Good afternoon, everyone, 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 gonna jump straight into Q&A. There is functionality for you to share that with me on the iPad. I'll grab that before we kick off. Please do ask your questions there, and I'll pose them on your behalf. Let me just grab that iPad, and then we'll kick off. Super. Fredrik, one of your medium-term targets is for greater than 17% ROCE, which on my calculation implies about 13.5% EBITDA 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?
Yeah, I'll be delighted to. I think it's a kind of an important. It's not just a target, it's also a commitment from the management to actually get to there. Maybe to give a little bit of background, we revised our target not that long ago. We used to have a target at 15% of ROCE. We reached that target, so we actually increased it. Of course this happened, we revised that target just prior to the last couple of years of very, very high cost inflation that we've, so many companies have experienced, and of course we're no exception. It's been a couple of tough years, of course, the distance to that 17% now is fairly large.
Mm-hmm.
Of course, hence the question, how are you gonna get from where you are now to that 17%? Cause it will mean a fairly big margin uplift. To just start with your first question, can I confirm, yeah, it's roughly about right, cause we got a capital turnover of, in the order of magnitude about 125, a bit above there. To get to the 17%, we need a margin of some 13.5% or a bit more than that. Just to give a bit of background there, we were in Q4 at 9.3%, so you can say there is a considerable margin uplift to be done in the next couple of years here before 2025.
Clearly, I think it's a journey to get to there. As I said, this is a commitment and part of the journey is, of course, to continue to adjust or compensate for the cost inflation that we have incurred. It's been very dramatic. We've raised prices more than any other consumer company, I guess, on the planet, actually. We have a little bit more distance to go, and we will manage that. That's part of that story to get to that higher margin. The rest is very much similar to what we have been executing in terms of structural movement in the past. Innovation driving mix improvement and margin enhancement as a consequence. Not only drive growth, but also margin improvement.
The rest is largely related to efficiency, you can say. What we have done, we have made a program we call Road to Seventeen. For every unit, there is clear targets, there is clear activity plans, milestones, and a timetable. Of course, so the journey is very clear for how to get there. Yeah, of course, this is more than a target. It's a commitment.
Thank you. That's very helpful. 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. 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. At the start of it, you just say that we cannot raise price, gonna lose lots of volume. We can't renegotiate contracts that are that haven't expired. We can't do this, and we cannot do that.
We can conclude 18 months later that we've done all of it, of course, we have been able, as we have done in the past, compensated pretty much all of the input costs with price. Of course, that creates a lot of self-confidence that the brand positions that we have, the strong brands, is actually capable of generating that pricing power. 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. We have put in place lots of new pricing tools, much more pricing transparency. In reality, we've got that much better. Of course, that means that we have speeded up. Hopefully we'll be able to compensate the rest of the necessary price adjustments fairly quickly. It takes longer.
I mean, we are basically three business areas. One is the retail, 60%. One is the professional hygiene part, which is another bit more than 20. The final part is our health and medical business with a bit lower than 20%. In that latter part, pricing adjustments takes that much longer because of the market functionality. We'll need to keep on raising prices in that end. For the other areas, we are largely, you can say, done. Not fully, but largely.
Super. Despite, as you say, a significant amount of pricing over the past year or so, volumes have remained largely very resilient. You know, it wasn't until Q4 that volumes actually declined. How do you see volumes, I guess maybe two parts. Was that volume decline in Q4, in line with your expectation or did that sort of surprise a bit to the negative? Secondly, how do you expect volumes to travel through 2023?
I think this is interesting because if you look a bit back, in a more longer timeframe, Essity, we're market leaders in so many different countries. Of course, if you happen to be market leader, you're also price leaders. Typically it's the responsibility of the price leader to kind of drive price increases. We have been more aggressive than pretty much everyone else, as we also have been in previous cycles in the past. If you look at our combined market share for all our products, 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 timeframe, gained market share. That's great. That's part of the strategy.
