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

Okay, perfect. Good afternoon. My name is Charles Eden, and I'm the lead analyst on Essity here at UBS. Delighted to be joined onstage by Fredrik Rystedt, Chief Financial Officer of Essity. Just in terms of the format, we're going to start with a short presentation from Fredrik. I'll then kick off on the Q&A. And then if there's any questions, please send them through on the iPad. And with that, thanks for joining us, Fredrik. Over to you.

Thank you. Thank you, Charles. And I'll -- as you said, Charles, I'll just give a really brief introduction to who we are, a little bit about past and a bit about the future. So looking forward to the discussion afterwards. So I'll just start, for those of you not knowing Essity, we are a leading global health and hygiene company. So in '23, using that as an example, our turnover was roughly SEK 147 billion with a profit of -- operating profit of roughly about SEK 19 billion, as you can see, and 36,000 employees. So these are numbers for 2023 without our subsidiary, Vinda, that we decided to sell and we announced that last December. And it will be concluded, the Vinda divestiture, completely and closed towards the end of March, so really soon. But for 2023 and the previous years, we have recalculated with Vinda's discontinued businesses. So all the numbers you'll see here will be basically without Vinda. So in 2023, SEK 147 billion roughly in turnover. And here is actually a fact we're quite proud of. Many of you know, as an example, Spotify with 250 million people listening every day, we -- our products are actually touched by roughly about 1 billion. So it's a widespread company with many different products and categories. I'll come on to that in a second, but something we're proud of. We're split up in three different business areas, which you see on the slide here. So starting to the left, Health & Medical, roughly about 20% of our business. It's basically two different parts of Health & Medical, one, our incontinence business under the TENA brand for institutional use, that will be elderly care homes or the hospitals, et cetera. And the other part is medical, medical supplies, so advanced and acute wound care. It will be compression products and also orthopedics. So that's basically roughly 20% of our business. If you look at Consumer Goods in the middle, that's all the products that we have for the retail consumer, roughly 54% of the business and consisting of incontinence products for retail use, feminine products, baby products, baby diapers primarily and then also Consumer Tissue. And finally, the third, Professional Hygiene under the Tork brand name. I'm absolutely positive you all have used products from Tork. They're widespread in many different places around the world, here in the U.S. with Xpressnaps, or in hotels, restaurants. Unfortunately, I don't think in this very hotel, so you need to change location next time, Charles. But it's under the Tork brand name, as I said. It's dispenser-based tissue. It is sanitation, or sanitizers, soaps, wipes and those kind of things for professional use, roughly 27%, as you can see, of sales in 2023. And there is one thing we're really proud of because this is an essential part of our company. We've got very, very strong market positions and, needless to say, also brands in all of our different business areas. So starting to the left, in Health & Medical, needless to say, for incontinence products, TENA. And there, we're global #1. If you look at the medical side, you can see compression therapy. We're also, under the JOBST brand name, the #1. And then orthopedics and wound care, also strong positions. The reason we're not more than #5 in terms of wound care is that we are globally not that spread. So it's more a geographical distribution. So wherever we actually are, we have typically strong positions. And that's also the case when you look at the Consumer Goods part. For feminine there, you can see we're also #5. But where we exist, we are typically #1 or 2 in the markets we exist in. And there are many names like Nosotras, Zewa, Libresse as an example for feminine. If you look at incontinence, also there, TENA, global #2, baby care, #5, and then Consumer Tissue, #3. And the reason for Consumer Tissue not being then, of course, bigger than that is we are not in North America and now we also divested Consumer Tissue in China. Professional Hygiene, global #1. And what is really important for us in terms of market positions is that in the branded part of our business, which is the absolute majority, wherever we exist, in 90% of what we do, we're either #1 or #2. We're quite strong market positions. And of course, this is a very, very strong