Essity AB (publ)

Good morning. Welcome to Esri's presentation of the Q3 results. We will start with an overview of the financial highlights and the business highlights and Ulrika will present the business highlights. Following that, we will have a session with our CFO who will take us through the financials. Ulrika will then present the initiatives that we announced this morning. Initiatives launched to accelerate Esri's profitable growth. We will as usual end today with a Q&A session where you have the possibility to engage directly with us. To ask a question, you just press star one on your phone. With that, let's dive into the quarterly performance. Ulrika, over to you.

Thank you, Sandra. And welcome also from my side to this presentation of Essity's Q3 results. And to summarize the quarter, we continue to deliver positive organic sales growth. We also strengthened our profit margins. We delivered a strong cash flow and a result above 5 billion SEK. Price, volume and mix all contributed to the 0.9% organic sales growth, with price being the most significant contributor. And we had organic sales growth in all our three business areas. Once again, we delivered record high gross profit margins. And this quarter, it flowed through down to the bottom line. So the call to action that we had in July to pull the brakes on our SG&A cost development really made a difference. And we ended up at a profit margin of 14.6%. Setting aside the quarterly results now for a moment, this quarter has also been about how to set ourselves up for future success. As I shared in the Q2 webcast during my first months in this new role, I have done an extensive review of the business and then together with the leadership team worked on what to change, what to improve, what to prioritize in order to accelerate our progress towards our financial targets and towards our vision. As a result of that, I'm today launching two initiatives that will improve our performance. The first one is a reorganization designed to sharpen our focus, to become more fast and also more agile. And related to that, the second one, a cost-saving program that will reduce our organizational cost. More about that later, but let's now dive into the Q3 results. And we start with health and medical. Q3 now for 25 marks the 18th consecutive quarter of growth for our medical solutions business. We are growing across the three therapy areas, so wound care, compression therapy and orthopedics. And what is very important for future growth and profitable growth in the medical categories is innovation that plays a key role. There are still so many unmet needs, both for health care as well as for patients and consumers to innovate on. One example is for people with wrist fractures. Today, it's difficult for them to keep up with hygiene and keep up with the daily activities of lives with the wrist braces that exist commonly in the marketplace. And with the launch of ActiveMove Manus Air, we are solving that problem. This wrist brace that you see now on the page here has a lot of advantages. It's water resistant so that you can wash your hands. It's food grade resistant so that you can cook and keep up hygiene. It doesn't restrain the movements of the fingers and the hands so you can keep on working if you work by the computer. Also it has an open design so if you're a healthcare professional you can inspect the wound and change wound dressings with the brace on. And all of this while providing that stabilization that is needed in order to heal in a fast way. So certainly this innovation is a very good addition to our offer in orthopedics. Then if we move to incontinence care in healthcare, also in incontinence care, we were growing sales and volumes in the quarter. You might remember last quarter, then I talked about the challenging market conditions that we had in some markets, and that is still the case. However, we have very strong underlying growth in many other markets that is compensating for this. And in times where healthcare funding is under pressure, it's even more relevant to have products and solutions that are saving time for caregivers. And with the launch that we had this quarter with Tena, a new product concept, we are addressing exactly that. The Tena Pro Skin Stretch Day and Night is a unique product concept that we have put to market now that makes it easier to put on and take off the product. When it's in a closed fashion then it is just as a Tena pant. You can pull it up and down just like normal underwear, making it easy for the wearer to use the product. The challenge with the panto is that it's not so easy for a caregiver to apply the product. And this one is reopenable. You can open and close it. And that means that the caregiver can also very easily apply the incontinence protection. And that saves time for the caregiver. Now, this is not the only impactful innovation that we are launching in the quarter. We're also launching a new product in the lighter range of our assortment, and that is the TENA Discrete Ultra. It's a very discreet product, super discreet to wear, yet it does not compromise on the superior TENA protection. And why is it then important to have a superior product in this part of the assortment? Well, this is where we attract consumers, where we bring consumers into the category. And we, of course, want the women to experience the first little leaks, to choose purpose-made products and to choose Tena as their purpose-made products. And many consumers do that. They choose Tena. And we see that because our incontinence sales in retail is continuing to grow at a very good rate. This is especially true for the US. And if you might remember that in US, we are investing to grow. And those investments are paying off. So in the quarter, we could enjoy a 21% growth of incontinence in US retail. In feminine care, we're also continuing to grow in a very good way with high growth rates. Here, Mexico is an important market for us. We are clear market leaders and we will continue to strengthen our position in Mexico by launching a new night product, Saba Noches. And also here, it's a very important segment to be superior in because not only do we provide a good night's sleep for the wearer, but also it's a quality stamp for the brand. So as you can hear, we are continuing to grow strongly in the two higher yielding categories in consumer goods. So feminine care and incontinence care. On the other hand, in consumer tissue and in baby, we are declining. In consumer tissue, we are suffering in the branded sales from the weaker consumer sentiment. And also we see a price competitiveness increasing across the consumer tissue business. The good news is that if we look at Mexico, we are growing very well in our Reggio brand during the quarter. And also now we are really gearing up for the sneezing season, making sure that we have the right hankies in the shelf to be ready for the sales boost that will come during the next quarter. And also we continue with our efforts to have a high promotional pressure and to focus a lot on the value segment so that we can fuel growth in consumer tissue. Then what about baby? Well, you all know that we have had a period where we have had declining volumes on the back of lower birth rates and also very intense competition. We're still declining in baby, but we have improved. In the quarter, we turned around Libro in the Nordics big time. We had the actions of higher frequency rate of promotions, of... Limited edition, I was going to say, that is called wildlife, that you see on the picture here, and also stronger marketing campaigns. And all of that paid off. So the Libro consumers have found their way back to their brand. Another category where we can report a big improvement is in professional hygiene. Also here, we continue to see a challenging market situation, not the least in the US, in the Eureka channel. However, we are improving volumes sequentially in professional hygiene, and that is thanks to the activities that we have done with selective price adjustments and also more focus on the value segment that we talked about last time. What's also very good to see is that we continue to grow our premium products, so our strategic segments, as we did also previous quarter. This is, of course, very important for us short term, but it's also important to fuel future profitable growth. And speaking about that, what's super important to fuel future profitable growth is that we really have strong relationships with our customers. What's happening right now in the customer landscape in professional hygiene is that a lot of our distributors are consolidating. And then it's even more important than ever to be the preferred supplier. And therefore, it's so nice to see that one of our customers, Impax, have this quarter named us the best supplier. And with that positive news, I hand over to our CFO, Fredrik Rystedt.

