Essity AB (publ) (ESSITYB) Earnings Call Transcript & Summary

Okay. Perfect. In the interest of time, I think we will kick off. Good afternoon, everyone, and thank you for joining. Delighted to host Fredrik Rystedt, Chief Financial Officer of Essity here for this fireside chat. In terms of format, I think we're just going to jump straight into Q&A. There is a functionality for you to share that with me on the iPad. I'll grab that before we kic off. So please do ask your questions there and I'll pose them on your behalf. So let me just grab that iPad and then we'll kick off. Super. So Fredrik, one of your medium-term targets is for greater than 17% ROCE, which on my calculation implies about 13.5% EBITA margin, maybe a little bit above over the medium term. Can you, a, confirm whether that's the right way of thinking about it, and secondly, talk about the pathway, the drivers to achieving that target?

Yes. I'll be delighted to. I think it's kind of an important -- it's not just a target, it's also a commitment from the management to actually get to there. And maybe to give a little bit of background, we revised our target not that long ago. We used to be at -- have a target at 15% of ROCE. And we reached that target. So we actually increased it. And, of course, this happened, we revised that target just prior to the last couple years of very, very high cost inflation that we've -- so many companies have experienced and of course, we're no exception. So it's been a couple of tough years, of course, and the distance to that 17% now is fairly large. So of course, hence the question, how are you going to get to -- from where you are now to that 17% because it will mean a very big margin uplift. To just start with your first question. Can I confirm -- yes, it's roughly about right because we got a capital turnover of -- in the order of magnitude of about [SEK 125 million], a bit above there and so to get to the 17%, we need margin of some 13.5% or a bit more than that. And just to give you a bit of background there, we were in Q4 at 9.3%. So you can say there's a considerable margin uplift to be done in the next couple of years here before 2025. So clearly, I think it's a journey to get to there. And as I said, this is the commitment and part of the journey is, of course, to continue to adjust or compensate for the cost of inflation that we have incurred. It has been very dramatic. We've raised prices more than any other consumer company, I guess, on the planet actually. And we have a little bit more distance to go, and we will manage that. So that's part of the story to get to that higher margin. And the rest is very much similar to what we have been executing in terms of structural movement in the past. So innovation, driving mix improvement and margin enhancement as a consequence will not only drive growth, but also margin improvement. And the rest is largely related to efficiency, you can say. So what we have done, we have made a program we call road to 17, and every unit, there is clear targets, there's clear activity plans, milestones and a timetable. And of course -- so the journey is very clear for how to get there. So yes, of course, this is more than a target. It's a commitment.

That's very helpful. And clearly, journeys are very rarely linear, but would you expect sequential improvement in that profitability towards that target from here in the absence of any supply shock that we're currently not aware of?

No. I think absolutely, nothing is, of course, linear because what we have done in the last couple of years is that we have become much more agile in terms of our pricing. So I think part of that story, when you're exposed to external shocks that we and others have been, you kind of meet that with a lot of fear. And at the start of it, you just say that we cannot raise prices, we're going to lose lots of volume, and we can't renegotiate contracts that are -- that haven't expired and we can't do this and we cannot do that. But we can conclude 18 months later that we've done all of it. And so of course, we have been able, as we have done in the past, compensated pretty much all of the input costs with price. And of course, that creates a lot of self-confidence that the brand positions that we have and the strong brands is actually capable of generating that pricing power. So that creates a lot of self-confidence. I think the other part is that it's not only about culture, it's also about agility and understanding pricing. So we have put in place lots of new pricing tools, much more to pricing transparency. So in reality, we've got that much better. And of course, that means that we have speeded up. So hopefully, we'll be able to compensate the rest of the necessary price adjustments fairly quickly. It takes longer. I mean, we are basically 3 business areas. One is the retail 60%. One is the professional hygiene part, which is another bit more than 20%. And the final part is our health and medical business with a bit lower than 20%. And in that latter part, pricing adjustments take that much longer because of the market functionality. So we'll need to keep on raising prices in that end. For the other areas, we are largely, you can say, though not fully, but largely.