fundamental part of the platform that we work from. So with this as a bit of a background, if you look at this slide -- and just to be clear there, you can see the last 3 years in different colors. The graph to the left shows the net sales development. The graph to the right shows the profit development. And the last 3 years, you can see are without Vinda. So it's not fully comparable. So obviously, had you included Vinda for the last 3 years, both the sales and profit numbers would have been higher and fully comparable. But it doesn't really matter. What this actually shows is a consistent organic sales and absolute sales growth over many, many years. And you can see exactly the same thing in terms of profit generation. And the margin has all consistently increased over the last several years. So obviously, when you look at this, the pandemic had a big impact, you can see that, and the hyperinflation that were obviously there in '21 and '22 were affecting the numbers. But as you can see, they were more a blip in the curve. So we've had a history of very long and consistent improvement in both net sales, profit and also margin and return. And of course, how did we accomplish that? It's really maybe not that important to talk about history. But it has a bit of bearing, of course, for the future, how are we going to approach the future. And the way this has been done has been very much driven by innovation, so constant innovation, putting new products on the market every year and growing net sales by mix and, of course, also by volume. And from a profit standpoint, we have coupled that with significant efficiency gains. And what this has led to is an overall increasing structural underlying return and, of course, also margin over time. And we have not just done this, you can say, more everyday operational work that has improved. We've also coupled this with quite a large set of activities that was -- that were intended to structure profitability. I'll just mention a few. We've run what we define as a Cure or Kill program, where we've consistently taken out underperforming positions, either cure them and make sure that they are value-creative or simply just divested them or shut them if we couldn't actually fix them at a positive net present value. So we've consistently done that. We've done restructuring of our business and taking out significant volumes or unprofitable contracts. And you can say, to a large extent, that has contributed to improve that structure of profitability that you see on this slide. Largely now, that work is actually done. So right now, we don't have any positions that aren't profitable in any of our categories and largely not in any of our geographies. So from -- you can say from the latter part of 2023 and as we go forward, it's just very much focused on expanding and continuing to expand our business through innovation and, of course, growth in all parts of our business. I'll come back to that in a second. Just a few words on '23. It wasn't really kind of different to this story. We continued to basically generate higher sales and higher profit. So it was the highest we've ever achieved, also when you exclude Vinda, so it was a strong year from that perspective. We have continued, as we have done in previous years, to improve the structural margins and profitabilities in all areas, not just for the group as a whole but for all individual parts and for all categories. We've made really good progress in what is completely essential to us. Innovation is what is basically fueling our business. We've done some significant efficiency gains and save lots of money that we have reported on. And of course, for us, sustainability is not about doing something good. It's about basically life and death. So those in our sector that help sustainability in a good way, they will prevail. Those that do not will not live over the longer perspective. So sustainability is absolutely key. And as I already mentioned, of course, we divested Vinda, which was a major undertaking. And we also divested our Russian business during '23. So quite an eventful year, quite a successful year and, of course, a good platform now to stand upon for the future. Now we've set financial targets for our business and for our future. And this was done basically many years ago, actually in 2020. So we aspire to have roughly a bit more than 3% or more than 3% of organic growth and another couple of percent coming from acquisitions. And we've also set a target to be more than 17% return on capital employed by 2025. And actually, these targets were set when Vinda was part of our group. And we have announced that, subject to completion of the Vinda divestiture, we will update these targets. So we'll be back within