Thank you so much Ulrika and I will give a little bit of numbers background to what Ulrika just mentioned here so I'll start with our sales and as you've already heard we are continuing to grow organically with 0.9 percent so just under one percent now if you look at the absolute sales number it is down by 4.5 percent but of course this is just due to the fact that the Swedish Krona is strengthening. So if you actually look at our sales in constant currency, then we actually grew with a bit over 300 million. So it's basically a currency impact. So turning a bit back to the organic sales growth of 1%, as you see the volume increasing. Growth was 0.2%. And this is exactly what it was also in Q2 and similar to what it was also in Q1. So we've had this volume growth level now for a few quarters. It is, however, a bit different. And so you remember perhaps that we have struggled a bit with... professional hygiene with baby and to a degree also with IncoHealthcare. And those have all three improved this quarter. But on the other hand, that improvement has been partly offset by a lower volume development in consumer tissue. So it is a bit different. We are happy to see the improvement in those areas that I mentioned. So to give a little bit more flavor, if we start with health and medical, Generally speaking, volumes picked up, actually. So it is still challenging when it comes to IncoHealthcare markets in general. But despite that fact, a bit as we expected, we have picked up volumes and it looks clearly a bit better at this point of time. Medical continues to grow, especially in the wound care. And we've seen that growth for so many quarters now. So it is a It's a very, very good and continuous development for medical in general. It's wound care, as I said, but it's also this quarter actually a lot in compression. So good development overall in the volume sense. Now, if I go then to consumer goods, geographically, we are growing everywhere when it comes to incontinence and feminine. It continues with strong growth in both of those areas. Ulrika mentioned earlier that baby is looking a bit better. And of course, this is due to a much better performance in our Nordic region. a branded area with libero so we've taken market shares there it's still challenging on the european market for the retailer branded european market for baby and that will also remain for for a few quarters to come most likely but it's looking a lot better so you may remember that we had a volume decline of about four and a half or or in that vicinity volume decline in baby in q2 and a similar decline also in in Q1. And this quarter, it's been about 1% decline. So it looks clearly better. On the other hand, as we have already talked about here, consumer tissue is a bit more down, negative growth. And this is because we have prioritized margin rather than growth in volume. And we do continue to see actually a a down trading in that in that market so volumes not so good in in consumer tissue finally professional hygiene looking a lot better and the volume decline is still there is minus one percent roughly and and of course that's a lot better than what we saw in q1 and q2 so clearly looking better as before it is a base assortment that is declining and the premium products or strategic products as we sometimes call them dispenser base is continuing to do quite well in terms of growth so overall mix is actually continuing to behave very very well in professional Hygiene. So turning a bit to price and mix, as you see, 0.7%. This is basically most of it actually related to price. And you can see from the slide here that consumer goods and professional hygiene both performing well in terms of price performance and health and medical is slightly down. This is all actually in-co. So this is selective price declines that we have seen. that we have done we did talk and rika mentioned it earlier that we also have sequentially a little bit lower prices in professional hygiene this is deliberate we wanted to on top of expanding our value offering in professional hygiene we also wanted to grow more generally by by selective price decreases so if you look at just sequential price decreases we also see a little bit of that in professional hygiene deliberate So that's pretty much it on the volume and organic sales size. So turning to our margin, that is improving both sequentially and year on year. So if we look at decomposed year on year improvement, you can see that a lot of it is coming, of course, from the gross profit margin. And most of it, as we've already talked about, relating to obviously price, to a smaller degree on mix and volume, but a lot of it is price. We also actually have a positive development