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

Hi, and welcome. My name is Sandra Åberg. I'm Head of Investor Relations. On today's agenda, we will summarize the full year of 2024, a year that we here at Essity are very proud of and very happy with. We will also take you through the highlights of the Q4 report, and we will share our priorities for 2025 to enable accelerated profitable growth. In the end of the presentation, we will give you the opportunity to ask questions. We will also be road showing here in Stockholm this afternoon and next week in London. So if you would like to meet with us, please reach out. Here to present are my colleagues, Magnus Groth, our CEO; and Fredrik Rystedt, our CFO. I will now hand over to Magnus, who will start by summarizing the full year 2024. Please, Magnus, welcome.

Thank you, Sandra, and good morning, everyone. First of all, as you know, I announced yesterday that I am resigning from this position at Essity, so -- but I will continue to run the business with my full force and energy until a replacement is found. With that, let's get straight into the numbers. So to start with, SEK 146 billion of sales and a record operating profit for 2024 and the first time we actually did over SEK 20 billion of operating profit in a year. Key achievements, as I mentioned, higher profits ever and good volume growth, which has been a key focus; strong cash flow generation, solid balance sheet; divestment of Vinda and -- resulting in a more attractive portfolio; new financial targets and the announcement of our share buyback program that we're in the middle of. And of course, always, impactful innovations, driving the business, driving growth -- profitable growth. And very important, last year, we started to see a turnaround in market shares and improving market shares year-over-year and, actually, towards the end of the year, and we'll talk more about that. And into this year, we see high demand for many of our products. So that's really, really encouraging that there's a solid demand for most of our products and categories in 2024 but also going into 2025. So a financial summary of the full year. Net sales were slightly down. This is due to the divestment of Russia in '23 and the strengthening of the Swedish krona. Organic sales growth, slightly up and up 1.8% then disregarding the restructuring in Professional Hygiene mostly. Strong operating cash flow. Earnings per share, up 10%. EBITA, as I mentioned, over SEK 20 billion. And as you can see, a very, very strong EBITA margin of 14%. And the same with return on capital employed at 17.6% and a big improvement year-over-year. And we announced today a proposed dividend of SEK 8.25, which then increased with SEK 0.50 or 6.5% on the back of the strong performance in 2024. Yes. Talking about dividends. Of course, this is behind that recommendation to the Annual Shareholders' Meeting to raise the dividend to SEK 8.25, a high EPS growth. Starting with the listing of Essity in '27 (sic) [ '17 ], the average growth has been 7% and, in total, 57%. And in the last year actually 10% year-over-year. This is the dividend development over the last number of years. So a solid positive development here. And also, overall, the financial development, this is a slide I always like to show because Essity is very, very much about the long-term improvements and continuous development, and I think it's very well reflected here. And it's good to see that when it comes to EBITA, excluding IACs, so operating profit, we are fully back on track after the pandemic and showing another record year. And of course, our ambition going forward is to continue to build on this very, very nice curve. And over the 10 years, operating profit has improved with over 130% and sales with over 80%. So big step every year, and this is what we aim to do also in the long term going forward. We do this very much through impactful innovations. Here are some examples. Starting there at the left. We are turning more and more of our Tork Professional Hygiene products into a compressed offering, which has a better sustainability profile, reduces logistics costs and is beneficial for those who are working with refilling our dispensers, so that's an example there to the left. The Zewa Deluxé that you also see to the left is an example of a product where we are looking at catering to the needs of those who are downtrading, who are looking more for value offerings, which has been the case over the last couple of years. There's no change in this trend, but we still see that there is a demand for these types of products. So it's a very attractive value offering under the Zewa brand. And then a number of other innovations in all our different categories as usual. We also have a very, very ambitious program in 2025. And what this leads to is product superiority and leading market positions. And we took a big step up in 2024 when it comes to product superiority as regards to product, brand and price. And we expect to take a similar big step or even bigger step up in 2025. And as we have seen now over many, many years, we retained #1 or #2 positions in over 90% of branded sales, which is so important for being a #1 supplier with retailers, and increasing market shares in over 40% of our market category combinations and stable -- including stable in 65%, which is an improvement compared to 2023. And as you know, new product launches, on average, have a higher gross margin than the product they replace of around 3%. So a very, very important part of what drives value creation and growth in Essity. We have ambitious targets also on sustainability. These are 2 of