Hello and welcome to the Duni Group year-end report 2025. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. Please note this call is being recorded. Today I am pleased to present Robert Dackeskog, President and CEO. Please begin your meeting.
Thank you. Yep, welcome to the year-end report for 2025. Headline here is an increased full-year net sales despite weak demand in the market. If we look at the agenda today, we have highlights first, a little talk around the market outlook and what happens in the market, a summary of Q4, then we're going into our business areas, and then sustainable targets and initiatives there. And at the end here, financial summary, and then in the end, questions and answers. All right, so if we go to the highlights for the year, full year first here, we have a net sales that increased in 2025 versus last year. And of course, a lot of challenging market conditions in the market we will come into as well.
If we look at, organic growth declined, and also the net sales was also impacted then due to currency effects, and also of course the subdued demand in the market. Acquisitions had a positive effect on our net sales during the year, and we have really worked hard on taking efficiency initiatives where we strengthen our long-term capabilities. The board of directors proposed an unchanged dividend of circa SEK 5, same as last year than 5, to be divided into two partial payments over the year. If we look then at the Q4, there we had a net sales decrease to SEK 1.965 versus SEK 2.057 last year, but it's up in fixed currencies with 1.5%. This is driven mainly by the acquisition of the companies in the UK and SETI.
Operating income then declined from SEK 178 to SEK 162, but down 2% in fixed currencies, so currency effect there as well. Decline is mainly due to, of course, negative currency effects, as I said, and of course the soft demand in the market. The organic growth was down with 7% versus last year in Q4. So if we look then at the market, how that looks, and as you can see bottom right there, it's all red down there, both in nominal and real terms, and it's been a tough market in 2025 as well. Of course, inflation has continued to weigh on restaurants and the purchasing power, both on consumers and the restaurants. Of course, the nominal growth has not been as sufficient to offset the pressure on the real demand in the market.
If we look a little bit on the broader picture here on the food service market dynamics, and you can see on the top right there, visits continue to further decreasing in the year, actually, between 2024 and 2025, actually down 1%. There was some anticipation actually of increasing in the beginning of the year, but that didn't really happen. If you look then, it's still down 11%, and this is the top five markets in Europe versus 2019, then 11% down. The outlook then below then in the bottom right here is that it will be a little bit more stabilization in the visits in the market and projected then 1% up almost for these five markets in 2026.
We can move to the key financials, so high-level turnover net sales decreased, the operating income decreased also, and the operating income ended up at 8.2% versus 8.7% last year in Q4. Coming into more details around this now. So as said before, total sales increased 1.5% in the quarter in fixed currencies, and that was mainly driven then by the acquired companies. And what affected net sales was the negative organic growth then of 7% in the quarter, but also then, of course, negative currency effects, also being in between larger contracts now with the retail channel and overall a lower demand in the HoReCa sector, where actually it's a bit of a negative mix here that customer placed maybe more order on lower quality and lower-priced products in the assortment.
We also saw an impact here on Christmas sales, was lower than last year in the HoReCa sector. To balance this, we had a gradual impact of price increases in the quarter, and BioPak Group in Australia continued to grow in local currency, which was positive for the quarter. Of course, operating income corresponds a lot to this then, and of course, it's driven by currency effects and of course the organic growth as well with mainly the mix effects in the market and the products we sell. We have good cost control, and we're taking a lot of decision to improve efficiency in the company, both in production. Now we're moving into the scaling up our new logistics facility, and this will of course strengthen the result going forward.
We also took some extra efficiency measures and programs here in the Q4 as well, which we'll come into as well. Positive improved margins in BioPak Group thanks to lower inventory levels brings an improvement of the result in both Aussie dollar and the SEK, which is important. All right, we're moving in, Magnus, to the BA.
Thank you for that, Robert, and good morning, everyone. As usual, I'll take you through a more detailed review of our two business areas, starting with dining solutions, which includes our table setting products. Despite the positive contribution from Poppies, the acquisition, the quarter was held back by currency headwinds and weaker sales in Europe, particularly so within our retail segment. As a result, sales were essentially flat versus last year, ending at SEK 1.2 billion. That means operating profit decreased from SEK 152 million to SEK 132 million, and the margin landed at 11% compared to 12.6% last year. Now we'll walk you through the main drivers behind this development in the next slide. If we adjust for acquisitions and currency, sales were actually down 9%, and the main decline came from the retail segment, which dropped almost 20% in Q4.
A main part of this is related to contract phasing, where the quarter fell between old and new agreements. We have seen this type of volatility before, although I think the magnitude in Q4 was clearly significant. In HoReCa, the hotel, restaurant, catering, cafés, which is the dominant segment in the business area, volume measured in pallets shift was slightly positive, actually. However, we continue to see a shift away from branded premium offering to more private label solutions. So customers are trading down, and that is a pattern we have seen across the previous downturns. However, also we're recovery following as the macro conditions improve. So this negative mix effect was particularly noticeable in Q4 with a lower share of branded sales. The positive aspect is that we have largely been able to retain customer loyalty by offering alternative solutions.
Price effects were slightly below what we anticipated early in the year when we talked about it, but it still positively contributed with a low-digit single number, I would say. True focus worked to adapt our production setup and cost base, and that means including adjustments to lower volumes and weaker demand. We have mitigated part of this negative mix impact, and we've also been able to protect our gross margin. I think this position as well once the market conditions improve. Our acquisitions, Robert talked about them, continue to progress according to plan, and with synergies carrying into 2026. Finally, as we have said a couple of times now, the negative FX effect in the Q4 , and that is similar to what we experienced earlier in the year compared to 2024 when FX contributed positively.
