Essity AB (publ)

Good morning and welcome to ESRI's presentation of the Q4 and full year 2025 results. Here to take us through the highlights, we have our CEO, Ulrika Kolsrud, and our CFO, Fredrik Rystad. After the presentation, we will open up for your questions. If you'd like to ask a question, you just have to dial in and press star one. With that, let's get started. I'll leave over to our CEO. Ulrika, the floor is yours. Thank you, Sandra.

And also from my side, welcome to this webcast. The final quarter of 2025 confirms that we are standing strong in a continued challenging market environment. We continue to grow in our strategic segments such as incontinence care, wound care and premium products in professional hygiene. And we strengthen market shares across our different branded categories. We're also strengthening our profit margins. Actually, we are strengthening our profit margins in all three business areas in the quarter, and we deliver a stronger result than last year's same quarter. When it comes to volumes, sequentially, we have a stronger volume, so stronger volume in Q4 versus Q3. Looking at quarter over last year's quarter, however, there is a flat volume growth. And that together with the fact that we are then lowering prices in order to compensate for lower input costs is resulting in that we are reporting a negative organic sales growth. And that underpins the importance of the initiatives that we took last quarter to accelerate profitable growth. We are now operating in the new organizational setup with decentralized decision making, with end-to-end accountability and with even sharper focus on our most attractive categories and segments. And we are starting to implement our cost-saving program. In the quarter, we also strengthen our position for profitable growth by acquiring the Edgewell Feminine Care business in North America. And now with the brands Carefree, Stayfree and Playtex in our bag, we are more than doubling our personal care sales in the US, in line with our focus on high yielding categories in attractive geographies. Another key highlight of the quarter is that we again got recognized for our strong sustainability performance. We were awarded for the Ecovadis Platinum Medal, recognizing our sustainability performance. placing us among the top 1% companies worldwide that they are assessing when it comes to sustainability performance. And also we have been placed on the CDP prestigious A-list. I would say sustainability performance is important in all of our business areas, but not the least in the healthcare sector. Many of our customers in the healthcare sectors have high ambitions when it comes to sustainability. One good example of that is one of our biggest customers, NHS in the UK. They continue to pursue ambitious sustainability agenda, even if there is financial pressure with the increasing demand for healthcare and funding under pressure. And speaking about funding under pressure, we talked already last quarter about that. We see in some selected markets that there are some cuts in funding, and we continue to see that, for example, in Indonesia. That does not, however, prevent us from growing. Quite the contrary, we have a positive organic sales growth in health and medical, and we grow volumes both in incontinence care as well as in medical solutions. If we double-click on medical and the medical business, this is the 19th consecutive quarter that we grow the medical business. And we grow in all three therapy areas. A critical success factor behind this good performance in health and medical is of course our strong and unique offers that we have. And we continue to strengthen those offers. In the quarter we upgraded one of our flagship products in the Tena assortment, the belted Tena Flex product. This product is specifically easy and ergonomic for caregivers to use on bedridden patients and in this quarter then we upgraded it with an even better comfy stretch belt. The elasticity is better so it adapts easier to different body types and thereby you can use this product for more patients. Also in the quarter, we relaunched one of our unique offers in the advanced wound care assortment, the Cutimed Siltec Sorebacked product. And in connection with that, we kicked off a new brand campaign for Cutimed on the theme of imagine a world where wounds would heal faster. And in this campaign, we showcase how our unique offers are helping healthcare to improve patient outcomes and reduce healthcare costs, thereby improving health economic or bringing health economic benefits. And it's, of course, leveraging these unique advanced solutions that is helping us and contributing to our performance in wound care and allowing us to gradually strengthen our positions in this category. Strengthened positions is also the theme if we go to consumer goods. In the quarter, we strengthened our branded market shares in more than 65% of our business. And this is not only attributed to one of the categories, but it's actually contributing from all four categories. Looking at incontinence care, there we strengthened our market shares, and also it's a fast-growing category. So as a result of that, we saw very good growth in incontinence care. In feminine care, we were impacted by a one-off, but underlying, we continue to perform very nicely also in this category. And that is demonstrated through the market share development that we see. In fact, in feminine, we grew our market shares in 80%. of our business. And we had also some good records that we saw in the quarter. One very exciting of those is that we now in Mexico have 62% market share in feminine care. And as you know, Mexico is one of our most important markets for feminine. Another exciting development in the quarter in Feminin was that we now are back to growth in NYX washable absorbent underwear. And that is thanks to new retail listings, higher prices, as well as product launches. Then if we move to baby care and consumer tissue, here we saw an organic net sales decline. And this is for the same reasons that we have talked about previous quarters. So in baby, we are impacted by the lower birth rates and also the fierce competition that we see and consumers being more price sensitive than what we have seen before. And in consumer tissue, it's the weak consumer sentiment that makes the growth happening mostly in the mid and low tier segments. And we also lost some private label contracts due to pricing. Then it's very encouraging to see that we are growing our branded business, both in baby as well as in consumer tissue. And that's a testament to the effect of our launches and our marketing activities. They are really paying off. And we continue to have a very high activity level in consumer goods. As you can see here on the slide, there are many different launches to talk about in the quarter. But in the interest of time, I have to choose one of them. And I choose to talk about the upgrade of our thin assortment, our thin towels in feminine care in Latin America. So having thin feminine pads is of course more discreet and comfortable than using thick pads when you have menstruation. But even so, many women actually choose thick pads because they don't fully trust the leakage security of the thinner ones. Now with this upgrade, we are introducing a new core technology that we call Smart Protect that manage even sudden gushes and thereby increase leakage security. And for that benefit, we have actually two benefits of that. One is of course that we strengthen our superiority even further in this ultra-thin segment in the market, but also that we move consumers from the thicker pads to the thinner pads, which is a benefit because we normally have higher profitability in this segment. Now, the activity level was also very high in professional hygiene in the quarter. Here, market growth continues to be depressed following the weak consumer sentiment, and we see that as impacting our sales. But we are responding to that by continuing to have selective price adjustments, continuing to work with joint sales plans together with our distributors and also adapting our assortment. In this situation, it's super important to be competitive in all different price tiers. And in the quarter, we launched some what we call volume fighter specifications to make sure that we are at the right price point for the customer. We expect this to pay off in the coming quarters, but what has already paid off is really our push in the premium segments. So we continue to see strong growth in our premium segments in professional hygiene like TORQ Skincare and TORQ PeakServe. We also continue to develop these products even further. So in the quarter, we launched an automated sensor-based dispenser for PeakServe, in addition to the manual one that we have already. And that will broaden the relevance of this premium solution in the markets. We are also broadening the relevance of our center feed dispenser solutions. The center feed dispenser solution allows you to take one sheet at a time, which is more hygienic and it also controls consumption. So it's cost efficient for our customers. Now, in some segments, it's more important with design than in others. A good example of that is in restaurants that have an open kitchen. Then, of course, you are very dependent on a good-looking dispenser. And if you see on this picture, the black, stylish dispenser here is what we launched in the quarter. And that is really a very strong fit into these type of environments. I would even call it decoration. It's really nice. Also, we launched a new refill paper with the natural color that also has a lower price point. And that is then an excellent choice for those customers who are either very price sensitive and or want to work with their sustainability image. Now, all of these innovations that I'm talking about, they have two purposes. I mean, one is to expand the relevance of the product, but also, of course, to drive product superiority. And with product superiority, we mean that it's the preferred choice by customers and consumers. And looking across categories in 2025, we reached a record level when it comes to product superiority. And that, of course, makes us very well equipped to continue on that positive market share growth that we have seen in the fourth quarter of 2025. And now, after all of this talk about products and innovations, I'm sure you guys want to hear a bit about the figures behind this. So over to you, Fredrik.

