Essity AB (publ)

Good morning and very welcome to STD's presentation of the Q3 results. My name is Sandra Åberg, I'm Head of Investor Relations, and I will soon hand over to our CEO, Magnus Groth, and our CFO, Fredrik Rystedt. Magnus and Fredrik will take us through the highlights of the quarter, and after that, we're very much looking forward to your questions. With that, let's move on to the fun part. Magnus, please summarize the quarter for us.

Thank you, Sandra, and good morning, everyone. And again, welcome to this press conference where we're going to talk about the third quarter for S&E. And overall, we showed profitable growth, higher market shares, higher volumes in all our business areas, excluding restructuring. A continued very good pricing discipline and sequentially higher prices. Strong EBITDA and higher margins and a record high cash flow. And we had our net zero emissions target validated by the science-based target initiative. So to summarize, Essity is in better shape than ever. And as you can see there on the picture, there's sports tape, one of our products in our medical range. Moving over then to the financial summary of the third quarter, our organic sales growth was 1.9%, so very satisfying to now turn to a positive growth there, and excluding restructuring in professional hygiene, even better growth, 3.4%. EBITDA, excluding items affecting comparability, was over 5 billion, 5.097, and actually that's a decline compared to a year ago in the quarter of 1%. we have to keep in mind that we have significant currency translation effects here we only have three percent of sales in sweden so most of our sales are outside of sweden and excluding those currency translation effects our adjusted ebitda was actually up by six percent compared to a year ago in the third quarter ebitda margin was also up to 14.1 percent and return on capital employed at 17.7 percent and We announced new long-term targets earlier this year to have a margin above 15% and 14.1% is of course not that far away. And for those of you who remember our previous targets to be above 17% ROSI, 18% excluding Vinda, at 17.7% we are not far from that level. Our business areas are all geared now to continue profitable growth. That's a theme that we really focused on earlier this year. It will be our theme for the next couple of years. It's turning out to be really successful as you'll see in the presentation. In health and medical where we have a very uh we have a smaller business but with very very strong brands very strong market positions and and good products we just need to scale we have high fixed costs here in our sales organization and as we grow we can see that we get improved margins and of course an accelerated opportunity to grow so the focus is really to grow to scale and health and medical in the quarter accounted for 20 of ourselves Consumer goods, our biggest business area, accounted for 54%, now excluding Vinda. And our focus here is to accelerate in the high-margin categories, and with the high-margin categories, we focus on Inco Retail, incontinence care retail, on feminine care primarily, and of course in attractive, growing, and high-margin parts of consumer tissue and baby. Professional hygiene, finally, 26% of sales. We are the global leader. We have a very, very competitive assortment with high margins. And our focus here is just to expand. And with a strong focus on emerging markets, we only have 20% of our sales here in emerging markets. So that's an area we're clearly focusing on going forward to accelerate growth also in professional hygiene. Moving over then to the three business areas specifically, a continued strong development in health and medical organic sales growth of 2.8%. We had expected a little bit more in this quarter and we expect higher growth here coming forward in the long term. The growth came from both higher volumes, higher prices and positive mix. So that's of course fantastic when you have it from all three different areas here. Incontinence products, healthcare grew 3% and medical solutions, 2.6%. Profitability, fantastic margin here, 19.4% and a huge improvement compared to a year ago, close to 3% margin improvement year over year. On the picture here is one of our innovations in the quarter. It's a Cutimed Sorbion. This is a dressing that's very absorbent, but the key improvement here is that it's now more flexible, so it's easier to apply. It's more comfortable for the patient. So a clear benefit both for the patient and for the caregiver. And this is already a best seller in our assortment. And with these improvements, we expect to do even better. Moving on then to consumer goods. Higher volumes in all categories. Organic sales growth of 3%. As I said, higher volumes, 5.3%. So a huge recovery here. Price mix still negative, 2.3%. This is all related to consumer tissue, where we had higher prices sequentially, Q3 over Q2. But compared to a year ago, when we took some price cuts, when pulp prices were depressed, there has been quite some swings here in the pulp price. we still had lower prices. However, during the third quarter, we have been working actively to increase prices in consumer tissue. So we expect a better price development here in the fourth quarter going forward, related specifically to consumer tissue. And as you can see here, fantastic growth in incontinence products retail, 6.3%. Femcare, 4.9%. Very strong numbers. Babycare, a bit softer. There are some variations here. We have a smaller number of big customers, so this could vary between the quarters, but underlying a very good performance, I would say. And consumer tissue recovering with 2% sales growth in the quarter. And profitability is slightly down for the reasons I mentioned. We have negative price in tissue in the third quarter, while at the same time, we had higher raw material costs specifically than wood pulp. So that's the explanation, but still a very resilient margin, I would say, at 11.8% in the third quarter in consumer goods. I mentioned the market shares here earlier, and of course, we follow market shares as best we can continuously, but it's easiest in consumer goods and in the branded parts where we, of course, we have really detailed data continuously week over week or even day by day. What we can see is that we are continuing to have over 90% of our sales in category market combinations, where we are either in position one or number two, which is so important for us. But we also see that we are now growing our market shares in over half of our sales and this was below 50% in the last quarter. So it's improving and we are growing or holding our market shares in 71% of our business, which is also a clear improvement compared to where we were a year ago and also the last quarter. So clearly growing market shares. And we believe our estimates are that we are also growing market shares in our remaining professional hygiene business after restructuring and in health and medical that we are mostly holding our market shares there in this quarter. But overall, we've had a good development also in health and medical in the first nine months. Moving then finally to professional hygiene, strong growth in premium assortment. And of course, this shows in mix and also in margins. We had organic sales growth of minus 0.8. But remember that we had this restructuring last year, both in the US and Europe. So excluding that, very healthy underlying growth at 4.7%. Volumes were down, minus 4.6, positive with excluding restructuring, and higher prices and positive mix, 3.8%. And of course, this positive mix comes very much from the restructuring we did and the focus we had since then on the premium strategic product ranges. EBITDA margin up 10 basis points and of course another very, very strong margin quarter for professional hygiene at 18.6%. That was a brief overview of the three business areas. I'd like to say something about sustainability. We are very happy and proud that our net zero ambition has now been validated by Science Based Target. We are one of very, very few companies in our industry that have achieved this validation. That means that we have very good and robust plans to reach our net zero ambitions by 2050. our targets for 2030 and you can see them here. So we're continuing on this path. We believe this is very value creating for the shareholders and that there are many opportunities here to reach the targets, not least as you can see here in the picture. This is our plant Suamere in the Netherlands where we have then installed the solar panels around the plant here on available land, just as an example of the many, many hundreds of efforts we're doing here to reach our targets. Thank you for listening with that. I'd like to hand over to Fredrik to dig into the details here of the financials. Fredrik.

