Ladies and gentlemen, welcome to the Duni year-end report. Today I'm pleased to present President and CEO Robert Dackeskog and CFO Magnus Carlsson. For the first part of this call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. I will now hand you over to Robert Dackeskog. Please go ahead.
Thank you. Hi and welcome to this year-end report for 2023, where we are on the journey to build a platform for sustainable growth for Duni Group. If we look at the highlights for the quarter, we strengthened the margins and improved our operating income versus last year. We have a very strong operating cash flow and low net debt provides increased room for maneuver going forward. The board proposed dividend of SEK 5 per share. We've done a bit of a change here. We're changing our business area name. So, business area Duni, it's changing to business area Dining Solutions, and business area BioPak will change name to Food Packaging Solutions, which is a little bit more descriptive and doesn't then collide a little bit with the brands as we have as well. So more descriptive, going forward. The agenda for today, market outlook, Q4 summary.
We go into both business areas. I talk about our innovations, the sustainability, and then financials in detail, and then at the end, a Q&A. So if we look at the market, we have shown this before, and if we see the right picture on the top corner here where you see the number of average check visits total spend, then we can see that in 2023 it's not back at the levels of 2019, so it's 10% lower visits. But the trend here, it looks like it's gonna increase, especially in Germany where it's been lower. In Sweden we had the same amount of visits as before the pandemic, so a little bit different picture in different countries in Europe.
If we look at the top, bottom, bottom graph, we can see that in the last December there, that it's a little bit lower turnout of bookings. So this is OpenTable data that we look into, for the last quarter of 2023. But we look at the group's financial position. This enables us to address really profitable long-term growth opportunities in the market, and we, of course, are in a very interesting market overall. If we look at the Q4 key financials here, our net sales was slightly down and amounted to SEK 1,971 million, and our operating income was up from SEK 153 million to SEK 191 million. We ended up with a margin of 9.7% in the quarter, and last year was 7.8%. So positive development there. A little bit more detailed comments for the group. The net sales, as I said, slightly down.
The sales are in line with last year's record Q4. What's driving is currency and prices are increasing, of course, the top line. In Q4, the retail channel declined. Christmas sales was lower than previous years. The market seems quite stable but are not yet back at pre-pandemic level, especially, as I said, the German numbers here with less visits. And if we look at the operating income, it's been a significant growth in operating income, versus last year, almost 25%. The balance between cost and price adjustments are the main drivers for the improved result, in Q4. Also efficiencies in our production and procurement has strengthened the result. We have some one-off costs of SEK 20 million that is affecting the operating income, which are included in Q4. We'll come back to that a little bit more when we go into the business areas as well.
If we summarize the year, we have a net sales growth of 11%, positive turnover development during the year. Of course, main growth coming from the first half of the year. Cost compensating adjustments has been implemented during 2022 and Q1 2023. That has significantly strengthened the top line in during the year. Sales towards the hotel and restaurants industry increase in volume while volumes for takeaway and through the retail channels has decreased, yeah, during the year. We had a 60% operating income improvement versus last year and is record high in absolute numbers. The balance between the cost increases and price adjustments towards the market is the main driver for the improvement. We have had a high stock level for business area Food Packaging, which has resulted in stock write-downs during the year.
But we're challenging actually also stock levels that have been going down during the second half of the year, which is good. And we have continuous efficiency gains in our manufacturing and production and sourcing during the year as well, which also supports our result. Yeah, I will hand over to Magnus here to go into our business areas.
Thank you, Magnus, Robert, and good morning, everyone. So, I will now go through our two business areas more in detail, and I'll start with business area Dining Solutions, previously known as BA Duni. That represents our products for dining solutions like napkins, table covers, and candles. So if we look on the numbers, Q4 showed a growth of SEK 27 million, and that is equal to 2.5%, ending just above SEK 1.2 billion . Operating income grew by almost 40% to SEK 175 million, with a margin improvement of 3.7 percentage points, ending on 14.4%. A little bit deeper look at the business area Dining Solutions, we can see that sales increase was driven mainly by favorable currency rates and partly price compensation measures. However, this effect is now significantly smaller.
So, it's fair to say that volumes are down in the quarter, and the majority of this is derived from the retail segment, which is down from a very strong 2022. As Robert mentioned, we could see a lower demand already at the end of Q3, and as the market data indicate, Dining Solutions experience now, slightly lower demand in Q4. The margin goes up compared to previous year, as I said, and now on 14.4%. I think the efficiency programs that have been dominating since the pandemic have now resulted in good operational leverage, that has strengthened the margin and the result. Since summer, we see that many raw materials are now increasing again. They peaked at the end of 2022, gradually went down, and pulp is now up, for instance, with roughly 15% since summer.
