Duni AB (publ)

Hello, and welcome to the Duny Group Q2 Interim Report 2020. Throughout the call, all participants will be in a listen-only mode. And afterwards, there will be a question-and-answer session. Please note this call is being recorded. Today, I am pleased to present Robert Dacascog, CEO. Please begin your meeting.

Yes, hello everyone and welcome to this interim report for Q2 2025. The headline for this quarter is subdued economic situation balanced by targeted measures and acquisitions. So if we move to the agenda and we will go through this today and at the end we will finish off with a Q&A. So moving into the highlights for the quarter. We see weak market and economic conditions pressured the demand and volumes in many markets, but we saw the quarter ended stronger than it began. The recent acquisitions had a positive impact and structural internal actions and measures were taken to adapt to the market conditions. One action is that the sales and marketing organization has been restructured as planned, including integrated sales team in the two respective business areas with a 10% staff reduction. And the expected annual impact of this is approximately 30 million SEK, and this will start from Q4 2025. And last, an improved operational cash flow seen in the quarter, and this is by lower inventory levels versus quarter one this year. If we look a little bit on the market outlook and the market data, it's still a continued weak market, persistent inflation, and a challenging consumer climate, as you know. And as you can see on the left graph below, that in 2025, the consumer confidence went down versus 2024. The forecast when we went in 2025 was the assumption that it was actually going to be stronger. We're not seeing that yet. and on the right side you can see the German graphs here which is our load which actually where the visits went down by 4.8 percent into one so it's a still tough market but the German government has proposed lower to lower the VAT for the restaurants from 19 to 7 percent which then hopefully will give that a positive impact to the restaurants When the consumers in Germany will start to come back is hard to say, of course, but historically, they always return of downturns in the economy. If we look a little bit the market and the restaurants, consumers are trading down to cheaper places. This graph shows the visits in the big five European countries, UK, Germany, Spain, France and Italy. And we can see that there is a trade down from casual dining to quick service restaurants, but also from quick service to retail, also delivery loss to quick service restaurants. But as I mentioned before here, historically, the arrows has gone the other way when the economy is getting better and the restaurants and Dune has after the different crisis in 2008 to 2012 and also after the pandemic always bounced back again. Looking into the key financial, the net sales is increased mainly driven by the acquisitions we've done. The operating profit declined by 14 million, mainly driven by lower volumes. And the margin ended up at 6.4% versus 7.2%. We'll come into this, of course, a little bit more here. So if we look at the net sales, it has increased by 5.2% in fixed currencies. And that was thanks to the contribution from our acquired companies, Poptis in the UK, and Sett in Slovenia, which covers the southeast of Europe. We had negative organic growth of 3.8% in the quarter, coming from a negative mix effect as customers placing lower priority on premium products, selling more tissue compared to, for example, our premium napkins like Dunilin. And of course, then the volume in total. We have a gradual impact of our price increases in Europe to balance the effect of inflation. In the second quarter, BPAC Group continued to grow, which has its biggest share of sales in the Australian market. If we look at the drivers behind the operating margin, as mentioned here before, the main driver was lower volumes in sales and the mixed effect in the assortment. So in order to mitigate Our efficiency, we have taken some measures, both in production and logistic, which has strengthened the income in the quarter. Also, measures have been taken to reduce our sales and marketing costs, and that will have an impact from Q4. Positive is that normalization of inventory levels throughout the quarter helped to improve the results within the impact group versus last quarter. And the recent acquisitions within Diamond Solutions, Poppins & Setti contributed by 21 million in the quarter. Now I'm handing over to Magnus to go through the two business areas in more detail.