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?
Mm-hmm.
The total is a gain. Of course, this is very consistent with just being large and market leaders and more aggressive. 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. That gives a little bit of feeling for how kind of large these price increases have been. 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.
Okay.
It was a very, very good year from volume perspective.
Sure. Just to push you on trajectory of volumes-
Yeah.
Do you expect-
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. 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. If you decompose that 3% of organic, roughly about 2% should be volume, about 1% mix, and 0% on price.
Mm-hmm.
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 clear. I guess your competitors will be responding to your price increases and narrowing the gap that you've extended by being the price leader. Is that fair?
Yeah, I think that's probably fair. I think they of course all... I remember we had this wonderful plan. When this all started, beginning of 2021, we actually put out a press release. We went out and said we're gonna dramatically increase prices. The competitors, they took this release. Actually, physically, this is not just... This is actually true. They took our release and they went to competitors and they say, "Here's the thing. Look at what they're gonna do. We promise not to increase any prices." Basically, they did exactly that. That gained them a bit of volume initially, but it didn't take very long for them to also start... Obviously, that wasn't a very good strategy. I think they... All the competitors have raised prices.
They're a bit behind, and of course, at some stage they'll simply catch up. I don't think it's... It's no drama.
No, very, very helpful.
Yeah.
As you mentioned, 6% sequential price increase Q4 versus Q3.
Yeah.
Less than that, but still some sequentially for Q1. Is that where we should think about it?
Yeah, I think so. I mean, once again, when you see markets 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. As I said, on health and medical, that will take some time. There, there'll 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. It's always difficult. We're managing the price cost gap, we're not managing absolute prices.
Sure.
Yeah, for Q1, we'll see higher prices, definitely.
Super. When you're thinking about prices and volumes, is it simply a bottom line focus? I guess it's more of a conversation on your sort of private label and retailer brands business, 'cause the brands carry their own, sort of equity with the consumer. Are you willing to walk away from volume if you can't get the margin and the absolute EBITDA that you're focusing on? How do you determine price versus volume?
Yeah. 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 wanna do. You can't fund your investment. You can't fund innovation. In the end, we require, I think, it's an absolute necessity to have the margins that we aspire to have. Yeah, in the short term, 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. In the short term, absolutely.
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 that, "Here's the thing, we cannot raise prices. It's impossible. We have contracts or whatever, and if we do that, we're gonna lose lots of volume, right?" We asked them to basically put forward, "So how much volume will you lose?" Eventually we said, "Fine, go ahead. Take the volume loss, just raise the prices." They did. We did, obviously. As we just alluded to before, we didn't lose any volume. In fact, we gained volume. I think yeah, we're 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 UK. What are you seeing there? 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.
Yeah.
Are they lower margin businesses for you?
Yeah, I mean, downtrading, We're kind of in the premium end of pretty 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've got lots of unemployment, which we don't at this point in time. Of course, recession always leads to different behavior with people. We kind of look at, okay, so times 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. There are two 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. The other thing is that they're not a big part of people's disposable income, typically. 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. Downtrading is never long-lived in our category. At least historically, that's not been the case. 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, has very little impact. It has a little bit of impact, but as I said, it's marginal. Of course, it's short-lived, so it's not a major issue. We get a lot of questions on it, though.
Yeah. No, so do I. In terms of sort of.
But it would be very different if we were selling cars or refrigerators or kind of high capital-type products. That's a different thing.
Yeah.
'Cause that's a much more important thing. People will continue to buy cheaper stuff for a much more prolonged period of time.
Yeah, got it. Thank you. You kind of alluded to this with the pricing comment, but obviously, raw material inflation arguably has been unprecedented for the last 2 years. You showed actually at your, I think, it was Q3 results for the first time, the sort of how quickly about 2-quarter lag that you're able to catch up on the pricing to compensate for that raw material. 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 inside the business? Because I guess if you're just seen as headline numbers, you're pushing more pricing, and yet still the firm's margins are coming down sequentially.