So I think the last year's volatility in raw material and energy has now become almost a new normal, and this is something I think we have been able to manage in a good way in the last years, and of course, also something that we will act upon as it develops. So to sum up, Q4 for Dining Solutions, record high in terms of both sales and profit, although we see somewhat weakening demand, I think impacted by the general economic uncertainty. So if we move over to business area Food Packaging Solutions, previously BioPak, focusing on products with sustainable within sustainable food packaging, we see a sales decrease of 4% in the quarter and a slightly lower profit of SEK 70 million from last year 27, and that's a margin of 2.2%.
If we look a little bit also here a little bit more in the details, the slightly lower sales follows a long period of superior high sales from the pandemic years, 2021 and 2022, that brought significant growth for the business area. The main part for the lower sales versus last year is price reductions, following a decline during 2023, and that's an compensation and adaptation that the container rates has come down from the end of 2022. Volume-wise, we are on par or maybe even slightly up in some product segments versus the same quarter last year. As many of you are aware of, we do see sharp increases again in container costs resulting from the war in the Middle East region and the attack from the Houthi rebels on trade ships.
This increase has not yet been as dramatic during the period now, Q4, and I would say have limited impact during the quarter, but we naturally follow this carefully and, of course, in close dialogue with both customers and suppliers to mitigate any negative effects that could come from this. But without a doubt, I think the last year has been a challenge, mainly for the European part of the business within Food Packaging Solutions. The high stock that was built during the time of the high container costs has caused challenges in lower profitability when the market prices went down, and this has impacted mainly the first half of 2023, but I would say the whole year. However, the stocks have reduced significantly outside of Europe and normalized in Europe, and this is now a clearly less impact.
So I would just like to say that food packaging is an industry of transformation towards better and more sustainable solutions with sharp focus on how to reach circularity and very much on having the optimum materials. I think we have been in the forefront for many years in offering the best solution for our customers. We continue to invest heavily in this, not only to stay ahead of legal demands, but to offer the best solution for every eating and drinking occasion, and regardless if it's recyclable or if it's a reusable solution. So therefore, we are very proud to be able to launch a new series of products that is both plastic-free and with non-PFAS added. This is a unique offer in the market.
but also we have taken some significant costs in the quarter for this, some phase-out costs, but also campaign costs, which temporarily burden the result. We are also cost-connected to an acquisition that we are happy to inform you about today. We just closed it 1st of February. So Duni Group expands further in the APAC region with an acquisition of Decent Packaging within BioPak Group, and this acquisition will contribute approximately SEK 150 million sales from 1st of February this year, and that's a profitability aligned with Duni Group. So we are very excited about this new acquisition, that will strengthen our presence in the APAC region, but it also have a very good foothold in the U.K. They show very strong growth, and this will continue to broaden and strengthen our offer in this market.
So the acquisition, just a final comment on that, is financed with the BioPak's own loan facility, their cash, and also shares from BioPak, and that will be consolidated in the business area Food Packaging Solutions. So I now hand over to Robert again.
Yeah, thank you, Magnus. Yeah, as Magnus said, we are investing to become this trusted sustainability leader in our industry and focusing a lot on circularity and focusing a lot on our own startup projects, Eden and Unmo, so I'll share a little bit around that. They are progressing positively during the quarter. We have increased the number of companies and potential employees in Unmo. That's great. We are expanding from Malmö to Gothenburg, Stockholm, and moving on there and see if this will fly, but very interesting, and it's socially sustainable to create this socially sustainable restaurant industry that we can help with where we play. And the Eden system is tapping into the restaurants into the circular economy with reuse, for example, and we've done tests with Liseberg.
We're wanting to enable circular food and beverage in their food court also, progressing and testing further. And if we look into our decade of action, our sustainability initiatives, we have three targets here: becoming circular at scale, and going net zero, where we're measuring carbon emissions for scope one and two, and living the change to become a trusted sustainability leader. And in the quarter here, we have, as I said, tested the system for reusable servings at Liseberg. We also, as Magnus mentioned, launched a takeaway range with no added PFAS or fossil plastic, which I'm very proud that we are the first in this. So really great job here. The second one, going net zero, we've got science-based targets approved, and living the change, we are really pushing e-learning in the company for sustainability. So if we move over to the financials, Magnus. Yeah?