Thank you, Ulrika, and I will I put a few numbers to what you have been talking about here. And as you can see, and you've already mentioned it, we actually had, in terms of organic sales, a negative development during Q4. And this is basically driven by price decline. and a slight volume decline. It's maybe worth noting or perhaps repeating what you said, Ulrika. We are taking market shares, so this is very much a market issue. And if we actually look at the sequential development of volume, it's always a little bit of seasonality. But nevertheless, you can see that we actually grew our volume sequentially between Q3 and Q4 with just under 2%. So it's a good momentum, despite the fact that we have a decline Q4 of 2024. I mean some of you will actually remember that Q4 of 2024 was very strong so we also have a bit of different difficult comparables. Now as before the volume decline is very much driven by baby or same as in Q3. Our baby business, our consumer tissue business and also professional hygiene and these all are leading to the group decline of volumes of of minus 0.2 percent so just really brief health and medical you've said it Ulrika we had a good volume development in both inco health care and medical and if you look at the medical area actually all therapy areas and especially wound care so that story you will will remember and if you take talk about price and mix largely flat in health and medical. Consumer goods, Inco really, really doing very well in terms of volume, Inco Retail. Feminine is as well. It's a little bit, it's a positive volumes, just under 1% of positive volumes. And that is actually despite a fairly weak market in Europe. So overall, you can say we are growing, but the European market is a bit challenging. Ulrika talked about a one-time issue in feminine, and that is related to an adjustment that we have made of customer rebates in Latin America. So we've increased those, and that has actually... impacted sales and the pricing components and this is why you see a negative organic sales growth for feminine and this is temporary for the quarter it will go back to normal in in the next next quarter and if you actually adjust for that we have stated that the underlying good growth is is good and and so what we mean by that is that growth would have been organic sales growth would have been low single digits, to give you a little bit of perspective. When it comes to baby, again, we are gaining in our branded business in the Nordics, but we are losing, continuing to lose in... in the rest of the retail branded business in Europe, and overall volumes are down with approximately about 4%. That's also for the market as a whole, so it's not just us, but it is a very competitive market in Europe. And this is also why we are losing volumes. And finally, consumer tissue, we're struggling a bit with volume there, minus 2%. And this is all actually related to private label. We have talked about this before, so there's no news here. We have lost a few contracts on the back of... of pricing and of course we have always prioritized margin over volume but of course we don't want to lose volume so we have selectively actually reduced prices in consumer tissue and hopefully that will pay off as we go forward. Horeca, we've talked about professional hygiene and this is of course still leading to a slight volume loss of about a half percent. And there are signs here of at least stabilization of the Horeca markets. So here we're hoping for better conditions going forward, but their time will tell. And to summarize maybe for the group, minus 0.2 in terms of volume, minus 0.9% in terms of price, and mix is actually flat. So that sums it up a bit. Then if I go to the margin... You can see that we've improved our margins, both if you compare between Q4 of 2024 and Q4 of 2025, and sequentially. And it's not only for... for the group it's actually for all the business areas gross profit as you can see increasing by 180 basis points and this is on the back of of lower cogs as we flagged when we talked to you last or after q3 so that actually happened and we've maintained a very good price management in the quarter, all of that leading to that very good improvement of the gross profit margin. The COGS reduction is all about, I should say, raw material energy, but we actually, and this is a little bit of, we're proud of that, we managed under tough conditions to reach also our COGS savings of just above 500 million so you will know our target for the year was 500 to a billion and we said we were struggling to reach that our that range but in the end we actually managed to do that and that contributed to that margin enhancement as you can see we and we've said that we want to fuel our our growth we want to fuel our our innovations that we put on the market. So we are spending more in terms of AMP, and that's both percentage of sales-wise and as an absolute number. When it comes to SG&A here, you see that it's actually favourable. So we have reduced in terms of absolute. Also in constant currency, we have reduced our spending in terms of SG&A. And this is due to, of course, a tight cost control. That's not surprising to you. We've reduced our travel, as an example, with more than 30%. We have a bit of lower bonus accruals. And there is also a bit of one time here that is positive. So it's not as good as you see here. There is a bit of one time. But if you look at the overall group, there is also positive and negative one time impacts in the results overall. all the one-time impacts are balancing off for the group as a whole. But all in all, we're quite proud of our SG&A performance. So let me then just talk a little bit about the SG&A program, the cost-saving program that we have launched previously. And as you know, we're aiming for a run rate saving of 1 billion towards the end of 26. Now, we are... actually aspiring to reach quite part of this saving already throughout this year but that will be more towards the latter part so you can expect more of the savings so far we have realized very very little and we've also put fairly little in terms of restructuring charges we expect the cost of this program to be a bit over 1 billion so approximately 1 billion 1.1 billion SEC in restructuring charges. Let me end this part with a little bit of guidance for Q1, as we normally do. We expect actually COGS to be slightly lower, partly from savings, but also a little bit from currency or positive currency impact. in raw material. So slightly lower COGS, that is what we expect. And we are expecting a slightly higher SG&A. And please remember, I'm now giving you guidance Q1 of 26 versus Q1 of 25. So we are expecting slightly higher SG&A, and this is primarily driven by higher A&P in line with our ambition to fuel growth. And customary, and you know that, we also give you a little bit of guidance for the full year. And we expect capex to start with that between 8 to 8.5 billion, a bit higher than we had in 2025. And this is actually partly facing and just ambitions to grow as we go forward. We expect other costs or the corporate cost, if you will, to be approximately 1.3, so very similar to this year or to 2025. The structural rate tax rate to be between 25 to 26%. And then finally, on the COG savings, we remain with our estimated range of 500 to 1 billion SEK. So let me move on then to the cash flow side. We're quite pleased with the cash flow here in Q4. This is driven by, obviously, a good cash surplus. The margins was good. So this was a good operating cash surplus. But we also had good working capital management. So inventory days came down a little bit, continued to do that. and and we had unchanged credit days both in receivables and and payables so all fine in terms of of working capital and net cash flow was also quite quite strong and this cash flow has driven a continued strengthening of course of our balance sheet so net debt ebta is approximately one here as as you can see at the end of the year we've continued to to repurchase shares in line with our programme that we launched with 3 billion SEK. And so far we have... Purchased 9.2 million shares or totally 2.4 billion. So we are roughly about 80% through this year's program. So let me then finalize with a little bit of overview of 2025. In many aspects, this was a good year. We had an organic sales growth of 0.9%. and this is despite challenging market conditions we actually had growth in all our business areas we maintained our volumes and price management remained strong for for the entire year in terms of margin. We've already talked about that, but it was a very, very good year in terms of margin. In fact, if you look at that operating margin of 14.1, it's the second highest we've ever had. It's second only to the artificially high margin during the pandemic that was caused by all the panic buying, for those of you who remember. So this is, from an historic perspective, a very attractive margin. And then turning a little bit to what does that imply? And some of you may have seen from the report that our EPS growth was, if you look at it between 2024 and 2025 in nominal terms, roughly about 1% growth. Now, of course, the Swedish krona has strengthened a lot. So if you actually look at the EPS growth in comparable currencies, you will see a growth of roughly about 8%. And this is quite consistent with the long-term growth of about 6% if we start with the birth of SET as the first year. So continued good performance. And this is, of course, on the back of good margins, the growth we've had, and, of course, also a shrinking finance net, as our net debt has reduced. Finally, then, the board has or will propose to the AGM a dividend increase of 50 euro to 8.75. This represents an increase of about 6%. And if you look at, once again, from the birth of Essity, you can say this is consistent with the growth that we've had, roughly about 6% or a total growth of 52%. So, with those words, leaving over to you, Erika.