the most important ones, health and safety, where we've had a fantastic improvement in TRI, so total recordable injuries in the year, but also over the last couple of years, and we are approaching world-class when it comes to health and safety, which is so important. We have 16,000 blue-collar colleagues working in our factories, and it's so important that they feel safe and taken care of going to work every day, and that goes for all our 36,000 employees, of course. When it comes to greenhouse gas emissions, where we have a target to reduce our science-based targets 1 and 2 by 35%, we also are progressing according to plan. And we're now at minus 27% after 2024 compared to the base year 2016. So that was a very successful, very busy 2024. And to summarize, adding to the numbers I just showed, we finalized the divestment of Vinda, we started our share buyback program, and we also raised our financial targets. But let's look now at the last quarter of 2024. So to summarize, strong organic sales growth, all business areas contributing. Higher volumes, sales prices and positive mix and higher profit but lower margin in the fourth quarter. Basically to summarize, Health & Medical, Professional Hygiene continue to deliver in a very, very impressive way when it comes to margin. We saw lower margins in Consumer Goods in the fourth quarter, and this is related primarily then to Consumer Tissue. And Consumer Tissue was negatively impacted by the strong appreciation of the dollar during the second half after the U.S. election of the fourth quarter. This was partly offset by another strong quarter of cost savings but not entirely, resulting in the numbers you see there to the right. So organic sales growth, which is, of course, way above our long-term target, we're very happy about that. I already mentioned that we see very strong demand for -- in most of our categories. EBITA, slightly up year-over-year, but margin slightly down, and ROCE on a stable level. Then moving into each of the 3 business areas and just you're looking now at the split after 2024: Health & Medical accounting for 20% of sales; Consumer Goods, 54%; and then 26% from Professional Hygiene. Starting with Health & Medical, really strong number across the board here. Organic sales growth, 5.6%. Volumes, 4.9%. Higher prices and positive mix. And what I'd really like to point out is the growth you see there in medical which is, to a large extent, volume driven. So we have really good momentum in the medical business. I'm always reminded by our business unit president here that we have been growing the medical business now for 15 or 16 consecutive quarters, but it's really accelerated in the quarter. Maybe also some end-of-the-year effects where maybe some customers were actually building some stocks in this area, but still a very nice development. And profitability, as you see there, EBITA up 21% and the margin at 18.3%. So a very, very solid performance here. Consumer Goods, strong growth. Cost pressures. Organic sales growth, 4.5%. High volumes in all categories, exactly according to our plan because we know that higher volumes means that we get operating leverage. It also indicates that we are growing market share, which we are doing in the highest-margin part of our business. A highlight on this page is definitely incontinence care retail. This is such a competitive category, even though the underlying growth is nice. I mean this is the reason why it's really growing also or why we have strong competition. But look at that, 11.2%, fantastic numbers, which shows that we really are competitive here now when it comes to product offering and brand positioning and also now winning after several years, as you know, when we have been very much under pressure from private label and from other big competitors. Really back here as the market leader and as we should be growing very, very quickly. But also Feminine Care, another very strong development. Baby Care, this is an event, some product recalls, which are referable to this quarter, and this will move to a positive development going forward. And Consumer Tissue, very strong at 4.3% organic sales growth. Profitability down, as I mentioned, and margins and primarily related then to the stronger dollar that we saw in the second half of the quarter, even though we also saw higher costs in some other areas. Distribution, we saw that distribution costs -- or energy cost did not decrease to the extent that we had expected due to the shutdown of the last gas pipeline from Russia during the quarter. And of course, we are now working very, very hard to manage this margin development. And as you know, in the mid to long term, we always compensate in different ways as we are doing this time as well. Professional Hygiene, finally, strong growth of premium products, higher profits. As you can see here, organic sales was up 5.1%, excluding restructuring. Volumes were down 6%, but with a very, very positive price and mix. These 2 numbers actually goes together. So we had a few large customers in the U.S. that did not buy as much from us as they usually do, and we believe that this is a temporary impact. That means that volume rebates that we had accrued for were released during the fourth quarter. So the negative volume actually accounts also for parts of the higher prices that you see there and positive mix, 7.4%. Nevertheless, profitability also on extremely good levels. EBITA margin, up on levels that we've seen over the last couple of quarters, but historically, of course, very, very good levels. So with that, I'd like to hand over to Fredrik to dig into some financials more in detail.

