10/24/2012 06:00 AM
Interim Report for Duni AB (publ) 1 January – 30 September 2012
Lower earnings but strong cash flow
1 January – 30 September 2012
- Net sales amounted to SEK 2 638 m (2 744). Adjusted for exchange rate changes, net sales fell by 2.2%.
- Earnings per share, after dilution, amounted to SEK 2.98 (3.46).
- Stagnating market development.
1 July – 30 September 2012
- Net sales amounted to SEK 849 m (917). Adjusted for exchange rate changes, net sales fell by 2.3%.
- Earnings per share, after dilution, amounted to SEK 1.01 (1.34).
- Operating income of SEK 63 m (98). Currency effects, lower seasonal inventory buildup, and fewer invoicing days than last year account for approximately three-quarters of the decline in earnings.
- Strong cash flow led to a reduction in the net debt in the quarter, from SEK 830 m to SEK 740 m.
October – September
|Net sales||2 638||2 744||849||917||3 701||3 807|
|Income after financial items||186||224||59||90||321||358|
1) Underlying operating income; for link to reported operating income, see the section entitled "Non-recurring items".
“The deteriorating economic climate has continued to impact on Duni's markets during the third quarter. The weaker economic trend is particularly noticeable in southern Europe, but generally speaking the hotel and restaurant markets in Europe also display a degree of weakening resilience.
Duni's business model has demonstrated its staying power and stability during tough times. Duni continues to develop at a relatively stable pace, bearing in mind market conditions. In total, Duni's sales in the quarter reached SEK 849 m, a reduction of 2.3% at fixed exchange rates. Cash flow during the quarter was strong and the net debt has fallen from SEK 830 m as per 30 June to SEK 740 m.
The Professional business area posted sales of SEK 635 m. Excluding currency effects, this represents a downturn of 3.1%. This reduction reflects a weaker market and the loss of a couple of large volume contracts in England. In addition, September – when the important Christmas sales begin to take off – had fewer invoicing days this year than last year. As regards Duni’s market investments, growth has slowed down appreciably in southern Europe, while sales in Russia continue to develop very positively. The new premium tablecovering, Evolin®, is continuing to gain territory, but it takes time to create substantial sales figures on a conservative and fragmented market.
The sales trend in the Consumer business area improved as well during the third quarter. Sales were SEK 101 m, a decline with 1.6% at fixed exchange rates, on a slightly weaker market. During the quarter, Consumer began deliveries under the major contracts which were entered into during the second quarter, however, with a slight delay on the German market. The phase-in is resource-intensive and has an initial negative impact on earnings. Sales in the Consumer business area is expected to develop positively during the remainder of the year, thanks to the new contracts.
The Tissue business area remains stable with sales of SEK 112 m during the quarter, compared with SEK 111 m last year. Costs have also been incurred in the third quarter regarding test runs of new hygiene product qualities, and earnings have also been affected by lower production volumes aimed at reducing inventory levels.
Duni reports a weaker earnings trend in the third quarter, with an operating income of SEK 63 m. This is SEK 35 m down on the figure of SEK 98 m reported last year. Since sales revenues and operating income are mainly derived from Eurozone countries, Duni's profitability has been affected by the substantial strengthening of the Swedish krona. The currency effect is the most important reason for the weaker result. This factor, taken together with a lower rate of production aimed at avoiding stock building, as well as the fact that there were fewer invoicing days in September, accounts of the overwhelming proportion of the fall in earnings. When purely operational effects are considered, income was negatively affected to a certain extent by somewhat lower volumes, but this in turn was partly offset by effective cost control.
We are now entering Duni's most important quarter, which includes the Christmas season. We believe that the economic climate will remain weak, which may impact on demand. On the other hand, it may also bring with it certain reductions in raw material prices from relatively high levels,” says Fredrik von Oelreich, President and CEO, Duni.