in our cogs, and this is no surprise. Raw material is performing better and so is energy. But we also have other cost items there. One thing that we have talked about a lot is, of course, the savings that we do. In this particular quarter, we had about 115 or so in savings, which we were happy about. Generally speaking, it has been a tough year when it comes to saving in COGS. And we still aspire to reach our annual target range of about 50 to 100 million euros. We're not there. We aspire to get into that range for the full year. But it is challenging. And this is, of course, due to the relatively low volume development that we have in our production. So that makes it a bit more challenging to get to our target range. AMP, not surprising, we've increased the absolute spending level and also as percentage of sales, and this is a profitable proposition. We know that the return of AMP spend is attractive, so this is why we do that. We talked a lot about SG&A previously, and we've also announced measures to actually you know to to make the growth rate to become much lower and there has been a lot of success there so clearly when you look at our stna development is much better now than we've seen in the previous quarters the the growth in particularly it and personnel cost is lower now let me just point out though that there is a portion a smaller portion i should say of the improvement that relates to lower bonus provisions so the improvement is not As strong as you see here, there is a smaller portion that is due to that. But I'll come back to the future in a second. But generally speaking, if you disregard that, underlying performance of SG&A is much lower than the inflation rate. So the measures we've taken has clearly paid off. Now, finally, there's a bit of other here. This is just a one-off in last year, actually. We had an insurance payments last year. And we didn't have it this year, so that's the final part. So overall, a very, very good quarter, I should say, for the group in terms of margin. And basically, you can see year on year that health and medical and professional hygiene are still slightly down and consumer goods up. But if you look at it sequentially, which we're happy about, both health and medical and professional hygiene have turned a little bit and actually now improved. So all in all, a good margin development. Turning to cash flow, just some short comments. Generally speaking, quite a good quarter, both in terms of underlying cash generation, but also in terms of working capital. We were not so happy about working capital in the second quarter. Much better looking this quarter. So when you look at accounts receivables or accounts payables in working capital the days are roughly about the same it's still a bit too high when it comes to inventory we are working our way down to that so hopefully we'll see a good development in working capital also as as we go as we go forward and finally the balance sheet as a consequence of that strong strong cash flow generation we have been able to in comparison to the six months balance sheet we have been able to reduce our our net debt with about three billion or so and of course our net debt ebta ratio is now down to 1.2 I think this is a good, perhaps, opportunity to give you a little bit about the flavor for what we expect for Q4. I mean, again, we don't give that much of a forecast, but let me just give you a little bit. Starting with COGS, perhaps, we expect that COGS will actually, from a year-on-year, compared to Q4 of 2020, we expect COGS to be lower this quarter coming up in 2025. And the reason is mainly driven by input cost and particularly so pub cost. So we expect COGS to be lower. When it comes to AMP, We expect it to be flat to higher compared to last year, so Q4 versus Q4. We expect to spend more in AMP. As I said, this is a good return on those investments. And finally, when it comes to SG&A, this is worth mentioning that we... will have also in comparison q4 q4 a fairly low growth rate so clearly we will retain that lower growth rate than we've had in the previous year but just worth noting that from a sequential standpoint q4 q sgna excluding amp is always much higher so sequentially you should expect higher cost but year on year and quite a low growth rate so finally i guess just a reminder perhaps we have our financial targets they remain intact so more than three percent in organic sales growth and more than 15 percent in any bit margin excluding items affecting comparability as you know as you've seen here in q3 we're close to our margin target and of course we got some work to do when it comes to our annual organic sales growth and that to rika i guess you will talk more about