Yes, thank you, Fredrik. And with that, we are leaving a solid 2025 behind us. We finished the year with stronger market shares, with continued growth in our strategic segments, and not the least with strengthened profit margins. It's been from an external perspective a quite turbulent year with a lot of geopolitical uncertainty and a weak economy. And that has of course impacted also our industry. And we see that the resilience that we have shown during this is really a sign of strength. As Fredrik has shared, we have grown organically during the year. We have strengthened our profit margins, and we have now the strongest profit margin in five years. And we have delivered a solid result. So we are proud over this, but we're also determined to accelerate our profitable volume growth and to speed up our progress towards our financial targets. And therefore, the initiatives that we've launched earlier than in 2025, with the reorganization, with the cost-saving program, and with the acquisition of the Edgewell feminine care business in North America. And we bring those initiatives with us together with the very strong financial position we have into 2026, where we remain fully committed to our strategy to drive profitable volume growth. And we will do that by first and foremost making sure that we have the customer and consumer at the center in everything we do. We will also do that by continuing on the path to strengthen our market shares and our product superiority. We will, of course, integrate the Edgewell acquisition to strengthen our personal care position in North America. And we will implement our cost-save programmes, both the COGS cost-save programme that Fredrik was talking about, as well as then the SG&A cost-save programme, where we have the ambition to reinvest the majority of that into fueling profitable growth. And also, we will fully leverage our new organizational setup with end-to-end accountability, with more decentralized decision making, and also with even sharper focus on our most attractive parts of our business, so that we can unleash the full power of our fantastic SCT teams, and also to make the boat go faster. Speaking about our fantastic SCT teams, you have the opportunity to meet some of them if you join us in our Capital Market Day on the 7th of May. We will host that in our Möndal office in Sweden, which is our largest office. And you don't want to miss the opportunity of hearing more about our strategy to drive profitable growth and to be able to see some of our R&D laboratories in this facility, as well as production facility in the neighborhood. So I really hope to see all of you there.

