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.

Thank you very much, Fredrik, for that walkthrough. Now it's soon time for Q&A. Magnus, would you like to join us? But before that, Capital Markets Day coming up.

Yeah, very exciting. The theme is accelerating profitable growth. What else could we talk about? and we will not only talk this is an opportunity to really get an in-depth understanding of our company so we will visit one of our most advanced multi-category sites we produce all our categories on this site it's growing very quickly this is vals in spain close to in tarragona close to barcelona we will of course tour the site you will also meet many of our colleagues and employees you can ask them whatever you want of course to to understand the depth of of our culture and and how we work and this includes also the full executive management team that will also be present and present and and be available for for discussions so i hope that you find this interesting and that you have have the time and opportunity to join us we are sure that it's worthwhile

Yes. So with that, let's start the Q&A session. So operator, please open up for questions.

Sure. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from line. Nicholas Eggman from Carnegie. The line is open now. Please go ahead.

Thank you very much. Yes, the first question, I just have to come back to the discussion about pulp prices, because in the past, pulp has had a very strong impact on your earnings, and not just Vinda, but even the underlying S&P business. And our pulp prices, they rose almost 60 percent, if I'm not mistaken. from mid-23 to mid-24, and your earnings are still surprisingly resilient. Can you elaborate a little bit more on what are the mitigating factors here? Is it wrong to look at a pulp index? Are your contracts different? Or is it just that the oil-based materials have been moving so strongly in the other direction? If you could help clarify, that would be very helpful.

Maybe, Fredrik, since you already spoke a little bit about cogs, you could give some more detail.

It will be my pleasure, Magnus. Thank you, Niklas. Pulp has actually had a quite negative impact. So there are a few mitigating factors, as I mentioned. The first one is that, as you already know, there is a delay in how they impact. So, of course, you don't get the full impact immediately when pulp cost increases. But there is a significant negative impact from pulp in our result. You mentioned 60%. The increase has not been that big. It's, of course, we... We have a mix of both soft and hardwood pulp, and the average increase is much lower than what you mentioned. But regardless of that, there's been a significant impact. And then, as I already mentioned, it was mitigated partly by... by oil-based material and the fact that euro versus dollar was actually stronger in the quarter. So there were mitigating factors, but pulp had a significant impact. So it's not that. And you mentioned energy as well. Yeah, but I think you asked specifically about raw materials. So then there were the other issues, of course, the savings that we had, the energy impact, and not least, actually, very good production volumes. And, of course, those production volumes just brings more efficiency and higher absorption costs, so operating leverage, if you will.

But actually, yeah, thanks. We ask ourselves a little bit the same question because it's clear that with our lower pulp exposure, we are more resilient and we are kind of getting more and more kind of used to that as well because of the history, of course. So really happy to be able to be this stable between quarters, even when we have strongly underlying problems. swinging raw materials and other costs. And of course, in addition, we are more agile now also in adjusting prices towards our customers. And this also helps and will also help further in the fourth quarter.

Very clear. Thanks for clarifying that. And very welcome to see more resilience here, of course. But following up on that, given that pulp has actually declined quite a bit in the past four months, is there a risk of lower prices? You mentioned here that you expected positive pricing in consumer tissue in Q4. Is there a risk that with the decline we've seen recently here that that might be difficult to put through or that we'll see price cuts going forward?

So when it comes to pricing for the fourth quarter, we will see benefits of higher prices, specifically in consumer tissue again, because in the other categories, there's really not much change actually, either in the underlying or in in in the prices however in the fourth quarter uh for for reasons frederick has already alluded to here we we don't expect to have such a positive impact from the raw materials and frederick maybe you want to Get back to that. No, I mean, we detail on that.

I think it's clear, Niklas, just maybe highlighting what you already know. But if you look at COGS development in Q3 versus Q2 is actually up. Right. So so the trend is actually up for the for the time being. Well, if you look at the full year. And if you look at Q4, we still expect COGS to be higher than what we have in Q3. So there is still, of course, reasons, obviously, to increase prices. There is a delay, as you have clearly noted here, when pulp price hits our P&L. And this will, of course, also be the case as we go forward. So all the reasons to, of course, increase prices.

Thank you. That's very helpful. Thanks for taking my questions.

Thank you. We will take the next question from line Oscar Lindstrom from Danske Bank. The line is open now. Please go ahead. Oscar Lindstrom Hi.

