Good morning, everyone, and a very welcome to this webcast. I'm Johan Karlsson. I'm the head of investor relations here at Essity. Together with me here today, I have our President and CEO, Magnus Groth, and also our CFO and Executive Vice President, Fredrik Rystedt. Today, we will first talk about yesterday's announcement, and after that, we will present the Q1 results.
After the presentation, we will open up for a Q&A session. In order for everyone to be able to ask a question during the Q&A session, we would like to ask you to limit yourself to one question each. With that, I would like now to hand over to you, Magnus. Magnus, please go ahead.
Thank you, Johan. Welcome everybody to this very busy presentation. We will start talking about the strategic reviews that we initiated. I also look very much forward to talking about the strong start of the year that we've had. We have good momentum throughout the company.
Starting with a strategic review of ownership in Vinda and in our European private label tissue division, this is a strategic review that we're starting now with the aim of reducing our share of consumer tissue sales in the business. Consumer tissue, as you know, is our most capital-intensive business and also the business that is most dependent on fluctuating pulp prices and energy prices. The review only covers these areas.
We also have a substantial consumer tissue business with our branded products and also with our retail brand partners, which is very much our core business and where we continue to develop the business for the long term.
We're looking at different options. We're early on in this process, so no decisions have been taken. We are not in a hurry. We are aiming to maximize value, so this is something we're doing step by step.
As you can see, this includes approximately 22% of Essity's sales that's subject to this review. Looking to Vinda listed on the Stockholm Stock Exchange, market capitalization around SEK 34 billion. We own close to 52% in Essity. Net sales last year was around SEK 25 billion.
The reason for including Vinda in this strategic review is the fact that 83% of sales is consumer tissue. This is a fantastic company, well managed, strong brands, strong market positions, an attractive market. This dependence on consumer tissue is the reason why we're including it in this review.
We are working closely with the board of Vinda. We have great relations since many years with the board and the management team. Again, we are in no hurry, and we are aiming to maximize value when we pursue this strategic review. Moving over to the private label division, the consumer tissue private label division that has sales of close to SEK 10 billion last year, seven production facilities, around 1,900 employees. We are finalizing the carve-out that we started two years ago.
It's been a quite complex process, but we're at the end of that, so it's a good timing. It's also a good timing for the entire strategic re-review that we're performing now that the private label division is back on track after the pandemic and performing well. I'm convinced that Vinda will have a strong second half of the year as raw material prices are expected to decrease in China and in Southeast Asia throughout the year.
Good timing. We're starting this review now. No hurry. We're aiming to maximize value here. Over to the interim report and a very strong start to the year. I think that sums it up pretty much. Price mix, 18.6%, of which mix was 1.2%.
We had positive mix in all parts of our business in spite of continuing to work very much with price increases, shows the strength of our brands, our market positions. As you can see there to the right, a very strong improvement compared to the same quarter a year ago in all areas. Sales growth up 17.2%.
This includes the acquisition of Knix, for instance, that accounts for approximately 1.2% of the sales growth. Knix is performing really well, growing over 20% in line with our business plan. Adjusted EBITA more than doubled, and the adjusted margin improved 200 basis points from 8.2 to 10.2.
I'm going through all these different numbers now because of the huge improvement, so it's a good slide to talk to. Of course, return on capital employed in the quarter up 370 basis points to 12.7%. Very, very strong start of the year.
Looking at that EBITDA margin bridge, a good gross margin contribution. Gross margin is so important for us. That's what we need in order to be able to invest in advertising and promotion in our brands, in innovation, up 160 basis points, and this is in spite of continued headwinds from raw materials, energy, and transports compared to a year ago of 880 basis points.
For anyone questioning if we were able to compensate for the cost increases through pricing, through cost savings, through mix improvements, I think this shows that that's been possible and of course something we will continue to work with in the quarters to come. AMP doesn't impact here the margin development. Growing in absolute terms about 5.1% of sales.
We expect to have higher AMP this year because we have a lot of good innovation coming, so looking forward to launching that in a proper way. SG&A contributed positively as percent of sales. It's an EBITDA. It's lower, even though it's higher in absolute terms due to inflation, of course. Ending at an Adjusted EBITDA margin of 10.2% in the first quarter.
