Essity AB (publ)

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 Rysstedt, our CFO. I will now hand over to Magnus who will start by summarizing the full year 2024. Please, Magnus, welcome.

Thank you Sandra and good morning everyone. Resigning from this position at SED 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 to start and a record operating profit for 2024 and the first time we actually did over 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 resulting in a more attractive portfolio, new financial targets and the announcement of a share buyback program that we're in the middle of. And of course always impactful and innovative 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 there's a solid demand for most of our products and categories in 2024 but also going into 2025. So a financial summary of the full year. Net sales were slightly down. This is due to the divestment of Russia in 2023 and the strengthening of the Swedish Krona. Organic sales grows slightly up and up .8% and disregarding the restructuring in professional hygiene by 10%. EBITDA as I mentioned over 20 billion and as you can see a very, very strong EBITDA margin of 14% and the same with the return on capital employed at .6% and a big improvement year over year. And we announced today a proposed dividend of 8.25 kronor which is an increase with 50 or .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 to 8.25. A high EPS growth starting with the listing of S&T in 27. The average growth has been 7% and in total 57% and in 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 as it 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 EBITDA excluding IAC so operating profit we are fully back on track after the pandemic and showing another record year and of course our ambition going forward is to continue to build on this very, very nice curve. And over the last 10 years operating profit has improved with over 130% and sales with over 80%. So 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 starting there at the left. We are turning more and more of our torque professional hygiene products into a compressed offering which has a better sustainability profile, reduces logistics costs and is beneficial for those who are working with refilling our dispenser. So that's an example there to the left. The SEVA 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's no change in this trend but we still see that there is a demand for these types of products so it's a very attractive value offering under the SEVA brand. And then a number of other innovations in all our 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 have 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 of combinations including stable in 65 which is an improvement compared to 2023. And as you know new product launches on average have a higher gross margin than the product they replace of around 3%. So very, very important part of what drives value creation and growth in SED. 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 one and two by 35%. We also are progressing according to plan and we're 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 finalized 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 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 and 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 target. We're very happy about that. I already mentioned that we see very strong demand for most of our categories. EBITDA is slightly up year over year but margin slightly down and rosy on a stable level. Then you're looking now at the split after 2024. Health and medical accounting for 20% of sales, consumer goods 54 and then 26 from professional hygiene. Starting with health and medical accounting, really strong number across the board here. Organic sales growth 5.6%, volumes 4.9, higher prices and positive mix. What I'd 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'm 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. EBITDA up 21% and the margin at .3% so a very solid performance here. Consumer goods, strong growth, cost pressures, organic sales growth 4.5%, higher volumes in all categories exactly according to our plan because we know that higher 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. I mean this is the reason why it's really growing also or why we have strong competition. But look at that .2% fantastic numbers which shows that we really are competitive here now when it comes to product. Product offering and 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, another 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 .3% organic sales growth. Profitability down as I mentioned and margins and primarily related then 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 costs did not decrease 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 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 .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 had accrued for were 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 EBITDA margin up on levels that we've seen of the last couple of quarters but historically. With that I'd like to hand over to Fredrik so dig into some financials more in detail.

Thank you Magnus I will do exactly that and I'll start with summing up the net sales bridge for you and Magnus alluded to it 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 and medical and Magnus you alluded to it earlier also for Incorita with double digit growth. Restructuring in professional hygiene is still there in the fourth quarter and the impact was 1% on group sales and actually .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 in Q1 or 2025 from that restructuring but it's not really material so most of that impact is now. Price and mix quite positive as you can see .2% out of which 1.9 relates to price and .3% to mix and we also saw in the fourth quarter sequentially a strong development of price .2% and this is mainly related to consumer tissue but also partly to the volume provision release that Magnus was alluded 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 a good mix development in health and medical. 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 the 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 impact of cost of goods sold for comparable products was roughly about 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 880 million and part of that actually big part 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're 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. You see flat development here so no real impact 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 our sales network and 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're quite happy with the result. 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 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 part of sales so basically you can say November and December very very strong growth overall and this of course means that we build 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 is more a temporary timing impact if you look at it in terms of credit days and accounts receivables we're actually improving and we're also improving in our inventory in terms of cover days so all in all. The current 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 FinanceNet. 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 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. Input 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. Thanks Fredrik

good that cash flow remakes are going to be a bit more efficient. And 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 and medical a record year record high profits margin improvement of 470 basis points consumer goods high volume growth margin slightly down but from a high level and professional hygiene again very very strong 2024 the 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 and medical it's in co-retail. Develop very strongly innovation brands market share gains that has 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 to 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 then for the Q&A session.

