Earnings Call: Q4 2013

Jan 29, 2014

My name is Josephine Edwell, and I'm Head of Communications for SCA. And today, our CEO and President, Jan Ljuansson, will go through the report. And after that, Landa Persson, our CFO, will join on stage for question and answers. So with this, I hand over to you, Jan. Thank you very much. Let's start with, as we normally do, some macro update. And nothing major had changed. We still see some growth in Europe and North America when it comes to tissue. We still have some good growth in emerging markets. Personal Care, stable in the mature markets, but continuously good growth emerging markets. And if we look at the trend or tendons in the market, we can't see any major change neither in Europe or U. S. That the market should substantially pick up. On the other hand, we have not really been impacted by the weakened economy that we had for the past 4 or 5 years. But there is still a lot of, of course, as you know, high employment rate in some countries. And some countries are doing better than others, but mainly due to higher export, not necessarily stronger internal consumption. So still similar as we have seen for the whole 2013. In forest, we have continued to see a decrease in demand in publication paper in Europe, but we do see a stronger market for solid woods and also a good market for kraftliner. If you look at some of the key events during 20 tissue company Vinda in China is a very important step for us to get a good position in China. And also the organic growth that we have started in India by launching Libre and Tempo And all of these investments have an impact on the margin because we need to invest to get the sales. I will get back to that a little bit when we come into Personal Care. We also divested the Lakishing during last year. We inaugurated our 1st wind park together with Stadt Kraft and we continue to be included in some of the major sustainability indexes in the world. Our priorities hasn't changed for the last years. We still work very much with efficiency and efficiency include both capital efficiency and cost efficiency and cash flow efficiency. Innovation is very important. It's becoming even more important while the competition is increasing. And of course also growth. And I will mention a few items on all three of these. If we start with efficiency programs, so shortly, it's running according to plan. We have some achieved cost saving of SEK 390,000,000 in the Hygiene business. And analyzed, we are at in average for Q4, we are up to €175,000,000 in the €300,000,000 program. Deutsche Pacific is also according to plan. And as you know, we have it has taken a bit longer time in France as we also expected, but it's running exactly as we expected. So we'll see the start of the cost saving in France also coming into 2014. And forest is well in plan, maybe even a little ahead of plan. So the savings are there. It's coming in as we expected and as we have communicated. Innovation drives profitable growth. And we have launched some 30 new innovations during the year. And we have been quite successful in innovation in Continence, which as you know is our biggest and most important category within Personal Care. We have one very interesting, still very small, of course, here is the Inco product you see with some strength things on, which means that we can communicate and measure the behavior of the patient without actually having to look at it. Those of you have been following the debate in Sweden, how we sometimes treat our older people with this is not necessary. We can measure it in distance and we don't have to work in the way we work today, but also a lot of other interesting innovation. And the good thing now is that we actually have more in our innovation funnel than we can actually market. And that's where we should be. The bottleneck should be in the market and not in the innovation side, and that's very good. But we also have new innovations in Feminine and in Baby. Sealer, which you see there, is our Chinese brand. I will come back to that a little bit later because that has quite a big impact on the Baby performance during the year. But we'll continue also to develop the important torque business with new innovative dispensers with patented solutions, which makes it more difficult for our competitors to actually copy what we are doing because we are ahead when it comes to incontinence and we are ahead when it comes to the torque innovation. So of course, we want to protect that position. Growth, we had a sales growth of 10% year on year. And when we talk of growth, I think it's important to once again emphasize that the strategy we have in growth is both organic and acquisition. So it's a combination of those. So when we acquire, it's part of our growth strategy. We had a growth in Personal Care of 10% and Tissue 13%. And of course, Vinda that we have not yet consolidated in full, but we have consolidated the balance sheet and I will comment a little bit on that later. That will next year, of course, have an impact on the growth of tissue. And India is coming on as expected. We already before had some sales of Torque and Tina into India, but we didn't have people on ground. Our people on ground, which means that we can accelerate the growth even in those categories. If we summarize the year, it is actually the highest GLA result in the history of SAE. It's actually also the highest quarter result in the history of SAE, even if we take away the profit from the forest swap that we had during Q4. We still have some negative impact on currency. It impacted the sales with SEK 2,100,000,000 year on year. But if we exclude that, we, as I said, had a sales increase of 10% overall. In Hygiene, we have a sales increase of 12%. And sorry, Forest Products is on CERO and we have higher volumes, but we still have seen lower prices coming in publication paper during last