Yes, thank you, Fredrik. So the question then, of course, is how to deliver on those financial targets. And you all know this, but I think it's worth repeating. We will deliver on our targets by prioritizing the categories, segments, market and channel combinations that has the highest potential for profitable growth and where we have a clear right to win. We will deliver on our financial targets not the least by delivering differentiated innovations that are driving market share development and pricing power. Also by having the most effective and efficient go to market. It should be easy to do business with Essity. Also to really find efficiency savings across our full value chain and not the least to continue to grow our people and to continue to build that winning culture that we have. Now, I've said before that this strategy is highly relevant and is something that we continue to execute on. My focus has been how do we accelerate the execution on this strategy? Because I see significant potential for us to fuel growth and improve our performance. For example, we could unlock the full potential of our portfolio by sharpening our focus on the most attractive categories and segments. Also, I see opportunities for unleashing the full power of our organisation by creating more end-to-end accountabilities, by decentralising decision-making and reducing our operational complexity in the organisation. And we could, by freeing up resources to reinvest in AMP and in our growth initiatives, we could drive profitable growth more forcefully and also be more competitive. And those are the reasons why we are now then launching two initiatives. The first one is the reorganization, to become faster, to become more agile, and also to sharpen our focus. What we will do is that we will create four new business units that are global and based on our product categories. They will have the full P&L responsibility and also have the end-to-end accountability. And that is what is different from before. Those four business units will be health and medical, personal care, consumer tissue and professional hygiene. And consequently, we will start reporting financially in these segments as from 1st of January 2026. Now, the benefits with doing this is that we are decentralizing decision making, we are cutting out duplication, and we are becoming more consumer and customer-centric. And by that, we will be faster in our decisions, we will be faster in our execution, and we will be faster in responding to evolving consumer and customer needs. We will furthermore sharpen our focus then on the most attractive categories and segments. Now, what I've explained now is how this organization will become more effective, but it will also drive efficiency since we are simplifying the structure. And those efficiency gains is the key component of the cost saving program that we're also launching. And this cost saving program is expected to generate a saving of one billion SEK and have full effect in the run rate by end of 2026. It's primarily SG&A we're talking about, and that is on top of the COGS saving program that we have, that Fredrik was alluding to before, that is generating 0.5 to one billion SEK annually. Market investments are excluded. In fact, it's important that we at least maintain both AMP as well as R&D investments in order to fuel growth. And we want to reinvest the savings that we generate into our growth opportunities in higher yielding areas where we also have a proven track record of high return on investments. So with these two measures, we will unleash the full power of the organization, we will free up resources that we can invest in profitable growth, and we will unlock the full potential of Essity's product portfolio. Now, let's summarize the quarter before we move into Q&A. In the quarter, as you have heard, we delivered positive organic sales growth. We strengthened our profit margins, had a good cash flow and delivered a profit above 5 billion SEK. We also launched two measures to improve performance and fuel growth. And needless to say, looking forward now, two of our key priorities will be to implement this organizational change as well as to achieve the SG&A and COG savings that we have been talking about. In parallel with that, of course, a priority is for us to continue with our efforts to drive volume growth and profitable volume growth in a challenging market environment with the ambition to perform while we transform. Thank you.