Thank you ladies and gentlemen if you would like to ask a question please press star one on your telephone keypad thank you. We will now take our first question from Celine of JP Morgan your line is open please go ahead.

Thank you very much 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 SETI and for having driven a city as an independent 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 retailers as you look 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 issue division in Europe thank you.

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 the higher prices that you read about since we have a time lag we would see higher prices also in the fourth quarter and this was what we were aiming to compensate for and not taking into account the dollar impact. These higher underlying prices they actually turn around in the first quarter so we have some benefit in our books from lower 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 you know everyone raised prices it's very much now delegated to the individual businesses and to the individual geographies to manage the price cost gap and the margins in the best possible way and of course always with the aim of increasing restoring and increasing margins so there's a lot of work going on in that area now in various parts of the business. The word Céline.

Thank you. Maybe can I ask a question to Fredrik could you please help us with the transition I mean you were mentioning for instance energy didn't turn out to be what you expected for Q4 so as we look into Q1 could you please help us with the different component on cost please.

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're moving parts but we prefer to give you an overall estimate of COGS as sequential comparison Céline and so we will see hopefully somewhat lower COGS than in Q4.

Thank you. Thank you and we will now move on to our next question from Patrick of Barclays. Céline is open please go ahead.

Hi thanks for taking my questions Magnus Fredrik and some comments on COGS inflation. 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 impact and as well you know you had the real side of 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 also looking at sequential kind of cost into Q1 and pulp to think of for that eBitDAB bridge. What was the kind of headwind there the impact on the baby care number and just double checking will there be any impact in Q1 to think about. Thanks.

Yeah so pricing no actually we did achieve the pricing increases we're talking specifically consumer tissue now that we that we planned for but then actually costing increased even further and within a 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 wind 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 is also in consumer tissue margins are very very good in most parts of our business but also in the 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 recall was specifically happening in the fourth quarter of last year.

Maybe just a comment Patrick on on SG&A but just to before that the kind of negative things that happened and you said it Magnus but just emphasize that the negative were 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 power 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 slightly higher.

Okay thank you and just if I may just squeeze one more in on professional hygiene you know the underlying volume looks a bit weaker quarter on quarter and it sounds like the restructuring still is not complete but you said there's a marginal impact it's very limited in Q1. Should the underlying performance improve how should we think about that?

Each the very very healthy underlying margin in professional hygiene so 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'll 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.

Thank you and just reiterating earlier comments Satsiyu Goh Magnus and good luck in your future endeavors. Thanks. Thank you

and we will now move on to our next question from Tom Flikes of Dite2Bank. The line is open please cover height.

Morning everybody I think before in Q3 you alluded to some lower production levels in Q4 and I wondered to what extent are you managing the seasonality if you can of your production and in particular I guess to reduce production in colder months when energy costs are 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 but there might maybe higher marginal cost 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 that COGS will be sequentially lower is that in SEC or dollars or euros or what just to be clear on the COGS comment please.

Yeah room to maneuver when it comes to kind of moving production versus sell out from us because our products are so bulky and low 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. 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 the year. So I think that's the reason why we see a very high demand for many of our products and costs due to that I think it's very very difficult. Handing over to you Fredrik on the dollars or Kroners.

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 60 or 70 million in that ballpark but it was there pretty much in line with our expectations so just to compliment it's not big as you say.

And the currency? Yeah

currency is actually based on SEC obviously because that's our reporting currency but we are not forecasting when we say that we're not forecasting any specific movement other than what you see out there so we expect the euro SEC rate to be constant as we do expect the US dollar SEC rate 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 or may not change as we go forward in the quarter but typically we don't. Yeah if you understand so somewhat lower. Okay many thanks indeed.

Thank you and we will now take our next question from Charles Edden of UBS. The line is open please go ahead.