Good morning. Three questions from me. First, on the price increases on consumer tissue in Q4, could you say anything about the magnitude or any changes in contract structure for these? That's my first question. The second question is on professional hygiene growth, where you say you're focusing on emerging markets. My question here is, do you foresee that to be organic or more perhaps acquisition driven? What geographies are you looking at? And then my third question, as always, has to be something about pulp. There's a significant difference now between hardwood and softwood pulp. What's your mix? And do you see that you could drive it further in the direction of hardwoods, which have a lower price point?

Okay. Yes. Starting with the first, the price increases, we can't really provide the magnitude. What's clear is that we are much, much more agile now that we have continuous negotiations with retailers on pricing in all our categories, not only on tissue, but of course, in tissue, we have the biggest impacts from raw materials, typically. So more agile. It's a magnitude that we think is efficient, and it's also a broad-based issue. price increase, so covering many markets and most of our customers. When it comes to professional hygiene growth, we think that being the global number one, having a very, very strong assortment, we have the right to grow faster than the market, both in mature markets and in emerging markets and in emerging markets we're primarily currently focusing on Latin America where we have a very very nice underlying growth and huge opportunities to penetrate further. There could be one or two acquisitions, but primarily this is about organic growth, especially when it comes to the tissue part of professional hygiene. In other parts, as we stated many times, could be sanitizers, soaps, other adjacent areas. We could also be looking at as we have stated many times before. so and then when it comes to the hardwood and softwood and the mix we of course continuously increase the use of hardwood here because of the price difference and this is accelerating and there's a lot of new technology that's actually developing here that makes it possible there have been periods i don't know exactly today but when we've been running our tissue plant involves actually completely with the hardwood without any software whatsoever. And the overall mix is slightly improving constantly. We expect that to continue to improve where it is today. I'm not sure.

the exact numbers but let me just give you if you look at consumer tissue in general the absolute majority is related to eucalyptus so hardwood but of course there's still a meaningful component left of softwood when you look at professional hygiene is predominantly actually recycled but also some some eucalyptus and softwood but but this is it's we're we're much more exposed to eucalyptus than we are to softwood in general thank you those were my questions thank you we will take the next question from line patrick fallen from backlist the line is open now please go ahead

Good morning. Thanks for taking my questions. Just three, if I may. So, first, just want to touch on consumer goods. Looks like volumes were much better, and Femcare and Tissue were helped driving that. Can you touch on what is driving the volume outperformance there? I guess with the consumer tissue and the pricing that will land in Q4, should we expect the price mix to be positive then in the quarter? And will that have an impact on elasticity for tissue volumes? Secondly, on the cost savings, as you said, Frederick, the number is over $1.1 billion now, which you guys highlighted, H1, it would be over the $1 billion mark. How should we think about the cost savings to land in Q4? Will it be similar to Q3, or will we see it slow down sequentially? And lastly, just on the bondholder situation, it would be just helpful maybe to know if anything has changed recently compared to when we last spoke in September. It would be helpful. Thank you.

Okay, so I suggest starting with question one and three, and then a little question to you about cost savings. Yeah, so very nice growth in consumer goods, and especially where we want to grow then in feminine care and incontinence care. Very much driven by innovation, very attractive assortment, and supported by strong marketing and AMP investments. So really, really... working what we have set ourselves out to do and of course this is nothing that's been achieved overnight we've been working with innovation and brand building for many many years and now that we put kind of more more support behind it and supported also by a strong go-to market and sales force it's it's really so it's kind of it's it's just operations it's just There's no magic behind it, but of course that's positive because that's something we can continue to do going forward. There's no big change in channel mix or anything like that. It's just hard work and good performance. And in consumer tissue, And you asked about price and mix. Of course, the price increases we put in place in consumer tissue in the third quarter will have a positive impact on price for all consumer goods overall in the fourth quarter. And I'm not able to specify exactly to what extent. What we've seen in terms of mix is as we have strengthened our tiering in our assortment, you know, good, better, best. And since we have a somewhat subdued consumer sentiment, we see and have seen it's not accelerated, but we have seen quite a lot of down trading. Some of our sales growth and especially in tissue is coming from the lower tiers. So kind of the good or better assortment rather than the premium assortment. And that has a negative impact of mix. We still want to do it because it's still value creating and it's still really helping our operating leverage. But these are just some kind of factors you need to weigh in when you look at it so sometimes actually negative mix could be affected negative even though our strategy is working of of growing volumes in a profitable way it's just that they're growing in segments where the consumers are where we're in specifically in consumer tissue we we are recovering a little bit compared to the last couple of years when we lost some volumes there so i hope that answers your question then when it comes to the bonds we issued a press release on the 17th of october because you mentioned if there's been any updates in september uh sds received a demand for early repayment of bonds and just to summarize that we are confident that this demand is unfounded so really nothing new from that perspective but there is this press release from the 17th of october frederick