Thank you, Ulrika, and thank you, Fredrik, for that walkthrough. Now we are ready to take your questions. To ask a question, you need to press star one. And I can see already that we have a long list of analysts that want to ask a question. And therefore, I kindly ask you to ask one question at a time so everyone gets a chance. Ulrika and Fredrik, are you ready to open up for questions? Perfect. We have the first question from Niklas Ekman, DNB Carnegie.

Hi, Niklas. Hi, good morning. Thank you. Can I start asking about your priorities for 2026? Obviously, volumes have been weak now for some time, and now you have a couple of quarters with a pretty strong margin expansion. How do you view that now in 26? Are you willing to sacrifice some of that margins in order to restore volume growth or are you more optimistic maybe about the market now having had some kind of cyclical headwinds that they might turn to some tailwinds in 26? You're thinking there on the mix between organic volume growth and margins and what your priorities are. Thanks.

Well, as we have talked about in previous quarters, as well as in this quarter, we are doing selective price adjustments in order to fuel volume growth, and also we have the intention to increase our E&P investments. We have seen that the investments that we do in AMP is paying off very nicely, as you saw in the market share development. So that we will do. And then the volume growth will give us operating leverage and thereby also securing the profit margins. And since we talk about this and how to drive volume growth, I want to mention one thing that we're also very proud of in 2025 that will support volume growth in 2026, and that is our innovation delivery in the year. We increased our share of sales that is generated through innovations and also the superiority record that I talked about earlier. That shows that we are strengthening our offers to consumers and customers, and that is the base for driving volume growth. Then, of course, we need to make sure we have the right price positioning and that we support those fantastic offers with AMP investments.