Thank you, Magnus. I will do exactly that. And I'll start with summing up the net sales bridge for the fourth quarter of 2024. And as you can see, we continued -- and Magnus alluded to it, we continued to have a very strong organic sales growth. And underlying, if we adjust for restructuring in Professional Hygiene, we reached almost 5% of growth. So volume was positive for all the categories, with the exception of Professional Hygiene. So a very, very strong quarter from a volume perspective and especially so for the medical part in Health & Medical, and Magnus, you alluded to it earlier, also for Inco Retail with double-digit growth. So super strong in terms of our volume. Now the restructuring in Professional Hygiene is still there in the fourth quarter, and the impact was 1% on group sales and actually 3.5% if you look at isolated business area Professional Hygiene. Now most of that impact is now gone. There is a small impact that will be there also in Q1 of 2025 from that restructuring, but it's not really material. So most of that impact is now gone. Price and mix, quite positive, as you can see, 2.2%, out of which 1.9% relates price and 0.3% to mix. And we also saw in the fourth quarter sequentially a strong development of price, 1.2%, and this is mainly related to Consumer Tissue, but also partly to that volume provision release that Magnus was alluded to in Professional Hygiene. But just generally, a strong professional -- or pricing performance in Consumer Tissue on the back of higher cost. And mix was mainly related to Professional Hygiene, but we also saw a good mix development in Health & Medical. So overall, growth, very, very good in the fourth quarter. So if I turn then to the EBIT bridge, you can see that we're slightly down if you compare to the same period of 2023. And this is all gross margin related. So we saw 20 basis points decline in gross margin. And we saw that despite a very good pricing performance that I was alluding to before, very strong volume and also mix. And of course, the impact was caused entirely by a quite strong increase of cost of goods sold. And if you decompose that, actually, the net impact of cost of goods sold for comparable products was roughly about SEK 760 million or 2%, and this is mainly related to raw material, actually all of it. So we had a very, very significant raw material impact of SEK 880 million. And part of that -- actually a big part, SEK 330 million, related to currency movement. And of course, this is mainly a result of the very strong appreciation of the dollar that took place in November and onwards, as you already know. So it occurred in the quarter, so to speak. So currency was quite negative. We also saw a bit of negative impact from distribution. But all of that compensated to some extent by the cost savings that we continue to execute on. So we're quite happy with the execution during the quarter. But all in all, COGS increased a bit more than we actually expected at the beginning of the quarter. When you look at SG&A -- A&P and SG&A, excluding A&P, you see a flat development here, so no real impact on the margin. But in absolute terms, both of them were actually growing. When you look at SG&A, excluding A&P, this is, you can say, largely related just to normal salary inflation and a bit of added investments into sales -- our sales network and digitalization. And when it comes to A&P, same thing there, we have invested more into A&P. And of course, clearly, you can see this is working as we also have that strong growth in net sales. So overall, we think this is quite profitable investments into SG&A and A&P. Turning a bit to cash flow. We continued in the quarter, Q4 actually having a good operating cash flow, but it was a bit lower than what you would typically expect from a fourth quarter. And so for those of you that knows us really well, you would know that we typically consume working capital or increase our working capital in the first 2 quarters of any given year, and we reduced our working capital in the last 2 quarters of every given year. So if you look at Q4 specifically, we actually had flat working capital. So no real change there. And normally, we would have expected to actually have a slight positive working capital contribution in terms of cash flow, and that didn't happen. The reason was quite simple. In the last part of the quarter, we had a very significant growth of sales. So basically, you can say, November and December, very, very strong growth overall. And this, of course, means that we build up our accounts receivables and we get paid for those more in the beginning of the first quarter. So you can say the relatively lower operating cash flow is all attributable to accounts receivable being a bit higher. And so this is more a temporary timing impact. If you look at it in terms of credit days and accounts receivables, we're actually improving, and we're also improving in our inventory in terms of cover days. So all fine really when it comes to working capital. So this is more timing. And if we look at net cash flow, we also there had a bit of temporary impact. Our overall tax rate in terms of effective tax rate for the year is roughly about 25% as it should be. But tax payment was a bit elevated in Q4, and that will also come back during 2025. So all in all, a bit of temporary impact from a cash flow perspective. But if you look at the year as a whole, very strong cash flow, and that is both on an operating level and on a free cash flow level, so after finance net and paid taxes. So as a consequence of the strong cash flow generation that we have, you can see that we have a net debt of just under SEK 31 billion and leverage ratio of 1.2. So a very strong balance sheet. And we continued, during the quarter, to execute our share buyback program. We have now in possession of -- at the end of the year, I should say, 31st of December, of 2.2 million shares. And as we have communicated a few times before, we expect to cancel that at the upcoming AGM. So all shares that we have in possession, we will ask for a cancellation at the AGM. And with those words, I'll turn it over to you, Magnus.

