Essity AB (publ)

Good morning and welcome to Essity's presentation of the Q1 2026 results. Here to take us through the highlights of the quarter, we have our CEO Ulrika Kolsrud and our CFO Fredrik Rystedt. After their presentation, you have the opportunity to engage directly with us. To ask a question, please press star one. And I kindly remind you to just ask one question per call. Now, enough of me. Let's get started. Ulrika, please, take us through the quarter.

Thank you, Sandra. And also from my side, welcome to this webcast. We started the year with organic sales growth coming from volume growth, and we continued to win the relative game, strengthening market shares in our branded business in retail. We furthermore strengthened our profit margins and delivered a strong cash flow. Then besides these solid results, we had three major events in the quarter. The decision to launch a new share buyback program of 3 billion SEK, well in line with our ambition to have share buybacks as a reoccurring part of our capital allocation. We also completed our feminine care acquisition in North America, now more than doubling our personal care sales in the US. And we have the organizational change, meaning that we now report in our four new business units, health and medical, personal care, consumer tissue and professional hygiene. And let's start with health and medical, where we continued on our track record of consecutive growth in medical solutions. We were especially pleased in the quarter with the continued good growth in wound care across geographies. Q1 was, however, a weaker sales quarter for incontinence care in healthcare. Given the financial pressure that we see in healthcare systems and also the lower input costs that we have had, we held on to prices very well. So margins and profit delivery was as high as ever. However, the sales performance was different from market to market. And one region that performed very well in the quarter was North America. And we also supported the business going forward to grow even further in North America by upgrading the Tena ProSkin brief assortment. We now equip this with our latest and greatest technology when it comes to, or technologies I would say, when it comes to leakage security, dryness, fit and comfort. And we know that these products are highly preferred among professional caregivers. We also performed very well in incontinence care in North America in our retail channel. And actually the good growth momentum and continued good growth momentum of incontinence care in retail was one of the key highlights in our personal care results. Two other key highlights were that we strengthened our share of markets in 60% of our branded business and also the good growth in feminine care. I want to stay for a while on feminine care because we had some exciting developments in this category in the quarter. For one thing, as I mentioned, we completed the acquisition of OB, Playtex, Carefree and Stayfree in North America. Now we start the integration and it's now that the real work is starting. So our first priority is to secure business continuity, to guarantee that we have uninterrupted customer execution, supply and operations during this transition period. Our second priority is to engage in top-to-top customer meetings, to now present the combined portfolio that we have and that we can offer from SCT. And then in parallel with this, we continue to work on supply chain, on branding and on innovation. So to capture synergies in supply chain, to combine the two innovation portfolios, to accelerate proven platforms and to apply our proven S&T brand building capabilities and assets in a globally scaled and locally relevant way. The other event, I would say, or exciting development in the quarter in feminine care was in our leakproof apparel. So as you can see here behind me on the slide, leakproof apparel was contributing positively to the growth in feminine care. And this is one fast-growing segment within feminine care, and we have taken action to make sure that we capture the growth in this segment. So we have, for example, reduced our production and product costs in order to enable a competitive pricing in a more challenging consumer environment. We have also improved our efficiency in consumer acquisition in the D2C channel and broadened our distribution. Then with the new organization that we have put in place, we are consolidating our efforts to make sure that we drive learnings and synergies for our full portfolio in this area. Now, innovation is as important for leak-proof apparel as it is for all our other categories and segments. And in the quarter, we upgraded with a specific range for teens. And this is a super important target group for this segment and for feminine care in general, because this is where we generate trial and capture consumers at the point of market entry. And these products are then specifically or tailored to the teen body. Also, they come with a day and a night variant and they come with a smart protect concept. And some of you might remember that I talked about smart protect technology last quarter and that we equipped our Saba Nosortras disposable feminine pads with this technology. Now we are reapplying this concept onto also leak-proof apparel, which I think is a good example of how we can reapply strong concepts. Of course, with the technical solutions that is fit for purpose. That now secures that we have instant absorption and a good spreading of the liquid in the product. Continuing on innovation, we also launched an upgraded Libro offer in the quarter. More precisely, we made our soft Libro Touch product even softer. And we know