick, the SG&A, there and we expect it to be slightly higher. You have seen an overall increase of spending and the result is quite obvious when you look at our net sales. So as I said before, we think the investments we are doing there is value creative, and we expect to do that also in Q1. So A&P, a bit higher and as a consequence, SG&A is slightly higher.

Patrick Folan : Okay. Thank you. And just if I may just squeeze one more in on Professional Hygiene, the underlying volume was weaker quarter-on-quarter and it sounds like the restructuring is still not complete. But you said there is a marginal impact is very limited in Q1.

Fredrik Rystedt: Yes.

Patrick Folan : Should the underlying performance improve, how should we think about that?

Fredrik Rystedt: Reached a very, very healthy underlying margin in Professional Hygiene. So you Magnus, you were talking about the release of the provisions related to volume. So, which is not unusual. Typically, what you do in Professional Hygiene, you would count for these or you accumulate these provisions during the year and depending a bit on how the year actually ends, you tend to typically release a bit. So we normally have that. We didn’t actually have it in ’23, but we have it in ’24 and most of the years previously. And this is why the Professional Hygiene margins are typically quite strong. And so we will see that pattern of course this time as well. So, I think it’s fair to say that the underlying performance of Professional Hygiene remains very strong and hopefully that will continue of course, obviously.

Patrick Folan : Thank you. And just reiterating earlier comments that sad to see you go Magnus and good luck in your future endeavors. Thanks.

Magnus Groth: Thanks.

Operator: Thank you and we will now move on to our next question from Tom Sykes of Deutsche Bank. Your line is open. Please go ahead.

Tom Sykes : Yeah, morning everybody. I think before in Q3, you alluded to some lower production levels in Q4. And I wondered to what extent you are managing the seasonality if can for your production and in particular, I guess to reduced production in kind of colder months and when the feed costs a higher. And if that's true, then to what extent is you maybe increase your production volumes coming into this year, do we get less fixed cost absorption than maybe higher marginal costs? And is that then are you trying to say that your all-in unit costs will be lower – sequentially lower is that what we should take away and I guess just to be clear on your COGS comments, which currency are you saying the COGS will be sequentially lower? Is that in SEK or dollars or euros or what just to be clear on the COGS comment please?

Magnus Groth: Yeah, room to maneuver when it comes to kind of moving production versus sell-out from us because our products are so bulky and the value as you know they need to get on trucks and be shipped out every day. So actually when the last year where we were actually running most of our mills at higher capacity than we usually do. So, and one of the reasons also why we had this cut-off when it comes to cash flow. So our operations were running at a very, very high rate throughout the year. And I also mentioned that we see a very high demand for many of our products which is of course good. But to see any kind of seasonality, or even quarter-over-quarter variations in cost due to that, I think is very, very difficult. Handing over to you Fredrik on the dollars or kroners or..

Fredrik Rystedt: Yeah, I think Tom, you were referring to comments we made in Q3, if I'm not mistaken that we expect slightly lower production volumes in Q4 versus Q3 which leads to an absorption impact. And we had exactly that. It was not super big. Roughly about SEK 60 or SEK 70 million in that ballpark. But it was there pretty much in line with our expectation. So, just to complement it’s not big as you say, Magnus, but.

Magnus Groth: And the currency.

Fredrik Rystedt: Yeah, currency is actually based on SEK, obviously, because that’s our reporting currency. But we are not forecasting when we say that, we are not forecasting any specific movement other than what you see out there. So we expect the euro SEK rate to be constant as we do expect the US dollar SEK rate has to be constant from where we stand here and now when we give that forecast. So, the answer is, to your question, in all currencies, but of course that may – may or may not change as we go forward in a quarter. But typically we don’t, yeah if you understand, so it’s somewhat lower.

Tom Sykes : Okay. Many thanks, indeed.

Fredrik Rystedt: Sure

Operator: Thank you. And we will now take our next question from Charles Eden of UBS. Your line is open. Please go ahead.