Thanks, Fredrik. Good that cash flow remains strong, and we just have some temporary cutoff effects. Okay. So to summarize 2024, highest profit ever, strong cash flow, solid balance sheet, a more attractive product portfolio. And we can see that even when we have, in spite of the dollar appreciation that we saw now in the quarter, we still have a very solid margin and profit development. Health & Medical, a record year, record-high profits, margin improvement of 470 basis points. Consumer Goods, high volume growth. Margin, slightly down, but from a high level. And Professional Hygiene, again very, very strong 2024, with a margin improvement of 200 basis points. Looking forward then into 2025, accelerating profitable growth. Our focus remains to grow in high-yielding segments. You know which they are. It's Professional Hygiene. It's Health & Medical. It's Inco Retail, Feminine Care, to a large extent, and in segments of the other categories. We also have an ambition to grow further in North America, where we have very, very good momentum in several areas, and also in Latin America that continues to develop very strongly. Innovation, brands, market share gains that has contributed so much to our long-term development is a key focus, and we have a very exciting program ahead of us here. Operational efficiencies, digitalization remains a key focus area. And of course, to continue to progress on ESG. So thank you for listening. It's time for questions. And Fredrik, you want to join me? And operator, let's open up then for the Q&A session.

[Operator Instructions] We will now take our first question from Celine Pannuti of JPMorgan.

Magnus, sorry to hear that you are leaving, but I wanted to congratulate for your tenure at Essity and for having driven Essity as an independent company, and wish you all the best for your next chapters. My first question is on the need for price increases. Obviously, you were mentioning the sudden rise in USD hitting your cost inflation. Can you talk about the pricing negotiation with retailers as you look in Europe? And maybe a follow-up on that, my second question is on how your market share performance is doing in private label and brand in the Consumer Tissue division in Europe.

Yes. So starting with the second question, we don't follow specifically market share in private label and brands, but both are doing quite well. So we saw volume growth in both areas, even though it's slightly skewed in this last quarter to the private label part of Consumer Tissue. When it comes to pricing, so when we went into the fourth quarter, we went in with raised prices in Consumer Tissue actually in most geographies that we, at that time, believed to be sufficient because what we saw was that even though pulp prices started turning down, the pulp prices that you read about, since we have a time lag, we would see higher pulp prices also in the fourth quarter, and this was what we were aiming to compensate for and not taking into account then the dollar impact. These higher pulp -- underlying pulp prices, they actually turn around in the first quarter. So we'll have some benefit in our books from lower pulp prices. So how we now manage pricing, I mean, it was easy to talk about this 3 or 4 years ago during the pandemic when it was -- everyone raised prices. It's very much now delegated to the individual businesses and to the individual geographies to manage the price/cost gap and the margins in the best possible way and, of course, always with the aim of increasing -- restoring and increasing margins. So there's a lot of work going on in that area now in various parts of the business without being more specific than that. And thanks for the kind words, Celine.

