Interim Report for Duni AB (publ) 1 January – 30 September 2015

Historically strong quarter with strong operating margin.

1 July – 30 September 2015

• Net sales amounted to SEK 1,043 m (997). Adjusted for exchange rate changes, net sales increased by 1.1%.
• Earnings per share, for continuing operations, after dilution amounted to SEK till 2.10 (1.80).
• High capital expenditure level, continued strong cash flow.

1 January – 30 September 2015

• Net sales amounted to SEK 3,030 m (2,736). Adjusted for exchange rate changes, net sales increased by 5.8%.
• Earnings per share, for continuing operations, after dilution amounted to SEK 5.05 (4.19).
• Decision to invest SEK 110 m in upgrading two of the paper machines in Skåpafors in order to increase capacity.
• Production of hygiene products in Skåpafors is now discontinued; the hygiene product operations and restructuring work within the Materials & Services business area are reported as discontinued operations.

Key financials 1)

1) For continuing operations.

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

CEO’s comments

”The operating income for the quarter is historically strong and exceeds the third quarter of last year by a considerable margin. Total net sales fell by 5% due to the closure of the hygiene products business. However, the continued operations reported organic growth of 3%, excluding currency effects and acquisitions. Despite improved growth compared with the two preceding quarters of the year, we have not achieved the target level of 5%. Operating income in the continued operations increased by 13%, to SEK 146 m (129), and the operating margin improved to 14.0% (12.9%).

The quarter was characterized by good delivery performance and cost control. The improvement in the margin was driven primarily by more efficient operation at our paper mill and in the logistics units, but also thanks to growth in the core business and continued favorable exchange rates. The weak krona generates exchange rate advantages; conversely, a strong USD negatively affects the prices of, first and foremost, pulp and plastic products.

The restructuring program in Rexcell Tissue & Airlaid AB is proceeding and the process of moving airlaid production to the mill in Skåpafors will be completed during the final quarter of the year. Despite a high level of activity, the restructuring has been implemented without any significant impact on the day-to-day operations. During the coming quarters, work will also be intensified on the previously announced investment in increased capacity at the paper mill. Installation is expected to be completed during the latter part of 2016.

The Table Top business area increased its sales in the quarter by 6% compared with last year. The increase in sales is attributable to positive currency effects. Somewhat weak sales in Central Europe and the Nordic region dragged down the growth rate for the business area, at the same time as southern and Eastern Europe grew by almost 20%. A return to growth in Central Europe and the Nordic region is a top priority issue and we are currently further intensifying our sales effort. The business area’s sales for the quarter increased to SEK 579 m (545) and operating income increased to SEK 109 m (97).

Within Meal Service we are witnessing continued strong growth driven by increased market demand and higher market shares. Consistent investments in unique and environmentally-adapted products have broadened the customer base, at the same time as strengthen our position as a leading innovator. During the quarter, sales increased by approximately 10% compared with last year. Sales reached SEK 155 m (140) and the operating income was SEK 10 m (8).

Sales in the Consumer business area fell during the quarter. This was primarily due to the somewhat weaker trend in Central Europe, which had a negative impact on revenues in the business area. Sales for the quarter amounted to SEK 245 m (249) and operating income declined to SEK 21 m (22).

Within New Markets we recorded strong growth in our main markets. The weaker economic climate in China, has led to a slowdown in the rate of growth in Southeast Asia, but our operations in Singapore compensated for this with increased export sales. The Russian operations have now been restructured and are better adapted to the prevailing economic climate. The workforce has been reduced and extensive price increases have been carried out. During the quarter, sales in the business area increased to SEK 53 m (50) and operating profit rose to SEK 4 m (1).

All in all, it is pleasing that our core business is continuing to improve in efficiency and is contributing to increased profitability. During the quarter, both delivery performance and efficiency in the flow of goods improved, at the same time as Rexcell implemented its restructuring program without significant disruptions in operations. We take this with us into the final and most important quarter of the year ”, says Thomas Gustafsson, President and CEO, Duni.