year. The EBITDA increase 19%, of course, we get the cost savings. We have higher volumes. We have the acquisitions. We have the forest land swap. And I will comment that a little bit on the forest because that's also part of our strategy, of course, to increase the value of the forest. But we also had higher energy prices and some cost and some lower prices. When it comes to cash flow, the important thing here is that it's all directed to working capital and it has nothing to do with the inventories because the inventories are actually down. It's all payables. When it's all payables, you can relax a little bit because then you know it will correct itself. A couple of points on this slide. One is, of course, that if we look at profit before tax, we have an improvement of 26%. And profit earnings per share is up to $7.90 But maybe even more important, independently that we have invested in Vinda, we have consolidated the debt of Vinda in our balance sheet. We still are in a very, very low gearing debt equity ratio. And if you compare to some of our major international competitors, I think we are we have a much stronger balance sheet, which also indicates that we still can grow by acquisition if you find the right category to acquire. If we look at Q4 to Q4, a weak sales increase. And here, we see the first impact of our Baby situation because Baby is down 5% Q4 to Q4. If you look at the other categories, we're actually up and you will see that a little bit later. Incontinence, feminine is doing great. Baby, we have a special situation that I will comment. Forest is also up by 5%. We have an EBIT increase of 31% q4 to Q4. And now we also see an improvement of operating cash flow by 11%. And what you can highlight here is maybe the earnings per share because it looks a bit strange that we have a lower earnings per share. But if you remember, we had a tax refund last year in Q4 of SEK1.3 billion. And that's actually what is making the difference between Q4 20132012 with a reduced tax rate in Sweden. If we look at Q4 to Q3, we always talk about invoicing days. We had 2 less invoicing days Q4 than we had Q3, and of course, that impact the business. But we do have a sales increase of 2% and an EBITD increase of 21%. And if we look at the Personal Care EBIT decrease here of 3%, if we take away Baby, we have an 8% increase of EBIT. So Baby has a huge impact on this quarter, which means that in continents, Feminine is doing great. Forest also is increasing quite a lot of course, 118%. We have the gains on the forest swap. I will show a little bit later how it looks about that. Now coming into Personal Care. We have invested heavily in Russia. We have invested heavily in China. We knew even before we entered China with every duty that we need to do a major relaunch of the product because the quality was not good enough. It has taken some longer time than we planned for various reasons That has impacted the whole year up till including Q3 last year and we lost quite a substantial volumes during this period. And when we relaunched sealer with new products, we still had too much old products on the shelves, which meant that we need to buy back all of that because otherwise you couldn't push the new product. That also had a very negative impact because you get a double. You have the cost of introducing a new product and you have the cost of taking back the whole product. So that is impacting that's the major impact on Baby for 2013 and Q4. The positive thing though is if we look at Q3 to Q4, all in China, we have a volume growth of more than 60%. So it shows that the new product is lifting. Of course, we have to invest behind that to get new product out on the market. But so far, it's working according to the plan. We had a similar situation in Russia except that we didn't need to take back old products, but we introduced completely new products on the market and we have to invest heavily behind that to get the market attention. So that's the two single reasons why Personal Care result is down, Russia and China, except that we actually have quite an improvement in Personal Care in the important category of incontinence and Feminine is still as it did Q3 doing great. So in my view, we have dealt with the situation at least what we can see in Q4. We have sold it. Volume is coming back to China with the growth we see in Q4. But it has a huge impact on the result. If we, as an example, remove Baby China from emerging markets and Baby from emerging market increase, we actually have an increase of 9% and not 1%, which means that the emerging market is doing well, but one category with expansion adjusted is impacting that extremely heavily. If you look at the EBIT results, if we deduct the cost we had to invest behind Baby, we actually have an improvement of 5% in EBIT in Personal Care. So then you understand the magnitude of the investments we have made behind our new products in the emerging markets. And of course, the theory is that we will be rewarded heavily by this during this year. And it will probably come not maybe in the Q1, but at least after the Q1 going on. And all the signs we see today is actually working in our direction. If we look at tissue, as you remember, we were forced by the EU Commission to divest businesses in U. K. And in Belgium and Benelux countries. And that, of course, an impact when we compare Q4 to Q4. But if we exclude that, we have a growth of 1%. And here, you can see also that emerging market is doing quite well. But we are still we still have our absolute bulk of the business in Europe and U. S. And that is not growing. We are gaining market share, but on a market that in some segment actually is a little bit down, but we are gaining market share as we are growing. But when the market is not growing in the major markets we are in, you can't expect that we are growing so much more than the market because taking