Ladies and gentlemen, welcome to the Duni Q3 Interim 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 listen only mode, and afterwards, there will be a question and answer session. I will now hand you over to Robert Dackeskog. Sir, please go ahead.
Thank you. Yeah. Hi, and welcome everyone to the Duni Group Interim Report Q3 2022. Yeah, we start a little bit with some highlights, short term. We had an all-time high operating income for the third quarter. The market consumption normalized, and we had a good comeback here with business area Duni with napkins and table covers and so on. Inflation and the high electricity prices continues to be a challenge, of course. In the quarter, we committed to setting Science-Based Targets, which I will come back to as well. Yeah, the agenda today is to look a little bit on the market outlook, the Q3 summary, the business areas, looking at our sustainability targets and the Financials, and then in the end, the Q&A.
Yeah, if we look at the market outlook, we here have some numbers here from Germany, and looking at table seat reservations. Q3 are back at pre-pandemic levels, and actually October indicates levels over 2019, so that seems positive still. If we look at the right one, we see the development in the main segments in Germany versus 2019, and we can see that the quick service restaurants are above 2019, and the other ones are a little bit below, but recovering more and more, of course. I think we believe here, and we've seen from 2008, 2009 during the financial crisis, that the restaurant sector, actually a lot of people wanted to socialize and went to restaurants and so on.
We see that there is a strong need for this as well, and indications are coming back. Key financials for Q3, we had a growth of 26% versus last year in Q3. Operating income ended up at SEK 154 million, and the operating margin ended at 8.4% versus 10.4% last year. A little bit more in detail then, net sales was up 26%, and that of course came from really continued strong recovery in the HORECA market, as we had the first actually full quarter without restrictions since the pandemic started. The consumption behavior we're seeing is in line with the pre-pandemic patterns. We also had a growth in all regions, and especially then in the rest of the world with Australia.
Of course, some price increases are a strong growth driver for both business area Duni and BioPak. We have further announced new price increases as the inflation is putting more pressure in the world. Looking at operating income in the quarter, it was up 1.5%, and actually the historically best operating reported for the third quarter, SEK 154 million. We see normalized volumes now in the business area Duni with the napkins and table covers and so on, and that improves our fixed cost coverage in the factories. There is a very high inflation pressure, as we know. While our price increases compensate, the indirect costs in the company are increased, of course, since activities are coming back to a bit more normal after the pandemic.
We also have some high warehousing costs, due to consequences of this volatile demand, especially on the packaging area. If we take a little bit summary of the year to date here, we are reaching SEK 5 billion, which is 42% growth versus last year, for the first three quarters. Of course, the beginning of the year was, there was still a lot of restrictions linked to the pandemic, but a lot less than in 2021. For some countries, especially Germany, that was a bit later than the other ones, so kept some restrictions into May. We see a really good recovery in the hotel, restaurants, event segments, but with a little bit demand for takeaway decreases since the restrictions then eased in the world.
Throughout the year, the retail channel in the Australian market has been the strongest during the year in sales. During the year, price increases have been very vital to protect our margins in during the year here. Operating income ended up at SEK 296 million versus SEK 169 last year. That was 75% up versus last year. Of course, Duni, which is coming back with the napkins and table covers, is the strongest contributor to this, as sales gradually now normalized during the year. There is a strong inflation, as we know, for raw material, energy and logistic services that put pressure on the margin, while trailing price increases to compensate this now. Last year, we had a government support of SEK 39 million.
We had this year SEK 39 million compared to SEK 104 in 2021 for the year to date. We see a positive trend in both sales and income growth after the pandemic, which actually affected the start of the year. I now hand over to Magnus to go through the business areas.
Thank you, Robert, and good morning, everyone. I will now go through our two business areas, and I will start with business area Duni.
That represents our products like napkins, table covers, and candles. In Q3 showed a growth of more than SEK 200 million, which now brings the business area over SEK 1 billion for the quarter. Although profit improved in the quarter, as you can see in absolute terms, the margin is unchanged versus last year, which also you can say is a seasonal average historical level. As you can see from the graphs to the left, Q3 follows a trend of improving net sales as well as profit levels from the absolute bottom during the peak of the pandemic, which I think were in first quarter of 2021. I would say that both the second as well as the third quarter are well in line with pre-pandemic levels.
Since we are a vertical integrator in the business area Duni, the utilization in our converting factories, and not least our paper mill in Sweden, are very important contributor to the profit improvement that we are seeing through a better fixed cost absorption. I think that we in the last five to six quarters, we have been talking about the inflation and the increase in raw material costs that we are seeing. We have in the third quarter seen a positive effects from these price increases to mitigate these costs. However, the recent energy crisis with a dramatic increase in both gas and energy prices, have forced us to diligently initiate new price increases during the quarter.
We should see positive effects from this by the end of the fourth quarter, but the main impact will be in the beginning of 2023. Another challenge is lack of personnel to meet the high demand that we are seeing. It is quite remarkable how quickly it can change, just within a year, actually. This has caused some delivery issues in this quarter, which we feel is a general challenge in the whole HORECA industry at the moment. The final comment for business area Duni is that we, through hard work in reducing our emissions, we have been able to sell off emissions rights for SEK 5 million. This is something that we now will invest in further activities to accelerate our goal to reach Net Zero by the end of 2030.