So your last question, Patrick, there was relating to cost savings in Q4. And I already mentioned that we expect cost of goods sold to be higher. And there are a few moving parts there as well. So we're expecting seasonally somewhat lower production volumes if you compare Q4 to Q3, at least in some of our businesses. We expect somewhat higher cost also for energy. And then finally, and this is also mainly seasonal, and then finally lower savings. And we actually said that, if you remember, perhaps in Q2, we said that the savings for the last half part of 2024 will be lower than the first part. So we expect Q4 to be lower than Q2. than what you see now.

Okay, that's clear. And just one thing on just the bond order situation of MA is just... you know, it looks like from a market perspective, you guys are well capitalized in a repayment situation. And I feel like there's been other companies that have went on with repayments in similar situations instead of disputing it. Is there something else we should be mindful of from your angle that, you know, is there a refinancing perspective we should be aware of or anything related to other financing agreements for the dispute other than, you know, the technicality of the VINDA percent of group sales?

We don't have any more information to provide than what we said in the press release here of the 17th of November. We have obtained professional advice, both legally and financially, and feel that we are in a very strong position and that the demands are unfounded. And that's the update we have to give at this point in time.

Well, I guess what we can add, and I think I'm not sure if I misunderstood your question there, Patrick, but when it comes to funding, just generally, we just don't have any funding needs. We have very strong cash flow, high liquidity, revolving credit facilities and other committed facilities. So we have a very, very strong financial situation in general, if that was your question.

Yeah, no, that's clear. Thank you, guys.

Appreciate it.

Thanks for adding that, Freddie. I took it for granted.

Yeah, yeah, absolutely.

Because our balance sheet is really bulletproof now.

You should take it for granted.

Thank you. We will take the next question from 9K13 from Kepler. The line is open now. Please go ahead.

Yes, good morning. Thanks for taking the questions. I have two questions. One is a follow-up on cash flow and the balance sheet situation, which is Very strong. How should we think about buybacks going forward? Will it become a recurring topic at SRT? And the other point is on volume leverage. I wish you a very good uplift of volume growth. How does this translate into leverage across your business? Obviously, it's very high in the medical space, but in the other businesses, how are you seeing the contribution to the operating margin? Thank you.

Okay, so I'll take the first question then and hand over to Fredrik. Yeah, the cash flow is very strong and we stated clearly at the time of the announcement of the share buyback program that our ambition is to make this recurring. And the reason why we're saying the ambition is that it requires annual approval from the AGM. the annual shareholders meeting and the program we're running now will actually then terminate before and our ambition is to ask them for a for a renewal and to do this for for a number of years because as as the situation is we have the opportunity both to to provide stable and rising dividends according to our policy to have recurring buybacks and to achieve our m a agenda so so we we we have all these opportunities to to combine going forward with the strong cash flow and the strong balance sheet that we have currently

Yeah, on the volume leverage, maybe a couple of things. There are two different sides of the coin. First of all, there's production leverage. And you've seen that actually, and I think I mentioned it already in this quarter. So when production volume increases, of course, the absorption of fixed cost in our markets Supply chain simply increases, and that has contributed quite a lot to the favorable gross profit margin comparison to last year. So it's already visible there. But, of course, over time, you also have, to various degrees in our businesses, operating leverage in SG&A and AMP, ultimately. We haven't seen so much of this this quarter, but, of course, this is behind our plans as we go forward, as we push volume. And this is particularly noticeable, you can say, in the medical area. But, of course, it's existing all over. So there is a lot of operating leverage. Thank you.

We will take the next question from line Misha Omanzad from France. BNP Paribas. The line is open now. Please go ahead.

Hi. Thanks for taking my questions. I have two follow-ups, really. The first one is on your pricing agility. You have recently been emphasizing how you have reduced this time lag between pulp moves and your pricing actions to only one, two quarters. Can you please specify what changes the organization has undergone to achieve this? And my second follow-up is on the share buyback. Just keeping in mind how cash-generative you are and how under-levered you are and how you have been emphasizing that large-scale M&A is probably not on the top of your agenda, is 3 billion SEC kind of a ceiling that we should be thinking of for share buybacks going forward? Thank you.