market share also has a cost behind it. And of course, with new products, we will get the attention of the consumers and we will get some market share without actually having to chase for it and that's we've seen during 2013. We see that the concept is working and we are having a different balance, a better balance in the consumer tissue portfolio where we're now getting to fifty-fifty or even more than 50% branded business in our portfolio. And that's of course something we are striving for. We have an EBITDA increase like for like of 18% if we take the remedies into consideration. And also getting to a decent margin in tissue, not good enough. We still need to improve it, but at least it's getting decent. Those of you who have followed us remember that we are coming from 5%, 6% margin and now we are up to 13% margin. But we are not happy. We still need to improve it. Forest, publication paper, all of you that follow that business know that the consumption is not going up. The structure change is continuing. Demand is going down, still an oversupply even though we see a lot of production being closed, but it's not closed fast enough. So we still have a tough situation. Kraftliner increased sales, solid woods increased sales, pub increased sales. So you can focus the challenge we have to publication paper. The rest is actually doing quite well. And going forward, it also looks quite well. And EBITDA increase of 188 percent. Then of course, we have the forest swap of 4.55%. And for me, that's obviously a task for the forest operation to manage the forest in the best way. And if we can trade land with less growth to land with more growth, that's exactly what we expect for them. So it's a natural part of their business. And that's exactly what we've been doing during this year and mainly during Q4. And we also get forest that is closer to our industrial part of the business, which means less cost in the system when we operate the forest. So if we deduct which I don't think you should do, but if you deduct the swaps then they will have gone from 7.1% to 12.6 percent in margin. So still quite a substantial improvement. We have also proposed an increase in dividend by 5.6 percent up to 4.75 percent. And of course, it's up to AGM to decide on that, but that's our the board's suggestion. So if we summarize the year, we do have higher sales and profit for the group. We have higher profits in all our business areas, even though we have this higher cost on Baby as I explained. We have higher sales in Personal Care and Tissue, flattish in forest. Efficiency program is going according to plan. Vinda, important step into China. And of course, the ambition we have is to combine our Personal Care business with Vinda's Tissues business with their enormous presence that they have in China. It will be really good situation for us. India, it's a long run. We go organically. We're not buying anything, which means that we need to invest. We do it carefully. We don't over invest. We have a good start. We get the product on the market. We are getting distribution in place. But of course, it will take some time before you see some positive impact on the margin on India because we need to reinvest the profits we make in India just to continue to grow. Innovations, I talked about that, extremely important. We have put a lot of effort into the innovation process during the past 2, 3 years, and now it's working much more efficient and we get much more interesting innovation that we can present to the market. Sustainability index is very important when we talk to customers, but becoming more and more important also when we talk to consumers. And of course, then the dividend increase as I just explained. So with that, ladies and gentlemen, I would like to open the floor for Thank you, Ines. It's Linus Larsson with SCB. And maybe if we could start with the Personal Care business. And you did provide a bit of detail on the emerging market situation. If you look at Europe in isolation in Personal Care, can you talk a bit about that? Have you also there seen margins coming under pressure sequentially or year on year? And also if you could update us on the competitive situation with Kimberly Clark gradually exiting? How to what extent have you been able to draw any positives out of that? And what are your other competitors doing in Europe please? We have we don't have the same volume problem as we have seen in China, for example. We are not losing any volume. We're actually gaining market share in Nordic the Q4, but with fierce competition. So in that aspect, we have had to we have not reduced the price, but we have had to put a lot of promotion in to keep the market share if we talk about the branded business. And in doing that, we actually grow the market share also. But the aim in the beginning was just to keep it. But it has been enormous competition and not maybe proctil is the toughest now, but also private label is trying to get higher market share in the Nordic countries. As you know, we have a substantial market share in the Nordic countries. So of course, it's tempting to try to get a piece of that, but we are defending it. If you look at the retail side, the private label sales, it's going quite well and we're continuously improving. Kimberly Clark leaving, no new entrances in the market, of course, because they would end up in the same situation as Kimberly Clark. So that will be a private label business. And of course, we will be trying to get the piece of that private label business. We are not going in with our own brands. We're at Kimball's leaving. We're going in with a private label business. And it looks as if on a sequential basis in Personal Care price mix was down, something like DKK 49,000,000. Is that entirely relating to emerging markets? Or is there something in the pricemix advertising promotion that is also relevant for the European