Very good, thanks. But do you see any... risk of margins? Or are you looking at maybe sacrificing some of these strong margins now to accelerate growth? Or do you think that you can do both?

Our ambition is to do both. I mean, in some areas, of course, when we have selective price adjustments, that will have an impact on margin short term. But in other areas, we have opportunities to go in the other direction. So that is a continuous work that we do to optimize this.

If I may, Niklas, as you're aware of, and we communicated last quarter that the cost saving program will generate fairly significant savings. And of course, we are aiming to use those funds to actually do what Ulrika was talking about here in terms of fueling growth, both in terms of selective price decline, but also A&P spend. So this is a way to make sure that we can do both, just to emphasize.

Very clear. Thanks. I'll jump back in the queue.

Thank you, Niklas. Next up is Charles Eden from UBS. Hi, Charles. Let us hear your question, please.

Hi. Thanks for taking my question. Excuse me. You mentioned the lower volumes and prices in consumer tissue, private label. Are you able to quantify the organic sales decline for that business in Q4? And can I ask whether the continued challenges of this unit makes you reconsider whether this asset is indeed core to S&T going forward, as you concluded at the most recent strategic review of this asset. And then if I can speak to your classification question, it's the usual one for me, Frederick, on the group EBIT Average. Of the 749 costs of goods sold to hell in the quarter, can you help break that down between raw mass energy distribution? I've got the 190 million benefit from COG savings in Q4 from the press release. Thanks.

If we start with the second question, maybe there, with the reconsidering, I mean, we are continuously looking at our portfolio in evaluating and optimizing our portfolio. Then Fredrik, maybe you can help on the details of the private label part.

Charles, we are not giving the details specifically as to the individual components, so I'm not going to say that, but of course we already alluded to that the majority of the decline in volumes of the 2%, or just under 2%, is coming from there. But it's worth noting that the performance, or actually EBITDA, is really, really good with Consumer Tish Private Label. And we always have a bit of volume volatility in consumer-teached private labels. So I don't think you can draw the conclusion that it's a bad business. In fact, it actually is generating quite a healthy margin and good profit. It's just that for the time being, volume is actually low. Should I answer also? You were asking for the breakdown of COGS, right? Was that your question there? Yes, please. So the majority was related to... to raw materials so that was about two-thirds give and take and then we had energy and energy how shall i say more or less the rest and then if you look at the other cogs which was basically volume decline or less absorption plus new lines etc that was about the same as as the cost saving program so to give you a little bit of indication Does that answer your question, Charles? Yeah, it does. Thanks, Frederic.

Thank you, Charles. Then let's move to the next question. Warren Ackerman from Barclays, please.

Good morning, Ulrike and Frederic. It's Warren Ackerman here at Barclays. Could you maybe dive a little bit deeper on the A&P spend? You're talking about the increase to help drive the volume. I get it's going to be funded from the savings, but are you able to say I think it's around 5% of sales at the moment. But how much do you want to increase that buy? And, you know, what is your current AMP mix in terms of online digital? And how do you measure the returns on that investment? You know, what kind of tools do you have to sort of figure out where and how you allocate that spend? It sounds like it's going to be a big part of the story for this year. So just keen to understand a bit more on the details.

And I can answer to some extent today, but I would also then invite you to the Capital Market Day and talk more about this in detail. But of course, we are eager to measure the return of our marketing investments. So we do that on a regular basis. And it's by doing research on what we produce as well as following up that the activation is having the effect that we expect, both when it comes to purchase intent, when it comes to awareness. and at the end of the day that it's generating the sales and the repurchase that we are expecting. So that we do on a continuous basis to make sure that we allocate the investments to where they do the best job for our brands. That was one question. The other question was more about how much we intend to increase AMP.

Yeah, we haven't specified that. And of course, it's connected also to the innovation that we put on the market, because that always has an impact on the ASP spend. But generally speaking, we are, of course, convinced, and Ulrika, you gave a couple of examples here, that AMP in general is fueling growth and is also profitable. You were asking there, Warren, about how we actually track profitability, return on market investments that we do. We believe we are reasonably good at it. Of course, as you always know, it's really very difficult to exactly have a scientific way of measuring, but we think we are pretty okay with measuring return of market investment. So to allocate where to put it, I think we are doing it reasonably OK. So we can't give you exact answers to your question as to how much or exactly how much the return is. It varies a lot. But generally speaking, we will increase and we think we know where to increase.