Charles Eden: Hi. Good morning. Thanks for taking my questions. Fredrik, first one for you. Could you please break down the SEK 759 million of COGS headwind, but you need your buckets. So I guess, I know this SEK 430 million tailwind from COGS cost savings, that was in the press release. But I guess that means as a SEK 1.2 billion headwind from energy and raw mats. Could you just sort of clarify that the number there? And was there a one-off sort of inventory revaluation downwards related to pulp prices. And if so if it was material, could you help us quantify? Second question just on the sort of share buyback, obviously, no and that’s one of an additional program this morning that you highlighted in the press release that will remain a recurring part of capital allocation going forward. So could we expect an additional share buyback at the AGM on the 27th of March when the current program completes? And then just sneaking a clarification and this interesting a bit, but the North American Professional Hygiene sort of delayed orders if that’s the right phrase that you quoted, can you help us quantify what that is? And would you expect that to materialize in the Q1 votings? Thank you.

Magnus Groth: I can start with the share buyback. So you should expect to hear us announce the plan going forward after the AGM since it’s required the decision by the AGM every year. So we cannot actually give any information before that. So, soon after the AGM, we will announce our plans for a recurring - for the recurring share buyback program. Then the bridge, I hand over to you Fredrik.

Fredrik Rystedt : Yeah. Charles, I actually gave you a little bit of insight into that when I spoke earlier. So, if you look at raw material, it’s SEK 880 million and out of that SEK 330 million is basically currency. So if you take raw material excluding currencies, bit over SEK 500 million give and take, SEK 540 million. And so, when you look at, and if you want to kind of decompose that even further, pulp is actually a bigger amount and the other materials are positive. So, there are lots of moving parts, but to make it may be simple, total raw material SEK 880 million. I also mentioned to you distribution of SEK 160 million there. So if you add all of that up of course, you come very close to that or more than a billion basically. And then there the cost savings, plus a lots of other smaller and I actually mentioned one of them earlier with production volume. So there is a bit of back and forth, but these are the main componenets, Charles.

Magnus Groth: And when it comes to the Professional Hygiene North American lower sales in the Q4 and when we expect that to normal, yeah, I mean, I can say, typically year-over-year our large customers come to buy similar volume when this normalizes. I can say it depends on the plans of those big distributors that we are talking about in this case.

Charles Eden: Thank you very much and congrats again. Magnus, looking forward to continuing speaking to you in the coming quarters. Thanks.

Operator: Thank you. And we will now take our next question from Jeremy Fialko of HSBC. Your line is open. Please go ahead.

Jeremy Fialko: Okay. Morning. So it’s a retreat comment for Magnus and yes, so good luck for your future endeavors that after the time with Essity. And so coming to the question of kind of the dollar and sort of sequential cost movement, to what extent would you see what happened in Q4. It’s a little bit of a kind of a temporary impact. When you saw this unanticipated dollar impact but then you perhaps you just said that you’ve seen the pulp prices come off a little bit more than you might have expected. So would you look at the situation in Q1, is what you would have expected a quarter ago or the components little bit different when you had better underlying commodity costs a bit of a washery. So we can see a little bit of a profit that is perhaps a slightly temporary impact. And then the second question is just on the demand that you spoke about being quite strong into the sort of the start of the year. What can you attribute that to? Is there anything kind of temporary there or do you think this is a good read for where the business is trading at the moment. And sort of quite a robust volume outlook for the first part of 2025? Thanks.

Magnus Groth: Yeah, so the demand is we believe in some as incontinence care, specifically both in retail and – that there is a stronger underlying demand. And maybe this is a result of I think we are discussing internally. Then we are doing better and better in terms of market shares and stabilizing or growing market shares in in most areas. So I think that's also helping. So, those, I mean that combined leads to a need for us to actually increase our capacities and this is now in the Professional or the personal care categories primarily and offer for new machines to cater for the higher demand. Then when it comes to what extent the Q4 costs were temporary or not? I think it's very, very difficult to say. What I can say is the organization is working very, very hard to manage variations both in costs and pricing and so on to be able to kind of come back to the margins we're looking for the immediate term for the medium-term for the long-term as quickly as they can. And it's very difficult now to start, of course we don’t provide forecasts for individual quarters either, but to break it down into details.