business? It's a negative impact of promotion and some positive impact on mix. So it's heavily promotion, no price decreases, some positive on mix. But it's both in Europe and in emerging markets. Okay. And then maybe finally on seasonality, could you comment upon near term seasonality? You've provided some guidance on that, if I recall correctly when you reported the Q4 historically. Do you want to say something about what to expect from the Q1, the hygiene category in particular? I mean we will obviously have the similar patents as you have seen every year that there will be a slight seasonality impact during Q1. And I mean, in China, we had the Chinese New Year and so you will see a similar pattern. But as you remember, we have actually reduced it over the years. I mean, it used to be in the level of $1,000,000,000 $500,000,000 So we are trying to mitigate it. And you don't really know how you succeed with that until you have seen the sort of full January sales. Thank you. Lars Schallberg, Credit Suisse. Coming back to China and Vinda, could you comment anything about their Q4 performance? There's obviously at least some debate about new capacity in China and that market has been quite competitive. Also when you're talking about moving in with your Personal Care products in the VINVA system, should we expect a meaningful sort of marketing and incremental cost as you broaden your footprint in China? Well, I mean the first question, I cannot comment on Linde. I mean it's a listed company and we have to wait until we see their results. When you talk to the Chinese producers and even the government, they don't seem to be particularly worried about the capacity question because there will be a lot of closure and the growth is still quite good in this particular segment. I've always said that probably you may see 1 or 2 years where you have an overcapacity. And then question is how do you deal with that? So far they are sort of exporting it out of China to other places. And I guess that's the way it will be dealt with. Vinda doesn't have any overcapacity. On the contrary, they're growing so fast, so we probably need some more capacity. My estimate is that there will be I mean, if we succeed in combining our businesses, my estimate is that there would be big synergies rather than big costs in doing that. And I understand they have some own diaper offering in their system. What do you do with that? Very, very small. They have a small, small, small brand. And I mean that's something we have to discuss with them. Just two more questions. Have you noticed any negative impact of current turbulence in LatAm? I mean, there's some significant Sorry, in In Latin America in that exposure. You're not necessarily mostly exposed into those geographies, but it seems to be quite a bit of turbulence. And the final question unrelated to anything hygiene, as you talked about, you see good markets for forest products. Do you want to comment anything about price movements, fabrication papers and particularly kraftliner? What you see in that market? It's the impact we see is the currency impact, because we normally have local production and local sales. And the consumers still need our products. So we don't really see a change in consumer behavior or any less consumption. But of course, the currency movement is hitting us as a translation impact. But otherwise not. And we are not, as you know, in Venezuela and some other country. Argentina, of course, we are in and we have a small business in Brazil. So it's more the currency movement than actually what has happened from a political point of view. Yes, I mean, we had a discussion last year on the publication paper, and I think probably I was the one who was the most negative on the possibilities to increase prices. And there will be price increases in use. There's no doubt about that. The question is the level of price increases and it will be single digit. It will not be double digit increases and it will not be high single digit price increases, but there will be price increases. In the magazine paper, it's too early to say. But it is a little bit tougher pressure actually in that area now than even in news. But in the other week or was it this week, we see also production is closing down in LWC. But it is a tough environment. There is an overproduction. There is a change in behavior from consumers and this will not disappear until we close as much as there is a balance in the market. The market will not pick up again. We just have to live with it. And kraftliner? Kraftliner is still a very balanced market and the Kraftliner as a main one is also quite dependent on the testliner development. And we have seen testliner coming up in the past quarter, which also gives opportunities to increase kraftliner. But the demand is there. It's not a big oversupply. Inventories has been slightly higher in Q4, but not in a level that you should be really worrying. Thank you. Thank you. Yes. Hello. This is Oscar Lindstrom from Danske Bank. I have a couple of questions now. I as well will start off with the Personal Care division. Some of your competitors who have reported already talk about increasing competition in general in hygiene markets and in all emerging markets, while you see more to focus on sort of specific issues in your own business in Q4 in China and Russia. Should we sort of start to pencil in sort of increasing competition overall? Or is this these problems that you had in Q4 something that will pass after Q1 as you mentioned? Maybe they're talking about us increasing competition. I don't know. I mean, there's always tough competition. We can't say it's increasing. It's always tough. I mean, you have the best in the world and you have the good locals everywhere. So I mean, there's new it's not a new one coming in that is increased. For me, it's always tough competition. And I haven't seen the