Thank you. So if we look in the income statement, we see that sales is on par with last year in absolute numbers for Q4. Price compensation measures only have a small positive effect versus last year now in Q4, and bearing in mind, as I said, some favorable exchange rates, volume is slightly down in the quarter. And as you can see, we have over the year and also in the fourth quarter increased our efforts in R&D, goes especially so in circular solutions, the products and the systems around this. We believe that this is key to increase our future relevance, relevance, and therefore very important. So we need to be involved in many different solutions, especially within food packaging since legislation and innovation in this industry is in is as intense as ever, and we simply need to stay on top of what is happening.
Furthermore, we need to play an active role in guiding our customers and making good and sustainable decisions. I think Robert mentioned it very clearly just before. A comment specifically on the Q4 numbers that sticks out maybe is the tax that is proportionally high in the quarter, but if you see, but this should be seen as an annual correction, and if you look over the year, it's just below 25% as we have indicated before. And earnings per share increased further, now above SEK 8 , SEK 8.3 per share. So if we look a little bit on the business area, we see that Dining Solutions improves quite significantly from previous year. However, food packaging slightly below last year, partly explained by temporary higher costs connected to the product launches, but also the DD costs and innovation costs.
Our operating cash flow continue to stay strong and in the same pattern as we have seen, basically throughout 2023. Main part comes, of course, from the improved result, but as you can see quite clearly, it's also from inventory reduction, especially in food packaging. We also say that CapEx is now back to depreciation levels of the three years with very low levels, consequently from the pandemic. So with almost SEK 1.2 billion from operational cash flow, our net debt is significantly down and now below SEK 600 million, and this naturally puts us in a very good position for various capital allocations. We saw that the board recommends a higher dividend, as Robert just informed you about, but we also see that we can now benefit from growth opportunities as well as CapEx improvements.
Return on net capital employed is now about 30% excluding goodwill. So lastly, as you can see, we are above our growth target, 5%. The board recommends a payout of SEK 5 per share, and that equals 60% of net income, so also above our target. However, the operating income still being 60% higher than 2022 was still slightly below our target of 10% in the margin. So with this, I thank you all for listening, and I hand over to Robert again for final comments.
Yeah, so a little bit short summary as to 2023 here. We have strengthened the margins as we talked around and improved our operating income versus last year, and of course, the strong operating cash flow is really positive and low net debt, and that, of course, provides room for maneuver. I think I'm really happy that we could do that acquisition of Decent Packaging here and also that we are looking into the whole Asia-Pacific area, which is a very interesting area, for the future. At the end here, board proposed a dividend of SEK 5 per share. So thank you opening up now for Q&A.
Thank you. Ladies and gentlemen, if you do wish to ask an audio question, please press star one one on your telephone keypad. Once again, please press star one one to register for a question, and there will now be a brief pause whilst questions are being registered. And our first question comes from the line of Johan Fred from SEB. Please go ahead. Your line is open.
Yeah, hi. Thank you for taking my questions. Starting off with, sort of the, the issue head-on in, in, Food Packaging Solutions, could you could you elaborate specifically on what drove the lower sales and, and earnings in the quarter, please?
I think we, we are operating in an, in a niche, compared to some of our peers, and we're trying very hard to shift, some of the assortment to be, future-proof and, and increase the relevance. And it's quite dynamic, and, and sometimes you go wrong, sometimes you go right, and it's a very much of interaction with customers being able to understand this and, and also to, to pay for it. And I think we are very successful, but in this quarter, I think we, we were slightly below, our efforts in increasing. So short-term, it is a bit dynamic. All data indicate that long-term, this is a fantastic, area to work in with growth between 5%-15%. So, it, it is very dynamic and, and it's a bit of a disappointment on the volume.
It also reflects, I think, very high numbers we had in the pandemic. So we are quite up from the 2019 numbers, but we are meeting very strong numbers as well. That should be said.
Yeah, and on the lower margin in the segment as well, is this due to the sort of still cycling through inventory acquired at higher input levels, or it's quite a significant drop-off, I feel? Could you elaborate on the margin development as well, please?
Yeah, I think it's important that we can go into maybe both a little bit Europe and Australia here, and I think that the margins has been under pressure, of course, with yeah, during the last years here in especially in Europe with long sea freight and everything. And of course, as Magnus said, in a way, the market in Europe has been under maybe more yeah, influence under a lot of changes legally and so on, so volume has been also a driver in that. Yeah.
