Duni AB (publ)

Hello and welcome to the Deluny Group Q1 Interim Report 2026. There will be a question and answer session at the end of the presentations. Questions will be taken by phone only. I will now hand over to Robert Dakishkov, President and CEO. Please begin your meeting.

Thank you. Yes, hi and welcome to the Interim Report for Q1 2026. And the headline for this quarter is Stabilized Development in a Challenging Market. And if you look a little bit on the agenda here during the presentation, a little bit highlights in the beginning, and then some market outlook and market insights. And then we have the Q1 summary, and then we're moving into more details within the two business areas. And then at the end, financials and our long-term targets at the end. And then a summary, and then we'll go to Q&A via telephone. All right, so if we move into the highlights, the quarter came in, the net sales is broadly in line with last year, if you look at the same currency as last year. And that is, of course, it's been a quite challenging and volatile market environment here lately as well, as we know. And if we look at the organic sales trend, that improved quarter-on-quarter. Come back to that, but it was minus seven last quarter, and now it's improved, even if it's a little bit negative still. There is a price-focused demand continuing in the market, so with the mix rather than volumes being the main challenge for us in the restaurant market. And then positive in the quarter was food packaging solutions, quarter more balanced performance this quarter. And coming back to that as well. So if we look a little bit on the market, of course, the market remains subdued across the Horeca sector, especially if we look at Germany, as we looked at the data from Germany on the top there. And then, yeah, lately here, I think yesterday was published the Consumer Confidence here, and it dropped significantly in the bottom right there in March because, of course, of the Iran war. And, of course, real revenues continue to decline in market and extending this multi-year downturn that we had. Of course, cost and inflation is a pressure for the market, and especially in labor. And there is purchasing behavior stays a bit cautious with a lot of focus, of course, on cost and efficiency all over the market. If we look a little bit on the higher level here, the European food service market, how that looks now and the projections for 2026 is that the visits have continued to further decreasing in the market. 2025 was actually down and predicted maybe when we went into 2025 that it was supposed to increase. But it's still very low if you compare to the pre-COVID. And these two slides, then, is the five big markets in Europe. And there are some other markets, of course, in Northern Europe here that have come back better, actually, than the top five countries in Europe. If we go into the main growth drivers in Europe at the moment is that, of course, delivery offers is one part where it's – driving growth area. And then, of course, digital ordering is a big thing as well and how you order and the behavior around that. And when it comes to a little bit to food and so on, healthy indulgence is a big trend as well. We also see that breakfast is growing in many parts of Europe and bakeries and so on. And, of course, it's a lot of focus on price value and promos in general in the horeca sector. And then one thing that is very important now is socializing experience when you go out and eat. It's more maybe about that than actually about the food in a way. So, getting to socialize, getting atmosphere. And I think here, Dune can offer a lot of things in the different areas. Delivery, we have our packaging part, and especially the uniform part. We'll come back to a little bit what we found there. And, of course, the social part at the end there, that is where we actually are our core, where we create atmosphere with our napkins and table covers and lights in the restaurants and also, of course, in all areas of the breaker sector. All right. Top line here, then, Q1 financial. If we look at the total net safe, then, it might be 1.764. billion SEC, which was lower than the last year, but in line if you look at the same currency. Operating income, 10 million less than last year, and operating more at 5.7, which is 0.2 lower than last year. And the main things here, then if we comment on the net sales, I think it's important then to look at the peak currencies, of course. It's a lot of currencies going up and down here in the world. And there we are in line with last year, so that's positive then versus last quarter where we were down. Organic growth then was also a positive trend compared to Q4 then. We have a negative mix effect in dining solutions where we have selling less premium napkins, so demand for that. at the moment, but still selling a lot of premium products, and our main products, like Tendusoft and Dunelin are the main ones there that we're really focusing on there. And, of course, the Middle East instability affected the dining solution a lot in the quarter as well. We'll come back to that in a minute here. And a food package loosened sustained growth in local currency this quarter, which was positive. The operating income declined with 10 minutes, as I said, mainly because of paper remits, but also it resulted from a little bit demand from lower-priced products. Of course, also affected the sales was the geopolitical tensions outside, especially in the Middle East here and Asia, where we have some business. The cost developed through a quarter. We have done some, which we announced last year, cost reduction initiatives that helped us during this, but we got some higher costs in energy, logistics, and IT costs during the quarter. And, of course, there's a lot of currency fluctuations, and there was positive impact of 5 million compared to last year. So that was a little bit at a high level, and we might as well move into dining solutions.

