04/27/2012 06:00 AM

Interim Report for Duni AB (publ) 1 January – 31 March 2012

Improved profitability within Professional

1 January – 31 March 2012

• Net sales amounted to SEK 856 m (867). Adjusted for exchange rate changes, net sales fell by 1.5%.
• Earnings per share amounted, after dilution, to SEK 0.78 (0.86).
• Evolin®, Duni's new revolutionary tablecovering material, was launched during the quarter.
• Strong seasonally adjusted cash flow following a successful reduction of working capital.

Key financials

1)  Underlying operating income; for link to reported operating income, see the section entitled "Non-recurring items".

CEO’s comments

“The economy has weakened during a couple of quarters, particularly in the heavily debt-burdened markets of southern Europe. In this economic climate, Duni achieved sales of SEK 856 m, which represents a fall of 1.5% at fixed exchange rates.

It is positive to note that sales within our largest business area, Professional, are continuing to increase, and did so by 3.4% in the quarter. The rate of growth in southern Europe has slowed down due to the harsh economic climate, while Eastern Europe continues to display solid growth. The sales trend in the larger, mature markets is stable or slightly positive.

Sales in the Tissue business area were unchanged compared with last year.

On the other hand, Consumer (formerly Retail) experienced a weak quarter, retreating 20%. This is due to a generally poor Easter season, high inventory levels of some customers, and a weak market position in the Nordic region. These factors, combined with the lost private label contract, already mentioned in previous reports, are the main reasons for the weak sales.

Despite Consumer’s weak start to the year, the prospects for the coming quarters appear to be better. We have signed a couple of new contracts, including with the major private label customer whom we previously lost, and these will have a positive impact on sales, particularly during the second half of the year.

Income for the first quarter fell due to the weak development within Consumer and lower capacity utilization in the Tissue business area, in order to reduce the inventory level. The Group’s EBIT was SEK 60 m, compared with SEK 67 m last year. The Professional business area increased its operating income by SEK 8 m, to SEK 61 m, despite expenditures incurred in the quarter on the new tablecovering material, Evolin®. We are currently in the initial phase of launching Evolin and sales will increase gradually during the year.

During the quarter, the Group generated a positive cash flow thanks to a reduction in working capital. As a consequence, the net debt was reduced even during the seasonally weak first quarter.

Duni's most important challenge is to create growth. Several initiatives have been taken and investments started up with this aim. As from the second quarter, Duni is introducing a new, more market-oriented organization, which should also be seen as a step towards creating improved conditions for growth.

Although Duni has taken measures to promote sales growth, we anticipate a continued slowdown in economic activity in Europe during the current year,” says Fredrik von Oelreich, President and CEO, Duni.