Maybe just to clarify quickly, Frederik, I guess I'll press you a little bit from a modelling point of view. I mean, another way to ask it is of that billion sec savings, you know, how much of that will be sort of allocated? to reinvestment. Or maybe another way to ask it is that 5%, how does that benchmark against peers? From a modeling point of view, do we stick in six? Because it's quite a big swing factor, so any kind of help would be useful.

Yeah, it's a great question. And of course, we got this question last quarter, that is this going to impact in the end... the EBIT margin or EBIT line. And we said, yes, it will indirectly. So it's not so that we are putting the savings to our income statement or to the EBIT line immediately. We are investing it. And through that return on market investment, we believe that over time we will both get operating leverage for growth and then, of course, margin enhancement. So And it's not all about A&P. It is also about a combination of selective price increases that we partly have already done, but will do, and A&P increases. So it's actually both. It's very difficult to give you specific details on exactly where. It's many different combinations. Over time, we think it will be profitable. Your final question as to how do we compare, quite difficult to answer that. We are making a lot of benchmarking and trying to adjust for the differences in structures and categories. But I think overall, there is an upside for us to do this. Got you. Thank you.

Thank you, Warren. Let's continue then with a question from Johannes Grunselius from SB1 Markets. Hi, Johannes.

Good morning, everyone. I have a question on COGS again, if you can dive in a bit more there. Because, Fredrik, you mentioned here you will have a slightly lower COGS year-over-year in Q1. In Q4, you obviously had a tailwind year-over-year of 749. It's such a huge COGS pace.

maybe you can provide a range or something on the year-over-year tailwind in q1 that would be very appreciated if you can give any indications please yeah we can so thanks johannes for the question and and we have chosen to guide only on cogs as a totality because understanding all the ins and outs doesn't make things easier to actually graph. So we are typically reasonably accurate when it comes to the estimates of the entire COGS number, and this is why we are giving it to you. But as I said, raw material is largely... They're a bit in and out there, or positive and negative, but it's largely going to be a bit positive. as as an energy as well perhaps if we compare them q1 versus q1 we're going to continue to have a little bit of unfavorable volume comparisons we're going to have a bit of new or cost for new lines that we're putting in place in Q1. And then we'll have a bit of cost savings. So all in all, this will give a slightly lower cost. The main driver actually still being raw material. And if you think about the main driver of raw material, it's actually mainly favorable FX, actually.

Okay, okay. Can I put the question in this way? If we look at the cogs sequentially, are you thinking about more stable cogs or cogs perhaps up a bit, Q1 over Q4?

It's mainly stable. Mainly stable, you can say.

Okay, okay. That's very valuable to know. Thank you.

Thank you, Johannes. So let's move to the next question. Erin Andamsky from Goldman Sachs. Hi, Adam. Let us hear your question, please.

Hi, good morning Ulrike, Frederik, Sandra. Thanks for taking my questions. First, I had a follow-up on growth expectations for 2026. I mean, against the backdrop of lower input cost environment that you highlighted, would you expect price to be negative for the entirety of 2026? And given that context, would you expect to achieve a better organic sales growth in 2026 than you have done in 2025? And then a second, a quick follow-up on the ANP discussion. Can you please give us a sense of how the advertising step-up is going to be phased through 2026? Is it going to be more front-loaded and therefore could we expect the margin delivery to be relatively weaker in the first half of the year, given everything you said on volume, price adjustments and cost savings delivery?

Thank you. I almost forgot the first question after the third question. What was the first question again? Sorry.

Sorry, yeah, just on pricing expectations for 26.

Oh, yeah, it was pricing and volume expectations, that's true. So, I mean, we need to be agile and want to be agile when it comes to pricing because it's, of course, dependent on what happens in the market environment. So we are adapting to both, of course, what happens with input costs, but also what happens when it comes to demand. and need to adapt to that situation as well as being fully equipped to capture the market growth when the wind is turning. So therefore, of course, there are scenario planning and so on, but to be agile is most important. When it comes to organic growth, Yes, our ambition is clearly to move towards our financial target with 3% organic growth. So our ambition is to accelerate our growth. But again, we are in a volatile environment. is so important for us and that's why it's so great to see that we are strengthening market shares in this quarter because when the market is as volatile as it is what we can focus on a lot is to win the relative game and what we see in the quarter is that we're doing exactly that and what's also important for us is that we win where it matters the most and that is to drive our strategic segments So that was an answer to say that we need to stay agile and see what happens in the market and then adapt to that.

Perfect, Aaron. Does that answer your question?

Yeah, just on the second question on the phasing of margins, I suppose, for 2026. Maybe if you could give us a bit more color on how the step up in A and B is going to be phased and how is that going to impact the margin phasing for there? Thank you.

