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.