increase. It's just tough all the time. So you're not expecting to, for example, increase market investments next year relative to sales? That you have this year? No. We're not expecting that. All right. Second question is on the tissue. You had some price increasing effects sequentially in Q3, boosting margins then, but the bulk were to come in now in Q4. I didn't really see a mention of it in the sort of comments to the Q4 results for the division. Could you perhaps elaborate a little bit on that? How were there price increases on tissue sequentially? We had price increases in Europe. At the same time, we had some price erosion in the U. S. But when we talked last time, we actually talked about Europe that it will increase prices. But we saw some price there in U. S. So that's sort of taking away a little bit of the positive European situation. All right. And finally on Forest Products, two questions. First of all, the forest land swaps, you mentioned something of this being part of your strategy. I sort of understood that this the forestland swaps were more relating to optimizing harvesting situations and sort of the age profile of your forest lands rather than as a sort of strategy to bring out value from the forest lands? Are you going to going forward, so continues to be a net seller of forest lands and capitalize on those? No, not really. And that's not resilient to the ivory. If you look at the cubic meters coming out of the forest, which is important. It's not the land. I mean, we capitalize on forest in many ways in my view. 1 is, of course, to produce what we do downstream. Another is the wind power. 3rd is the bioenergy. And then 4th is, if we can swap land, so we get land closer to our industrial areas and also place where the forest is growing faster or older than with the swapping. And the reason we can do this is, of course, that the government has very ambition plans even creating bigger areas in Sweden for reserves. That's the driving force, nothing else. And as long as they have this ambition, then of course, they need land for reserves. And we happen to have had lands now that have been very suitable for reserves. So that's the main driving force. But the result for us is operationally better, growing better, higher value. We should expect you to be a net positive impact also in 2014 from land swaps or It's too early to say, but we're looking into it all the time. I mean, it's nothing you can predict. It depends on where the government want to have it. And I mean, you know how it is. But if there is an opportunity, we will certainly grab it. All right. So just a final question on Forest Products. In the Wukliken Mill, you have started producing a type of kraft paper called sustainable packaging. Could you perhaps elaborate a little bit on how that is going? And then is this something that you're planning to grow substantially going forward? It is an opportunity we have with the press and technology to produce a paper. It's not a kraftliner, but a sort of packaging paper for cookies and things like that. And there is an interesting potential in it. It will not replace the publication paper, Russia. But there is an interesting niche for us to go into, we'll see how big it is. But it's going quite well as we speak. Could you I'm not going to give you any figures on that now because we're still on the starting point. All right. But the margins are better, competition is less. All right. Super. Thank you very much. And then we are on the first row. Thank you. Mikael Jov from Kepler Cheuvreux. Could you please say a couple of words on raw material cost development? What you see coming in the coming few quarters? Lena, do you want to comment on that? Yes. What we can see is, of course, that we have seen the softwood pulp coming up, creeping up. On the other hand, it depends also on the U. S. Dollar movement. This may be foreseen that it should increase somewhat. And we have also seen, if you look at 2013 compared to 2012, we had raw material cost increases, but not sequentially. So and then it is also some movements in the plastic materials. Okay. But nothing sort of dramatic at all? Not dramatic, no. And then second question on publication papers. I see here in the footnote that if you exclude the divestments, the deliveries were up quite a lot in Q4. Am I reading this correctly? Could you just say a couple of words what was driving that? Were you taking market share? Or was the market better? Or what happened? I think here it is more that between the two years that we had a better production and also that we had better deliveries. We find customers even if it is not that profitable. But of course, it is help to cover the fixed cost. Perfect. Thank you. We have in the back, Janette. Yes. Hi. It's Alan Hellstrom from Nordea. I wanted to come back to the tissue in the U. S, the away from home business there. The price erosion that you saw in the Q4, do you see that as is this something temporary or something we should also consider for coming quarters? We have normally we have our strongest quarters in U. S. In the second and third quarter And we have normally a little bit weaker in the 1st and 4th. And also depends a little bit on where you pay out the bonuses for the year. We actually had some impact on maybe on that also that it was paid in Q3 instead of Q4 last year. No, we don't expect any price any market price decreases. This was very specific one for Davos' answering. All right. And then also a question on again on Personal Care. If you maybe also can comment there how you see your the difficulties that you had then in China in Q4, how that will evolve in Q1 and into 2014? Are you shipping your new product now? And are you up to speed? We have now removed all the old products. And we're talking about China now, so it's quite a big country. And I actually bought them back. And now we have all the new products