Super. And despite, as you say, a significant amount of pricing over the past year or so, volumes have remained largely very resilient. It wasn't until Q4 that volumes actually declined. How do you see volumes -- I guess maybe 2 parts. Was that volume decline in Q4 in line with your expectation? Or did that sort of surprise a bit to the negative? And secondly, how do you expect volumes to travel through 2023?

Yes. So I think this is interesting because if you look a bit back in a more longer time frame, Essity, we're market leaders in so many different countries. And of course, if you happen to be a market leader, you're also price leader. So typically, it's the responsibility of the price leader to kind of drive price increases. And we have been more aggressive than pretty much everyone else. As we also have been in previous cycles in the past. So if you look at our combined market share for all our products, and this is actually quite interesting, if you look at a 10-year horizon, what you will see there is that we have consistently over that time frame, gained market share. So that's great. That's part of the strategy. But you can also see that in times of input cost increases, we have lost. And in times of stable or falling input costs, we have gained, right? And the total is a gain. And of course, this is very consistent with just being large end market leaders and more aggressive. So I think when you look at the price increases that we have put in place and just to give you a bit of perspective between Q3 and Q4 of last year, we increased prices sequentially on average of all our products with 6%, just in 1 quarter. And that gives a little bit of a feeling for how kind of large these price increases have been. So the fact that we lost a bit of volume in Q4 was very much expected. What was a bit of a surprise was that we didn't do that in Q3 and Q2. So it was a very, very good year from volume perspective.

Sure. And just to push you on trajectory of volumes, can you...

Yes. I mean if you look at the kind of structural, what we are, we have a financial target, not only for ROCE, as you alluded to, but also for growth. So we aspire to grow with an average of 3% or a bit more than 3% organically and another about 2% a year on inorganic or acquisition-led growth. And if you decompose that 3% of organic, roughly about 2% should be volume, about 1% mix and 0 on price. So I think as things stabilize, and of course, obviously, they are stabilizing at this point in time, then we should be back to those kind of normal growth levels that we have seen so many times in the past.

Very fair. And I guess your competitors will be responding to your price increases, narrowing the gap that you've extended by being the price leader, is that fair?

Yes, I think that's probably fair. I think they have, of course -- I remember, we had this wonderful plan. So we -- when this all started beginning of '21, we actually put out a press release. So we went out and said we're going to dramatically increase prices. So the competitors, they took this release -- actually, physically, this is not just -- this is actually true. They took our release. They went to competitors, and they say, here's the thing, look at what they're going to do. We promised not to increase any prices, basically. They did exactly that. And so that gained them a bit of volume initially, but it didn't take very long for them to also start. I mean, obviously, that wasn't a very good strategy. So I think they -- all the competitors just have raised prices. They're a bit behind. And of course, at some stage, they'll simply catch up. So I don't think it's no drama.

Very helpful. And as you mentioned, 6% sequential price increase Q4 versus Q3, less than that, but still some sequentially for Q1. Is that the way we should think about it?

Yes, I think so. I mean, once again, when you see market stabilizing, and we've done so much in professional hygiene and the consumer goods space, we still need to do more in parts of consumer goods. And as I said, on health and medical, that will take some time. So there will be continuous price adjustments. If you would suddenly see kind of a fall in input cost, then of course, the need to do more price increases will diminish. So it's always difficult. We are managing the price/cost gap. We're not managing absolute prices. So -- but yes, for Q1, we'll see higher prices.

And when you're thinking about prices and volumes, is it simply a bottom-line focus? I guess it's more of a conversation of private label and retailer brand business because the brands carry their own equity with the consumer. But are you willing to walk away from volume if you can't get the margin and the absolute EBITA that you are focusing? Or how do you determine price versus volume?

