Interim Report for Duni AB (publ) 1 January – 31 March 2014

1 January – 31 March 2014

• Net sales amounted to SEK 921 m (852). Adjusted for exchange rate changes, net sales increased by 5.2%.
• Earnings per share, after dilution, amounted to SEK 1.09 (0.77).
• Operating income increased by 24% at fixed exchange rates.
• New segment reporting: three business areas have become five.

Key financials

1)        For bridge to EBIT, see the section entitled “Operating income - Non-recurring items”.

CEO’s comments

“In accordance with previously communicated information, segment reporting within Duni has been changed. As from the first quarter of 2014, the operations are reported within five business areas: Table Top, Meal Service, Consumer, New Markets, and Materials & Services.

The initial quarter of the year follows the trend set at the end of the preceding year: growth in prioritized business areas and strengthened profitability for Duni as a whole. Net sales for the quarter amounted to SEK 921 (852) m and grew by 5.2% at fixed exchange rates. Operating income increased to SEK 73 (55) m, with an operating margin of 7.9% (6.4%). Cash flow remains strong and the relatively low level of capital expenditures in the quarter contributed to the net debt falling to SEK 454 (608) m by the end of the quarter.

Organic growth is one of Duni's most important objectives and, since the middle of last year, we are growing within prioritized market and product segments. The total European market is not increasing compared with last year, which means that the increase in sales is driven by higher market shares.

Table Top business area; table top products for the HoReCa market. Within the HoReCa market the full-service restaurants category has retreated to a certain extent during the past year. In the quarter, the business area increased its net sales to SEK 477 (450) m. Growth compared with the preceding year, at fixed exchange rates, amounts to 2.4%. The operating income is SEK 64 (56) m, and the operating margin increased to 13.3% (12.4%). A more effective market organization and several successful product initiatives have generated new customer contracts. In addition, targeted endeavors on markets in southern Europe and within what we refer to as brand profiling for global customers have yielded positive returns.

Meal Service business area; meal packaging for fresh, ready-to-eat meals, catering and take-away. The market for ready-to-eat meals and take-away is demonstrating somewhat stronger growth than the HoReCa market in general. The business area is growing by 6.1%, at fixed exchange rates, and sales amounts to SEK 123 (114) m. Meal Service is profitable on an annual basis, but the first and third quarters are seasonally weaker than the second and fourth quarters. Operating income amounts to SEK -1 (-3) m. Following a restructuring period, we are witnessing the effects of a dedicated organization and sales to major customer groups are increasing through a clearer offering. In addition, we are seeing the gradual effects of endeavors within purchasing and product innovation, which vouches for continued strong sales growth during the year.

Consumer business area; retail trade consumer products. Sales increased by 7.5% compared with the preceding year, at fixed exchange rates. Since the end of 2012, and during 2013, several major customer contracts have been won, at the same time as the Designs for Duni® concept is contributing to stronger growth for premium products. Sales amounts to SEK 157 (140) m. Operating income reached SEK 6 (-2) m, with an operating margin of 3.6% (-1.6%).

New Markets business area; Duni’s markets outside Europe. The business area is responsible for, among other things, Duni in Singapore and Duni in Russia, as well as export sales to South America, the Middle East and Australia. Export sales are managed primarily through local agents, but on most of the markets Duni supports the local operations with its own sales personnel. Sales amounts to SEK 43 (21) m with an operating income of SEK -3 (0) m. Profitability for the quarter has primarily been affected by the negative currency trend in Russia.                

Materials & Services business area; hygiene product sales as well as tissue sales to external customers. Most of the business area’s revenues are generated from external sales of hygiene products, i.e. from the business that Duni has decided to discontinue as from the first quarter of 2015. Sales amount to SEK 120 (127) m and the operating income is SEK 7 (3) m. During 2014, revenues from the business area will decline due to reduced volumes associated with the phase-out of the hygiene products business.

Despite continued weak market growth, net invoicing is increasing in all prioritized business areas. This is mainly due to an effective market organization, with growth leading to increased capacity utilization in our production units. The challenge going forward lies in continuing to adapt to market demand through improvements in areas such as customer service, product innovation, and delivery certainty”, says Thomas Gustafsson, President and CEO, Duni.