out on the shelves. And as I said, it's been doing quite well during Q4. But of course, we're doing that. We also have to invest in A and P and promotion to get the consumers back to the new products that we lost on the old products. But it's going quite well now. But it will of course impact also Q1 the investments to get the volumes back. Thank you. Just a question also on if you can comment something on the private label business for baby diapers in Europe, but actually if you had weak volumes in Q3, if you saw those volumes coming back and if there's anything else happening in terms of pricing in that area. I mean today in the market in Europe as KC has left, that there is the competition only between 2 private label and Procter and Gamble, if we exclude the countries where we are branded in Nordic and Russia, etcetera. And private label is gaining market shares. So private label is growing. And of course, being one of the biggest suppliers to private label in Europe, we will benefit from that. And we have improved during the last 2 years, Magnus, who is responsible for this, the profitability quite substantially in private label. Thank you very much. It's Ian Simpson from Barclays. Sorry to come back to it yet again, but just the China diaper situation. Could you please explain how that drove a volume shortfall? Because I understand that you had to pull existing products off shelves, but I would have thought that the inventory sell in of your new products would have counterbalanced that unless were you completely off shelves for a period? Or had it also been accompanied by a destock of what's in the distribution? It's a combination of being too slow in replacing the product, which meant that we were losing volumes during last year, up including Q3. And when we then started to introduce the new diaper, the inventories were substantially bigger than we expected, which meant that we need to buy back and sell at the same time. So it was a double negative impact Q3 to Q4. But now when we have got it off the shelves, off the inventories of our distributors, we actually see the new products taking off with this, as I said, high extremely high growth that we had during Q4. So it's an unfortunate combination of a little bit too late with the product and not really having full control on the size of the inventories in stock with distributors. So just to confirm that destock is now fully finished. We shouldn't see any destock. It's finished. Perfect. And then just on European diapers, you said that sales there were a little bit weak in the 3rd quarter, but you speculated that might just have been due to the warm weather. Was that the case? You did see European diapers go to a more normal level in the 4th quarter. We had a slight pickup during Q4, if I look at our business. Okay. Thank you very much. And just one last question if I may on Russia. I didn't quite catch what you were saying there. Is it a matter of just increasing marketing in Russia? Or are you planning new products there as well? It was a launch of new products that we started minus, I think, in after summer sometime? Q3. Q3. And in the same way as in China, but we didn't have a lot of stocks that we need to buy back. It was planned in a better way. But of course, in doing that completely new product segment, we invested in promotion and advertising to get attention of the consumers. And we've also built distribution in Russia by increasing the sales force. Thank you. Thank you very much. And I know that it must be very difficult to measure sellout in a country like China, but do you have any do you feel you've permanently lost share in China as you switched? Or do you feel that in a couple of quarters it should be back to normal? In the segment that I'm talking about now, which is the value segments, I'm not talking about the economy segment or the premium segment. And in the values segment, we don't really have any of the international competitors. So our belief is in a way that we will get back the share that we have. Thank you. And here is Chris. Yes. Thank you. Karin, Anders Banken. If I look at the cost savings that you achieved in 2013 in hygiene and then your guidance of what to expect going forward, Can you confirm that then the incremental cost savings in 2014 should be higher than 2013? Is that implied in your guidance of reaching the full run rate in 2015? I mean, what we can see today, we should reach the €300,000,000 as a run rate after 2014. Then it depends a bit on the phasing over the year. But absolutely what is we still have to deliver it will come. But in 2015, on a full year basis, you should be there? Yes. Yes. Okay. Then a follow-up on the 2013. Your earnings in Hygiene grew a bit less than what you saved in terms of cost savings, I. E. Organic growth was below what you saved or organic growth was negative in earnings. Can you sort of summarize the outlook for 2014? We have discussed investments in India. We have discussed less headwinds from China and Russia in terms of these relaunches. So what would be the sort of the magnitude? Are the investments in India in the same ballpark than these sort of headwinds have been in Russia or China? Or are they considerably smaller in 2014? So how should we see the organic earnings growth in Haijin? India is smaller than the impact you have seen from China and Russia definitely. So that will have a I mean, just like for like that will have a positive impact. But otherwise, we are not going to give you the forecast exactly how it looks and what we are doing. But the first assumption, yes. Okay. Thanks. Then finally, in tissue, we have discussed more competition in personal care space, especially in diapers from private label. Have you seen anything in the on the tissue side in Europe from private label guys in 2013 becoming more aggressive or less so? Just a comment to more completion of private label. When