not-too-distant future and update these. But obviously, as you can see, this will require even further improvement of our structural profitability. But just to actually say when you look at these numbers and these targets, 17% is on the visible capital employed. But if you take away the intangible assets that we have acquired through acquisitions, the underlying return on operating capital is a bit over 30%. So in essence, when you look at these two targets, you can imagine that 1% of growth means just a massive value creation. So of course, that growth target and achieving growth as we go forward is just a very key priority. So what we have done, we have created this platform. And from that, we will generate value for shareholders and, of course, just generally value creation through growing our business through volume and, of course, also continued mix. Now we've changed our portfolio a bit. I gave you what it looked like. I gave you the different percentages there of Health & Medical and Consumer Goods and Professional Hygiene. And of course, this has changed gradually over time. And if you look to the far right there, you can see what is the long-term aspiration and it is long term. This is not going to be next year. It's not going to be probably in the next 3 or 4, maybe not in the next even 10. But in the longer term, what we aspire to do is to continue to grow our high-yielding businesses. And what you -- where you will find those in particular would be feminine as an example. It would be Health & Medical in general. It would be parts of Professional Hygiene. And of course, you will find also other pockets of high-yielding returns. And of course, as we over allocate our capital to these high-yielding areas and we couple those also with complementary acquisitions, bolt-on more, then over time, we develop in the direction that you see here. So in 10 years when we meet and we talk about Essity, then we will expect -- you should expect to look at -- us to look a little bit more as the pie chart on the very right-hand side, so more on Health & Medical, more in the value-creating parts of Consumer Goods or Personal Care and a bit less in Consumer Tissue. What are we going to do in the short term? Well, obviously, in the longer term, as I said, we want to over-allocate to these high-yielding businesses. We will continue to strengthen our portfolio with innovation. Efficiency will be absolutely key. There are defined growth plans and efficiency plans for all our categories, for all our value-creating areas that we now have. And we will continue to support our business with growth in all parts. And this will, of course, also be the name of game in 2024. So if history has been both innovation, growing the business, a lot of restructuring, divestments, all of that, the future will be much more focused towards profitable growth. And it's super important that we basically also remember that we're profitable. Because now we have created a platform, we want to maintain that. We want to grow that platform as we go forward. So continue growth in the high-yielding segment, innovations, as I've already said and, of course, needless to say, market share gains. Our -- if you look at our market in general and the weighting that we have in terms of geography and category, it grows by a bit over 2.5%. We aspire to grow more than that and take market share. And this is why this is an explicit part of our priorities for 2024 but also onwards. Price management is always key. Basically, we have compensated the full cost inflation that we had in the past. So this is more kind of an ongoing management. And then efficiency and operationally -- yes, operational efficiency both in COGS and SG&A, quite key, and ESG or sustainability will also be key. So again, those of you listening, this is a very superficial and quite brief description of the company. But why as a shareholder would you want to own? And I'm one of them. Why would you want to own the company? Well, obviously, I hope you understand that we have a leading position in a very attractive market fueled by lots of positive market trends. We have a really, I think, proven position of strong brands and the innovation pipeline has been continuously generating a positive mix and further improved margins for many years. Our strategy is value-creating. We know that for a fact. You have seen the numbers. And we are -- have no doubt that it will be so also in the future. Sustainability is at the core. We have an attractive financial profile and also a stronger balance sheet. And of course, we have executed -- everything we have said, we've also executed and we will continue to do so. So this is a brief introduction, Charles. And now I leave everything to you.