Yes. I think any company, you -- I mean, a successful company cannot have too low margins because if you do have too low gross profit margins or margins in general, you just can't fund whatever A&P spend that you want to do. You can't fund your investment. You can't fund innovation. So in the end, we require -- I think it's an absolute necessity to have the margins that we aspire to have. So yes, in the short term, we're giving -- we're happy to give up volumes if necessary. Over the longer term, that's not our aspiration. As I mentioned, we aspire to have more than 3% growth mainly coming from volume, not only but mainly coming from volume. But in the short term, absolutely. And I remember so much in the beginning of this kind of hyperinflation for some of the materials that we use, there were a lot of our business leaders that approached us, and they said, here's the thing, we cannot raise prices. It's impossible. We have contracts or whatever. And if we do that, we're going to lose lots of volume, right? And so we ask them to basically put forward how much volume will you lose. And then eventually, we said, fine, go ahead, take the volume loss, just raise the prices, and they did. And we did, obviously. And as we just alluded to before, we didn't lose any volume. In fact, we gained volume. I think, yes, we are prepared to lose volume, but we haven't so far.

Super. That's very helpful. One of the other dynamics I just wanted to touch on is consumers downtrading. You sort of in the last couple of quarters talked a bit about it in Latin America, a little bit about it in the U.K. What are you seeing there? And within the -- can you also sort of explain to us, is that a negative for your profit if people are downtrading? Obviously, you have meaningful private label exposure in baby and in tissue. Is that -- are they lower margin businesses really?

I mean downtrading, we're kind of in the premium end of much everything we do. So from that perspective, downtrading is never positive. I think this is -- once again, it's early days, right? But you can say downtrading is always there at the beginning of either recession or large -- when you got lots of unemployment, which we don't at this point in time. But of course, recession always leads to different behavior with people. We kind of look at, okay, so clients become tougher, I'll buy cheaper stuff. That's the kind of initial reaction for pretty much everyone else. But if you look at our products, they don't represent -- or 2 things. First of all, it's the kind of product that you would buy under any circumstance. People are reluctant to kind of use less diapers if it's incontinence or baby diapers or less feminine products. And certainly, you don't want to use less bathroom tissue, right? Obviously, you kind of continue to consume roughly the same volume for obvious reasons. And the other thing is that they're not a big part of people's disposable income, typically. And what happens -- or at the outset of a weaker economic environment is that you kind of retract from or you buy cheaper stuff and everything. But after a while, you realize that it's not a major part of your disposable income. So you go back to the products that you like. And so downtrading is never long-lived in our category. At least historically, has not been case. But we've seen downtrading, particularly in Latin America. We've seen it, as you mentioned, in the U.K., a bit of that in Germany. From an overall context of things from a margin standpoint, it has a very little impact. It has a little bit of impact, but as I said, it's margin. And of course, it's short-lived, not a major issue. We get a lot of questions on it, though.

Yes. Nice. In terms of sort of shifting...

It would be very different if we were selling cars or refrigerators or kind of high capital type products. That's a different thing. That's a much important thing. Then people will continue to buy cheaper stuff for much -- for long period of time.

Got it. You've kind of alluded to this with the pricing comments, but obviously, raw material inflation arguably has been unprecedented for the last 2 years. And you showed actually your -- I think it was Q3 results for the first time, sort of how quickly, about 2-quarter lag, that you're able to catch up on the pricing to compensate for that raw material. But clearly, with the inflation being a moving target, you have seen your margins sort of fall quite significantly over the last 2 years. Can you talk a little bit about how you keep the team motivated, morale side of the business? Because I guess if you would have seen those headline numbers, you pushing more pricing and yet still the firm's margins are coming down sequentially. How do you sort of square that internally? How does the business think about that?