Thank you, Ulrika, and thank you, Fredrik. We will now move into questions. Just press star one on your phone if you have a question. And please try to limit your questions to one at a time, because that will give Ulrika and Fredrik the possibility to give you the best answers. Are you ready to start with questions? Yes. So let's move into questions. And we have a first question from Erin Adamski. Good morning, Erin.

Hi, good morning, Sandra, Ulrike, Frederick. Thanks for taking my question. My first question is on the divergence between lower COGS picture and the prices which are higher. In that context, it would be great to hear what are your expectations for pricing across your biggest categories over the next couple of quarters. And also, are you currently seeing any pressures from retailers to rollback prices or maybe the competitive pressures accelerating?

If I start, I could say that as I mentioned, when it comes to consumer tissue, there is a high price competition across that business. And of course, also in other parts of our business, it's a high price competition. And we always look at ways to balance, of course, volume growth with having a good pricing performance. We've talked before in Q2, but also this quarter, about the selective price adjustments that we do in professional hygiene, which is to fuel growth and to adapt to the market situation that we have there. Anything you want to add, Fredrik?

No, not really. I mean, we didn't specifically talk about sequential price movement now in our presentation here, but we've seen a bit of price decline sequentially in IncoHealthcare and professional hygiene and baby, as you alluded to. And these are deliberate, basically. I think it's fair to say... We also saw a very, very tiny price sequential decline in consumer tissue. And exactly as you say that, of course, there is more room for that potentially when pub comes down even further. But again, it's very difficult to discount. We always try to maintain a very solid price management, so it's difficult to comment in advance.

I hope I answered your question, Aaron, did it?

Yes, that's perfect. Thank you.

Thank you, Aaron. So now it's time for Oskar Lindström, Danske Bank, to ask a question.

Hi, Oskar. Hi. Good morning. A couple of questions from me. First off on the cost savings. Of the one billion, how much should we expect to sort of drop down to the bottom line or to EBIT? And how much will be reinvested in EBIT?

increased amp spending that's my first question should i go on with the others no let me answer that one first because as i said primarily we we we are going to reinvest that saving into into profitable growth and then you will see the effect on margin as we grow volumes and then we'll have the operating leverage of margin right and about the timing here uh should we expect the sort of reinvestment into amp then to

sort of come at the same time as the cost savings are being implemented or before? What's the timing going to look like? Essentially, what I'm looking for is, is this going to have a positive and negative impact on EBIT margins during 2026?

If I start with the way we will work with this is that as the savings materialize, we will then have freed up resources that we can reinvest. So it will coincide to a big extent. Fredrik, do you want to comment on margin development in light of that?

No, I think one thing, Oskar, maybe just to remind you, is that we've always said that what will bring our margins higher is basically operating leverage. So it's volume. So what we are now doing is using the freed up, as Ulrika just said, we are using the funds that we free up to leverage. fuel volume growth and that volume growth in its in its turn will will enhance margin that's the plan so it's not our intention to boost if you say the margin with the cost saving program but rather to reinvest it as the savings occur does that make sense yes yes thank you and just a final question on the sort of balance between uh

lower-end private label and your own branded or higher-end branded products. I mean, in a lot of other consumer segments, we've seen this deteriorating from the producer's perspective in that consumers are down-traded, and you've also mentioned this in the past. How is that developing? Are you seeing any, you know, is it worsening the same signs of an improvement?

I would say if we're talking consumer tissue here, it's pretty much the same. I mean, we see that there is a downtrading, and that is what we see in our branded businesses is declining. And the private label market is increasing. And I don't see any major movements. It's quite similar to what it's been.

Right. Thank you. Those were my questions.

Thank you, Oscar, for your questions. So to ask a question, please press star one on your phone. And as I can see, Patrick Folan from Barclays, you have a question. Please go ahead.

Hey, good morning. Thanks for taking my questions. I just joined, so I'm sorry if I'm repeating questions I've already asked, but two for me. On health and medical, can you maybe walk through any kind of contracts that were gained or lost during the period and maybe how you see kind of the outlook for the segment, considering your experience there, and maybe more specifically kind of looking at the reorganization and the change in structure. I mean, what was behind the decision to strip out personal care and tissue from the consumer goods unit? Is there more focus trying to go into certain segments, or is it just trying to have more disciplined cost strategy in terms of how you allocate resources?