Yeah, as Robert said, maybe just to add on that, it's mainly derived to Europe, which is slightly in a different position than the rest of the world. And we are also here adapting quicker to the new demands both from our customers but also from the legislation. And this is costly. However, we think we're in a better position going forward, but we have taken some costs in Q4 that pushed some pressure on the margins. Yeah.
Yeah, the European market is changing more than maybe outside Europe, actually, with especially reuse coming in and so on and putting a lot of, yeah, questions in the market as well.
Okay. Perfect. Thank you. But how should we think about the recovery for the segment, both returning to growth and margin recovery, in 2024? Is it more sort of, when can we expect to see an increase or a shift?
I think on if you take a little bit longer perspective, I think that the shift from plastic to fiber will continue. That's a very important part, that we are driving, and we're doing a lot of good stuff. And I think, as Magnus said, that we are the first one moving out of PFAS and launching that. It's a big thing. And the shift from plastic to fiber will continue. And then, of course, you have short maybe, yeah, latency in the market depending on customer demand and so on, but the shift from plastic to fiber here is very important.
Yeah, and I think comparing to historical numbers, especially in food packaging, bearing in mind the last three or four years' volatility and what has happened, is difficult. So it's a difficult base to work from. But as said many times, we have taken a bet of moving away from plastics to different fiber solutions and tried to be the absolute forefront with sustainable solutions. They are a little bit more costly, but it's in our destiny to work with the customers, to understand this and to drive it. So we are positive, and, as said, the market in itself is growing, especially so in fiber solutions.
So just to clarify, you have to take a sort of longer-term approach rather than seeing, I guess, a sharp recovery in 2024. Is that correct?
Yeah, I think if you go back five years, the market and our performance has been quite good over the years. I agree Q4 is a little bit disappointing. The volumes are down, but overall, we also expect them to grow with high numbers going forward. That goes for 2024 as well as for the coming five years, but it is very dynamic. We are working in a niche, and that could be higher numbers, but it could also be short-term a little bit more uncertain. So that's maybe what we try to say here.
Okay. Perfect. I'll move on to BA Duni or Dining Solutions now. Volumes continue to decline, albeit with low numbers, but I still gather from your report that there are some sort of subsectors or niche or whatsoever that are still below 2019 levels. How should we think about the recovery in those specific sectors or geographies, and the sort of volume growth going into 2024 in BA Duni? Thank you.
I think, yeah, I think if we look into BA Duni for quarter four, then we had a drop in retail, mainly. I think the professional side has been quite flat in a way, a little bit down just in organic growth. So that is, in a way, positive that our core is growing. That's very good. It's the retail, maybe Christmas sales that has dropped significantly in the quarter versus maybe pre-pandemic numbers. And that is, is that a change in behavior, or is it just yeah, this year a little lost year than in December?
Okay. Fair point. And how much of BA Duni's sales are from the retail segment?
I would say, clearly below 50%. I think it's, say, around 20%. But of course, the volatility has been higher here, so it has had some impact also for the quarter.
Okay. Fair enough. A final question on margins in BA Duni as well, or sorry, Dining Solutions. We've seen some very impressive margin development, and in Q4, the margin was above 14% for the segment. What levers do you have left to pull, in terms of the efficiency improvements in production, and what do you think the segment can generate in terms of long-term margin? Thank you.
I think maybe I should put it like this, that we have a good potential for continuous good operational leverage. Our factory is on a full build, and if we grow in the right areas, we will see a nice operational leverage on the bottom line of this. If in periods where the volumes are more flat or even decreasing, it's a bigger challenge to take out cost. So we're growth. That will a good operational leverage will follow.
Yeah, and I think as you've seen in the last quarter here that we're doing small things everywhere. So, I mean, we're consolidating now in Asia-Pacific as well that we're trying to be more efficient, of course, as well, in that. So that's, yeah, it's hard work everywhere.
Got it. That was all of my questions. Thank you so much for taking the time.
Thank you.
Thank you. And once again, if you do want to ask a question, please press star one one on your telephone keypad. Once again, that is star one one on your telephone keypad to ask any questions. And as there are no more questions registered, I hand back to our speakers.
Yeah, great. Thanks for the questions. And, yeah, we hope that people will enjoy good food and enjoy restaurants here in 2024 and looking forward to the next quarter. So, yeah, see you soon. Thank you.
This now concludes our presentation. Thank you all for attending. You may now disconnect.