Thanks very much, Fredrik. So I wanted to pick up on a couple of things you briefly touched on, one being the sort of targets, and you mentioned imminently going to come back to us when hopefully Vinda is completed. I'm not that patient, so I'm going to ask you a little bit on it now. But just in terms of the organic growth, taking Vinda out historically would have been roughly 100 basis points accretive to your growth. So I guess, that 3% organic growth that you refer to would be closer to 2% ex Vinda. Is that the right way to think about it? Or do you think some of the portfolio pruning and rightsizing the portfolio means you're in a better place to potentially continue to grow at that level even excluding Vinda?

Yes. As I said, we have promised to update the target subject to the completion of Vinda. And we estimated that the closure of Vinda would take place towards the mid part of the year. Now that process has been a lot faster. So it's actually going to be completed more or less in March. So that has actually put a bit of time pressure on us. So I can actually fully understand that you're asking the question. And we will update you quite soon on our updated targets. And you're absolutely right, Vinda has had a positive contribution to our growth with about 1% or so organically if you look at it consistently over many years. But as you saw on that slide, our growth has actually been quite a lot bigger than that. And as I mentioned, our operating return is really high. So actually, having high growth is extremely value-creating, so securing that we achieve a strong growth. And I'm not going to kind of mention any targets at this point of time. I'll be back on that. But you can be absolutely certain that focus on growth with retained profitability is, of course, super essential because it really brings a lot of value. And we have defined very clear plans for all of our businesses, all our categories and geographies on securing the exact growth. And we have also secured that we have sufficient innovation to continue to execute on a growth agenda. So it's a primary focus. Exactly what the target will be and how we will address that, we'll come back. But obviously, we have high ambitions in terms of growth because it really brings a lots of value.

Very clear. So targets is one side. The second, I guess, is proceeds that you'll receive. Can you sort of just talk a little bit about what you're thinking on that side of things? And I guess, does the current share price valuation play into your thinking of what to do with the proceeds from Vinda?

Yes. Well, of course, it does to a degree, right, not necessarily the Vinda proceeds only but just generally how you dispose of your -- or use your operating cash that we generate. We -- consistently with our return profile, we just generate a lot of cash, of course. And exactly how to use that from a balance sheet perspective or capital allocation is just a key subject for us, not different to what it has been. But generally speaking -- and we haven't actually communicated our plans here. But to give you a bit of at least feeling for it, the Vinda proceeds in the short, medium term will, of course, strengthen our balance sheet. And we're perfectly happy with that. We don't have a target capital structure. We have a capital restriction. It should never go above 3.0 if you look at it in terms of net debt-to-EBITDA. But that's, of course, not where we want to be under normal circumstances. It should be much lower than that. So over time, we have no problem in strengthening our balance sheet through the Vinda proceeds. And over time, of course, we can potentially use that for value-creative acquisitions. But we should be lower, much lower than 3 under normal circumstance in terms of leverage. But then of course, on -- if you look at it historically, the cash flow we have generated, roughly about half of that, we have distributed to shareholders through ordinary dividend and the rest has been used for bolt-on acquisitions. And exactly to your point, if you look at our current valuation, and typically the multiples that you would need to pay for acquisitions in the spaces we're looking, like medical or feminine or whatever, are typically higher. So acquisitions in the current environment are less -- from a shareholder perspective, less attractive. So the kind of surplus that we generate in terms of cash flow, I believe, either need to be repatriated in some way or to strengthen the balance sheet even further. But in the end, you can say you don't want an inefficient balance sheet. So we'll simply need to get back to you, Charles, there on how to use the funds both the kind of ordinary cash flow and the Vinda proceeds. But largely, Vinda proceeds will strengthen the balance sheet.

Very clear. And you mentioned sort of bolt-on M&A. And it's been something you've used selectively but quite well in the past. What exactly are the criteria that you judge? Is there a payback period you're typically targeting? Is there a sort of returns profile? How do you think about acquisitions work internally before deciding whether they are a go or not?

Yes, I mean, the first obvious criteria, are they strategically correct? So what we have done is that we have a very clear strategy on how we want to develop all parts of our business. And then we look at what can we do best organically. Because whatever you can do organically is a lot better, of course, than acquiring. Acquiring is good in certain circumstances. But largely from a return standpoint or net present value standpoint, organic growth is always preferable. But there are areas where we can actually not strengthen to the position we want to have or aspire to have. And in those cases, acquisitions could be could be quite attractive. So we look at our strategy. And then we have defined selected areas where we think acquisitions could be strengthening our business even further or more than organic growth can be. And then we have identified potential targets in those areas. And all of those potential targets, we have kind of melted down to a top 20 list that we continuously follow. So there are many potential acquisitions that we could do to strengthen our business. But as I said, in the short term and potentially medium term, of course, with our current valuation, acquisition simply becomes less attractive. But there are many opportunities to continue to strengthen our group over time. And of course, you'll see more acquisitions as we move forward into the future.