Fredrik Rystedt : Maybe Jeremy to add on that, because I'm not sure if I understood your question fully. I interpreted a bit you felt that because of the dollar strengthening, you saw that where you anticipate perhaps that pulp prices were coming down faster or more than what otherwise would have happened, that we don't see. So, from that perspective the dollar impact is actually kind of coming through at its full. So it’s more of what you say Magnus, it’s a matter of how we compensate and how we deal and compensate for that dollar increase

Jeremy Fialko: Yes, it’s multiple is that you are still seeing the underlying pulp price is still falling and you are still seeing kind of sequentially lower cost savings you want. So I just felt that it’s a bit of a – is it a transitory impact from the dollar given you are actually seeing more favorable developments because elsewhere your cost base is, that was what I was trying to…

Fredrik Rystedt : Yeah, I get it Jeremy. But you can say the fact that we see that sequential decline as I mentioned somewhat lower in Q1. Has the reason there is that we have a delay as we've talked about many times. So you can say that that fall of the pulp price has already occurred in the marketplace. It's just that for us in the P&L it comes in Q1. So, so, yeah, I don't - clearly the dollar impact is of course negative.

Magnus Groth: And they are separate leads to impact. So they are not connected in any way.

Fredrik Rystedt : No, exactly.

Jeremy Fialko: I just - not in fact of that

Magnus Groth: No it’s just one I just since Fred predicts that many other moving parts. So just wanted to mention one and this is just a specific in Q4 and actually, what's really pleasing is that we are really, really good at stocking up new machines. We typically do this now in days or weeks rather than months and with very high capacity – in a short time frame. So but we have had some of that in the fourth quarter, which is of course not recurring.

Fredrik Rystedt : And they of course, those were expected as…

Magnus Groth: Yeah, yeah.

Fredrik Rystedt : But the only unexpected impact in kind of margin in comparison to our own expectation was currency and a bit of energy.

Jeremy Fialko: Okay. Thanks very much.

Fredrik Rystedt : Sure.

Operator: We will now take our next question from Linus Larsson of SEB. Please go ahead.

Linus Larsson: Thank you. And very good morning gents. How you're planning the year ahead and maybe if you could comment on your capex budget, but also in terms of marketing investments and maybe as a third point this long going IT project that has appeared or affected the other EBIT line. If you could also give us an update on where you're seeing the EBIT in 2025 full year please?

Magnus Groth: Fredrik?

Fredrik Rystedt : Yes, I'll be very happy to do exactly that. So starting with CapEx. We expect it to be SEK 8 billion or slightly there above. So 8 between SEK 8 billion and SEK 8.5 billion. So clearly higher than the SEK7.3 billion that you saw in 2024 and this has to do with what Magnus has already have alluded to basically capacity investments. So that is the absolute driving part. So, roughly SEK 8 billion or perhaps a bit there above. When it comes to the market Investments, we have said that we expect A&P as a percentage of sales to increase as we go forward. Not going to be super big. It’s not a kind of a massive number, but it will in terms of percentage be bigger, that's at least what we expect for 2025. And finally the digital investments and the all other line it will remain elevated also in ’25 for that reason. We are not giving you an exact number for the other line, but it will be perhaps you can say slightly higher than for 2024. And parts of that relates to the digital project that will remain with high cost also for 2025.

Magnus Groth: Yeah, and just to follow up on the A&P and CapEx, of course this is profitable growth. This is what we are aiming for. So, we're talking about the cost parts here. But I mean, this translates into high margin growth. So, these are new incontinence care line, feminine care lines mostly and something that we will benefit very much also and an important part of our journey to reach our new financial goals. So, I mean that's why we're doing it to accelerate profitable growth for the future. I mean, sometimes we talk about this just as cost items. But these are decisions that we have taken in the company in order to hit our targets.

Linus Larsson: Great. That sounds great. Very, very clear. Thank you very much and a special thanks to you, Magnus. And good luck in your future endeavors.

Magnus Groth: Thanks, Linus.

Operator: Thank you. And we will take our next question from Matt [Indiscernible] of Danske Bank. Your line is open. Please go ahead.

Unidentified Analyst: Hi. Thanks for taking my call. I want to get back to the ENTN legal issue. You updated that the matter has now been taken through the English courts. It’s been ongoing for quite a while. I guess, you are still interested in fighting this. I mean, you believe the claim is unfounded. But what sort of timeline can we expect here before this is resolved and could you be looking into doing some kind of settlements to get it out of the way or you just didn’t fighting this?

