Interim Report for Duni AB (publ) 1 January – 30 June 2014

Historically strong second quarter and strategically important acquisition of Paper+Design Group

1 April – 30 June 2014

• Net sales amounted to SEK 1 017 m (914). Adjusted for exchange rate changes, net sales increased by 7.1%.
• Earnings per share, after dilution, amounted to SEK 1.54 (1.41).
• Growth in all prioritized business areas.
• As from the middle of June, the acquisition of Paper+Design is reported within the Consumer business area.

1 January – 30 June 2014

• Net sales amounted to SEK 1 937 m (1 766). Adjusted for exchange rate changes, net sales increased by 6.2%.
• Earnings per share, after dilution, amounted to SEK 2.64 (2.18).
• Demand strengthened somewhat in pace with an improved economic climate.

Key financials

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

CEO’s comments

“Growth of 11% was recorded in the quarter, with all business areas except Materials & Services increasing their sales compared with last year. Net invoicing, amounting to SEK 1,017 m (914), was driven by increased market shares, a weaker Swedish krona and, to a certain extent, also by the acquisition of Paper+Design. It is worth noting that, excluding acquisitions and the hygiene products business (which is being phased out), we are achieving the growth target of 5% at fixed exchange rates.

Operating income amounts to SEK 101 m (91) with an unchanged operating margin of 10.0%. Internal efficiency measures are continuing to contribute to a stronger EBIT. However, during the quarter non-recurring acquisition and marketing costs were incurred, and somewhat decreased efficiency was experienced within logistics due to the fact that full productivity has not yet been reached following the systems and structural changes of the past year. Net debt increased to SEK 1,164 m (793). The increase in indebtedness is entirely due to the acquisition of Paper+Design.

On 11 June 2014, Duni acquired all of the shares in Paper+Design. The company's operations are located in Wolkenstein in eastern Germany and the company is a leader within design-printed napkins, focused on the specialty goods trade. This market position well complements Duni’s strong presence within the retail grocery trade. Thus, a consolidation creates conditions for both product and efficiency initiatives in which the companies focus on two separate distribution channels. Paper+Design has sales in some 80 countries and approximately half of total sales are within central Europe. Last year, external sales amounted to EUR 38 m, with an operating margin of approximately 20%.

The trend in our largest business area, Table Top, gradually improved. The market for full-service restaurants has experienced weaker growth than the market in general, and consequently the 7% increase in sales during the quarter was generated by currency effects and also increased market shares. Due to certain disruptions in delivery capability and costs for growth initiative projects, profitability will not fully match that of last year.

The Meal Service business area operates in a more positive market climate. Growth amounts to 8% and we believe that the increase is well in line with the market as a whole. Meal Service is enjoying strong growth in Central Europe, but facing a tough challenge on the Nordic domestic market.

The Consumer business area has strengthened its positions significantly since 2012. During the past two years, several important contracts have been won and the change in strategy has resulted in a more attractive market offering. Among other things, the “Designs for Duni”® initiative has come to play an increasingly important role and it is pleasing that the concept is continuing to grow with strong profitability. Consumer increased its revenues during the quarter by 36% compared with last year. Paper+Design accounts for approximately one third of the growth. Profitability in the quarter is slightly stronger than last year.

As a consequence of last year's acquisition of Duni Song Seng, New Markets is continuing to grow at a very fast rate. Sales increased by 85% during the quarter. Excluding Russia and Singapore, other export markets have a growth of approximately 10%. We are continuing to face challenges on the Russian market, where domestic demand has fallen due to a sharp devaluation of the currency combined with the political climate. We are witnessing stable growth in other prioritized areas.

Materials & Services is experiencing a slowdown in sales but with more stable profitability. The trend is entirely in line with the phase-out model decided upon for the hygiene products business.

Duni's overarching ambition is to grow with profitability on prioritized markets. Growth will take place organically through gradually improved efficiency and market offerings, complemented by acquisitions. An additional acquisition was carried out during 2014, at the same time as initiatives vis-à-vis the market were intensified. Improved customer service, enhanced brand attractiveness and improved cooperation between market, logistics and sales are very highly prioritized in the work going forward.

As we now enter the second half of the year, we are doing so supported by underlying growth and the acquisition of Paper+Design. This is, of course, very gratifying, and top priority is now being given to implementing efficient, value-driving integration work,” says Thomas Gustafsson, President and CEO, Duni.

Additional information is provided by:
Thomas Gustafsson, President and CEO, +46 40 10 62 00
Mats Lindroth, CFO, +46 40 10 62 00
Tina Andersson, Corporate Marketing & Communication Director, 0734-19 62 24

Duni is a leading supplier of attractive and convenient products for table setting and take-away. The Duni brand is sold in more than 40 markets and enjoys a number one position in Central and Northern Europe. Duni has some 2,100 employees in 18 countries, headquarters in Malmö and production units in Sweden, Germany and Poland. Duni is listed on NASDAQ OMX Stockholm under the ticker name “DUNI”. ISIN-code is SE 0000616716.

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