That's useful. And then just on sort of disposals -- and you mentioned in your opening remarks, portfolio pruning has been quite a feature of Essity since it became a public company. You said largely done there. Maybe you could just sort of talk about the Consumer Tissue private label Europe? Because clearly, that was something you were considering or at least preparing for a potential opportunity disposed. But you've now decided to retain it. Can you just talk us through the rationale there? Is it a strategic asset now? Could that be something you'd revisit in the future?

Yes, it could. And it's actually a super interesting business case, I've got to say that. Because what we -- to give you a bit of context, Consumer Tissue in Europe, and that's what we're talking about, there are -- we have a branded part, which is quite profitable. We have a retailer-branded, which is very close. What we mean by retailer-branded is that we run it with full innovation. We run it with -- as category captains typically for our customers. And we sell also other products to these customers. So it is largely managed in the exact same way as our branded business. And we typically also manage the brands of our customers. And then there is a private label part, which is much more, you can say, cost-driven. It's responding to RFQs from customers. And you provide a certain amount of rolls or tonnage or use a certain grammage. And so there is less innovation in those products and it's much more typical private label, as I would phrase it. And these businesses have been fairly integrated. And what we have actually done is that we have separated out completely the Consumer Tissue private label division from an operational standpoint, from a managerial standpoint, from a legal standpoint and perhaps most difficult, also production standpoint, warehousing. So all of these flows were previously mixed. And now we basically split everything. So it's a completely, you can say, self-sustained unit. And in that process, it became very clear for the people working in that division, what their purpose was and, of course, retaining efficiency and effectiveness and being really, really strong with their customers. So what happened during that process is the profitability simply improved, quite a lot actually. And it became a very, very well-performing unit. And in the end, we felt that from a valuation standpoint, it was actually more valuable to the shareholders to actually keep it rather than sell it. So whilst Vinda was very much a strategic decision that was also financially attractive, the decision to keep Consumer Tissue private label was much more a financial discussion or decision, if you understand what I mean. Your question is would that decision be changed? Well, of course, it can. If the performance of Consumer Tissue private label is not upheld, so to speak, then of course, we would reconsider.

Moving just to sort of current trading and sort of volume dynamics, you mentioned you walked away from some lower profitable business last year, which has sort of weighed on the headline volume number that you've reported, including ex Vinda. Clearly, Q1 has still got some of that to lap and, to a certain extent, Q2, particularly on the professional side. How are the underlying -- excluding those impacts, the underlying volumes in your categories trending? Are you seeing any sort of pickup in 2024? Or is it still sort of a pretty tight environment?

Yes, I'm not going to comment on volumes for this year. We just don't give that kind of forecast. But just generally, when you look at our financial target here, organic sales target of 3% or more than 3%, it basically consists of, you can say, two components. So one is mix, roughly about 1% or so in mix thereabout on an annual basis. And the other 2% are relating to volume. So obviously, underlying volume growth is actually what we see in our targets. And that's also, when you look at the global market, it's roughly about 2.5% or above if you weigh the growth with our geography mix and our category mix. So if we just, yes, how do I say, go with the flow, right, just follow and we don't lose or take market share, then the expected growth should be about 2.5% and really -- so there is an underlying volume growth in our global markets. And of course, we have aspirations to continue to take market share as we have done for many, many years. And of course, there, that's basically it. So you're absolutely right. All the restructuring that we have done has created a headline volume decline. Underlying, however, of course, we believe that generally our underlying markets will grow. And of course, we will grow as well. I will not comment on specifically the underlying growth for 2024. But our aspiration is, of course, to continue to grow underlying absolutely.

Yes. You mentioned on volume, you mentioned on mix. Pricing, obviously, you selectively increased trade spend or put some pricing down, particularly in Consumer Tissue, last year in the second half as pulp prices, in particular, came off. They're now sort of creeping back up a little bit. What is your expectation in terms of pricing in that environment? Obviously, in the past, you've talked about a 2-quarter lag to compensate. And I think it was at the full year results, you talked about being a bit more nimble now in being able to sort of move prices both ways with customers. In that environment, if pulp prices came back up, do you think it's going to be possible to start taking pricing again at some point this year?