This slide shows the quarterly development, and I think what's the takeaway here from the sales growth is this is now the fifth consecutive quarter of very, very good growth. In most quarters, a combination of price, volume, and mix, and of course, very much price throughout the last year, but also the other components.
We also see a pickup now in the Adjusted EBITDA margin with an exception in the third quarter of last year when we of course had the huge energy spike in Europe that impacted the margin quite significantly, but also a nice trajectory here when it comes to the A djusted EBITDA margin development. Something that is becoming an opportunity for us is to continue to work with efficiency. You recognize these areas.
These are areas we've been focusing on improving year over year over year with good outcome. Of course, it was more challenging during the pandemic and also during the supply chain disruptions last year.
We're really looking forward now to be able to focus more clearly again on energy savings, material rationalization, sourcing savings, waste reduction, all the good things that's good for the environment and good for our business. We will also talk during the year about further footprint optimizations, Cure or Kill efforts.
We are talking about one of those efforts in Professional Hygiene in this quarter, where we will take out some underperforming assets which will have a EBITDA margin improvement in the short to medium term associated with some restructuring costs.
Longer term opportunities for improved performance and efficiency is definitely the integrated supply chain to improve our supply and demand planning, the S&OP process, and so on through digitalization. Of course, with the inflation that we've been seeing now over the last year, an increased focus on SG&A costs going forward.
Now that we are out of the turbulent times of the last couple of years, we are increasing focus on these specific areas and see new opportunities also as a consequence of our new organization that we put in place at the beginning of the year.
We always have a slide about innovation. The first quarter is typically not our strongest quarter. Still, we have some important innovation here. Maybe I to focus on one, the Tork hand towel that you see there in the middle.
It's quite gray or brown, and this is because 30-50% of the ingoing material is carton board. It's a new source of fiber for us that's been difficult to convert to soft and absorbing hand towels before, but where we are now launching a new grade here that of course has a strong sustainability profile and also expands our fiber sourcing opportunities.
Finally, before handing over to Fredrik to go through the three different business areas, we continue with our initiatives and our progress in sustainability and also a number of awards and recognitions as we're used to, which remains of course, a core pillar of our strategy. Welcome, Fredrik.
Thanks, Magnus. Thank you, and I will just take you through some of the details around our three business areas. Starting with Health & Medical, we've had a good start to the year with growth of 10.5%, and growth was strong in all regions of the business area.
You will hear this some more, but we've had an impact from much lower volumes in our Russian business, and of course, also here for Health & Medical, we were impacted. If you take out Russia, it's about 1% or so higher, like-for-like sales, so roughly about 11.5%. As you will hear from me also in the other business areas, price and mix was generally strong.
Starting with price, we had an increase this quarter in comparison to the same period last year of roughly about 10%. Also sequentially, just comparing to Q4, the increase was 1%. We continue with a good price momentum.
As Magnus, you said it, the mix was positive, so close to 1% for Health and Medical. We continue to benefit from our innovation that we put on the market. As you can see from the slide, volumes were stable. It's a bit different in different areas. We had a minor decline in the Inco business where we left some low end, or I should say low profitability contracts.
We had a corresponding or balancing growth in our medical business, and that growth volume-wise came from all three therapeutic areas. We're quite happy with the development in that area.
Now as you can see here, we had a very significant cost increase if we compare to last year. In this case, the impact from a EBITA margin perspective was 560 basis points. We also did see an increase in SG&A coming from inflation.
From that perspective, the environment looks kind of similar as you saw before. I'll come back a bit later to what we see for the immediate future. I'll do that at the end. Turning to Consumer Goods, we delivered a really strong growth, as you can see.
If you include the acquisition 17.6%, and the acquisitions that are included here, as Magnus alluded to, Knix and Modibodi. We are very, very happy with the performance, not least in Knix with over 20%.
It's the same thing here that we are impacted by the lower volumes in Russia. Here, we're also impacted by the fact that we left our diaper business in Colombia, as we have reported on before. If you exclude these two unusual items, if I put it that way, the growth was a bit above 19%, really, really strong growth. The main driver, of course, positive mix here, but the main driver was pricing.
If you compare Q1 versus the same period last year, roughly about 18.5% or thereabout in just pure pricing. Also here, sequentially, we achieved another 1.3% of additional pricing. It continues to be a good pricing market for us.