Maybe I can... We don't give those kind of detailed guidance, as you've seen, Aaron, but just maybe as a little bit of still a hint, or two maybe even. First of all, you can see that Q4, as we have just reported, was higher than Q4 of 24. So that step has already actually happened. And if you remember, I mentioned maybe you didn't... you weren't participating, but I actually mentioned that we do expect higher SG&A cost in Q1 on the back of higher AMP. So this gives you a little bit of hint. So we believe that the higher AMP cost will be there immediately, actually already is there higher, if you see the numbers. Great. Thank you very much.

Thank you, Eren. Now let's move to Tom Sykes, Deutsche Bank. Hi, Tom. Please let us hear your question.

Yeah, morning. Thank you. Would you be able to say how the AMP to sales for you differs by category? And just what are the categories which would have the greatest elasticity to increased AMP spend, please? And maybe just in addition is what's happening to your trade retail spend? And how big is that in the COGS costs, presumably? Thank you.

Well, if we look at AMP to sales, it's the categories that you find in personal care that has the consumer brands, that has the biggest AMP spend in relation to sales, or I should say AMP investment, rather, in share of sales. Then if you look at a category like wound care, for example, you have a much lower AMP in relation to sales. There, it's much more about the sales force and equipping the sales force with the right products and support. And you find that fueling growth is through the sales force. And then we have everything in between there.

Okay, thank you. And in terms of sort of the elasticity, where do you think the best place to allocate incremental AMP is? Was it just across the board?

Yeah, this is more about where we have our most attractive segments and categories. We want to invest the most where we have the highest potential for profitable growth and the strongest reason to win. So I think what you've seen here also now is that we've had good effect of investing, for example, in feminine care as well as in incontinence care. But we do want to... want to fuel growth across our categories. But that should give you an indication.

And I guess, Tom, your question on trade spend, are you referring then to promotional activity there, I guess, right?

Yeah, I guess it's yes. And with retailers.

Yeah. And that is by far consumer tissue traditionally. So the promotional, the percentage of all products sold on a promotion is by far highest in consumer tissue.

Okay, so that's just sitting in your reduction of your revenues. It's a pricing issue.

It's a way you can say they're pricing activity. They're strategic. So kind of headline pricing. And then you've got tactical pricing. And so promotion is a tactical is what you do on a more temporary basis. So it's not this price adjustment.

Some of it. Sorry. Is there not spend that you would do on the advert on the websites of major retailers to get up there? ladder of people searching for particular categories. I mean, that wouldn't... Or do you just include that in pricing?

No, there is also brand communication and marketing that we do through the retailers or in connection with the retailers. So that is one element. But to Fredrik's point, when it comes to price campaigns, that you see in the sales.

Okay, just to clarify, does all your if you like, AMP-type spend, setting aside any promotion and price reductions, does all of that sit in the AMP line or does some of it sit also in the COGS line because it's trade spend that goes on?

Not in COGS. It's either sales or AMP. So in this case, what you're referring to is AMP. So it's not COGS. I'm not sure how that could be possible, but we can talk about that offline. But it's not in COGS. Promotion is in sales and marketing in AMP.

Perfect. Thanks for your question, Tom. Next question comes from Carol Soeti from Kepler. Hi, Carol. Can we hear your question, please?

Good morning. Good morning, all. I have two questions. The first one is in relation to M&A. You've done last year one acquisition, but the market is difficult. certainly in places such as Latin America. What's hindering you from doing more M&A, or why haven't we seen more acquisitions over the last 18 months, given the very difficult markets? And then the second question is more in relation to Asia. I think there's still an agreement with Finda that they can use some of your brands. What's the status of this? Is this going to be renegotiated in the coming year, or do you have plans to build operations yourself selectively to capture some of the growth in the Asian market? Thank you.

If I start with the M&A question, maybe you can answer to Asia later. We continue to work actively with M&A, identifying potential targets and assessing potential targets. As you know, it's part of our strategy to grow both organically but also inorganically. So we clearly have the ambition to to do value creating M&As. But we are to that point very disciplined to make sure that they are value creating. So that is of course always what we're doing in the screening to make sure that that is the case. And always judging what is the most value creating. Is it organic growth or inorganic growth? And you could argue, of course, when it comes to valuation, that in order to bridge the potential valuation gap, we need to find quite a lot of synergies then to secure that value creation. So the short answer is that we have the ambition to drive more M&As and are working on that actively.

So, Karel, when it comes to Asia, the story isn't really different there. When we divested Vinda in 2024, there was a license agreement for these brands, and that expires in 2027. As we sold the company, we also granted an option for the buyer to continue licensing these brands also in the future against, of course, a license fee. And that option has not yet been translated into an agreement. And of course, we remain unsure of whether that will actually happen. Two possibilities here. One is that we continue with the license agreement subject to the buyer actually exercising on that option. Or if they don't, then of course we get those brands back in Asia. So we cannot give you an answer at this point of time as we actually don't know.