you say that, you have to remember that we are the biggest private labor. Fair enough. Yes. So it's actually helping us. No, not really. No. All right. Thank you. Yes. Oscar Munster from Danske Bank again. Regarding the increased marketing costs that you had in China and Russia now in Q4. You're talking about them that they impacted actually all of 2013. But I don't recall you haven't talked a lot about that in earlier earnings calls. Was the magnitude fairly small in the 1st 9 months or even in Q3 and it was really in Q4 that this became significant. I'm trying to understand if to what extent this also impacted the 1st 9 months as opposed to only the Q1? Well, if I remember right, I think we have some higher impact of pricemix in A and P even in the 1st 9 months, which of course is included in this. But the problem is if you really communicate everything that you know in a situation like this, you will also tell your competitors what you're going to do. And then if you do that, the cost would be even higher to get into the market. So that's why you have to be very careful to say that, of course, I know what we're going to do Q1, Q2, Q3, Q4 when it comes to launches, etcetera, etcetera. But that's nothing we want to give away because then we will get much more resistance from the competitors. We are also trying to understand every day what prop the KAC is going to do so we can mitigate that by action. So we have to be very, very careful. I mean to say that now we're going to invest heavily in China to get back to the shelves because then it will be much more difficult. So we have to have a balance there what we actually communicate to you and the risk of that hurting us on the market side. All right. I don't know if you understand. Yes. Yes, I understand. Thank you. Okay. We have some questions from the telephone conference as well. So operator, let's open up that line and start with the first question. Thank you. Your first question comes from Celine Tanuti from JPMorgan. Please go ahead. Yes. Good morning. I have a few questions. First of all, if I look at pricing for tissue, where you said that you had a sequentially higher pricing in Q4 in Western Europe, but then you had right, first of all, to believe that this U. S. Did you say it was only temporary in Q4? So if you could clarify that. And what should we look on pricing in 2014 given that if I understand well you kind of hinting to a rather soft raw material inflation? That's my first question. My second question is that you have been tracking at around, I think, 3% to 4% growth in tissue for the 9 months and we didn't see much growth in the Q4. Are you still comfortable with your 3% to 5% annual growth as we go into 2014? And my yes, those would be my two questions please. And also I have another question. You mentioned Vinda, that was it. You said that you would see substantial synergies. Can you elaborate effectively on the plans you have for Vinda and to maybe give some quantification because I think it's quite a meaningful acquisition? Thank you. When it comes to pricing, I comment that on the margin development on tissue that has been reasonably good, but it's not good enough, which means that we need to continue to increase prices and make sure that we deliver on the cost saving program. I mean, you know we have a target on return on capital employed on Tissue of 15%, and we're not there. And we need that return really to have an investable business over time. So we need to increase prices. So we do have some slight raw material increases, but that should not per se be the only reason for having a price increase. And that goes both for Europe and U. S. Then talking specifically on the U. S, it's I mean, it's not really a market overall market price decrease. It's a very specific situation that I rather not comment on. But obviously, we will have to have further price increases in the U. S. What was the second question? Growth. Yes, growth. It's I mean, we do have the ambition, as you know, Celine, of 3% to 4% growth in tissue organically, and we will absolutely stick that. But in certain situation, we may focus a little bit more on the margin than the growth if we see opportunity to do that. But overall, we still have the ambition of 3% to 4% growth in tissue. It's always a balance between margin and growth. Vinda, it's a listed company and Lennart has in I am in the Board of the company and we know the rules of the Hong Kong Exchange. So I can't really comment upon that until we have an agreement with Binda how we should do it and we communicate it together. And can you when is that what could that happen? Yes. I want to happen it as fast as possible. And then do you think that you would be ready already this year to launch your own product into Vinda distribution should an agreement happen as fast as possible? I would be disappointed if not. Okay. Thank you. Okay. Operator, let's have the second question from the telephone. Thank you. Your next question comes from Kartik Swamy from Bank of America. Please go ahead. Hi, there. Thank you very much for taking my question. Kartik Sorenaykin from Bank of America Merrill Lynch. I just had one question, if I may. If I understood correctly, the product situation on Baby Diaper in Russia and China was pertaining to a rollback of an old product, which was subpar in terms of quality relative to group. And I was just wondering, are there any other gaps in your product range in China, which may require a similar treatment, so rollback of an old product and the introduction of a better product and that's kind of stretching across your legacy and vendor operations. The rollback was all in China, not in Russia. And no, there is no other situation like this in China. Very much. Thank you. Okay. And let's have the 3rd question, operator, please. Thank you. Your next question comes from Peter Testa from 1 Investment. Please go