You can see here that volumes are down with 3.1%. If you exclude the Russian business and the diaper business in Colombia, the reduction is roughly about 1.7%. This is a reflection of a couple of different things. First of all, not least in consumer tissue, we continue to prioritize margin over growth. We also have done the same for baby, where we have exited one contract with much too low profitability, as we've also reported on.
This is where the volume declines mainly come from, where we do just the opposite for Inco and Femine, and we grow volumes there. We're really pleased with the development in both, and not least in Femine, actually, where we continue to take market share in Latin America.
Just as a perhaps curiosity, we reached our highest market share ever in Mexico during the quarter as an example. Here, I mean, obviously the cost inflation is the highest. This is of course driven to a large extent by our consumer tissue business, so pulp and energy, and the margin impact here was 1,050 basis points, so a considerable increase. We also have, although of course much smaller, an impact from inflation in SG&A.
Turning to our third business area, Professional Hygiene, this is actually where we're seeing the strongest or highest organic sales growth. If we exclude Russia here, the growth was roughly about 22%. This is driven by a fantastic price performance of 21%. Here, actually prices were relatively flat sequentially, but year-on-year up by 21%.
The mix was actually 3% in this area, so really, really strong. You can see volumes are down. This is partly, again, repeating what I've already said here a couple times, due to Russia, but it's also as we are going out of very low profitability business, it's impacted by that. It's not everywhere. It's mainly in mature markets where volumes have come down a little bit.
We can also see that emerging markets are continuing to do well, not least in LatAm, although we are of course much smaller there, but generally very good performance. Input cost, the same here, 630 basis points if you compare Q1 of 2023 versus last year, same period. Pulp and energy, as it is, as is the case also for Consumer Goods, they are the main driving factors, and indirect cost obviously impacted by inflation.
I'll touch upon the last point a bit. Of course, as you already know, as part of our strategy, we continue to premiumize our offering with more innovative and value-creating products. We will, as part of this general strategy, take some steps in our Professional Hygiene business.
What we are planning to close some capacity used for lower value creating, for our lower value creating and less innovative range. As Magnus said, this will trigger some cost restructuring charges, approximately in total SEK 410 million.
Out of that SEK 340 million we will take as items affecting comparability in the second quarter. This will have some impact on growth also going forward. It's partly actually had a bit of an impact also in Q1, but we will see low single digit impact throughout this year and to the early part of next. It will be very much margin accretive. This is a project that we are planning that will yield some very good result.
Over time, obviously saying that we will replace these volumes that we are now taking out or plan to take out with more value-creating sales. I'll end with a couple of statements. Normally, we just give a bit of an outlook. It's always uncertain, but when it comes to our cost structure. Three items there, starting with raw material, energy, and distribution.
Generally, we see now that sequentially, and I'll only comment on this sequentially. What we will see now in Q2 for all three business areas, we will see lower cost sequentially in terms of raw material. It will be more so for Consumer Goods, but all three will be impacted positively. When it comes to energy, we see also there lower cost, and this is due to a couple of things.
If you look at our hedging positions when it comes to gas and electricity, it's roughly about 60% for Q2. Prices, if you compare to Q1, they're actually, roughly on the same level within the hedging contracts, but we also estimate lower market prices. This is the reason why we also see lower energy cost. Then we also see lower distribution costs.
Generally, the cost picture on the input side is positive, and of course, that's also generally seems to be the trend for the year as a whole. When we look at other costs, you will see in our report that we've had some negative impact from that. It's mainly inflationary driven, and it's also driven by distribution and other things.
We don't expect that if you look at it from a sequential basis to deteriorate further. This is much more something that has happened, and we are expecting that to be more stable. Then finally, SG&A. A bit less positive picture there.
We're not adding resources when it comes to SG&A excluding AMP. It's more the inflationary environment that we live in that will clearly lead to higher costs. There is a negative thing there coming from SG&A. As Magnus already said, we expect to have continuously throughout the year higher AMP. I'll end there. Magnus, please.
Thanks. If you could move to the next slide, please. We've been very focused on our strong first quarter. It's a great quarter to talk about and also Fredrik has given an outlook for the next quarter. We have a longer-term perspective. We're focused on the next three to five years, not the least 2025, when we have set ourselves the target to achieve a Return on Capital Employed above 17%.