Thank you, Patrick. If I start with the first question, I think if you look at health and medical, it's a lot of contracts, especially on the medical side, but also on the INCO side, it's a lot of contracts. So we don't necessarily talk about all those individual contracts and what we have gained and lost and so on over time. I think in the incontinence care healthcare arena, it's quite stable when it comes to our contract base. And in health and medical, as you can see, we are continuing to grow. So we are growing with new contracts and taking new business as well as with growth within those contracts that we have. Then if we move to the organization. So there is the intention, as you heard me, or maybe you didn't hear explain, you said you came on a bit late, but we want to create this end-to-end accountability. And to do so, we want to work then with the different product categories more separated, because then that allows us to have that end-to-end accountability where the business unit and the one P&L responsible is responsible for innovation, marketing, supply chain and sales. So that is one reason. Another reason is that it allows us to focus on the most attractive categories and segments. Both that personal care comes more in the limelight and that will drive performance and focus on personal care. But also in consumer tissue, it allows us to focus more on the most attractive segments within that category. And then I would say thirdly is that personal care and consumer tissue are businesses that have quite different character. And by running them separately, we can optimize the way we work based on the specific business drivers in those two businesses.

Okay, clear. And just to follow up on that, in terms of the benchmarking exercise for the SG&A kind of cost program, how did you guys arrive at that kind of $1 billion number, I suppose?

Maybe I can try and answer that, Patrick. So two things. We looked at the reorganization if we start in that end and we looked at what kind of... savings potential that organizational change actually brought with it so so that's that was a starting point we also looked at our other buckets of sgna and we looked at where we could optimize that that spend so as an example our it spend as we go forward you you will perhaps remember that we've had a very, very significant increase of our IT spending for various reasons over the course of a couple of years. We now feel it's appropriate to actually reduce that as an example. So there are many different things that have gone into that analysis, but the main part is actually related to the reorganization that we have described here today.

Thank you, Patrik. I hope you have your answers to your questions now. Then we will move to Niklas Ekman, DME Carnegie. Hi, Niklas.

Thank you. Hi. Hi. And can I ask you about use of funds here? Because you are now generating cash flow in the range of 12, maybe 13 billion. You have dividends that are slightly below 6 billion and buybacks of 3. So you're essentially now improving your balance sheet significantly. Can you elaborate a little bit on your thoughts here on M&A potential? Are you saving for future M&A potential? Is there scope to increase either the dividends or buybacks? Or what's your thoughts here on the use of pubs?

Well, if we start with the dividends, we stay with our policy to increase our dividends over a year and stay true to that. Then we see buybacks as a recurring way to allocate capital, so that we will continue with as well. Then the good thing is that we have, as you say, a strong balance sheet, so we can both invest in organic growth and e-leverage, and we can have the funds to invest in an M&A should we find something that is value-creating. You want to add anything, Fredrik?

Just how is that market now and the potential for you to do M&A and also considering the valuation of your own shares at the moment?

Well, I think we talked about that last quarter as well, right? That, of course, we want to be careful in making sure that our M&As that we potentially do are value creating. And then there has to be the synergies to bridge that gap between the valuation of a potential acquisition and our own valuation.

Very clear, thank you. Can I also ask about US tariffs? That was not a big, but still an issue in the Q2 results. What is it looking like now? How is it impacting you?

Maybe I can take that, Niklas. We've had this quarter Q3, 110 million roughly. And we are looking at a lower number, about 70 million in Q4. And the reason between the difference between these numbers is simply that the Canadian government has actually taken out the tariffs on our exports from the U.S. to Canada. So this is the difference. So as I said, Q3, 110, roughly about 70 in Q4.

Thank you, Niklas, for your questions. Thank you, Niklas. The next question comes from Antoine Prevost, Bank of America. Hi, Antoine.

Thank you. Good morning, everyone. Good question for me on Latin America. I mean, continue to be strong compared to, I mean, maybe some of the part of staples which have been a bit weaker there. Anything specific you want to flag? It's you many continue to gain market share there and you expect that to continue in the coming quarters? Thank you.