How do you sort of square that internally, and how does the business think about that?
I think it's a great question because if I put it this way, I think it's a matter of kind of believing, right? When you go to a retailer and ask for higher prices, you don't get a lot of hugs, right? They're not gonna tell you how nice you are and I'm so happy to give you more price. That's not what they. They're gonna boycott you or delist you or threaten you or do all sorts of things. Of course, at the outset, you get really kind of frightened with that. Very tough discussion. The motivational aspect and the necessity to do it, of fundamental importance really. As I alluded to, we have basically been.
All of those kind of feelings that we're not gonna be able to do this, we're not gonna be able to raise prices, we have fixed contract, we're gonna lose lots of volume, all of that has proven not to be true. After a while. Two things happen. The first thing is that you realize that you've 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.
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 forced to or whichever way you phrase it, and you have the competitors actually doing the same or roughly the same. Of course, that becomes then easier. 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. That's just massive, right? Every time you look, costs have gone higher. 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." After having done that a few times, then obviously it becomes that much easier. Now as things stabilize, we have become so much more agile, of course, the kind of, yeah, self-confidence, as I alluded to, and I think the mood in the organization also improves that much. Yeah, it's been a tough time, but it's also, I think, worth a lot to me at least, that we've got that self-confidence, and I think it's been an astonishing achievement by the people in the company.
Just to give you a bit of perspective, we had our best top year from a, from a operating year 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. You can say the cost increase consumed all our profit plus another SEK 10 billion. Despite that fact, we have lost a bit of margin, but only a bit. You can imagine what kind of things that has been achieved there. I think there is a lot of pride in that as well.
I think that's very, 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 helpfully tell us what it is. I think from memory, just over 6% of sales in 2022. With energy costs coming down in Europe and sort of 30% of your energy still being purchased on spot, that must help, right?
Yeah, it does. Yeah. Sure. I mean, clearly, it's been kind of dramatic for all sorts of reasons, right? Clearly, if you were in August, September of last year, I mean, gas prices were EUR 300 per megawatt, something like that. Just to kind of as a point of reference, or more than that, and as a point of reference, historically, it's been EUR 30, so it's 10 times, right? We consume a lot of gas, especially for our tissue business. Of course, that is just fundamentally very, very challenging. On the other hand, we addressed it and compensated a large degree of that. 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 more normalized and hopefully now stable levels.
The 70% that's hedged as a reminder, it's over the sort of 3-year hedging.
Yeah. It's incumbent year plus another two. That's been very beneficial for us. It's really not anymore because now it's practically at market levels, you can say. Right now, it's not beneficial, but it has been helpful, absolutely.
Super. I think, you know, if you include Russia, maybe just over 50% ex Russia, probably 40%-45% of your tissue manufacturing capacity is in Europe. That's the market that matters most from a.
From a consumer tissue standpoint.
Exactly. Which is.
Yeah. The biggest market is actually China, right? As an isolated country.
Mm-hmm
it's just a very large country, and we're the largest producer there. As a kind of continent, yeah, European business is clearly bigger.
Super. You mentioned China, so teaming up nicely. Vinda. Vinda obviously had a tough Q4, profitability obviously was eroded almost completely. Well, it was completely eroded at EBIT level. What do you expect to see from China? Obviously, it's a separate listed entity, so but to the sort of where you're able to just sort of communicate how you see the profitability improvement, is it just a function of they need to get more price and that's the key focus? How do you see that development in China, and does a reopening help with that as well?
Absolutely. I mean, first of all, I think China has been kind of a challenging market now for some time, obviously. To give you a bit of perspective, Vinda is the market leader in China, so it's the biggest company, and it's by far the most profitable. It's as you say, they rode a profit zero. It tells you a bit about the sector in at large, right? The reason for this development for the sector at large is kind of pretty interesting. 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.