We are very committed to that. With this report, we have taken a good step in that direction, but we have more to do. Of course, for this year, there will be a big focus now on price management. We have proven that we can raise prices, that we have strong brands and market positions. I want to emphasize that again. Of course, we will leverage that also now, when we're entering a phase where we're talking about the cost margin gap and price management.
Then for the longer term, to continue with innovations, building our brands, focusing on the growing channels, the prioritized growth areas, in our business, both when it comes to categories and geographies, sustainability, efficiency, and not least winning with people and culture and where we are continuously strengthening our team in a very positive way. All of this leading to Essity being a leading global hygiene and health company. Thank you so much for listening. Let's head over to questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We advise you to limit yourself to 1 question each. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take our first question from Victoria Nice from SG. Your line is open. Please go ahead.
Hello there. Good morning, everyone. My question relates to the strategic review. Just wondered if you could go into more detail on the rationale for both reviews and the likely timings. You say you're in no hurry, but does that mean we shouldn't expect anything in 2023?
What are you assessing in the review which might lead to a disposal versus retaining the businesses? Also, what could a potential vendor sell-down strategy look like? Still related to that, wondered if you could just talk about the operating environment in China related to the competitive situation. Finally, on the consumer tissue private label business, if you could indicate how the margin compares to the rest of the tissue business, that would be really helpful. Thank you.
Okay. Thank you for that one question, Victoria. We're just starting the strategic review now, and what I wanted to underline really was not, of course, that this could take time because we always aim to execute quickly.
Having said that, in this case, our clear focus is on maximizing valueUh, for us, for our shareholders, and for all the shareholders of Vinda as well. Clearly a focus on maximizing value, and we're starting this strategic review, so it's very early to get into the different alternatives and options. When it comes to the two businesses, the private label division in Europe has recovered well and is operating at a good margin level. Very efficient, high-performing business.
Vinda is, of course, right now, as we could see from the Q report, struggling with remaining cost inflation. They're in a little bit of a different cycle than we are. I expect that the second half of the year will be much stronger for Vinda than the first half. I'm ready for the next question.
Next up, we have Oskar Lindström Your line is open. Please go ahead.
Why only Vinda in the European private label consumer tissue business and not the other parts of the consumer tissue business if the aim is to reduce your exposure to consumer tissue? Are there, you know, other reasons why that remaining part of the consumer tissue business in Europe, is not part of this strategic review? Thank you.
Yeah. Just making the assumption, again, we're early in this process, that, where you take out the two businesses under the strategic review. Consumer Tissue would reduce from being today 41% of our sales as a total to 29%. It's a considerable change there in the overall mix for the company.
Actually, in such a future scenario, then Consumer Goods would be approximately half of our business and where Consumer Tissue and Personal Care would be half, and then the rest, Professional Hygiene and Health & Medical. A very good balance in such a scenario. The reason why we are not reviewing the rest of the Consumer Tissue business is because it's very strong brands.
There's a lot of innovation here, a lot of sustainability. Many opportunities actually with also the breakthrough technology that we had mentioned on the sustainability update here also, to really. It is value-creating today, and we believe it will be even more value-creating.
It regards our own brands, but also the retail brands that we are working with a number of partners to develop in Europe. That's a very good value-creating business. Also the combined business in Consumer Goods of all the different categories with all the strong brands is a strength for us. That's not subject to this review currently and not in the future. It's definitely part of our core business.
Thank you. Just to follow up on this, is there an extent where some of your consumer tissue production facilities in Europe are joint with Professional Hygiene facilities, and that's a reason why it would be difficult to carve out the remaining consumer tissue?
No, this is a part of the exercise we've been going through over the last 2 years. We are finalizing that carve-out, which is both organizationally, financially, legally, and not least from an asset allocation perspective.
By early next year, also the assets will be clearly separated and carved out. It's the machines supplying private label volumes and the branded and retailer brand volumes. That's what we've been working with over the last couple of years, and we are now finalizing that, and that's why we are announcing this today or yesterday.
All right. Thank you.
Thank you.
Once again, ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the next question from Patrick Swann from Barclays. Your line is open. Please go ahead.
Hey, good morning. Thanks for the question. Moving away just from the strategic view, for now, looking at pricing, how should we think about pricing evolving this year? I'm thinking that input cost inflation is coming down.