I'm only taking my questions. Frederick, first one for you. Could you please break down the 759 million sort of COGS headwind between the usual buckets so I guess I know there's this 430 million tailwind from COGS cost savings because that was in the press release but I guess that means there's 1.2 billion headwind from energy and rawmats. Could you just sort of clarify the numbers there? And was there a one off sort of inventory revaluation downwards related to the pulp prices and if so if it was material could you sort of help us quantify? Second question just on the sort of share buyback obviously no announcement of an additional program this morning but you highlight in the press release that it 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 if I'm just squeezing a classification and it's been touched on 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 volumes?

Thank you. I can start with a share buyback so you should expect to hear us announce the plan going forward after the AGM since it's required 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 share buyback program. Then the bridge I hand over to you Fredrik.

Yeah Charles I actually gave you a little bit of insight into that when I spoke earlier so if you look at raw material is 880 million and out of that 330 is basically currency so if you take raw material excluding currency it's a bit over 500 million give and take, 540. 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 maybe simple total raw material 880 million. I also mentioned to you distribution of 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 are the cost savings plus a lot of other smaller and I actually mentioned one of them earlier with production volume so there's a bit of back and forth but these are the main components Charles.

And when it comes to the professional hygiene North American lower sales in the Q4 and when we expect that to normalize I mean I can't say typically year over year our large customers tend to buy similar volume when this normalizes I can't say it depends on the plans of those big distributors that we're talking about in this case.

Thank you and congrats again Magnus looking forward to continuing speaking to you in the coming quarters thanks.

Thank you and we will now take our next question from Jeremy Philco of HSBC. Eleni Souten please go ahead.

Okay morning so first of all yeah I reiterate the comments for Magnus and yeah so good luck with your future endeavors but obviously not after what time with SET. So yeah they're covering this question on kind of the dollar and sort of sequential cost movement. To what extent would you see what happened in Q4 as a little bit of a kind of a temporary impact as in you obviously saw this unanticipated dollar impact but then perhaps is it fair to say you've seen the pulp prices come off a little bit more than you might have expected. So actually when you look at the situation in Q1 it's not a lot different to what you would have expected a quarter ago albeit the components are a little bit different where you've perhaps got better underlying commodity costs a bit of a washery. So we could see this little bit of a profit miss as being perhaps a slightly temporary impact. And then the second question is just on the demand that you spoke about being quite strong into the year 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 just 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.

Yeah, so the demand is we believe in some areas in continence care specifically both in retail and healthcare that there is a stronger underlying demand and maybe this is a result of something we're discussing internally. Then we are doing better and better in terms of market shares and stabilizing or growing market shares 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 in the personal care categories primarily and also for new machines to cater for the higher demand. Then when it comes to to what extent the Q4 costs were temporary or not, I think it's very, very difficult to say. What I can say is that our 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. 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.

Maybe Jeremy to add on that because I'm not sure if I understood your question fully. I interpreted a bit that you felt that because of the dollar strengthening, you saw that where you anticipated perhaps that 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 what you say, Magnus, a matter of how we compensate and how we deal and compensate for that dollar increase. I

guess it's more of the point is that you're still seeing your underlying pulp price is still falling and you're still seeing kind of sequentially lower costs in Q1. So I just felt that it's perhaps a bit of a transitory impact from the dollar given you actually see more favorable developments elsewhere in your cost base. I suppose that was what I was trying to.

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, yeah, I don't clearly the dollar impact is, of course, negative.

And they are separate, these two impacts. So they're not connected in any way. No, exactly.

I just

want to add to that. No,

it's just one I just since Fred Pettig said that many other moving parts, I 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 sorting out new machines. We typically do this now in days or weeks rather than months and with very high capacity utilization in a short timeframe. So but we have had some of that in the fourth quarter, which is, of course, not recurring.

And of course, those were expected. Yeah, yeah. So the only unexpected impact in kind of margin in comparison to our own expectations was currency and a bit of energy.

OK, thanks very much.

Sure.

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

Thank you and a very good morning, gents. And how are you 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 other EBIT in 2025 for you,

please. Fredrik.