Thank you for that, Robert. So as usual, I will now provide a more detailed overview of our two business areas. And I start off with Dynasolutions, which includes our table setting products. So despite currency headwinds, sales increased by 70 million compared to the previous year. And that's reaching 1.14 billion SEK. This growth was primarily driven by acquisitions completed earlier this year and at the end of last year. And profit improved slightly year on year with a stable operating margin of 8.7%. So as Robert mentioned earlier, the second quarter was marked by challenging market conditions, reflecting weak consumer confidence and declining volumes in the Horeca industry, I would say, across all over Europe. The price effect was close to 2%, implying a volume decline of 3% to 4% in the Horeca segment. In retail, however, we experienced a double-digit volume drop, primarily due to the loss of a few large contracts, though these were low margin in nature. So as we touched upon in the market outlook section, in tough market conditions, we've seen a shift in customer behavior, particularly in the premium segment. Some customers are opting for more cost efficient alternatives over our higher end offerings. And while we have competitive solutions also in these segments as well, the result has been a negative mixed effect, lower margins and reduced cost absorption in our factories. But this behavior mirrors what we observed in previous downturns, as Robert said. Still, we remain confident in the strength of our premium offering. thanks to enduring appeal in terms of quality and sustainability and its contribution to the overall dining experience. The look on the acquisitions made in the past nine months contributed positively to the profit this quarter in line with our integration plan. So although full synergies are expected to be realized by 2026, the contribution from the acquisitions were approximately 20 million SEK, And this was partly offset by volume decline in our core business. Nevertheless, we are well positioned to capitalize on increased volume once the market recovers. Finally, we continue to see growth opportunities outside Europe, particularly in the APAC region, which remains relatively immature in terms of the premium fiber-based dining solutions offers. However, as you have seen also this spring and summer, We have huge geopolitical uncertainties driven by conflicts in Middle East and discussions, I guess, on global tariffs. That has created a more cautious market environment. So while we don't foresee any direct threats to our markets, the indirect effects of reduced consumer willingness to spend on travel and by extension also maybe on dining are being felt. Return to... Business area food packaging solutions, which focuses on sustainable food packaging. Sales declined by 7%, primarily due to weak quarter in Europe and negative currency translation effects from a stronger Swedish krona. So although improvement from the first quarter, which was very weak, you can see that profit decreased to 22 million from 40 million last year. That corresponds to an operating margin of 3%. There are essentially two main reasons behind the weak sales performance in this quarter. Firstly, organic growth was 0.6%. So it's nearly in line with the same period last year. So the primary driver of the overall sales decline was the weak Australian dollar, particularly against the Swedish krona, which has strengthened by more than 10% in the period. And these currency effects accounts for the majority of the top line decrease. Additionally, we observed continued softness in the European takeaway market with lower sales compared to last year. But on a more positive note, sales outside Europe, especially in Australia, continued to show organic growth when measured in fixed currencies. We also saw continued growth in our Uniform system, which we mentioned earlier. This system, comprising sealed machines, trays, and films, is designed is designed to optimize food packaging processes. It's an area where we are currently accelerating efforts backed by strong customer recognition. And the system offers a clear competitive advantage by prioritizing food safety, operational efficiency, and user-friendliness. During the quarter, we completed the restructuring of our commercial and marketing functions, as Robert mentioned. This is an important step towards increasing efficiency. in a rapidly evolving market. And more important, this change allows us to strengthen our focus and expertise across our distinct business areas. So the restructuring will impact both business areas, delivering annual savings of approximately 30 million SEK. Majority will be realized with dining solution, but also in food packaging solutions. So we remain convinced that a more specialized and capable sales force is essential for future success. So as the demands on restaurants and hotels operators grow, particularly around materials and regulatory compliance, we are well positioned to provide meaningful support and create real value. So food packaging is undergoing a fundamental transformation driven by evolving legislation, shifting customer expectations, and emerging business models centered around recycle, reuse, and compostable solutions. And Uni has a long been a leader in developing innovative materials and packaging solutions. And we are committed to stay in the forefront. So key focus going forward will be our ability to clearly communicate and demonstrate these future ready solutions to both existing and new customers. So I hand back to Robert again. Thank you.