Magnus Groth: So there's no difference. And there is no more information since our last press release. So no news in this area.

Unidentified Analyst: Okay. Thank you..

Operator: Thank you. We'll take our next question from Oskar Lindstrom of Danske Bank. Your line is open. Please go ahead.

Oskar Lindstrom : The first one is on the US dollar impact. Are, the current spot exchange rates, are they sort of fully in Q4, or will there be a sort of a delay lag effect into Q1? So that’s the first question. The second question is on COGS inflation affecting Consumer Tissue and margins there. You say that you are looking at ways to restore the margins, do you believe the market would allow for further price increases on Consumer Tissue or are you more leaning towards cost cuts or even restructuring as a means to restore margins? And how soon do you think will any of these could – could be impact or could be implemented? That’s my second question. And then the third question, you may have answered this already, but I didn’t quite catch it. In Professional Hygiene, where you mentioned customers holding back on volumes in Q4. Have they sort of come back to normal buying in Q1? Or will there be a sort of higher level of volumes in Q1? What’s your expectation?

Magnus Groth: I realize it’s still quite early in the quarter if it’s still. And of course we don’t provide, I mean, in this case, I actually don’t even know the answer. I mean, we don’t provide that level of detail. I mean what I know is that the team is working very, very hard to grow volumes of course and hit the targets. And I think the same answer applies to when it comes to Consumer Tissue and margin - restoring the margins, pulling all the levers we have. And, again after the pandemic, after the bottlenecks that we had in the supply chain and all this, we are much more agile and we are working very, very hard in the Consumer Tissue part of our business to restore margins in every different way. So, it’s – I can’t give that level of detail and our teams have their targets and they have their goals and they're working very, very hard to hit to hit those goals of course. And then, I think we can say something about the US dollar, Fredrik.

Fredrik Rystedt : Yeah, I can't forecast US dollar, Oskar. But, of course, as the strengthening of the US dollar actually occurred in the middle of the quarter, you can say, there is a bit of lag impact. But as I said earlier, we expect COGS to be somewhat lower and that's driven by pulp. So obviously the impact.- the lower pulp prices, that positive impact is bigger than the remaining lag negative impact from the dollar, if that makes sense..

Oskar Lindstrom : Wonderful. Thank you. Thank you and thank you, Magnus also, for these get going on 10 years you’ve been with us.

Magnus Groth: Yeah, key report number 40 today. Thanks, Oskar.

Operator: Thank you. And we will now take our next question from Molly Wylenzek of Jefferies. Your line is open. Please go ahead.

Molly Wylenzek: Good morning. This is Molly. Just trying to to get a little bit more information on the energy. Maybe I missed it, but did you give us the energy impact in the quarter other than it was higher than you expected? And on your hedge position heading into ’25, should we expect that to be a headwind or a tailwind or relatively neutral versus ‘24? Thank you.

Magnus Groth: Yeah. Molly, it depends a little bit on what you're comparing with sequentially the impact was negative with SEK 60 million roughly. So just to give you a bit of number there on the energy for Q4 versus Q3. When we look at our hedging position as we go forward, it actually is neutral. So the level of hedges is somewhat lower. But what is more perhaps important is that we are now very close to market rates when you look at the hedging prices if I put it that way. So, to use your own terminology there Molly, I would say neutral.

Molly Wylenzek: Thank you.

Operator: Thank you. And we'll take our next question from Karel Zoete of Kepler. Your line is open. Please go ahead.

Karel Zoete: Yes, good morning all. Thanks for taking the question. I have two questions. The first one is on on top-line growth in your Medical & Health business. Particularly the medical science seems to be growing volumes mid to high-single-digits. What is going well and where and particularly the reason also why effect from innovation is seems to be more effective issues? Get a question is something you mentioned on accelerate your business or grow your business further in North and Latin America. Can you give more color here? And also just the – your North American washable underwear business, how that's performing nowadays? Thank you..