Thank you for that, Robert, and good morning, everyone. So, as usual, I start with a more detailed review of our two business areas and starting off with dining solutions. So, sales declined by 68 million, mainly driven by currency effects, but also a continued weak record market. Operating profit decreased from 102 million to 82 million, a decline of 20 million. This is mainly explained by the negative mix effect, which I will come back to shortly. But in addition, we also experienced cost pressure on variable costs like energy and logistics during the quarter. As a result, the operating margin declined to 7.8% compared to 9.1% last year. So if we jump to the next one. So incomparable exchange rates, sales declined by roughly 1%. So we do not yet have full market statistics for Q1, but our assessment is that this performance is broadly in line with the Horeca market overall. If we look on the volumes measured in pallets and pieces, we actually see a positive development. And this allows us to conclude that in several segments, we're actually flat or even gaining market share. However, the challenge is clearly the sales mix, as mentioned. already, we are losing share in branded premium products, which carry higher margins, while gaining volume in private label and commodity products with significantly lower gross margins. Regarding Germany and their reduced VAT for restaurants, we mentioned that before. We do not yet see any clear trend shift in visits to full-service restaurants. Anyhow, Such measures are important to support fundamentals and make eating out more affordable. But it is a fact that inflation over the recent years has been significantly higher for restaurants than for consumers in general. As Robert mentioned, geopolitical uncertainty remains very high. Consumer confidence is still at historical low levels. You maybe saw that on the previous slide. And cautious continues to dominate spending behavior. And this is not yet supporting a recovery strategy. unfortunately, in the Horeca segment. Against this backdrop, we have increased our initiatives and adapted to the new reality of customers having less financial room. So during the quarter, we launched mid-segment offerings in napkins and table covers, soft-tick and velvetech. This provides smart value for effortless professional table settings. It's still a bit early days, but the reception from the industry has so far been positive, and these products will play an important role in protecting sales momentum during these challenging times. So, over the last year, we have also worked hard to increase efficiency and reduce costs, both backend and frontend. So, despite having fewer resources in the field, we have increased end customer visits by 27% year-on-year. This is, of course, a very important leading indicator for long-term growth and supports the loyalty among restaurants and hotels. So, what the result decline of 20 million is, to try to summarize, is mainly explained by three factors. First, the negative mixed effect that is the most dominating one. We mentioned that. This is a challenge in tough times, but we firmly believe that customers value what our brand stands for and the role we play in creating atmosphere around eating and drinking and not least our initiatives in sustainability solutions. We are well-positioned. However, our focus is not to wait for better times, but to actively shift this curve already now. Second, we saw clear cost pressure, mainly related to energy and logistics, partly driven by the geopolitical disturbances. And finally, third point, we had a positive currency effect versus last year. That supported the result, but not enough to offset the weak markets and the lower share of premium sales. So to summarize Q1, A recovery in organic growth after a weak Q4, I must say. But the key challenge remains the declining share of branded sales, which continues to crash across margins. Positively, again, we are growing in pieces sold, indicating that we are defending and in some cases growing our market share, despite severe headwinds. So moving over to food packaging solutions. focusing on sustainable food packaging. Sales declined by 4%. That is fully driven by negative currency effects. In comparable currencies, actually a slight increase. Operating profit improved from last year, increasing from 7 to 80 million, and that corresponds to a margin of 2.5%. As mentioned, currency is the main driver on sales. It's been also quite a volatile period for currencies lately. This primarily is to the strong receipt versus the euro, but also versus the Australian dollar, which averaged in Q1 this year 635 compared to 690 last year. But at the same time, the Australian dollar has strengthened versus the US dollar, which has supported a gross profit in Australia. Inventory levels, always very important, are now significantly more optimized compared to a year ago. I think diligent work in the last nine months or so has reduced storage costs, especially in markets outside Europe. But this remains a key focus area, and given the continued supply chain uncertainty driven by the geopolitical situation. We experienced a notable cost pressure in logistics and oil and gas-related input linked to the situation in the Middle East, of course. Price compensation measures have been initiated, although the short-term impact is more pronounced in food packaging, particularly so in Europe, where plastic products are still part of our portfolio. But a positive aspect of this is that the vast majority of our products, and especially so outside Europe, are fiber-based. And these products have historically been more expensive than plastic alternatives, and this now creates an opportunity to accelerate the shift towards fiber solutions. Experience from previous price effects shows that close customer dialogue and reliable delivery are critical to gain market share and staying ahead of smaller and more optimistic competitors, which, of course, will always be there. Our recent strategic-focused acquisitions, Linepack in Europe, in Finland, and BuyGreen in Australia, continue to develop well and strengthen their overall