I think it's a great question because I -- if I put it this way, I think it's a matter of believing, right? When you go to a retailer and ask for high price, you don't get a lot of hugs, right? They're not going to tell you how nice you are, and I'm so happy to give you more price. That's not only -- they're going to say -- they're going to boycott you or delist you threaten you or do all sorts of things. And of course, at the outset, you get really, really kind of frightened with a very, very tough discussions. So the motivational aspect and the necessity to do it is of fundamental importance really. But as I alluded to, we have basically been -- all of those kind of feelings that it's not going to be able -- we're not going to be able to do this. We're not going to be able to raise prices. We have fixed contract. We're going to lose lots of volume. All of that has proven not to be true. So after a while, 2 things happened. The first thing is that you realize that you got that pricing power. Your brands are strong enough. Your go-to-market capabilities, your understanding of the market is strong enough. That's the first thing that happens. So your self-confidence grows, and therefore, also your motivation. And the second thing that happens is that your surrounding world suddenly gets used to a kind of a price increase environment. So you get both the retailers much more willing to accept or force to or whichever way you price it and you have the competitors actually doing the same or roughly the same. And of course, that becomes then easy. So what you're alluding to there, Charles, is that we've had a sequential increase of input cost every quarter for, what is it, 7, 8 quarters or something like that. And that's just massive, right? Every time you look, costs have gone higher. And so of course, as you execute on your price increase, it takes a bit of stamina to go to a customer. And finally, you negotiate on the price and they'll agree to it, once you put your name on the paper there, you say, by the way, I'll be back in a couple of weeks with my next price increase. And after having done that a few times, then obviously, it becomes that much easier. But now as things stabilize, and we have been become so much more agile, of course, the kind of self-confidence, as I alluded to, and I think the mood in the organization also improves that much. So yes, it's been a tough time, but it's also, I think, worth a lot. To me at least, that we've had got that self-confidence and I think it has been an astonishing achievement by the people and the company. And just to give you a bit of perspective, we had our best top year from an operating profit performance standpoint in 2020. We earned SEK 17.5 billion. Right now, for the exact same production of the exact same product, the cost increase since then equal, everything equal, is roughly SEK 26 billion. So you can say the cost increase consumed all our profit plus another SEK 10 billion. And despite that fact, we have lost a bit of margin, but only a bit. So you can imagine what kind of things that has been achieved there. So I think there is a lot of pride in that. I think that's a very strong performance.

Not only have you had to deal with raw material inflation, energy is not an immaterial part of your cost base either. In your annual report, you hopefully tell us what it is. I think from memory, just over 6% of sales in '22. With energy costs coming down in Europe and sort of 30% of your energy still being purchased on spot, that must helped, right?

Yes, it does. Yes, sure. I mean, clearly, it's been kind of dramatic for all sorts of reasons, right? So clearly, if you were in August, September of last year, I mean, gas prices were EUR 300 per megawatt, something like that. And just to kind of as a point of -- or more than that, as a point of reference, historically, it's been EUR 30. So it's 10x, right? And we consume a lot of gas, especially for our tissue business, and of course, that is just fundamentally very, very challenging. But on the other hand, we addressed it and compensated a large degree of that. So certainly, of course, it's now back to much more normalized levels. It's not back to where it used to be a long time ago, but it's back to much normalized and hopefully now stable level.

And the 70% that's hedged, reminder it's over sort of a 3-year hedging?

Yes, it's in common year plus another 2. So -- but -- and so that's been very beneficial for us. It's really not anymore because now it's practical to market levels. So right now, it's not beneficial, but it has been absolutely.

And I think if you include Russia, maybe just over 50% ex-Russia, probably 40%, 45% of your tissue manufacturing capacity is in Europe. So that's the market matters most from a...

From a consumer tissue standpoint.

Exactly.

Yes. So the biggest market is actually China, right? But as an isolated country, it's a very large country, and we're the largest producer there. But as a kind of continent, yes, European business is clearly big.

Super. And you mentioned China, nicely, Vinda obviously had a tough Q4. Profitability, obviously, was eroded almost completely, completely right at EBIT level. What do you expect to see China? Obviously, it's a separate listed entity. So -- but were you able to just to communicate how you see the profit improvement? Is it just a function of they need to get more prices and that's been the key focus? How do you see that development in China? And does a reopening help with that?