What does that phasing look like? I guess Health & Medical, you know, big step up quarter-on-quarter. How should we think about pricing going ahead for the next into Q2, and kind of thinking about Professional Hygiene bit flat quarter-on-quarter. Is that peak pricing there? Thank you.
Fredrik, do you wanna talk to that?
Yeah.
You started talking about.
Yeah, I'd be glad to.
the rest of the year.
Yeah. Thanks for the question. It's generally of course, very difficult to talk about pricing, but what you can see there is that the price cost gap or margin expansion needs to continue to take place, and we're convinced that we're able to do that. To comment on specific pricing is always difficult because it will depend on, of course, the cost development in the more long-term future. Generally, the price cost gap needs to continue to widen, and we are committed to make that happen.
Next up, we have Linus Larsson from SEB. Your line is open. Please go ahead.
Yes. Thank you. Thank Thank you very much. Maybe then, after all, jumping back to the strategic review. In your calculations, I wonder CG Vinda and the European private label business, what's the ROCE change?
In the portfolio, if you maybe look over, I don't know, if you look over a cycle or something like that. And also second to that, I mean, today Vinda and Essity are highly integrated, Essity or SCA has sold Asian assets into Vinda in the past. There are licensing agreements. So I'm just a bit curious, and I understand it's an early stage, but if you could open up a little bit on your thinking-
Mm.
as to the separation, process, potentially down the road. Are you going to maintain some sort of presence in Asia even without Vinda?
Regarding the first part of your question, what would Essity look like without these two businesses? It's too early to say. These are two capital-intensive parts of the business and with volatile earnings.
I think that's something that you can also kind of look at and estimate from all the numbers that we're continuously publishing. Second, yes, very good question. We would like to continue to cooperate with Vinda also then in kind of a hypothetical future where we are not longer the owner. We have a great working relationship and they are licensing our brands, TENA, Tork, Tempo, and Libresse, not the least, so global brands.
Of course, we would like to see an outcome where we continue to be represented on the Chinese market and other markets with these strong brands. That's part of the strategic review that we're doing now, how we can achieve that going forward.
Next up we have Simon Öst from DNB Markets. Your line is open. Please go ahead.
Yes, good morning, guys. I have one question. You have previously talked about reaching around 50% emerging market share, I know there is no formal decision on Vinda yet. If you were to move out of Asia, what kind of region would you be looking at to increase the emerging market share?
I think that our emerging market share today is around 37%, and it would be reduced to, in this hypothetical, again, scenario, 25%. It's still something that we're very much pursuing and gradually achieving an increased share of sales in emerging markets because of course the underlying growth rates have been at least historically higher. It's been looking a little bit different actually recently.
We are very, very successful growing very nicely in Latin America. That continues to be a key focus area and an area where we are really doubling down, adding categories in countries and really kind of expanding our presence because based on the strong performance we already have. Former Eastern European countries is another area that's very important to us.
Of course, with Australasia, our business there, we have some opportunities and also especially in Health & Medical, to develop in Southeast Asia. Southeast Asia, including China, remains very important for us as a growth area also going forward.
Okay, thank you. That's very helpful.
Next up we have Charles Eden from UBS. Your line is open. Please go ahead.
Hi. Thanks for taking my questions. First one just on cost savings in the course, if you could sort of set out how those progressed and maybe if you could kind of give it on a gross cost savings basis, 'cause I know kind of the way you normally account for it, net of inflation kind of gives us a negative number when inflation is there.
Comments on the cost savings would be appreciated. My second question, just a clarification. Am I right to assume this above 17% ROCE target is also holding true should the strategic review not result in a disposal of either of the assets you announced yesterday, i.e. that target of above 17% ROCE is something you're aiming to achieve as Essity exists and stands today? Thank you.
Thanks. To the second question, the answer is absolutely yes. This is the path we're on, with the business composition that we have to achieve about 17% return on capital employed during 2025. By the latest. That's definitely a yes to that question. Regarding gross and net cost savings, I happily hand over to you, Fredrik.
Thank you, Magnus. Yeah, you're absolutely right. It's been quite difficult to kind of do the net because of the significant issues that had related to the past year or two. If you look at Q1, and you just take the gross efficiency gains and cost to goods sold, it was SEK 250 million or SEK 248 to be exact.