that this is highly appreciated by parents who really want soft products for the soft and delicate skin of their babies. So we have high reasons to believe that this will continue to support the very good momentum that we already have in this business. Because Libro had, again, a very strong quarter. We strengthened market shares and we increased volumes. When it comes to our retailer brand business in Baby, however, it was weaker. So overall for Baby, we had a slight decline of organic sales. The other category where we were declining organic sales in the quarter was in consumer tissue. And that is the result of lower volumes and lower sales prices in Europe specifically. Latin America was doing good. Also, the good news is that we continue to perform very well in our branded business in consumer tissue, gaining market shares and growing volumes. And we will continue to support that profitable growth in our branded business of consumer tissue. And by also continuing with our innovation agenda. In the quarter, we launched SEVA VisionVecSmart. And what that is, is that we are reapplying our coreless technology onto household towels as well. So now we will have less waste in the kitchen moving forward. This is first and foremost, of course, to bring convenience to our consumers. But it's also an innovation that is supporting our sustainability agenda. And that brings me to another initiative on our sustainability agenda in the quarter. Because in the quarter, we inaugurated a new biomass boiler in a Kunheim factory in France. This is the second one. We have one in Latté since before. And I think this is a very good example of how we translate our net zero ambition into tangible industrial execution at the site level. And with this spoiler, we are then covering for 70% of the steam needs at the plant. We are more than half our natural gas dependency in that plant and reducing carbon footprint by 40% or more than 40% in the paper machine. And this is also highly appreciated by our customers, which we could see also because we had a customer joining us in the inauguration. And in these times, I think it's worthwhile to mention that this is not only about sustainability. By reducing our dependency on natural gas, of course, we also become more long-term cost resilient. Last, but certainly not least, let's turn to professional hygiene. I have talked the past quarters about our strong development in strategic segments, that we grow very nicely in strategic segments, which is important for us. And we continue with this positive development also in this quarter. A good example of that is that we grew Torque Pixar more than 10%. We also grew Torque Skincare 5%. This quarter, we reported volume growth for the total professional hygiene as well. And that shows that the activities that we have put in place in order to fuel volume growth are starting to pay off. That's not the least true in North America, where we have gained some contracts in the fast food channel, but also work more expansive in the other channels beyond Horeca. Then we were helped a bit by a stabilized market also in North America. And now to talk about the financial performance of Professional Hygiene and our other three business units, I hand over to Fredrik. Over to you.

Thank you, Ulrika. I will do my best to do exactly that. And I will start with our sales. And as you can see on the slide, we declined our sales with 5.1 percent. And this is, of course, just due to currency translation on the back of a stronger Swedish krona. In constant currency or using the same currency rate, we increased our sales with about half a billion or 1.5%. And as you can see on the slide or this bridge, 1.1% of that comes from the acquisition of the feminine care business in North America. And the other 0.4% is related to women. to organic sales growth. Now, just to comment a little bit, it's really a bit premature, perhaps, to comment on the feminine care business from a financial standpoint. It's included as of February 2nd, so we've had very short experience from owning it. But so far, if you look at the full quarter, so to speak, also the period that we didn't own it, sales was roughly about comparable in comparison to last year. So, so far, as expected, pretty much. Now, if I turn to volume, then... you can see that we grew here with 1.1%. And we were particularly happy, actually, to see professional hygiene growing with close to 2% of 1.9%. And this is of quite a number of quarters with negative volume development for professional hygiene. This has been on the back of deliberate restructuring, but it's also been challenging markets. And as Ulrika mentioned, we see a bit of improvement in... in actually Southern Europe and North America on the market side. But we also see some some good results of the initiatives. So, again, a good development and personal care with three and a half percent volume growth coming from a very strong or I should say yet another very strong Growth quarter for incontinence, good for feminine. And in fact, if you remember perhaps the previous few quarters that we've had relating to baby, where you see 45% of volume decline for baby, we have a much, much better situation this quarter with about 1% volume decline for that specific category. Now, this is much better than before, and it's on the back of good performance in pregnancy. in the northern part or our branded part in the Nordics, was the rest of the business pretty much performed in line with the market. So a better situation for baby in general. When it comes to... Then to consumer tissue, finally, we had a slight volume decline, so minus roughly about half a percent. And this