Maybe can I ask a question on -- to Fredrik? Could you please help us with -- as you usually do, given some outlook on the component of cost inflation. I mean you were mentioning, for instance, energy didn't turn out to be what you expected for Q4. So as we look into Q1, could you please help us with the different component on cost, please?

Yes. I mean, generally, when you look at cost -- or COGS as a total for Q1, we expect it to be somewhat lower. And part of that story is, as Magnus just alluded to, actually pulp becoming a bit lower there. So overall, we expect to have somewhat lower COGS. And then there's lots of moving parts. So COGS -- or pulp is expected to be down. Energy, actually expected to be higher. This is partly seasonal, also partly from a pricing perspective. So there are moving parts, but we prefer to give you an overall estimate of COGS as sequential comparison, Celine. And so we will see hopefully somewhat lower COGS than in Q4.

And we will now move on to our next question from Patrick Folan of Barclays.

Just kind of going back to the comments on COGS inflation. Just in terms of the agile pricing structure you guys talked about last year, it didn't seem like that maybe came through. I understand the FX impact, and as well, you also had positive cost savings coming through in Q4. Can you just maybe highlight maybe what -- is the pricing environment just a bit more difficult to get that through? And second of all, just on the kind of also looking at sequential kind of costs in Q1, how should we think about SG&A? Any other items other than energy and pulp to think of for that EBITA bridge? And then lastly, you talked about product recalls in Baby Care. What was the kind of headwind there, the impact on the Baby Care number? And just double-checking, should there -- will there be any impact in Q1 to think about?

Yes. So pricing, no, actually, we did achieve the price increases. We're talking specifically Consumer Tissue now that we planned for, but then actually costs increased even further. And within that quarter, it's -- I mean we are much more agile than we were before. And of course, the overall impact on us is much less since we don't have Vinda anymore. But when there's such a drastic change within a quarter, I mean, there's nothing you can do in that short time horizon. And as I mentioned, we are more agile, and our organization is looking for ways of, of course, restoring margins also in Consumer Tissue. And margins are very, very good in most parts of our business, but also in Consumer Tissue. And then when it comes to baby, yes, what I wanted to say with the recall with one specific customer is that this was temporary, and we expect to see growth in the Baby Care category in 2025 going forward. Specifically in the individual quarters, very difficult for me to comment. But the recall was specifically happening in the fourth quarter of last year.

Maybe just a comment, Patrick, on the SG&A, but just before that, the kind of negative things that happened, and you said it, Magnus, but just to emphasize that, the negative happened -- the things that happened during the quarter from November and onwards were very significant. So when you talk about currency, it was very, very significant. You know roughly what our exposure is to the U.S. dollar mainly relating to pulp purchases. And of course, that's very significant. And if you add the energy that was clearly elevated during parts of the quarter, you can clearly see that had that not happened, our margin would have been considerably better. So I think we have that agility. There's no doubt about it. You asked about, Patrick, the SG&A there, and we expect it to be slightly higher in Q1. This is mainly related to A&P actually. We -- you have seen an overall increase of spending, and the result is quite obvious when you look at our net sales. So as I said before, we think the investments we are doing there is value creative, and we expect to do that also in Q1. So A&P, a bit higher. And as a consequence, SG&A, slightly higher.

Okay. And just if I may just squeeze one more in. On Professional Hygiene, the underlying volumes looked a bit weaker quarter-on-quarter. And it sounds like the restructuring is still is not complete, but you said there's a marginal impact since it's very limited in Q1. Should underlying performance improve? How should we think about that?