We continue to do the underlying work, and as before, many, many projects leading to those efficiency gains. That work continues with full force. It just isn't that visible. Hopefully, as I already alluded to, it will become more and more visible as we go forward in the following quarters.
Thank you very much.
Next up we have Karel Zoete from Kepler Cheuvreux. Your line is open. Please go ahead.
Yes. Good morning, all. Thanks for taking the question. The first one is on the exit of Russia. You highlight that. In, in the annual report, we can see it's still, about 3% of revenues of the group. What progress are you making, and what can we expect, this year? The other question is on market structure in Europe in consumer tissue. Can you speak about how potential sale of your private label business might alter the market structure here? Thank you.
Okay. Yes, exit Russia, which is something we announced very quickly the last year after Russia's invasion of Ukraine and something that we've been working with ever since. This is very complex, of course, taking into account sanctions, taking account government approvals and so on. We're in the middle of that process.
We hope to be able to give some new information in the not too distant future. We're in a very intense phase here. The objective remains the same as before, to leave the Russian market. In the meantime, from a volume perspective, the business is actually shrinking because of the market conditions, because of currencies and price increases, you can see from a sales point of view this number that you mentioned.
Uh, so, so that intention is, is clear, and that process is ongoing. When it comes to the market structure, eh, we believe that, um, th-there is a clear difference between the, the branded market, where we are clearly the number one, uh, the partnerships we have with, with some retailers since decades and the pure, uh, private label business.
And, uh, we see this also to some extent in, in, in other categories. And with, with those clear differences, uh, we are partly working in, in different segments. Uh, s-so I don't see, uh, in, in the short to medium term a, a, risk here, uh, which I guess you're kind of maybe alluding to, uh, of, of kind of-
Yeah
... creating a competitor. That's our view. Of course, we believe that those consumers who prefer the premium, innovative, branded products will continue to do so also going forward.
All right. Thank you.
Next up, we have Karin Wånta from Handelsbanken. Your line is open. Please go ahead.
Yes, thank you very much, Karin Wånta . Very quickly on the Consumer Goods and more specifically this continued difference in pricing for consumer tissue private label versus branded consumer tissue. Is that a reflection of different contract structures, i.e., that the private label is more... It goes quicker to adjust prices for private label and branded should follow? Or what's explaining this? Can you remind us of your contract structures for branded tissue and private label tissue?
I'm not sure. Maybe we can give a general answer, Kari. Thanks for the question. I think we never comment on contract structures. Typically, we've said before that we have yearly contracts, but it varies, so there are differences here.
One of the reasons why the consumer tissue private label divisions has actually achieved somewhat higher prices than the rest is simply also because the raw material content is significantly higher for that business. If you imagine a branded business, you have more cost for innovation or for marketing or for AMP, as an example.
The typical average selling price is also higher. If you take the raw material content as % of the sales price, it's obviously higher for private label. The need for price increases in that part of the business is obviously higher, and this is, part of the explanation.
Thanks, Fredrik. Sorry, Kari, I didn't completely get the question, but good answer. Thanks.
Once again, ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. Ladies and gentlemen, if you have a question, please press star one on your telephone keypad. We will now take the follow-up question from Karin Wånta from Handelsbanken from Handelsbanken. Your line is open. Please go ahead.
Yeah, thanks. To follow up to Fredrik's comment about the annual prices. I guess question is that have you gone back to having annual contracts? I guess the message last year was that you are shortening the duration of your-
Absolutely
... tissue contracts.
I guess that, I mean, what happened during the last two years is that we were kind of continuously in negotiations because we were always behind the cost curve. Now we feel that we're in a quite stable situation for the time being, and that without getting into any specific details, because it varies so much between markets, between brands, between geographies, we are very focused now on kind of managing again the price cost gap and the overall margin development.
We see good opportunity to do that because our brands are strong. Also actually recently, and I think I mentioned this before, that we have quite good service levels compared to many competitors, and we're perceived as a dependable supplier that can deliver when there has been some hiccups over the last couple of years. We are managing that price cost gap from a good position, I believe.
All right. Thank you.
Next up we have Niklas Ekman from Carnegie. Your line is open. Please go ahead.
Thank you. Yes, first a question on volume. I believe after Q4 you said you still expected to deliver volume growth in 2023. I'm curious if that's still the view, given that you have now seen volumes continuing lower in Q1, and do you expect volumes to reverse already from Q2?
