Essity Aktiebolag (publ)
Interim Report Q3 2021
Essity Aktiebolag (publ)
Interim Report Q3 2021
October 22, 2021
9:00 a.m. CET
Joséphine Edwall-Bjorklund:
Hello and welcome to the conference for Essity's Interim Report for the Third | |
Quarter 2021. I'm Josephine Edwall, Head of Communications for Essity. | |
And today, our President and CEO, Magnus Groth, together with our CFO, | |
Fredrik Rystedt, go through the highlights in the report followed by a Q&A | |
session. | |
So with this, I hand over to you, Magnus. | |
Slide 1, 2 | |
Magnus Groth: | Thank you, Josephine. |
Slide 3 | Key Achievements, Q3 2021 |
So in the third quarter, Essity continued with a high pace of innovations and a | |
number of important product launches. And this, together with the increasing | |
sales in e-commerce, resulted in the highest-ever market shares in our branded | |
retail business. We are now gaining market share in over 70 percent of our | |
sales in this area. | |
Another highlight of the quarter is the continued momentum in Medical. It's | |
now the fifth quarter in a row when Medical Solutions is growing and in the | |
quarter with over 9.7 percent compared to a year ago. | |
We are continuing with our price increase programs across the business in all | |
our categories. We have started the integration of Familia and Asaleo that we | |
acquired earlier in the year, but we also concluded the deals and took over the | |
ownership during the third quarter. |
Essity Aktiebolag (publ)
Interim Report Q3 2021
We started up tissue production based on alternative fiber, which we believe | |
can be a significant step in our efforts to reduce our dependency on fresh | |
wood pulp going forward. And we have continued to work with creating the | |
Private Label Consumer Tissue division. | |
Slide 4 | Financials Q3 2021 vs 3 2020 |
And moving over to an overview of the numbers. We have a couple of | |
different sales growth numbers this quarter. Organic sales growth that we are | |
typically presenting was 7.4 percent. So another strong - our second solid | |
growth quarter in a row after the pandemic. But here, we also show actually | |
that for the first quarter, we are also growing as the group - as a whole | |
compared to 2019. So we're starting to leave the impacts of the pandemic | |
behind us that, for Essity's categories, was mostly negative from a top line | |
perspective. | |
We also added another growth number, which is the sales growth, combining | |
organic and acquisition growth, which was 9.7 percent, and this is primarily | |
due to the fact that we now include Asaleo or Essity AustralAsia, as we call it, | |
in these growth numbers. | |
Adjusted EBITA margin was down, and I will soon show a bridge explaining | |
that, while operating cash flow was very, very strong. We're happy about the | |
development there, and it's a combination of a very good reduction of working | |
capital, lower stock levels and also higher payables as we continue to grow. | |
And adjusted ROCE is very much impacted, of course, by the margin | |
development. | |
We were compensating significantly higher cost for raw materials, energy and | |
distribution by higher volumes, higher prices and better mix in nearly all our | |
businesses and continued also to achieve savings in cost of goods sold on a | |
high level and we are now year-to-date at SEK 470m. And as you know, our | |
target range for the year is to be between SEK 500m and SEK 1bn. So | |
already after three quarters, we're very close to get into that range. |
Essity Aktiebolag (publ)
Interim Report Q3 2021
Slide 5 | Adjusted EBITA Margin - Q3 2021-Q3 2020 |
So then looking at the EBITA margin bridge. There's a significant negative | |
impact here of 370 basis points. But as you can see, the raw materials, energy | |
and distribution together accounted for 670 basis points. So very good | |
performance in terms of higher volumes, higher prices, better mix and cost of | |
goods savings and, in addition also, positive contribution from A&P and | |
SG&A. So this is something where I'm very proud about the achievements. | |
Looking forward, we see continued significantly higher prices or costs in all | |
the areas I just mentioned but also a very good momentum in our efforts to | |
continue to mitigate and compensate. |
Slide 6 | Continuing Our Transformation - New Business Areas |
With that, I'd like to move over to a couple of news that we have announced | |
today in the Q3 report and then we'll talk more about on the Capital Markets | |
Day that's coming up on the 3rd of November. | |
And one important change is in how we account and present our business | |
areas. We're moving away from a more product-oriented business area | |
definition to a definition that's based on our consumers, our customers, our | |
competitive environment and the rapidly changing channel shift that we see in | |
all our different categories and businesses. | |
So our new three segments or business areas are Health & Medical that | |
includes what used to be our medical business, wound care, compression | |
therapy and orthopedics but also our significant presence in incontinence care | |
health care. And of course, there are significant synergies in this business, | |
