Essity (ESSITY) 21st Annual dbAccess Global Consumer Conference 2024 summary

Business overview and strategic positioning

• Operates in hygiene and health, reaching over 1 billion people daily across 150 countries, with 36,000 employees and 72 production facilities.

• Holds leading market positions, being #1 or #2 in 90% of branded sales and #1 in 60% of branded sales across chosen segments, focusing on Health and Medical, Consumer Goods, and Professional Hygiene.

• Recent divestment of Vinda reduced exposure to low-margin, capital-intensive consumer tissue, generating SEK ~19bn in proceeds and a capital gain of SEK ~9bn, and shifting the portfolio toward higher-margin, lower-volatility categories.

• Achieved significant supply chain efficiencies and factory consolidation, enhancing operational effectiveness.

• Maintains a strong sustainability agenda, recognized by major NGOs and integrated into product innovation.

Financial performance and targets

• Over the past decade, achieved an 82% increase in sales and a 115% increase in EBITA, with an average annual sales increase of SEK 7.4bn and EBITA increase of SEK 1.1bn.

• Q1 EBITDA margin at 14%, with Health and Medical at 19%, Consumer Goods at 13%, and Professional Hygiene over 15%.

• Gross margin reached an all-time high of 33% in Q1, driven by mix changes and restructuring.

• Net debt to EBITDA at 1.36, with strong cash flow and plans to update financial targets in Q2.

• Return on capital employed at 17%, aided by the Vinda divestment, with ambitions to grow above 3% organically.

Growth drivers and market trends

• Focused on aging populations, shifting investment from baby care to incontinence and healthcare.

• Health and Medical benefits from sticky, long-term contracts and rapid pricing adjustments.

• Professional Hygiene recovering post-COVID, with growth in hotels and industry but lower office demand.

• Consumer Goods sees downtrading to private label in tissue, but brand loyalty remains strong in emotional categories.

• Operating leverage and volume growth are key to future margin improvements.