offer. And in Q1 this year, we also signed the acquisition of Silsu as a small acquisition around 50 million or so in revenue. But that has a very meaningful impact on Duniform offering in Sweden, but also in the Nordics. Duniform is Duni Group's sustainable food packaging concept. And the integration will start 1st of April for Silsu. We continue to see foreign exchange volatility. So while we see a stronger Australian dollar that supports the gross profit, we also saw some negative revaluation effects in Biopack Group during the quarter. Long term, a strong Australian dollar versus the US dollar is positive, just to be clear. To summarize, Q1 is a seasonal weak one, and margins remain below normalized levels. However, as shown by the rolling 12-month trend to the right. Profitability has slowly but steadily improved since Q2 last year. If we now jump in a little bit more to the financials, starting off with the income statement. So as mentioned, we have FX effects that reduced the sales by almost 5% in the quarter. Organic growth improved significantly from the week previous quarter, now close to zero, minus 1%. So although we are defending our market position by offering more affordable alternatives, the negative mixed effect that we said a couple of times now continues to put pressure on the profitability. So gross margin remains resilient, and that is supported by dedicated cost reduction initiatives that we have done. especially so in our production facilities, but also in the front end. Also, price compensation measures were implemented or at least initiated to mitigate these costs increases seen, especially so in the second half of the first quarter. As communicated earlier, we are seeing higher costs also related to digital investments. That includes an ERP replacement project. But adjusted for the inflation and higher IT costs, That is roughly 20 million a quarter. All in all, we've also taken out costs of almost the same, and that is in line with our previous guidance. Financial met last year was positively impacted by currency translation effects, and therefore was exceptionally low. This year, we also have an effect on interest rates from the leasing contract in our new warehouse, explaining the main difference we see now between 26 and 25. If we jump to the business areas, financials, and dining solutions, if you look on the last 12 months, just below 10% margin, which is, you could say, relatively strength, given the market environment. Food packaging improves slightly to 3.3%. Look on the rolling 12 months again. But I would say both business areas remain 3% to 4% below targeted levels. primarily due to the low volumes and pressure on the branded sales. And that's more so than the structurally weak gross margins or any excessive indirect costs. So with improved volumes, we know from experience that operational leverage will support margins going forward. Indirect costs are therefore adapted to the pressure on sales levels. And during the last year, we have reduced the cost, particularly so in sales and marketing and in production. Okay, if we look on the operating cash flow, it's typically negative in Q1, also this year, in line with prior years. However, there are some slightly differences. Inventory increased significantly last year, as you can see, particularly so in Biopack Group in Australia. That had negatively impacted both cash flow, but also the profit we were part to reduce in 2025. In Q1 this year, inventory development improved clearly with only a normal seasonal increase. So, the negative deviation mainly reflects lower accounts payable. That is partly a timing effect, partly lower purchase volumes. Okay. Moving on to the financial position. I would say the prolonged recession and industry challenges over the last two, two and a half years have started to reflect a little bit in our financial position. Working capital remains stable, both in value and in days. Net theft has increased versus year-end, and that is fully explained by our long-term logistic partnership and the related lease liability we have of approximately $600 million. So, this is not an increase in traditional interest-bearing debt. It does not influence the covenant, just to be clear. So, the solution secures our deliver performance with this warehouse for many years. And I stated earlier, we expect to generate annual savings of around 35 to 45 million, starting at the end of 2026, once the warehouse reallocation from Ramse, where it is now, to map when it's completed and stabilized, I would say. Finally, we have reached the slides to the group targets. And as previously communicated, we have updated our both financial and sustainability targets effective from 1st of January. So we now target total growth about 6% in comparable currencies. Currently, we are below this level, as you can see. mainly due to the weak Hoveca market. M&A has contributed until quite recently, but had a marginal impact in the quarter. The operating margin closed at 7.3%, stable, I would say, versus the last quarter or quarters. But as also you can see, it is below our 10% target. The board proposes a dividend of five cents per share, That's unchanged from last year. It corresponds to a payout ratio of 75%. That is above our target for 50%. We also have updated our sustainability target to 2030 to lead and secure our role as being the trusted sustainability leader. First, we should have at least 90% share of circular input materials, renewable or recyclable, and that ended on 87%. of the first quarter. Second, our way to net zero should be reduced by 77% versus 2019. Here we ended at minus 58%. And third one, we should be a great and safe place to work in, and we measure this by the below 10 lost time injuries per 1,000 employees. Here we ended at 16. We continue to invest heavily in our production to ensure we gradually reach our targets. And finally, supplier responsibility. 100% should have signed the group's business partner code of conduct by 2030, and here we are at 83%, and we work diligently to reach that. So thank you for listening, and I will now hand over to Robert for his concluding remarks.