Starting with your second question, because I can't answer or I can answer the question. The answer is no, the 3 billion is what we have agreed for this program. And remember, this is the first time ever that SEA or previous to that SEA has actually provided a share buyback program. There are no ceilings or any considerations regarding that. And as we get into next year, we'll just have to see where we are. So that's regarding the share buybacks. Then when it comes to the pricing, because that's very interesting. During the pandemic, of course, and after in the ensuing then raw material and energy kind of costs shocks from our perspective, price shocks, as you remember. We were forced to go back to our retailers specifically, but we did this also in professional hygiene and health and medical and say that we need dramatic price increases now, basically. And it turned out that we had to come back every quarter for a year and a half because of the raw material shocks and that this worked. Our brands are strong, our relations are strong, we provide Typically good services, high quality. It worked. In the meantime, we also actually developed specific, our systems are kind of IT interfaces with retailers, but also with other customers in the other two business areas to make it much easier because it's quite cumbersome when we implement a price increase. Of course, it's not just a price increase on one SKU, it's hundreds of SKUs, it's different store formats, it's different geographies, different markets. And it could also be different types of promotions related to this. So there is a degree of automation that makes it possible to do this much quicker than what we could before. and my absolute perception is that our customers they are also more happy to have a continuous dialogue about pricing depending on not only raw materials but in general of course product launches and so on then during doing it you know once per year we still need to do it once per year specifically in france because there's illegal obligations but in other markets It's much more ongoing continuously now. And, of course, our sales force is also now more confident and more used to this. So it's become, which we also hoped after the pandemic, a new way of working together with the customers. That, I think, is to the benefit of everyone.

Very clear. Thank you.

Thank you. We will take the next question from line Charles Eddin from UBS. The line is open now. Please go ahead.

Hi, thank you for speaking to me. Just a couple of quick ones, please. And they're probably both for you, Frederick. Firstly, on the 552 million set of COGS in the Q3 EVA bridge, could you just split that out between Rawmats Energy and the COGS cost savings, please? And then the second one, just to clarify, when you said somewhat lower COGS in sort of somewhat less of a benefit from COGS in Q4, Were you saying just less of a benefit or were you saying you expect it to be a headwind in that bridging Q4? It wasn't clear. Thank you very much.

Right. Good questions. Let me start with the last question first, Charles. If you look at Q4, COGS will be up. So there is an overall negative impact on the group, just to be perfectly clear. And part of that math is lower COGS savings or performance, if you will. So just to be clear. And then your first question, the different components. So if you take, starting with the raw material in total, the negative raw material impact, and then, of course, it's all of our raw materials, is 260 million secs. If you take the positive energy, it's roughly about 350, give and take. And then you have the cost savings of about 280 or 276, to be specific. And then you have the higher production volume absorption, which is roughly about 200. So if you actually sum that up, it gets to your number.

Super, thanks.

Thank you. It appears no further question at this time. I'll hand it back over to your host for closing remarks.

Thank you, operator. So time to end the session, but I leave over to you, Magnus, for some final remarks. If we could have that slide, please.

Sure. And I realize, Sandra, I actually missed to present some of our innovations that we have here behind us. Yes. Not least our new... baby diapers, which are the best baby diapers that we ever produced. So they're softer and more leak proof than ever before. We have a pack here and the pack is quite interesting because what we're doing also now with the baby assortments that we're compressing it. So these packs are now 20% smaller than the previous packs. And of course, this reduces then transport costs and it reduces carbon footprint. And inside, beautiful, soft, leak-proof product that we expect will be very much appreciated. And we're launching this all over in Baby right now. Has some impact on also the numbers you saw in the third quarter, because that was during the launch period. and, of course, expecting this to do really, really well. Just to bring up one of the innovations I forgot, I'll put it here. Okay, to summarize, SED is in better shape than ever. We will continue to prioritize what has been very successful this year, accelerating profitable growth. And just to leave kind of an impression behind, we for fun put in this box to the right here with the actual growth that we already presented, but in different slides, organic sales growth for the different categories. And I think it's interesting because it also gives the relative size of the categories here. And of course, what I really like is that it's green everywhere. This is professional hygiene excluding restructuring. But having said that, it's a very, very nice picture and coming from the strong development that we saw in the quarter. So with that, thank you very much for listening to our Q3 presentation.