The short answer is yes. But let me just give you a bit of background here. Because we -- Charles, when you go to your shop there and you buy your bright-looking suit, you're not going to ask what's the price of cotton or wool, right? It's not a cost-plus. What we want to talk to our consumers and customers about or patients or whatever, we want to talk about the features of our product. So you can say, if you look at our targets, they don't contain any kind of pricing. So under normal circumstances, we live in a relatively, you can say, with the exception of pulp perhaps, but otherwise a relatively stable environment. So pricing is not what we talk about generally. Over the last several years, there's been a lot of talking about input cost inflation and everything. So pricing has been a major theme. What we said a couple of years ago when this all started is that we will compensate -- whatever input cost movement happens, we will compensate with price, price alone, not mix, not volume, not efficiency but just price. And that we have basically delivered. So although '21 and '22 were quite painful years, we also demonstrated that the pricing power that we thought we had, we actually also know that we had it. And in reality, since we have done that, we have no doubt whatsoever that we will also continue to do that going forward to compensate. Now one thing -- and there wasn't a lot of benefits with cost inflation or hyperinflation even in '21 and '22. But one thing that was actually beneficial was the fact that we became a lot faster in the way we actually address pricing. So whilst it previously took about 4, 5 quarters to compensate, we were down to -- you mentioned 2, it was actually faster. In some parts of the businesses we were about a quarter or so. So we have become a lot faster. And this is, of course, for many reasons. Mentally, it was a big shift internally. Secondly, we became better analytics and, of course, just general price management systems. And thirdly, the whole market, functionality changed and became a lot more agile. So of course, we have become, for that reason, less volatile. And maybe just the obvious, stating the obvious here that as we now have divested Vinda or will soon, we have taken roughly about half of our pulp purchases out of our business. So generally, volatility is a much, much smaller problem than it was a year ago.

Very clear. Moving a little bit further down the P&L, I just want to touch on margins. And clearly, with your ROCE target, we can see that there is a sort of underlying margin improvement expectation within Essity. But just sort of thinking about the dynamic there, I guess, this year, raw material costs are creeping back up. You've got your underlying cost savings, the SEK 0.5 billion to SEK 1 billion a year that you aim to deliver. Energy costs probably are going to be down, at least on the spot part that you have there. How should we be thinking about the margin progression, I guess, over the next 1 to 2 years at Essity in that dynamic? Are you expecting sort of a steady recovery in profitability up to, I guess, on the old target as sort of 13%, 13.5% EBITA margin that you...

Yes, I mean, maybe just to kind of tee off the discussion a bit, the 17% here was including Vinda. And we'll update that. And the 17%, that's the 13.5% you're referring to. So the 17% is a margin of roughly about 13.5% and a capital turnover of SEK 125 million. So that's the 13.5% you're referring to. And of course, basically when we update, we might change that a bit. But of course, we, exactly to your point, believe that there is more margin in our business than we currently are delivering. And of course, innovation and mix creep is part of that equation. Efficiency gains is another part. And then generally, as we become bigger, we also have scale advantages. So we haven't actually raised the structure of profitability. And we haven't created this platform with a lot of scale. We have created it largely through, yes, innovation obviously but also restructuring measures, Cure or Kill or those kind of things that I mentioned briefly. But of course, as you take out unprofitable volumes, you also lose a little bit of scale. When you have completed that journey and you continue to grow in line with the history or the planning that we have ahead of us, you also gain scale advantages and margin advantages or margin enhancement also comes from scale. So needless to say, I'm not going to comment on specifically 2024 or, yes, you said consistent increase. That's always hard to predict exactly. But of course, obviously, we are aspiring for higher margins over time, definitely.