If we now move over to the BioPak segment, which is offering sustainable food packaging, we continue to see good growth more than 30%, and that is equal to SEK 200 million also for this business area. We are meeting a strong quarter last year, and I think especially the European parts, which represents almost half of the business area, has seen challenges causing the margin to drop versus last year, and profit in SEK is therefore slightly down. As mentioned previously, the region outside Europe, and especially Australia, has had another strong quarter profit as well as sales wise. We have seen several large contracts that have been secured in the quarter and are already contributing to the strong sales that we have in this region. Europe has been relatively more hit by transportation costs, also raw materials and recently the high energy costs.
Consequently, this region explains the drop in margin. Europe is also more dependent on pure takeaway concepts like boxes and bowls, which we now see when we're reaching the end of the pandemic, slightly back versus a very strong demand in both 2020-2021. However, important to say is that we do see fundamental good and strong demand in the area of sustainable food packaging, where fiber solutions will play a vital part to exchange all the plastic solutions. Also delivery performance has been an area challenged during the pandemic, but we have now in the last year invested in higher stocks to mitigate the effects from the very fragile supply chain from Asia.
Of course, the higher stocks bring also higher costs, but of course better possibility to deliver and meet the demand that we are seeing. As for business area Duni, price increases are now under implementation and also new ones are initiated to secure margins going forward.
Yeah. If we go over to our sustainability initiatives, we have three targets here becoming circular at scale, going Net Zero and living the change. On our carbon intensity, we put an index there from 2019, which is based on the index 100, and today we're at 39, which is then the tons of CO₂ per ton self-produced product. Just to some numbers there, in 2019 we had 45,000 tons of CO₂, and now so far this year we're around 13,000 tons, so for the full year around 20,000. That's good trend we're seeing there in our goal to reach Net Zero on Scope 1 and 2.
If we look further into our decade of action here, what we're doing, we have goals for these three areas. In 2030, we also put some interim targets in 2025. Just wanna mention some activities then in the quarter that we are committed to the partnerships in the multi-use solutions with governments and other players in the market and stakeholders. With the next target, Net Zero vision for the greenhouse gases, going Net Zero, we have committed to set Science-Based Targets, which is fantastic. That means that we should be in line with the Paris Agreement of 1.5 degree targets.
This we see hopefully then, depending on how long this takes, but within two years, with our target or maybe during, even during 2020- 2023 to set these targets. More important also on delivering the change, we have worked really hard and updated our policies for better governance in the company, so the G in the ESG. A lot of new good things there where we have put the human rights policy in place and code of conduct that we are working now with. Okay. I hand over to Magnus again.
Thank you. Looking on the income statement, I think the continuously improving demand on our products together with the price increases is the main contributor to operating income being slightly above last year despite severe cost inflation. As you can see, as mentioned previously, the cost pressure through inflation results in slightly lower margins. Consequently, as we have said, price increases have been initiated in the quarter. The lower gross margin is also explained by higher logistics costs. I think that is a structural change all over Europe, not only for Duni Group. Nevertheless, we do see that the share of indirect costs as well as these logistics costs is being reduced and consequently mitigate the negative effects that we see in the gross margin.
If we move over to the business areas and to summarize these, it is clear that we now see an improvement in business area Duni, while BioPak being slightly behind. Since the start of the pandemic, Duni Group have benefited from these two business areas complementing each other and working as a hedging versus the other, and we consider this as a strength also going forward. Looking on the cash flow, it's positive in the quarter, but burdened again by the stock buildup. It is partly a seasonal normal development facing Christmas season. Again, our ambition is to reduce the stocks within BioPak going forward and consequently free up capital in the coming quarters. Some comments on the financial position.
As you can see, the net debt is up slightly from a year ago, but improved outcome versus rolling EBITDA. It is basically two factors again that we have said before that drives the slightly higher net debt. It's the inventory level, and it's also the strong growth having impact on accounts receivables as a natural effect. Return on Capital Employed, excluding goodwill, continues to strengthen now, on 16%. Finally, some comments on our financial targets. As you can see, we now have continued to have a very strong growth, clearly above the level of 5% as the financial target. BioPak has been for quite some time the growth driver in the last years and continue to do so. Now also we see that business area Duni drives the growth.
Price increases is and will be an explanation as well going forward. We have a positive trend if we look on the operating margins, coming from the pandemic, but we are still behind our financial targets and price increases, as we have said, has already been initiated. No dividend was paid for the year 2021. With this, I thank you all for listening, and I'll hand over to Robert for final comments.
Yeah, some final words. Of course, it's a difficult situation in the world, but I think we learned from the financial crisis in 2008, 2009. I think the restaurant market was pretty stable at that time. We have a real belief that people have a desire to meet up and socialize over food and drinks, so that's what we hope for in the future. Thank you for today.
Thank you.
Thank you.