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 Rystedt, 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 Essity 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 our share buyback program that we're in the middle of. And of course, always impactful, 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 23 and the strengthening of the Swedish Corona. Organic sales grows slightly up and up 1.8% then disregarding the restructuring in professional hygiene 10%. EBITDA as I mentioned over 20 billion and as you can see a very very strong EBITDA margin of 14 percent and the same with the return on capital employed at 17.6 percent and a big improvement year over year and we announced today a proposed dividend of 8 kronor and 25 euro which is an increase with 50 euro or six and a half percent 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 STD 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 to build on this this very very nice curve and over the last 10 years operating profit has improved with over 130 percent and sales with over 80 percent so a big step every year and this is what we aim to do also in the long term going forward we do this very much through impactful innovations here are some examples starting there at At the left, we are turning more and more of our TORQ professional hygiene products into a compressed offering, has a better sustainability profile, reduces logistics costs and is beneficial for those who are working with refilling our dispensers. 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've seen now over many many years we retain number one or number two positions in over 90 of branded sales which is so important for for being a number combinations and stable including stable in 65 which is an Improvement compared to 2023. And as you know, new product launches on average have a higher gross margin than the product they replace of around 3%. So very, very important part of what drives value creation and growth in S&E. 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 targets scope 1 and 2 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 very successful. To 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 ebta 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 medic really strong number across the board here organic sales growth 5.6 percent volumes 4.9 higher prices and positive mix and 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 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 18.3%. So a very, very solid performance here. consumer goods, strong growth, cost pressures, organic sales growth 4.5%, high volumes in all categories exactly according to our plan because we know that high volumes means that we get operating leverage. It also indicates that we are growing market share, which we are doing in the highest margin parts of our business. This is such a competitive category, even though the underlying growth is nice. I mean, this is the reason why it's really growing also, or why we have strong competition. But look at that, 11.2%, fantastic numbers, which shows that we We really are competitive here now when it comes to product. And the brand positioning and also now winning after several years, as you know, when we have been very much under pressure from private label and from other big competitors, really back here as the market leader and as we should be growing very, very quickly. But also feminine care, 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 4.3 percent organic sales growth profitability down as i mentioned and margins and 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 5.1% excluding restructuring. Volumes were down 6%. but with a very, very positive price and mix. These two numbers actually goes together. So we had a few large customers in the US that did not buy as much from us as they usually do. And we believe that this is a temporary impact. that means that volume rebates that we 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 percent Nevertheless, profitability also on extremely good levels. EBITDA margin up on levels that we've seen over the last couple of quarters, but historically. With that, I'd like to hand over to Fredrik to 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. Featuring in professional hygiene is still there in the fourth quarter and the impact was one percent on on group sales and actually three and a half percent 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 be there also in in q1 or 2025 from that restructuring but it's not really material so most of that impact is is now is now gone. Price and mix quite positive as you can see 2.2% out of which 1.9 relates to price and 0.3% to mix and we also saw in the fourth quarter sequentially a strong development of price 1.2% and this is mainly related to consumer tissue but also partly to that 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 good mix development in health and medical. So overall growth, very, very good. EBIT Bridge, you can see that we're slightly down, if you can compared 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 price. increased 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 a 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 AMP 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 in into amp and of course clearly you can see this is working as we also have that strong growth in net sales so overall we think this is quite profitable investments into sgna and amp 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 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 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 receivable 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... Look at net cash flow. We also there had a bit of temporary impact. Our overall tax rate in terms of effective tax rate for the year is roughly about 20%. 25 as it should be but tax payment was a bit elevated in q4 and that will also come back during 2025 so all in all a bit of temporary impact from a cash flow perspective but if you look at the year as a whole very strong cash flow and that is both on an operating level and on a free cash flow level so after finance net and 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 in 0.2 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.