Thank you. Thank you, Karel. Let's move then to Misha Omansky, BNP Paribas. Hi, Misha. What is your question today?

Morning. Thank you. I just wanted to zoom in a bit more on your end market dynamics where you already provided some helpful color. And overall, it seems that the markets remain challenging. If you were to look at your biggest category geography exposures, where would you say you saw the biggest sequential change from the previous quarter in both positive and negative direction in terms of end market trends and consumer environment? Thank you.

I wouldn't say that we've seen any big movements between quarter four and quarter three. It's been quite stable when it comes to market environment.

Thank you, Mischa.

Next question comes from Henrik Bartnäs from ABG. Hi, Henrik.

Hi, thank you. One question for me, please. You have historically talked about seasonal lower volumes in Q1 compared to Q4. And if we look at Q1 sequentially, how should we think about volumes this year? Are there any indication that this year won't show any seasonal lower volumes? Thank you.

I can maybe answer. First of all, we don't give volume estimates. We can only report what has historically been the case in terms of seasonality. So, as you rightly say, seasonality would suggest that volumes in Q1 are lower than Q4. It's not actually one and the same for all our business areas or categories. Some don't have that. But in general, if you look at the group as a whole, volumes are typically lower in Q1 versus Q4, but we're not giving an estimate for 26, specifically. Okay, that's clear. Thank you.

Thank you, Henrik. Let's now move on to Celine Panotti from JP Morgan. Good morning, Celine. Let us hear your question, please.

Thank you. Good morning, everyone. So my question is coming back on the consumer goods performance with price mix negative. I think you mentioned that you had to roll back some pricing in order to keep some of your customer, I think it was in private label. Does that mean that going forward we still have to analyze that and so we'll have continuous negative pricing? I also said you mentioned there was a one-off impact from Latin America. So if you could give us a bit of an idea on that, go forward. Sorry, your sound is not working really, so we can't really hear your question.

Maybe we can just start with the two questions you had now, because then we have to move on. Is that okay? Perfect. Good.

Yeah, I think I got the question whether the price mix, the negative price mix in consumer goods would flow into Q1 or Q2. Was that the question, Céline?

Yeah, I mean, I would presume it annualizes if you have make some pricing concession. And then the question is that any of the price negotiation that you are going through now in retail?

Yeah, right. No, again, we can't comment on, obviously, price negotiations. That's more commercially related. Can't do that. But, of course, as we have lower prices now in Q3 and Q4, and especially here in Q4, so there's been a price decline in consumer tissue. That will, of course, obviously continue into Q2. So, in short, we'll see those... price impacts coming or continuing in Q1 and Q2 potentially.

And just how material is the Latin America impact that you mentioned?

Yeah, we are not actually giving you the exact number there, Celine, and this is for commercial reasons, basically. But if you actually look, I gave you a little bit of guidance. It's always interesting when you say you're not going to give a number and then you almost do it anyway. But I'll do it because if you look at the minus 0.6 in terms of organic sales growth for... for feminine in the quarter and then we we also stated that without that sales organic sales growth would have been low single digit that gives you a little bit of indication of as to the size so this is a bit of course for the group not not a lot but for for feminine it is a bit and it comes out as pricing so that's temporary that will not be there in the next quarter

Perfect. Thanks for your question, Celine. Now we will move to our final question. And that question is from Oskar Lindström, Danske Bank. Good morning, Oskar.

Good morning. Just a slightly different question from me. Following the Edgewell acquisition and an acquisition by another company, you're not going to be sharing, I understand, the brand Stay Free and Carefree between you. who owns those brands and who is paying royalties or fees to whom?

Well, we own the brands in the geographies that we are operating the brands with, so in those geographies we can actually then do what we think is commercially right to do with those brands.

No royalties paid to anyone.

Wonderful. That's all the question I had. Thank you very much.

That's what he wanted to know.

Thank you for that interpretation. Thank you, Oskar, for that question. And now it's time to wrap up. But before we end, I would like to hand over to you, Ulrika, again for final remarks.

Yeah, well, thank you, Sandra. Thank you for joining us today. We are leaving, as I said, a solid 2025 behind us where I think our resilience has really been a critical success factor. And it's especially great to go into 2026 with this good market share momentum that we have talked about today. And finally, I look forward to see you all on the 7th of May in Mölndal, Sweden.

Yes, thank you for that, Ulrika, and thanks to you for joining. If you have any further questions, just reach out. We will be roadshowing in Stockholm today, virtually next week, and we will also be in London next week. So see you there and take care and have a good rest of the day. Bye for now.