Absolutely. I mean, first of all, I think China has been kind of a challenging market now for some time, obviously. So to give you a bit of perspective, Vinda is the market leader in China, so the biggest company, and it's by far the most profitable. So it's -- and as you say, they wrote a profit 0. So it tells you a bit about the sector at large, right? Why? And so the reason this development for the sector at large is kind of pretty interesting. So what's actually happened there as part of the lockdowns and the zero policy that's been entertained there for a long time has actually been that there has been suppressed demand, a bit less capacity utilization. And therefore, quite difficult times to actually increase prices. So Vinda has actually done that. They raise prices a lot, but very, very far from what's needed to compensate for the input cost. There's not that much energy there. It's more pulp, right? So of course, the whole sector at some stage are not -- is not doing that well. So how will this then play out? Now, of course, obviously, they've abandoned that policy. So things are looking a lot better from a demand perspective. So that will help, certainly. And we've also seen now pulp cost in China actually coming down. It's going to take some time for that to kind of hit the P&L because they buy a lot of that pulp from far distance. And so it will take some time, but clearly, it will improve. And so it's been a very, very tough time for our Chinese entity there, but clearly, a much better outlook as we go forward.

We talked a lot about raw materials, a lot about pricing, but -- there's also been a lot of good work done in terms of internal cost savings and obviously, the manufacturing road map being a key driver. Obviously, you target SEK 500 million to SEK 1 billion per annum savings there been masked a little bit through '22 given the way you report on a net basis. But could you sort of tell us a little bit about what the underlying cost improvement was looking like in '22 on a gross basis? And also your expectations for that in '23.

Yes. I mean, we -- I'm not sure you actually asked Charles before. Do you like the way we account for this and you put it very straight, you don't really. And so I do. And so the reason we have a different view here, just for your information here is that you can talk about cost savings, but it's really kind of if you save in one end and you double your cost on the other end, who's going to be happy for that. So to me, everything that hits P&L is very beneficial, everything that doesn't, doesn't really matter. So this is why we do it in that. That means that from when we talk about cost savings, we also deduct negative things like inflation, like higher maintenance costs, like lower productivity coming from kind of turnover of personnel and new people not being as productive as those before. So we look at it from a gross and net. And typically, that's been in a stable environment that works really, really well. But if you suddenly see sharp inflationary-driven things like, as I mentioned, higher maintenance or if you got disturbances in the production system that kind of leads to lower productivity among the people, these things hit all of the company -- every company. So they're market-driven. But to me, that's all negative productivity. So you can look at it from 2 different ways. One is what is total productivity, and that's what we're showing. And the other thing is the impact of the efforts that we can control internally, and that is your question, how much was that in 2022? And it was a bit lower than in '20. So historically, as you said, SEK 500 million to SEK 1 billion. It was slightly below SEK 500 million last year, a bit below. And the reason why was that? Well, the focus was a lot in restoring service levels. It was a lot about getting kind of productivity levels back to where it should be. So the absolute focus on projects, and there are hundreds of them that leads to these SEK 500 million to SEK 1 billion. They were slightly less focused on that and more focused on getting service levels to where they should be. But in the context of things, I think the underlying efficiency work and what's been done there was really, really good. And we were quite happy with that in '22. May not sound like that, but it will. And we expect to step that up as we go forward back to more what we think is normalized efficiency levels that we could achieve. So I think it would be likely to be better in '23 and onwards.

Super. And the buckets of areas where most of those savings are coming from?

Yes. So there are several. I think 1 -- they're basically, you can say, in our factories, and how much we are able to put out in terms of using the same kind of personnel, so we call it product cost fixed. Can -- how much can we have? So machine efficiency is a good measure. So if you have 80% machine efficiency in a paper-making plant or in a baby diaper machine, as an example, if you can get to that 85%, you're able to basically produce 5% for the same cost as you do with 80% in terms of your fixed product costs. So part of that improvement, actually, a large part was related to that fixed product cost. We became much more efficient during the year. The other bucket was related to distribution. So we have put basically all our demand planning and also we call it a smart hub where we kind of consolidate all the transportation that we do internally in the group into one single hub in Spain, in Barcelona, and we basically then were able to -- using all sorts of technological tools, including machine learning, we're able to actually utilize and get the cheapest transportation available and consolidate and basically run full truckload. So that was another story. The whole distribution part, purchasing is another, qualifying more suppliers and being able to basically negotiate cheaper contracts because you kind of expose more suppliers to materials as an example. So there are many different buckets where we have, I guess, very firm activities and targets for all of them. So all of that combined generates. So it's, as I said, hundreds of different projects.

