Generate increased shareholder value through profitable growth
One of Essity’s objectives is to generate long-term value for its shareholders and that the Essity share will deliver a higher total shareholder return than competitors.
Essity aims to provide long-term stable and rising dividends to its shareholders. The Board of Directors proposes a dividend of SEK 5.75 per share for the 2017 fiscal year. The 2017 dividend represents a dividend yield of 2.5%, based on Essity’s share price at the end of the year.
Financial targets and outcome
Essity’s financial targets are annual organic sales growth of above 3% and adjusted return on capital employed of above 15%. In 2017, organic sales increased 1.2% and adjusted return on capital employed amounted to 14.9%.
Essity focuses on profitable growth in order to increase the Group’s value creation and the total shareholder return. We prioritize to grow and invest in product categories and markets with high profitability. Investments are made in, for example, innovation initiatives, marketing activities and upgrades of machines or new machines. Regarding market positions with inadequate profitability, Essity is working to improve profitability. During 2017, Essity has, for example, continued to improve profitability and also increased organic sales for Incontinence Products in North America. We have taken the decision to discontinue operations in product categories and in markets where we concluded that the necessary investments are not expected to create value and where profitability cannot be improved within a reasonable time frame. Due to this, we discontinued the hygiene business in India in 2017.
In addition to organic sales growth, Essity sees an opportunity to also grow through acquisitions. On April 3, 2017, the Group closed the acquisition of BSN medical, a leading medical solutions company. The acquisition was successfully integrated during the year. The acquisition is expected to generate at least EUR 30m in synergies with full effect three years after closing. The synergies concern both cost and sales synergies through cross-selling of Incontinence Products and Medical Solutions since these product segments share sales channels and customers in the healthcare sector.
Focus on cost and capital efficiency
Cost and capital efficiency has the highest priority to strengthen competitiveness and increase profitability and cash flow in the Group. We continuously strive for a more effective supply chain and for better leveraging economies of scale to achieve a more efficient value chain. During 2017, cost savings increased by SEK 1,231m, primarily related to greater savings in sourcing, material rationalizations and efficiency improvements in production.