I don't want to necessarily comment on the coming quarters because we don't know how that will play out. But what we can say is that we are doing well in what is a quite challenging market now in Latin America, where the consumer sentiment is changing and so on. But we are growing very nicely. We talked earlier now this morning about the feminine brands, for example. that is doing very well. And also in our consumer tissue business, we are growing in, for example, Mexico. Also, our incontinence business is growing very well in Latin America. So overall, it's looking good for us in Latin America. Perfect.

Just to follow up, I mean, is it more like innovations led to market share or is there something else there?

Can you repeat, sorry? Antoine, can you repeat your question?

Yeah, no, sorry. Is it just what's driving this different strong performance in Latin America and the different categories you defined? Have you launched new product there or what has been backing that?

It's a combination, as in many cases. If we look at consumer tissue, we've had a quite good promotional season that has helped to boost growth in that category specifically. In feminine, as I shared, we have a new launch and we have a very strong offer that we continue to invest behind and we get the payoff from those investments. But in most cases, it's a combination of really marketing our attractive offer, adding on new innovations and upgrades to fuel growth, and then also promotions.

Thank you. Thank you, Antoine, for your questions. Let's now move to Charles Eden, UBS. Good morning, Charles.

Hi, morning, Sandra. I just want to clarify your comments because I think there is perhaps an incorrect interpretation this morning looking at how the share price has developed during the call. You said the cost savings are not going to improve the margin of the group, which one could conclude means your cost of business is going up and therefore you need to spend more just to stand still. Am I correct? What you're trying to say is you will reinvest these 1 billion cost savings into the business with the aim of driving superior volume growth and market share gains. And then these factors should contribute to stronger margins over time, as opposed to just trying to cut costs to drive the margin improvement. Is that the right way to look at it? Because I think maybe that's been misinterpreted.

Exactly.

OK, thank you. I think people have sort of interpreted you saying we need to spend more just to stay where we are on the margins. And that's not what you're trying to say, right? You're trying to say, look, we want to drive it through market share gains to push the margin higher rather than we have to spend more to stand still.

Exactly.

OK, thanks for the clarification.

Thank you for clarifying for us. Very helpful.

Thank you, Charles. Then I think that we have another question from Aaron Adamski, Goldman Sachs. Is that right, Aaron?

Yes, I have two very quick follow-ups. Firstly, on baby care, I think clearly the business performance improved sequentially, but it's still below the mid-term outlook that I think you laid out at the CMD last year. I was just wondering, since your targets were formed initially, do you think there has been any fundamental shift in the category fundamentals, specifically in Europe, that could perhaps make the initial goals more difficult to achieve in the longer term? And then the second follow-up is very quick, just on consumer tissue, and sorry if you mentioned it already. How is your private label business performing both on volume and pricing? Is that still a significantly accretive part to this category? Thank you.

If I start with the first one, I'm not so sure about the time horizon here, what we are referring to, but generally speaking, I could say that we do see the lower birth rates and that is something that continues to develop that has an impact on the fundamentals of the category. When it comes to the weaker climate that we see and that some consumers are more price sensitive, that is more of a temporary situation. So that we expect to change over time. Then with the private label division, that is still a value-creating part of our business, even if we now have lower volumes in that business in the third quarter. As we said, it's a high-priced competition in this category.

And we mentioned it earlier, Antoine, that we have maintained a margin protective stance a bit. So we've been eager to do that. And of course, with high price competition, it is a bit challenging on the volume side. But once again, this is more, you can say, normal fluctuations in that business. So nothing dramatic.

Understood. Thank you.

Thank you, Erik. So I think that we are out of questions or do we have any more questions? Just press star one. I will give you a few seconds to do that.

no i think we're out of questions that means that we can wrap up any closing remarks before we end yes i think we are leaving uh we are leaving a positive quarter uh behind us now and we are launching initiatives that will fuel our profitable growth going forward and just on the on the previous discussion that we had I think it's important to point that out, that we have a lot of belief in our growth platforms that we have and looking forward to freeing up resources so that we can continue to accelerate growth in those areas. And that will drive also margin improvement by operating leverage and mix improvement. So that I want to leave you with. And thank you for listening.

Thank you, Ulrika, and thank you, Fredrik, and thanks to our audience for listening in. And if you have any further questions, you know where to find us. Have a good rest of the day. Bye.