ahead. Hi. Thank you very much. A couple of questions please. Maybe just to try to put a line under this Chinese question as to how it impacted Q4. Can you be please a bit more specific as to what you think the sales impact and EBIT impact in Personal Care was from this rollback and situation in China? Well, I mean, what we gave was the total baby impact, Lena, didn't we, On Personal Care. And if we would have excluded Baby, the EBIT result would have been increased would have been plus 5%. I'm not going to go in specifically to China. Okay. But was that the vast majority in China? Was also some of that the European points you made? Well, I did discuss Russia also. Yes. Okay. And so then when looking into the start of this year or 2014, you described the Chinese situation is still on the technical fully recover that in Q1 and look to get the rest through the year? Yes. So fully recover that in Q1 and look to get the rest through the year? What I said is that with the program we have, you will see the impact after Q1. Of course, you will see some positive impact in Q1 also, but the sort of major recovery, I mean, if it has an impact that will make the profitability to increase of 5% from what we have now. It's quite a substantial thing we're doing, yes. Right. Okay. And then when looking through the innovation impact as you launch new products into the market, can you give a sense group from this? Or do you expect this to be much smoother and more strictly additive through 2014? If we look at some of the major launches that we will have this year, it will be in an environment where we have much more experience and much better control. And we'll not risk to have the situation of huge inventories in distributors when we do it. So that will not happen. But of course, when you introduce new products, you always have start up costs, etcetera, etcetera. But that's also the way to improve profitability. I mean, we need to introduce new products on the market and we have some great ones coming out. No, no, of course. And then specifically inside Inco, where the sales growth is still quite good but has slowed a bit. When you look at the around that, do you see this as related partly to how you're introducing products at this point in time into also into 2014? Or is it or what is your comment on that please? Well, when it comes to Inco, it's we always try to balance growth with margin. And obviously, we could grow much faster if we wanted, but then at the cost of the margin. So there's always a balance between these two. We had a great growth in emerging market. We even had a great growth in Europe in a market that is not growing, which means that we are actually gaining market shares, but we try to balance that in a way. Okay. And last question is just on M and A. You talked about M and A as being part of your strategy. I know it's not something one can forecast. But when you look at M and A and M and A opportunities, do you would you expect significant opportunities in 2014, 2015? Or is it something that's not really visible based upon what you can understand? Just maybe if you could help us understand within your growth strategy, how you see the M and A component of it, please? I think the only comment I can make there is that we are not going to do anything that destroys the balance sheet. Okay, perfect. All right. Thanks very much for your help. Thank you. And then we have a final question from the telephone. So operator, please go ahead. Thank you. Your final question comes from Charles Manson from Societe Generale. Please go ahead. Yes, good morning. I have a few. Firstly, you talked about your A and P spend to sales in 2014 being broadly stable, but you have talked about increased investments behind these new launches in China and in Russia. Does that mean elsewhere there are offsets? So is the A and P stable, but the new investments are part of that or are they incremental on top? So overall, it will go up? It's question number 1. Question number 2, you were a bit shy about the U. S. Tissue pricing erosion. But without going into details, could you answer the question about whether this is a temporary erosion or whether it's a longer lasting erosion? Could you talk about the sort of innovations of 2014, at least the ones you can talk about at this stage? And then finally, about these new launches in China and Russia, could you perhaps give us a bit more color about the scale and scope of them? You said you wanted to recover your previous value segment volumes. Could you give us an indication of how big those were? That's it. Thank you. When it comes to A and P, we don't see any increase including what we do in China in relation to sales. So that's our plan. And I don't see that it will that will impact negatively another category. U. S. Tissue is temporary. When it comes to China, I can't really comment on that. You can't comment on your previous volumes? Sorry, on the On your previous volumes? What were your kind of number of baby diaper units you had before at the peak? No. I don't want to comment on our ambitions on that one because then I will comment that to the market also. Okay. When it comes to innovation, well, as I said, we do have more innovations in the pipeline now that we can actually marketing and which is very, very positive. And it's in all categories within hygiene. So from that perspective, it will be an exciting year this year. But I don't really want to give out what we have. I guess you won't get that from Procter or KCLI either if you ask. No. I was just wondering whether that some had already been announced to the trade or already being rolled out. Some have been announced and some not. Okay. Thank you. Thank you very much. Okay. So with this, I think we conclude the Q and A session. And any final comments from Leon? I don't think so. I think we've covered almost everything now. So thank you very much.