And given you touched on target, just a hypothetical question. I guess, I understand the ROCE target and the focus there as you prune the portfolio. But given there doesn't seem to be much within the portfolio that doesn't belong in Essity long term now, to your own point, is there a sort of debate around switching from a ROCE target to an absolute EBITA growth target? Is that something that you've considered? Or maybe you could help me understand why ROCE is the chosen focus.

It's quite simple. Because absolute EBITA is -- or EBIT or whichever an absolute target is potentially a good thing. But if you combine -- you cannot look at ROCE isolated. You need to look at ROCE in combination with the growth ambitions. That's obviously -- and the combination of organic growth and your margin becomes absolute EBITA. So inherently, we actually have a growth target of our EBITA already in our target. And as I already said, if you have the operating return we have, which is north of 30%, if you take out the intangible assets there, then in reality, the growth is incredibly profitable. But you need to secure that people remember or we internally remember the expression profitable. Growing is fine, but you just don't want to take out the profitability. And the risk is always with absolute targets that you just grow businesses that aren't profitable and then you consume a lot of capital in actually doing that. So from a value creation perspective, having that kind of all value creation drivers like growth, like margin and capital turnover, which is combined ROCE, is basically generating the best value creation.

Super. I want to sneak two more questions in. Firstly, I guess, change of Chairman of the Board, Jan Gurander now taking over as Chairman, really he was on the Board previously. So I doubt there's going to be anything drastically changing. But I'm sure he'll bring one or two of his own ideas. Could you just give us a little insight how you would expect, if anything, to change under Jan following his appointment?

I really can't comment because he will be appointed Chairman now at the AGM in March 21 here. So exactly how he will address it is premature for me to comment. I can't really say that. But my understanding is, as much as I know, is that he is very supportive of the strategy and the journey that we have in front of us. So I would expect that to be, yes, a continuation rather than a dramatic change. But once again, I'm not familiar with...

Stay tuned for the AGM.

Exactly.

Okay. And then final point, I wanted to end on something that I know is very core to Essity, and that's innovation. Innovation has always been important for any consumer business. But I sensed that at CAGNY this year, in particular, there was a lot of talk of the importance of innovation for a brand. I'd just be interested to hear some thoughts from you on Essity's innovation pipeline. Is there -- would you -- how would you describe the innovation pipeline at Essity? And is there anything particularly exciting that you want to sort of highlight as a major innovation in the pipeline?

Yes. I mean, there are many things that I could point to. But maybe if I just generally talk about how we approach it, so what we do is we look at every category in every market and we define how we think growth will play out, how much can we grow for a specific category in any specific market. And then we look at our existing product portfolio and how much of that will support that growth. And the rest, we need to actually have innovations to deliver, if you think of it that way. And what we see there is that if we have too little innovation for any given category or market, then our innovation sufficiency, as we call it, is not sufficient. And then we simply put more resources. Occasionally, we have too much innovation. And of course, that's a waste of money and we reduce. So we constantly secure that we have sufficient enough innovation for every market all the time to actually deliver the profitability or the profitable growth that we aspire to have. And then we measure the profitability in the innovation pipeline. And as long as that profitability is higher than the existing portfolio, then it doesn't only have growth in net sales impact but also a margin impact over time. So I think that mentioning any specific innovation wouldn't be fair because there are many in each of these categories to continuously support growth. And of course, if you want to do that, you need to have your ears really close to the ground, really close to your consumers or patients or customers to secure that you capture their needs and different solutions to their problems. So the answer is we've got many that we're quite excited about. But we are not a one-stop shop or just one innovation that will pull the entire company. There are many, but -- and there are many innovations that actually pulls the company at this point as well and has done so. I won't point at any, but the whole portfolio is quite exciting as we...

Super. Well, looking at the clock, we're just about done. So thank you very much, Fredrik, for joining us.

Thank you. Thank you, Charles.

And thanks, everyone, for joining the conference. Thank you.

Thank you.