Vinda has actually done that. They've raised prices a lot, but very, very far from what's needed to compensate for the input cost. It's not that much energy there, it's more pulp, right? Of course, the whole sector at some stage is not doing that well. 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. That will help, certainly, and we've also seen now pulp cost in China actually coming down. It's gonna take some time for that to kind of hit the P&L because they buy a lot of that pulp from far distance.
Sure.
It will take some time, but clearly it will improve. It's been a very tough time for our Chinese entity there, but clearly a much better outlook as we go forward.
Super. Thank you. We've talked a lot about raw materials, a lot about pricing, There's also been a lot of good work done in terms of internal cost savings and obviously the manufacturing roadmap being a key driver. Obviously, you target SEK 500 million - SEK 1 billion per annum savings there.
Yeah.
Been masked a little bit through 2022 given the way you report on a net basis. Could you sort of tell us a little bit about what the underlying cost improvement was looking like in 2022 on a gross basis and also your expectations for that in 2023?
Yeah. Yeah. I mean, I'm not sure. I actually asked Charles before, "Do you like the way we account for this?" You put it very straight, you don't really. I do. 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 in the other end, who's gonna be happy for that? To me, everything that hits P&L is very beneficial. Everything that doesn't really matter. This is why we do it net.
That means that from when we talk about cost savings, we also deduct negative things like inflation, like higher maintenance cost, like lower productivity coming from kind of turnover of personnel and new people not being as productive as those before. We look at it from a gross and net. Typically that's been in a stable environment that works really, really well. If you suddenly see sharp inflationary-driven things like, as I mentioned, higher maintenance, or if you've got disturbances in the production system, that kind of leads to lower productivity among the people, these things hit all of every company. They're market driven. To me, that's all negative productivity. You can look at it from two different ways. One is what is total productivity, and that's what we're showing.
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? It was a bit lower than in 2020. Historically, as you said, SEK 500 million - SEK 1 billion, it was slightly below SEK 500 million last year, a bit below. 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. The absolute focus on projects, and there are hundreds of them that leads to these SEK 500 million - SEK 1 billion, there were slightly less focus on that and more focus on getting service levels to where they should be.
In the context of things, I think the underlying efficiency work and what's been done there was really, really good. We were quite happy with that in 2022. May not sound like that, but it will. We expect to step that up as we go forward back to more what we think is normalized efficiency levels that we could achieve. I think it would be likely to be better in 2023 and onwards.
Super. The buckets of areas where most of those savings are coming from?
There are several. I think one, they're basically you can say in our factories, and how much we're able to put out in terms of using the same kind of personnel, so we call it product cost fixed. How much can we have it? Machine efficiency is a good measure. If you have 80% machine efficiency in a paper making plant or in a baby diaper machine as an example, if you get that to 85%, you're able to basically produce 5% for the same cost as you do with 80% in terms of your fixed product costs. 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. We have put basically all our demand planning, and also we call it a SmartHub, where we kind of consolidate all the transportation that we do internally in the group into one single hub in Spain, in Barcelona. We basically then were able to using, you know, 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. That was another story, the whole distribution part. Purchasing is another. Qualifying more suppliers and being able to basically negotiate cheaper contracts because Kind of expose more suppliers to materials as an example. There are many different buckets where we have, I guess, very firm activities and targets for all of them.
All of that combined generates, so it's, as I said, hundreds of different projects.
Really interesting. Thank you.
It's not actually just in COGS. We're doing exactly the same when it comes to SG&A. We are currently in the midst of putting together basically a significant part of our administration into Mexico in Santa Fe, into Portugal and Lisbon, and consolidating all that work. That's another way of reducing cost with the same output and higher quality. We're doing that as well.
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. It's a key driver given the innovation pipeline you continue to come through. A&P will continue to be an investment area for Essity.