Yes, I can start, maybe, Magnus. But I think we have reached a very, very healthy underlying margin in Professional Hygiene. So you -- Magnus, you were talking about the release of the provisions related to volume, so -- which is not unusual. Typically, what you do in Professional Hygiene, you account for these -- or you accumulate these provisions during the year. And depending a bit on how the year actually ends, you tend to typically release a bit. So we normally have that. We didn't actually have it in '23, but we have it in '24 and most of the years previously. And this is why the Professional Hygiene margins are typically quite strong in Q4 and a bit lower in Q1. And so we'll see that pattern, of course, this time as well. So I think it's fair to say that the underlying performance of Professional Hygiene remains very strong. And hopefully, that will continue, of course, obviously.

I'm just reiterating earlier comments. Sad to see you go, Magnus, and good luck in your future endeavors.

Thanks.

And we will now move on to our next question from Tom Sykes of Deutsche Bank.

I think before, in Q3, you alluded to some lower production levels in Q4. And I wondered to what extent are you managing the seasonality, if you can, of your production and in particular, I guess, to reduce production in kind of colder months when energy costs are higher? And if that's true, then to what extent, as you maybe increase your production volumes coming into this year, do we get less fixed cost absorption than maybe higher marginal cost? And is that then -- are you trying to say that your all-in unit costs will be lower -- sequentially lower? Is that what we should take away? And I guess, just to be clear on your COGS comments, which currency are you saying that COGS will be sequentially lower? Is that in SEK or dollars or euros or what, just to be clear on the COGS comment, please?

Yes. So we'll start with the kind of production volumes. We don't have much room to maneuver when it comes to kind of moving production versus sellout from us because our products are so bulky and no value. As you know, they need to get on trucks and be shipped out every day. So actually, when demand is high, we have to produce every day, and this is what happened last year where we were actually running most of our mills at higher capacity than we usually do. So -- and one of the reasons also why we had this cutoff when it comes to cash flow. So our operations were running at a very, very high rate throughout the year. And I also mentioned that we see a very high demand for many of our products, which is, of course, good. But to see any kind of seasonality or even quarter-over-quarter variations in cost due to that, I think it's very, very difficult. Handing over to you, Fredrik, on the -- is it dollars or kroners or...

Yes, I think, Tom, you were referring to comments we made in Q3, if I'm not mistaken, that we expect slightly lower production volumes in Q4 versus Q3, which leads to an absorption impact, and we had exactly that. It was not super big, roughly about SEK 60 million or SEK 70 million in that ballpark, but it was there pretty much in line with our expectations. So just to complement, it's not big, as you say, Magnus, but -- yes.

And the currency?

Yes, currency is actually based on SEK obviously because that's our reporting currency. But we are not forecasting -- when we say that, we're not forecasting any specific movement other than what you see out there. So we expect the euro-SEK rate to be constant as we do expect the U.S. dollar-SEK rate to be constant from where we stand here and now when we give that forecast. So the answer is, to your question, in all currencies, but of course, that may or may not change as we go forward in the quarter. But typically, we don't. Yes, if you understand. So somewhat lower.

And we will now take our next question from Charles Eden of UBS.

Fredrik, first one for you. Could you please break down the SEK 759 million sort of COGS headwind between the usual bucket? So I guess I know there's this SEK 430 million tailwind from COGS cost savings because that was in the press release. But I guess that means there's a SEK 1.2 billion headwind from energy and raw mats. Could you just sort of clarify the numbers there? And was there a one-off sort of inventory revaluation downwards related to the lower pulp prices? And if so, if it was material, could you sort of help us quantify? Second question just on the sort of share buyback. Obviously, no announcement of an additional program this morning, but you highlight in the press release that it will remain a recurring part of capital allocation going forward. So could we expect an additional share buyback at the AGM on the 27th of March when the current program completes? And then if I can just squeeze in a clarification, and this has been touched on a bit, but the North American Professional Hygiene sort of delayed orders, if that's the right phrase that you quoted, can you help us quantify what that is? And would you expect that to materialize in the Q1 volumes?

I can start with the share buybacks. So you should expect to hear us announce the plan going forward after the AGM since it's a required decision by the AGM every year. So we cannot actually give any information before that. So soon after the AGM, we will announce our plans for a recurring -- for the recurring share buyback program. Then the bridge, I hand over to you, Fredrik.

