ETTYF - Essity AB (publ) (ESSYY) Q4 2023 Earnings Call Transcript

2024-01-25 17:37:05 ET

Essity AB (publ) (ESSYY)

Q4 2023 Earnings Conference Call

January 25, 2024 3:00 AM ET

Company Participants

Sandra Åberg – Head of Investor Relations

Magnus Groth – President and Chief Executive Officer

Fredrik Rystedt – Chief Financial Officer

Conference Call Participants

Celine Pannuti – J.P. Morgan

Charles Eden – UBS

Niklas Ekman – Carnegie

Patrick Folan – Barclays

Karel Zoete – Kepler

Oskar Lindström – Danske Bank

Mads Rosendal – Danske Bank

Mikheil Omanadze – BNP Paribas

Simen Aas – DNB Markets

Victoria Nice – Société Générale

Tom Sykes – Deutsche Bank London

Presentation

Sandra Åberg

Good morning, and welcome to Essity's Presentation of the Fourth Quarter and Full Year 2023. My name is Sandra Åberg. I'm Head of Investor Relations. And joining me today are our CEO, Magnus Groth; and our CFO, Fredrik Rystedt. Magnus and Fredrik will go through the results. And after that, we are very much looking forward to your questions. I would just like to kindly remind you to have one question per call. And any additional questions, please reach out to me after. We will also be road showing in Stockholm today and in London tomorrow and in the U.S. next week. So if you would like to meet with us, please let us know.

With that, we are ready to get started, and I'll invite Magnus on the scene. Magnus, please.

Magnus Groth

Thank you, Sandra, and good morning, everyone, to this year-end report of the best year ever for Essity and, of course, also a thorough follow-up on the fourth quarter. Just as a reminder that every day, our brands care for the hygiene and health of over 1 billion people in 150 countries and it's done through our fantastic leading global brands where in many cases, these brands are multibillion dollar brands or billion dollar brands and in good health and, of course, a fantastic starting point for us as we continue our profitable growth journey.

So what's really, really new, of course, for the first time now, we are presenting the Essity Group with Vinda as a discontinued operation. And as many of you remember, Vinda accounted for approximately 17% of sales. So this is what the full year 2023 numbers look like without Vinda, net sales of SEK147 billion, SEK18.9 billion of adjusted EBITA, which is the highest ever with or without Vinda and 36,000 employees. Key achievements in 2023, it was a very, very busy year. It's – we achieved the highest profit ever, and we have created now what we see as a very strong platform for growth and I'll get back to that, and so will Fredrik throughout this presentation. We substantially improved our structural margins for all business areas. And of course, this is from this position we aim to continue to grow and we made good progress on all our key priorities other than the financial priorities, innovation, efficiency and sustainability, which is so important for us in the longer term.

In the quarter, we also received a pre-conditional offer for Vinda, which enables a more attractive portfolio for Essity going forward. Starting then with a pre-conditional offer for Vinda, very attractive offer for Essity and our shareholders at the price of HKD23.5 per share. The annual return during the nine or ten years that we've been holding the stock would be approximately 14% per annum and the EV-to-EBITA multiple ends up at around 18x. So the cash proceeds amount to about SEK19 billion and we will remain with Vinda as a license provider for the – some Essity brands that will still be sold in China and in other neighboring markets. And in this way, we remain committed to China and Southeast Asia with Essity's strongest brands going forward. The transaction is expected to be completed mid-2024. And again, interesting or important to notice that we are now in this presentation, also looking back the last three years, we will only look at numbers that has Vinda as a discontinued operation.

So what does this mean the offer for Vinda? We have looked at our sales split several times, as you can see here down in the left-hand corner, that's the net sales split in terms of sales in 2022, where the two components making up our Consumer Goods business, Personal Care and Consumer Tissue accounts for 61% in total. And the stated aim of the divestment of Vinda was to reduce our exposure to Consumer Tissue. And as you can see there in the middle this is the net sales split 2023 then with Vinda discontinued, and there is a huge shift Consumer Tissue after then Vinda only amounting to 33% of sales. And so we could almost state that we have come a long, long way to our long-term direction of having a more balanced portfolio, where the graph to the right there just shows what could be, of course, not an exact state, but some kind of longer-term direction....

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