and this is something that we've spoken about many times. And we see that | |
those synergies are just growing stronger over the years and also resulting in | |
the strong performance that you're seeing in the medical business, but also in | |
the incontinence care health care business. | |
Secondly, Consumer Goods. I think it's clearly defined by the name here. | |
Incontinence Products Retail and Feminine Care, which are coming closer and | |
closer together into an Intimate Care category. We'll talk more about this on | |
the Capital Markets Day. Baby Care and Consumer Tissue, branded and retail | |
brand. And in this business area, we also report the new division that we're | |
creating for our Consumer Tissue Private Label Europe. |
Essity Aktiebolag (publ)
Interim Report Q3 2021
And finally, Professional Hygiene that you recognized from before but, of | |
course, emphasizing the increased focus that we're putting on not only tissue | |
products but also solutions, skin care, cleaning and wiping. | |
So it's a significant step that we believe also underpins the new growth target | |
that we have announced today. | |
Slide 7 | Financial Targets and Policies - New Sales Growth Targets |
And the new growth target is to achieve sales growth over 5 percent. Our | |
previous target was organic sales growth over 3 percent, which came from the | |
notion that we have very good underlying growth in the markets where we are | |
present. And in addition, we aim to grow market share. And what we're | |
adding now is that based on our strong M&A agenda, we believe that we can | |
add up to overall sales growth number of over 5 percent in the long term, of | |
course with variations between the different years. | |
The other financial targets remain unchanged, the adjusted ROCE target of | |
over 17 percent and the policies that we have for capital structure and | |
dividend. | |
Slide 8 | Consumer Tissue Private Label Europe Division |
An update on the Consumer Tissue Private Label Europe division. The work | |
is ongoing. We are slightly increasing the scope of the division, and we are | |
still focused on having this division developed and ready and split from the | |
rest of the Consumer Goods business area by the end of this year. | |
Slide 9 | Sustainability Journey - Supporting Net Zero |
We've also taken not just one but a number of steps when it comes to our | |
sustainability journey, not least, of course, our target to achieve net-zero | |
emissions by 2050. And here are some examples. I already mentioned, and | |
you can see in the picture there, our new facility to use alternative fiber, which | |
has a significantly lower carbon footprint than using fresh wood pulp. We've | |
also decided to invest in a paper machine that will be fully supplied with its | |
steam from geothermal steam in New Zealand. It will be a world's first paper | |
machine of that kind. And we're also increasing our efforts of recycling | |
different types of paper products in order to increase the sourcing then of non- |
Essity Aktiebolag (publ)
Interim Report Q3 2021
fresh fiber materials and of course, again, to reduce our dependency on fresh | |
wood pulp supplies. | |
Slide 10 | Innovations with Well-being and Sustainability in Focus - Q3 2021 |
Innovations, always a big topic. And I think here we have a very, very strong | |
line up for this quarter, starting with we have also now launched a washable | |
underwear not only for women in TENA and in different Fem Care brands but | |
also now for men as one example. | |
Slide 11 | Innovations with Well-being and Sustainability in Focus - Q3 2021 |
We're also continuing to grow our brands with adjacent products. And in the | |
middle here, you see one example with Tempo, which is, of course, a very | |
famous tissue brand in Asia. And in Central Europe, we're now also adding | |
some skin care products. | |
Slide 12 | Innovations with Well-being and Sustainability in Focus - Q3 2021 |
And finally and a very important launch for us, a new cleaning cloth range for | |
the industrial sector, where we have been underrepresented and undertrading | |
historically and where we are now making an effort to grow our presence. | |
And this product that you see here has 27 percent lower carbon emissions | |
compared to the product that it replaces. | |
With that, I'd like to invite Fredrik to talk about the financials for the different | |
business areas. Welcome. | |
Fredrik Rystedt: Thank you, Magnus. | |
Slide 13 | Personal Care - Q3 2021 vs Q3 2020 |
And I'll start with Personal Care. And it was a good quarter with strong | |
organic sales and market share development in the quarter, and this was | |
driven both by good volume growth and also price/mix in that combination. It | |
was not only good in comparison to 2020 but also versus the same period of | |
2019. So we grew by close to 7 percent also in comparison to 2019. |
Our medical business, for the fourth consecutive quarter, strengthened considerably, and all therapy areas continued to grow at a good pace and
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Essity AB (publ) published this content on 10 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 November 2021 08:44:03 UTC.