Really interesting. I want to...

And it's not actually just in COGS, we're doing exactly the same when it comes to SG&A. So we are currently in the midst of putting together basically a significant part of our administration into Mexico and Santa Fe into Portugal and Lisbon and consolidating all that work. So that's another way of reducing cost with the same output and higher quality. So we're doing that as well.

And despite all of the cost headwinds, one area you haven't cut back on is A&P. That's obviously something which I expect will continue going forward as a key driver, given the innovation pipeline you continue to come through. A&P will continue to be an investment area for Essity?

Yes. I think it's actually not that difficult with A&P because what we do is we innovate, right? And of course, if you don't innovate, you die. If you do that well, you do well, right? You grow your sales and your profit. And of course, if you innovate and you have a large number of innovations that you put on the market, if you don't put sufficient A&P behind it, you might as well forget about innovation because no one will buy your stuff or even they won't know about it. But the A&P just follows the level of innovation that we do and innovation follows what we define as something we call innovation sufficiency. So we said the way it works is that we set in an aspire growth rate. And we know roughly how much our current portfolio will actually lead to. And the difference, we know we need to innovate. And that number of innovation, we know also will require a certain amount of A&P, right? So this is the kind of first part of the A&P bucket and then using all sorts of different tools, we calculate what is the return of investment in A&P. So we put as much A&P as actually generates a present -- or a positive present value. So this is why we haven't cut back because it's basically profitable, either through supporting innovation or as a return on investment basically. So it's -- we can cut back but it wouldn't be profitable. It would -- I think there is reason to believe that we could potentially invest a bit more and making more money, I think, but we haven't cut back.

Very clear. Switching slightly, the carve-out of the private label consumer tissue business, is that now legally and operationally completely separate? And I guess, the rationale for doing that, one would infer essentially, it doesn't have a long-term home at Essity. Is that fair? And sort of, I guess, maybe you can comment on the rationale for that separation.

Yes. I mean, first, let me just comment on the last, if it's a legal home or not with Essity. Everything is core in Essity until it's not. So just we haven't taken any decision to do something. But of course, we are enabling such a decision potentially. So -- but it's -- I can't comment on that until we've ever even had that discussion. But -- so to give a bit of frame there or background, we got -- if you look at our European tissue business, roughly about 50% is our own brands and about 50% is with other brands, right? And of that 50%, roughly half of it, so 25% of the total is what we would define as retailer brands. And what we mean by that is that, that business is with strategic customers. So we manage their brands. We provide all the innovation. We're category captains. And in addition, we also sell other categories. So you can say there is very little difference between that business and the branded business. They're largely the same. But the other half of the business not under our own brands is what we would define as pure private label. And that's a whole different thing because that would be customers like Aldi or Lidl just to mention a couple of examples. Putting out a tender saying that here's a thing. We want this number of cases. We want this number of ply, this grammage and give us the cheapest price. And so that's pure private label, and that represents approximately then 25% of the total. And this is the part we're actually separating out and we're doing that managerially. So we have a separate management team for it. Legally, we are complete with that. And financially, we also track that separately. And the final step of it is to make sure that the 7 plans that are included in that structure only do exactly that and not as it is today, doing a bit of both branding, retail brand and private label. So we're basically purifying that structure, which will be complete about a year from now or in that order of magnitude. So the rationale for this from a commercial perspective is, of course, that's a very, very cost-driven business. Lowest cost wins in that sector. And of course, if you mix that with too much overhead or too much innovation or too much whatever, you're not going to be cost-efficient. So having that as a pure business enables that business to be much, much more competitive. And I think that's worked out. It's proven already. I think it's actually doing quite well. And eventually, it also enables the discussion, are we the right owners. But once again, we are not there at that point. We're not at that stage yet.