Yes, I'll be very happy to do exactly that, Linus. So starting with CAPEX, we expect it to be eight billion or slightly there above. So eight between eight and eight and a half billion, so clearly higher than the 7.3 that you saw in 2024. And this has to do with what Magnus has already alluded to, basically capacity investments. So that is the absolute driving part. So roughly eight or perhaps a bit there above. When it comes to the market investments, we have not yet that we expect AMP 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 other line, it will remain elevated also in 2025 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 part of that relates to the digital project that will remain with high cost also for 2025.

And just to follow up on the AMP and CAPEX, of course, this is profitable growth. This is what we're 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 lines, feminine care lines mostly and something that 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.

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

Thanks, Linus.

Thank you. And we'll take our next question from Matt Tarsendahl of Danske Bang. The line is open. Please go ahead.

Hi. Thanks for taking my call. I want to get back to the EMTN legal issue. You updated that the matter has now been taken to the English courts. It's been ongoing for quite a while. I guess you're 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 settlement to get it out of the way or you're just still interested in fighting this?

So there's no difference and there's no more information since our last press release. So no news in this area. Okay. Thank you.

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

The first one is on the US dollar impact. You know, 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, well, any of these could be impacted 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 in the US 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? I realize it's still quite early in the quarter, but still.

And of course, we don't provide, I mean, in this case, I actually don't even know the answer, but 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 their 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 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 those goals, of course. And then I think we can say something about the US dollar, Fredrik.

Yeah, I can't forecast the 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 lagging. There is a positive 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.

Wonderful. Thank you. And thank you, Magnus, also for these. I think it's going on 10 years you've been with us.

Yeah, Q report number 40 today. Thanks, Oskar.

Thank you. And we will now take our next question from Molly Villenzek of Jeff Race. Your line is open. Please go ahead.

Good morning. This is Molly. Just trying to get a little bit more information on 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 tailwind or relatively neutral versus 24? Thank you.

Yeah, Molly, it depends a little bit on what you're comparing with. Sequentially, the impact was negative with 60 million sec, 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.

Thank you. Thank you. And we'll take our next question from Karel Zurete of Kapla. Your line is open. Please go ahead.

Yes, good morning all. Thanks for taking the question. I have two questions. The first one is on top-line growth in your medical and 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, aside from innovation, is the sales team more effective? The other 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 discuss the North American washable underwear business, how that's performing nowadays? Thank you.

Okay, yes. Top-line medical, as we said, has been growing now for I think 15 or 16 quarters, but very good growth here. And actually we're growing in all our three different therapy areas, goods 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's 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 hydrophilic 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... 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 emphasis on our biggest markets, which are Mexico, Colombia, and also now in addition, Brazil, where we have established the market leading positions in Inco and see a very, very good growth. So that's that. And then, yeah, Nix 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 we have now good plans for 2025 because the brand is so strong in the market, the 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 Nix in 2025.

Thank

you. Thank you. And we will now take our last question from Anton Provod of Bank of America. Your line is open. Please go ahead.

Good morning, everyone. And thank you for taking my questions. So free for me, please. Just medical, you talked a bit about maybe some stock building at the end of Q4, anything to quantify or maybe the impact on the pro-fod of Q1. Second, I mean, in consumer goods, branded sales winning market share has come down to Q4 versus Q3. Anything specific that to flag and do you expect improvement in Q1? I mean, from what you are seeing maybe in current trading. And last one, on return of capital employed for Q4. I mean, it was a bit down sequentially in medical and consumer goods. I mean, I understand a bit the margin erosion there, but what is behind maybe the increase in capital employed for both divisions, please?

Thank you. Okay, I leave the capital employed to you, Fredrik. But when it comes to market shares, it's actually difficult to judge individual quarters. Yes, we are overall we had 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 there could have been some stock building in Q4. We have seen that sometimes before and maybe that's also kind of a question raised 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.

Yeah, 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 and 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 capacity investments as Magnus alluded to before. So there is nothing kind of out of the ordinary there. Thank

you. Thank you. 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 underline that. And that 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 leading market positions, strong brands and successful innovation and more and more every year. I mean, this is continuously improving. We focus to increase sales in the fastest growing and highest margin parts of the business. That's a very important part of combining the accelerated growth with profitable growth. And of course, sustainability and a winning corporate culture as foundations for achieving this. And we're doing this based on a very, very strong financial position with the 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 SETI. Thank you very much for listening.