Essity improves people's well-being
The listing of Essity on Nasdaq Stockholm on June 15, 2017, resulting from the split of SCA, has shown the value of two strong listed companies. Through the split and the acquisition of the leading medical solutions company BSN medical, we created Essity, a leading global hygiene and health company.
The name Essity stems from the words: essentials and necessities. Hygiene and health are necessities for a better life, and our products and solutions play an essential role in improving well-being in the world. Our vision is: Dedicated to improving well-being through leading hygiene and health solutions.
We are improving hygiene and health in the markets in which we operate through innovation and education, thereby strengthening our market positions and creating growth opportunities. During the year, we launched 41 innovations that improved our customer and consumer offering in all categories and we have educated more than 2.5 million people about menstruation, puberty, hand hygiene, incontinence care, parenting as well as lymphology and wound care.
Increased net sales and improved profitability
Essity’s net sales and adjusted EBITA1) increased by 8.0% and 12%, respectively, during the year. Organic sales increased by 1.2%. Excluding currency translation effects and the acquisition of BSN medical, adjusted EBITA1) increased by 1%. Essity’s adjusted EBITA margin1) rose 0.5 percentage points to 12.3%. The adjusted return on capital employed1) was 14.9%. The Board of Directors proposes a dividend of SEK 5.75 per share.
2017 was a challenging year, with lower market growth and price pressure in parts of the business at the same time as raw material costs increased by approximately SEK 1.7bn. We have therefore intensified our work to achieve savings, which resulted in lower costs of approximately SEK 1.2bn. Through innovations, we have substantially improved the product mix in several areas. To further compensate for the higher raw material prices, we negotiated with many customers concerning price increases during the second half of the year.
“Essity targets continued growth, both organically and through acquisitions, at the same time as we improve profitability.”Magnus Groth
President and CEO
Innovation and efficiency to achieve our goals
Essity’s financial targets are annual organic sales growth of above 3% and adjusted return on capital employed of above 15%. To achieve these, we are working to improve underperforming market positions, enhance efficiency, reduce costs, and implement price increases and, through innovation, improve the product mix. Our focus on digitalization is continuing in all parts of the business. Our products are well suited to e-commerce and are currently available online in most markets, either via our own or external platforms. During the year, we entered into a partnership with Microsoft relating to the Internet of Things to further enhance our digital innovation and create market-leading digital products and solutions. We have launched Tork EasyCube™, web-connected dispensers for products such as soap and paper hand towels, which provides real-time information to optimize cleaning procedures.
In the Personal Care and Professional Hygiene business areas, we are focusing on growth. In the Consumer Tissue business area, we are prioritizing increasing the margin and the return on capital employed. To improve margins and increase value creation in the Consumer Tissue and Professional Hygiene business areas, we have continued to work with Tissue Roadmap, a plan launched in 2016 to increase efficiency in tissue production, increase capital efficiency and ensure high-quality capacity for future growth.
Within the scope of the Group objective to contribute to a sustainable and circular society, we are working to minimize resource use and waste, which also results in cost savings for the company. Innovations have a key role to play in achieving a circular society. In 2017, under our globally leading Tork brand, we launched Tork PaperCircle™, a service that helps our customers to recycle used paper hand towels, and Tork PeakServe®, an efficient dispenser for paper hand towels specifically designed for busy washrooms.
A winning corporate culture
Our corporate culture is decisive for our continued success. During the year, we worked to develop our culture, which is characterized by commitment to results, care, collaboration and courage.
All employees are trained in our well-established Code of Conduct, which, for example, emphasizes zero tolerance for abuse, harassment, corruption and other unethical behavior.
Successful start to the integration of BSN medical
The acquisition of BSN medical, a leading medical solutions company within wound care, compression therapy and orthopedics, was closed in 2017. Integration work is progressing as planned and the business is included as the Medical Solutions product segment in the Personal Care business area. The acquisition has provided us with leading market positions in several attractive medical solutions product categories and a growth platform with future consolidation opportunities. Our incontinence business, with the globally leading TENA brand, shares similar positive market characteristics, customers and sales channels with Medical Solutions, which will provide opportunities for accelerated growth through cross-selling.
Initiatives and awards
Essity has a business strategy that includes economic, social and environmental perspectives to achieve long-term sustainable, efficient and profitable business. We received confirmation of this when we were named one of the world’s top 100 most sustainable companies by Corporate Knights.
In addition, CDP, an international not-for-profit charity that promotes a more sustainable economy, named Essity as global leader in sustainable initiatives for water and wood fiber-based materials. CDP also stated that we have a leading role in climate work.
Essity was convening partner to the fifth annual meeting of the UN Foundation Global Dialogue, which brings together companies, authorities and NGOs to discuss how to achieve the UN Sustainable Development Goals. Essity supports the UN Global Compact.
Essity in five years
Essity targets continued growth, both organically and through acquisitions, at the same time as we improve profitability.
We will develop our culture to attract result-oriented employees who, through great dedication, will develop both Essity and themselves.
The world’s population and life expectancy are on the increase at the same time as poverty is decreasing, meaning more people are using hygiene and health products to improve quality of life and well-being. There is great potential for Essity in emerging markets and our ambition is that these will account for a larger share of net sales in the future.
Innovation has the highest priority when it comes to meeting the needs of customers and consumers. We will continue to strengthen and develop our offering and brands. Digitalization is a top priority in our production, sales and marketing communication to increase growth, efficiency, market presence and profitability.
Every day, hundreds of millions of people use our products and solutions. By continuing to grow and develop as a company, we want to contribute to improve hygiene and health in the markets where we operate to improve people’s well-being.
President and CEO
1) Excluding items affecting comparability.