is, of course, just mainly coming from the non-branded business, whilst, as Ulrika mentioned earlier, the branded business actually performed super well, both from a market share perspective, but also positive volume growth. Turning to price mix, this is all, or I should say, mainly coming from consumer tissue, where we have deliberately lowered prices on the back of lower COGS. We also have, and we reported on that before, we have selectively lowered some prices for certain SKUs in professional hygiene to get more products. growth in that area. But if you look at the combined price mix for professional hygiene, it is actually slightly positive because we have a continued strong growth in our strategic products. So mix is actually bigger than the price decline. I'll go there from sales. I'll go to our margin development. And it's clear we have increased our margin with roughly 40 basis points. And all of our business areas, with the exception of consumer tissue, strengthen the margin or at least about the same margin. So a good development pretty much across the group. You can see here that there is a negative contribution margin-wise from the feminine acquisition. And if you look at that negative contribution for the group, it's roughly about 10 basis points and bigger for personal care. So if you look at the personal care margin, it has an impact of minus 70 basis points. Now, We have, if you look at the feminine business in North America that we acquired, it has a positive operating margin, but it's very low as expected. And the low margin has to do with, of course, transition costs plus service agreements that we have. And over the next 12 months, we are gradually going to take over transition. both administration, sales and all of the other things, and gradually, of course, also improved profits. So very much with the feminine acquisition as expected. Now, turning to gross profit, you can see that this is the source, basically, of our increase or our improved margin with 60 basis points. I already talked about volume price mix. So, of course, that contributes positively. But a lot of the improvement comes from overall lower COGS. And this is mainly related to currency, actually, FX or positive currency impacts. But we also have good savings. So typically, savings in COGS is quite low during the first quarter. And this quarter, we have 130 million roughly in savings. So we're quite pleased with that number. So overall, 60 basis points in improved margin. We have talked a lot about investing more into growth. And of course, part of that exercise is more investments into A&P. And as you can see, we continue to invest more both from an absolute perspective, but actually also as percentage of sales. And we compensated that partly with lower SG&A. So very much in line with our plans. Now, you may think that this is possibly a consequence of our cost savings program. That's not the case. As we have reported earlier, pretty much all of those savings will appear late in the year. So more towards the third and fourth quarter and full run rate as we have talked about at the end of the year. So savings is not really compensating so much at this point. This is other types of efficiency gains like low travel, like similar types of actions. So all in all, this was the increase of the 40 basis points. points now let me just take as a final remark on when it comes to margin let me just give you a bit of an outlook for for q2 it's always we are in an uncertain environment and of course on the back of the geopolitical situation we do expect cogs to be higher if we look at the q2 of 26 versus q2 of 25 so higher cogs we also expect higher sgna and this is partly or this is all of it i should say due to Salary, just common salary inflation and a bit of higher IT cost. We will have a little bit of savings in compensating for that from the cost saving program. But as I said, it will be small also in in Q2. Good. So turning then to the cash flow. So seasonally quite strong. Four point four billion. And if we look at our our net cash flow or I should say cash flow after finance net and taxes, three billion. So it was good start to the year from a cash flow perspective and with a reasonable, I should say, working capital growth. We still think we got more mileage, to put it that way, in our working capital performance, but we were reasonably okay, I think, in the first quarter. And as partly as a consequence of that, we continue to strengthen our balance sheet even further. Now, you might have expected our balance sheet to, or net debt, I should say, perhaps to increase a little bit since we did actually acquire the Edgewell feminine business in the quarter. And so that was, of course, a negative drain in terms of debt with approximately about three billion. And that was fully compensated by the cash flow. But we also had a couple of other things like share buybacks of six hundred million and some some currency impact. But we also had one thing that was quite quite special for the quarter, which was a reduction of our debt in our pension liabilities of a bit over 3 billion. So that contributed quite a lot to that lower net debt. And all in all, as you can see, the net debt is now 24.5%. with a net debt EBITDA ratio of 0.96 or 1.0, as it says on this slide. Finally, and Ulrika has already mentioned it, so let me just give the technical details around the share buyback program, 3 billion, and it will start May 11th, 2026, and it will go on up. until the most 2027, the AGM. And you have said it, the ambition is to continue sharebacks, buybacks as a recurring part of our capital allocation. And with those words, I'll leave over to you.