Thank you, Magnus. And I will try and sum up the group numbers a bit. And starting with the organic sales growth, we had... And underlying growth continuing to be strong and developing well, as you can see, 3.4% excluding restructuring. We're very pleased with the volume growth in all our categories, actually, and particularly so with IncoReta, with Feminine and Consumer Tissue. And professional hygiene, if we look at the underlying growth, was also quite strong. We did, as we have reported previously, many times here restructuring of our european and north american business for professional hygiene and that has still some impact on our overall growth for professional hygiene on organic sales growth roughly about six percent and for the group as a whole 1.5 so if you disregard that restructuring that was that has been done then underlying growth in professional hygiene is also quite quite strong This restructuring impact will also remain in Q4 at a somewhat lower level than what you have seen now in Q3. So we look at price and mix, minus 10 basis points, minus 0.1%, and that consists of a Negative price of 0.6% and a positive mix of plus 0.5%. Now, as we have said before, this price decline is relating to the price concessions that we did during last year for consumer tissue. And if we look at... This quarter and sequentially, Q3 versus Q2 of 2024, prices for the group is actually up by 0.7%. And this is predominantly the price increases that we have executed within consumer tissue in the quarter. The positive mix component is basically related largely, I should say, to professional hygiene. So if we look at... Our EBIT bridge, we continue to improve our gross profit margin in comparison to the same period of last year. We did that also in Q2 and Q1. And the pricing discipline remained strong. COGS was actually favorable. And there were a few moving parts that I'd like just to touch on briefly. Perhaps not so surprisingly, raw material was negative. So we had a higher cost for raw material. This was driven by PAL. So a significant increase there. But we had some mitigating factors, so lower cost for oil-based material. And we also had positive currency or transaction currency impact that mitigated that increase of pub cost. We also had a fairly considerable positive impact from lower energy costs. And this is not so much related to the market movement in underlying prices. This is rather a consequence of the fact that our hedging prices or the prices that we have within our hedging contract were much lower in 2020. Q3 of 24 versus the same period of last year. Thirdly, as you can see from our report, we continue to have a high savings levels or COGS performance. And we're quite happy with that. So if you look at the year as a whole, so far we have reached 1.1 billion SEC in savings. So it's been a really good year from that perspective. And as before, it's very much related to procurement saving. It's also material rationalization that we continuously work on and just general efficiency improvements within our factory setup. And finally, the fourth also positive component is that if you look at the production volumes in comparison to last year, they're significantly higher. And if you take all of these things together, cogs develop quite favorably. So turning to A&P, I mean, we talk a lot about... profitable growth and volume growth and of course we fuel that growth with A&P and that's up as you can see also in percentage of sales so 50 basis points and we are now at roughly about 5.1% of sales so this is fueling the growth and we expect that to be continues to be higher than previously SG&A, same thing. It's a bit up in comparison to last year as a percentage of sales. And of course, partly this has to do with the fact that our overall sales growth as a consequence of the restructuring has been a bit low. But there is also some other factors. Normally, normal salary inflation is one of them. We have a bit of higher provision level for bonuses. And thirdly, we continue to invest quite a lot in the digital sector. structure of the group so so those are the different components if you look at and and this is perhaps more of a smaller topic but still if you look at the number of employees they're immaterially higher in number this quarter in comparison to last year so so we're not really growing the number of employees It was a good quarter in terms of cash flow. Obviously, the operating cash surplus was super positive. But as normal, you can say we also had a good performance in terms of our working capital. So it's developed positively. And we remain, I think, in general with a good capital discipline overall. CapEx was a bit lower this quarter. And we have previously guided between... the 7.5 to 8 billion, we remain with that guidance. So it's going to be roughly a bit over 7.5 billion for the year as a whole. And if you kind of look at year-to-date numbers, you will conclude, therefore, that we will see a step up of CapEx levels in 2020. in the fourth quarter. So clearly, if you just summarize all of this, quite a good cash flow generation from the group. And we've had that actually all year. And then finally, as a consequence, the strong cash flow has continued to lower our net debt. We bought shares during the quarter in our share buyback program. So in the quarter, we consumed 1.1 or purchased shares for 1.1 billion. And we now hold 0.6% of the shares. It is our intention to cancel these shares at the upcoming AGM. So in summary, our net debt to EBITDA ratio 1.1. So with a strong balance sheet. Thank you.