We stick to the fact that we hope to have positive volume development for the full year. How this will vary now over the quarters is very difficult to say because, of course, there are quite some fluctuation normally and also seasonality. I think that's very difficult to talk about individual quarters. In the longer term, and also for the year, we would like to see growing volumes.
That's because we always try to manage, of course, volumes, market shares, pricing and to find that balance. When it comes to underlying volumes, since we are providing essentials and necessities, as you know, we expect there to be an underlying stable or growing volume in many of our categories.
Super, thanks. Just a second question also. You mentioned here in the presentation, you talked about Professional Hygiene and the Cure Kill initiative, indicating that you're looking at closing or divesting business. Is that a sizable business, and can you give any more details about what kind of business we're talking about?
As I said, Nicolas, I did actually comment on it. I said it will have, from a volume perspective, low single-digit impact on volumes for Professional Hygiene during this year, so the rest of 2023, and also at the beginning of 2024. Yeah, it's from that perspective it'll have a bit of volume impact and sales impact.
Maybe you could mention the restructuring charges then.
Yeah, I can repeat that if... I'm not sure if you were on the call, Nicolas, before, but I talked about the restructuring costs that we will take. The total cost is roughly about SEK 410 million. Out of that, we will take SEK 340 as items affecting comparability during Q2. That's the cost for it. It's relating to not actually divestment, but rather closing of some mainly converting equipment, you can say.
Okay. Super. Thank you for the-.
Just to remind you one thing, this is what we are planning. We have not yet decided this, but this is what we are planning. We'll come back more.
Super. Thanks.
Thank you.
We will take our follow-up question from Karin Wånta from SEB Your line is open. Please go ahead.
Yes. Thanks. Going back to return on capital employed, the unit that has the lowest return on capital employed right now is Health & Medical. Of course, we know that you still need to raise prices, and we should see higher margins in the future, and that will to some extent, or that will help return on capital employed as well. You're still probably going to be quite a ways below the 70% target that you have for the group. How do you plan to get to 17% in Health & Medical specifically?
We have very specific breakdowns of the overall target, but we're not providing that externally. There are different return on capital employed targets for the different business areas and also different parts within the business areas. That's kind of part of our internal work and depends very much on different plans, but also on the market conditions.
Of course, in the short to medium term, the next number of quarters, it's important to continue to work with price increases specifically in Health & Medical, where we still see as a quite significant headwind from costs. I think that's the information we can provide right now.
Maybe I could add one thing, which is just reminding of one pretty obvious thing here that the reason why you would see this very low in comparison, or not very low, but low in comparison, return on capital employed for Health & Medical is that we have a very considerable intangible asset there as we purchased BSN medical.
If you would look at the return, operating return on capital, excluding intangibles, actually Health & Medical is clearly very high or highest in the group. From a return perspective, it's actually doing really well, but we have the intangible assets. Just as a kind of a background to what you said, Magnus.
Of course. All right.
Next up, we have a follow-up question from Victoria Nice from SG. Your line is open. Please go ahead.
Hi there. Just wondered if you could go into a bit more detail on other costs and any other elements that we need to bear in mind in Q2 and through the rest of the year, 'cause presumably we'll have the fallout of energy subsidies paid to suppliers last year from Q2. Will this still fall in the other line? Thank you.
Yeah. I did comment on it earlier that when you look at... and I presume you're asking about other COGS there, because if you look at our report, we split out kind of what is SG&A, et cetera, and AP. I've already commented on that.
We will see there sequentially an increase. When it comes to other COGS and including the issues that you were mentioning there, we expect more stable environment as we go forward. No real change sequentially Q2 versus Q1. Overall, a slightly higher cost because of the SG&A, but in total it should be relatively flat. Of course, it, time will tell, but this is approximately the outlook.
Ladies and gentlemen, once again, if you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. It appears that there are no further question at this time. I would like to turn the conference back to our speaker for any additional or closing remarks.
As a closing remark, we have a very strong start to 2023. Very strong top line improvement, strong margin improvement. We're seeing a kind of more helpful market outlook for the coming quarters and rest of the year. We are starting now a strategic review of our tissue, consumer tissue assets, Vinda and the private label division in Europe, and we will come back with more information over time. Thank you very much for listening.