Yeah. I think it's actually not that difficult with A&P because what we do is we innovate, right? 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. 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. The A&P just follows the level of innovation that we do, and innovation follows what we define as something we call innovation sufficiency. We set...
The way it works is that we set an aspired growth rate, we know roughly how much our current portfolio will actually lead to. The difference, we know we need to innovate. That number of innovation we know also will require a certain amount of A&P, right? This is the kind of first part of the A&P bucket. Using all sorts of different tools, we calculate what is the return of investment in A&P. We put as much A&P as actually generates a present or a positive present value. This is why we haven't cut back because it's basically profitable, either through supporting innovation or as a return on investment, basically. We can cut back, it wouldn't be profitable. It would...
I think there is reason to believe that we could potentially invest a bit more in 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? I guess the rationale for doing that, one would infer potentially it doesn't have a long-term home at Essity. Is that fair? Sort of, I guess, maybe you could comment on the rationale for that separation.
I mean, for... 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. Just, we haven't taken any decision to do something, but of course, we are enabling such a decision potentially. But it's... I can't comment on that until we've ever even had that discussion.
Of course.
To give a bit of frame there or background, if you look at our European tissue business, roughly about 50% is our own brands and about 50% is with other brands, right? Of that 50%, roughly half of it, so 25% of the total, is what we would define as retailer brands. What we mean by that is that business is with strategic customers, we manage their brands. We provide all the innovation. We're category captains, and in addition, we also sell other categories. You can say there is very little difference between that business and the branded business. They're largely the same.
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 the thing. We want this number of cases. We want this number of ply, this grammage, and give us the cheapest price." So that's pure private label, and that represents approximately then 25% of the total. 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.
The final step of it is to make sure that the seven plants that are included in that structure only do exactly that and not as it is today, doing a bit of both branded, retailer branded, and private label. We're basically purifying that structure, which will be complete about a year from now or in that order of magnitude. 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. Of course, if you mix that with too much overhead or too much innovation or too much whatever, you're not gonna be cost-efficient. 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.
Eventually, it also enables the discussion, are we the right owners? Once again, we are not there at that point. We're not at that stage.
Yeah. 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 awards from third-party providers as well.
Yeah, I think, awards they're great, right? It's not really kind of doing anything good for the planet to start with. To put it in perspective, I think, Charles, it's obvious that we're in sectors that, first of all, emits greenhouse gases. We're also engaged into sectors that actually sell single-use plastic. Overall, I think if you're a contender or a competitor in our sector you gotta 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. I think if you do it well, you're gonna do fine.
If you don't, if you miss it then over time you won't even be there, right? 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. Of course we've joined the science-based targets already in 2018. We have targets for net zero. Or a journey to net zero. Plastics target, packaging targets, water...
I mean all sorts of different targets that we put as much emphasis on as we do on the financial targets. 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. This is why we attribute so much importance to it. 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. You can take a couple of examples. We bought a couple of companies last year that produces reusable or washable absorbent underwear.
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 is also quite comfortable or very comfortable and good to use. That's just one example. 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. Instead of throwing away lots of plastic you just continue to reuse it. 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.
You can say we've just launched a washable and reusable towel for the kitchen. There are many, many examples in all our business areas where we have sustainable products. We 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. We are engaged into tons of different activities there.
For as an example, taking back diapers that comes from elderly care homes or in Tork PaperCircle 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. Instead of cutting down trees and shipping and drying pulp and then shipping it to 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. We are now selling products on a few markets with the content of that pulp. It has a super beneficial sustainability profile. These are just examples and there are many, many like those.
Super.
Sorry for being a bit long there but.
No, no.
Very close to what we do so yeah.
No, I appreciate the color. We're nearly at time but I did wanna throw one curveball question to you at the end. You've got to take a six-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. Yeah. I think it probably would 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.
That number. There we go. We're very nearly at time, thank you very much.
Thank you.
It's a pleasure to host you as always and thank you everyone for joining. Thank you.
Thank you very much.