Got it. Thank you. I think it would be wrong not to spend some time on sustainability because it's core to Essity and not only sort of thinking about alternative fibers, but also the innovation you're launching. Maybe you could give us a couple of examples of the recent innovations in this area because I think it is obviously core. And I think I'm right in saying you're probably by far the leading tissue and hygiene in terms of sustainability award from third-party providers as well.

Yes. I think awards, they're great, right? But it's not really kind of doing anything good for the planet to start with. So I think we're -- to put it in perspective, I think, Charles, it's obvious that we're in sectors that, first of all, omit greenhouse gases. We're also engaged into sectors that actually sell single-use plastics. So overall, I think if you're a contender or a competitor in our sector, you got to do this. Sustainability is really absolutely fundamental because if you get it right, of course, over time, you'll simply win for all sorts of reasons versus the consumers or customers but also from a cost perspective. So I think if you do it well, you're going to do fine. If you don't, if you miss it, then over time, you won't even be there, right? So we put as much emphasis on the sustainability targets and the activities. I talked about -- and you started there with the ROCE, and we also talked about the kind of organic sales development or net sales target. But it's equally important with the targets that we have set for sustainability. So of course, we joined the science-based targets already in 2018. We have targets for net 0 or a journey to net 0 plastics, targets, packaging targets, water, I mean, all sorts of different targets that we put as much emphasis on as we do on the financial target, then it's not for fun. It's because we believe very much that we generate higher shareholder value or financial performance by doing that, but also actually consumer benefits. And of course, obviously, it's good for the planet. So this is why we attribute so much importance to it. And generally, when you talk about products, that's one part. I think one part is, of course, how we produce stuff and how we use it and other relates to the products that we sell. And you can take a couple of examples. We've bought a couple of companies last year that produces reusable or washable absorbent underwear. So instead of using single-use plastic liners or pads, you would buy a reusable underwear, which has, of course, obviously, very, very good sustainability features, but it's also quite comfortable -- or very comfortable and good to use. That's just one example. We are -- we just launched, another recent example, a diaper where you reuse parts of the diaper. So you just change the inner core and the rest of it, you reuse. So instead of throwing away lots of plastic you just continue to reuse it. But there are lots of products like that. In Professional Hygiene, as an example, so much of our dispensers is about actually using less. So instead of getting kind of 10 towels, you get 1 or you get 2 and that's enough. Or you can say we've just launched a washable and reusable towel for the kitchen. So there are many, many examples in all our business areas where we have sustainable products. In Professional Hygiene, it's not all about product. It's also about production. So being able to use much less energy or much less water. And of course, all of that is quite beneficial from a cost perspective. And it's also -- finally, I think it's also about recycling. So we are engaged into tons of different activities there. So for -- as an example, taking back diapers that comes from elderly care homes or in tour paper circle where we take back towels that have been used and remake it into new pulp. And one other very important thing that we have been engaged in is we now manufacture actually pulp ourselves coming from wheat straw. So instead of cutting down trees and shipping and drying pulp and then shipping into our plants, we now collect wheat straw. And just adjacent to the paper machine, we manufacture pulp by using agricultural waste and then pumping it in. And we are now selling products on a few markets with the content of that pulp has a super beneficial sustainability profile. So these are just examples, and there are many, many like those. Sorry for being a bit longer, but this is very close to what we do. So yes.

No, I appreciate the color. We're nearly at time, but I did want to throw one curveball question to you at the end. You've got to take a 6-month holiday. Sandra and the IR team can send you one KPI number at Essity to judge the health of the business. What one number do you want Sandra to send you?

Oh, dear. That was a tricky question. Yes, I think it probably would be -- it would probably be -- we have something we call my voice, internal my voice and an engagement index. It's basically how people perceive how things are going, and it would be that number.

There we go. Well, we're very nearly at time. So thank you very much.

Thank you.

Pleasure to host you as always, and thank you, everyone, for joining. Thank you.

Thank you very much.