Magnus Groth: Okay, yes, topline medical as we said been growing now for I think for 15 or 16 quarters. But very good growth here and actually we were growing in all our three different therapy areas and compression. I would say that what the difference is from a therapeutic areas perspective is that, we had a good growth in advanced wound care and wound care for a long time. But actually we see also now an improvement in compression, partly because of our improvements that we've done in the business partly because there is a new scheme for reimbursement for compression products in the US that’s really helping and also the OSG part of the business is growing better. Geographically, we've seen actions taken over the last year and a half to really improve the Hydrofera acquisition that we did a couple of years ago has been doing extremely well ever since the acquisition. But we also see an improvement now, as I said in compression and in all parts of the medical business in. North America and in Latin America. So, those are. – it’s [Audio Gap] Then when it comes to - that we have a couple of efforts, specifically focused on North America. One is as I already mentioned to medical of course, but also in incontinence care, retail we are growing very, very nicely. So part of the growth you saw there over 11% actually comes from a very nice growth on Amazon and in other channels and increasingly also now getting listings in the trade for Inco Retail in the US. So that's very, very encouraging. I mean, Latin America has been doing really good for a long time now and it just continues to develop all over I would say with the emphasis on our biggest markets which are Mexico, Colombia and also now in addition Brazil where we have the established the market-leading positions in Inco and see a very, very good growth. So that's that. And then, yeah, Knix had a somewhat subdued year last year. That's our North American washable underwear and we did not grow with the market and we are working very hard to establish plans and now we have now good plans for 2025 to – because the brand is so strong and the market position is so strong to get that back on track in terms of growth and margins and the underlying growth is good. So we see big opportunities for Knix in 2025.

Karel Zoete: Okay. Thank you.

Operator: Thank you. And we will now take our last question from Antoine Prevot of Bank of America. Your line is open. Please go ahead.

Antoine Prevot: Yeah, good morning everyone and thank you for taking my questions. So three for me please. Just for Health & Medical you talked a bit about maybe some stock building at the end of Q4 and you seem to quantify or there maybe the impact for Q1. Second, I mean, in Consumer Goods, branded sales winning market share has come down in Q4 versus Q3, anything specific there to flag? And do you expect improvement in Q1. I mean, from what’s your orbits seeing maybe in reading and the last one on return on capital employed for Q4, I mean it was a bit down sequentially in Medical and Consumer Goods, I mean, understand a bit margin erosion there but what is behind maybe the increase in capital employed for both divisions please? Thank you..

Magnus Groth: Okay. I leave the capital employed to Fredrik. But when it comes to market shares it’s actually difficult to judge individual quarters. Overall, we had a good market share growth last year and we expect to continue to grow market shares based on the high demand we're seeing. It’s difficult to say more than that and to be more specific. We have good momentum. So, step-by-step, we see that we are growing market share in larger parts of our business. And then when it comes to H&M, this was just something that I know we’ve been discussing in the business that I mean perhaps it could have been some strong stock building in Q4. We have seen that sometimes before and maybe that’s also kind of a question raised to when you see those very, very high numbers in Q4 to what extent that’s the case or not? I don’t know. So, I don’t think it would have a major impact in going forward.

Fredrik Rystedt : Working capital, sorry, capital employed, I think your question was, it’s nothing out of the ordinary there. So this is just normal variations. A bit of higher working capital actually for especially Health & Medical and this was due to the very strong sales at the end of the year. And then we actually have a bit of higher and elevated invest - capacity investments as Magnus alluded to before. So there is nothing kind of out of the ordinary there.

Antoine Prevot: Thank you.

Fredrik Rystedt : Thank you..

Magnus Groth: Okay. So thank you very much for the Q&A. And before leaving, I would like to flip to one last slide here. And maybe it needs to be zoomed out just how we continue to drive increased shareholder value. Our equity story to make that clear and underlying that and then we are very purposefully and focused in driving to these what we see as our key components of the equity story that we are globally leading in attractive and growing hygiene and health markets. We have the leading market positions, strong brands and successful innovation and more and more every year. I mean, this is continuously improving. We are focused increased sales in the fastest growing and highest margin parts of the business. That’s the very, very important part of combining the accelerated growth with profitable growth and of course sustainability and a corporate winning – that’s foundations for achieving this. And we're doing this based on a very, very strong financial position with this stable cash flow, attractive dividends and the EPS growth year-over-year. So to leave you with that overall equity story that’s so compelling for Essity. Thank you. very much for listening.