Yes, Charles, I actually gave you a little bit of insight into that when I spoke earlier. So if you look at raw materials, it's SEK 880 million. And out of that, SEK 330 million is basically currency. So if you take raw material, excluding currency, it's a bit over SEK 500 million, give and take, SEK 540 million. And so when you look at -- and if you want to kind of decompose that even further, pulp is actually a bigger amount, and the other materials are positive. So there are lots of moving parts, but to make it maybe simple, total raw material, SEK 880 million. I also mentioned to you distribution of SEK 160 million there. So if you add all of that up, of course, you come very close to that or more than SEK 1 billion, basically. And then there are the cost savings plus a lot of other smaller -- and I actually mentioned one of them earlier with production volumes. So there's a bit of back and forth, but these are the main components, Charles.

And when it comes to the Professional Hygiene North American lower sales in the Q4 and when we expect that to normalize, I mean I can't say. Typically, year-over-year, our large customers tend to buy similar volumes or, of course, gradually step as we grow higher volumes. And when this normalizes, I can't say. It depends on the plans of those big distributors that we're talking about in this case.

And congrats again, Magnus. Looking forward to continuing speaking to you in the coming quarters.

And we will now take our next question from Jeremy Fialko of HSBC.

Okay. So first of all, yes, I reiterate the comments for Magnus, and yes, so good luck with your future endeavors, but obviously, not after a bit more time with Essity. So yes, a couple of questions for me. First one, just maybe to sort of frame this question on kind of the dollar and sort of sequential cost movements. To what extent would you see what happened in Q4 -- is it a little bit of a kind of a temporary impact? As in, you obviously saw this unanticipated dollar impact, but then you perhaps -- is it fair to say you've seen the pulp prices come off a little bit more than you might have expected? So actually, when you look at the situation in Q1, it's not a lot different than what you would have expected a quarter ago, albeit the components are a little bit different where you perhaps got better underlying commodity costs but then slightly worse currency, and net of it is actually a bit of a washery. So we could see this a little bit of a profit miss as being perhaps a slightly temporary impact. And then the second question is just on the demand that you spoke about being quite strong into the year -- into the sort of the start of the year. What can you sort of attribute that to? Is there anything kind of temporary there? Or do you think this is just a good read for where the business is trading at the moment and sort of quite a robust volume outlook for the first part of 2025?

Yes. So the demand is, we believe, in some areas, incontinence care, specifically, both in retail and health care, that there is a stronger underlying demand. And maybe this is a result of a higher acceptance for these products, aging population and so on. We're actually -- something we're discussing internally. Then we are doing better and better in terms of market shares and stabilizing our growing market shares in most areas. So I think that's also helping. So those -- I mean that combined leads to a need for us to actually increase our capacities, and this is now in the professional -- or in the Personal Care categories primarily. And also, one of the reasons for some of the higher COGS in the fourth quarter, we were actually having start-up costs for new machines to cater for the higher demand. Then when it comes to what extent the Q4 costs were temporary or not, I think it's very, very difficult to say. What I can say is that our organization is working very, very hard to manage variations both in costs and pricing and so on to be able to kind of come back to the margins we're looking for, for the immediate term, for the medium term, for the long term as quickly as they can. And it's very difficult now to start. Of course, we don't provide forecast for individual quarters either, but to break it down into details.

Maybe, Jeremy, to add on that because I'm not sure if I understood your question fully. I interpreted a bit that you felt that because of the dollar strengthening, you saw the -- or you anticipated perhaps that pulp prices were coming down faster or more than what otherwise would have happened. That, we don't see. So from that perspective, the dollar impact is actually kind of coming through at its full. So it's more what you say, Magnus, it's a matter of how we compensate and how we deal and compensate for the dollar increase. But I'm not sure I interpreted the question correctly, Jeremy.

I guess it's more the point is that you're still seeing your -- the underlying pulp price is still falling, and you're still seeing kind of sequentially lower costs in Q1. So I just felt there's perhaps -- it's a bit of a -- is it a transitory impact from the dollar given you're actually seeing more favorable developments kind of elsewhere in your cost base? I suppose that was what I was trying to...