The year-on-year delta in operating income from FX alone is around SEK 20 million in the quarter, and it's more than SEK 50 million for the full year. So to summarize, Q4 is a bit of a disappointment in terms of topline, and together with these FX effects, this explains the profit decline. We have taken measures to increase efficiency, and that includes the warehouse consolidation we are in the moment of doing, and that is planned for 2026 going forward, and with full savings expected in 2027. Some cost improvements will already materialize during 2026. As Robert mentioned, we have taken additional measures in the Q4 , and these steps provide a good platform for operating leverage once the volumes recover.
So if we look to food packaging solutions, which focuses on sustainable food packaging, sales declined by 10%, largely driven by FX effects, especially so versus the Australian dollar, which is the most important currency for this business area. But despite these lower sales, operating profit improved from SEK 26 million to SEK 30 million, and that means a strengthening of the margin from 3.1% to 3.9%. Moving into a little bit more of the details, and as mentioned, the biggest impact on sales comes from the strong SEK, and that again, particularly against the Australian dollar, which is now around 6.30, and that should be compared to levels closer to 7 SEK per Australian dollar, a difference actually more than 10%. But if we look on Europe, the demand remains soft in the takeaway segment, while the Duniform, as we have mentioned several times before, grew slightly.
Our Australian-based BioPak Group showed growth in local currency, and that contributes to the improved result. So we see a slow but steady margin improvement trend reflecting several years, I think, of work. During the year, we have invested heavily in updating our product portfolio, and that prepares us, for instance, for the non-PFAS products, giving us a strong position ahead of legislative bans coming into force in 2026. Inventory level, which were elevated early in the year due to this transition, I think they have now normalized, and that also relieves pressure on the profit. So as with dining solutions, we have protected the gross margins despite, I think, the challenging market conditions. So with a more specialized sales force and market-specific content, we are well positioned to guide customers through the very complex landscape of sustainable packaging.
We continue to see competitors, often from Asia, taking shortcuts around standards and regulations. Over the coming years, I think we expect the upcoming directives to clearly strengthen Duni's relative competitive position. We completed two acquisitions in the business area during the year. They are small in size, absolutely so, and only contributed a few% to the topline. However, they bring valuable fiber technologies that strengthen our portfolio. So to summarize food packaging solutions, sales were weak in the quarter, but we have a strong gross margin. Combined with not being vertically integrated in this business area, it has given us good room to mitigate the impact on the softer demand. So with that, I hand over to Robert again.
Thank you, Magnus. Yeah, if we look into our Decade of Action , 2030, we have three sustainability initiatives: Becoming Circular at Scale , Going Net Zero , and Living the Change . And this will be the last time we present it like this. And as you know, we present the new targets in Q3 here, which we'll come back to at the end of the presentation here again. If we're looking into the KPIs here, the one that's been maybe the most easier to measure and so on is Going Net Zero , where we actually have a reduction of 63%. We had a target then of 60%, actually, in 2025, which we have succeeded.
So a lot of good work here in our factories and all over the company on this area. We will come back to the others later on, the new ones, and we're moving into financial, Magnus. Yeah.
Thank you, Robert, for that. So if we start with the income statement, as mentioned several times today, the negative FX effect has reduced the sales by almost 6% in the quarter and 5% for the full year. And this nearly offsets the 8% positive impact we had from acquisitions that we completed earlier this year and last year. So the decline is therefore mainly explained by weak organic growth in the quarter, as said. And we estimate that roughly half of this is temporary, and it's linked to those retail contract and the phasing of those, as we've said. The soft market environment also contributed to the decrease in operating income from SEK 178 million to SEK 162 million. But during the year, we have adapted our commercial and marketing activities to this situation. This began to show effect already in Q4, and that will continue into 2026.
So cost increases are primarily related to the acquisition and investments in digital solutions. And that includes an ERP replacement project covering most of the group. We also take a restructuring cost in the UK mainly, related to merging two companies coming from the Poppies acquisitions. The full effect of these savings will materialize in 2026. Gross margin continues to improve, but that's a result of pricing discipline in tough markets. While this may have cost us some volume, it strengthens our long-term position. So we end the year at SEK 560 million in operating income. In simple terms, the SEK 60 million negative FX is offset by M&A contributions. So consequently, the SEK 40 million decline, you can say, linked to the soft demand situation we have seen in 2025. Okay, moving into the business areas.
Dining solutions , as mentioned, continues to perform above 10% margin target, which is a positive highlight, I would say. Food packaging, on the other hand, remains below target, some 2.9%, although it is steadily, but again, slowly moving towards where we expect the business area to be, and that is closer to the group's long-term 10% target. So despite significant FX headwinds, I think with over 90% of the sales is actually outside Sweden, we managed to grow the company in an industry that is still demanding and dealing with lingering effects of lost consumption occasions after the pandemic. We look a little bit on the cash flow. Operating cash flow was positive in Q4, however, lower than last year.
You can also see that CapEx has increased, and that mainly reflects investments in IT and the ongoing group-wide ERP transition, but also that we now have more production sites, actually. For the full year, operating cash flow is close to last year. I think with stable cash conversion, we can continue to support our growth agenda, and we are well positioned to accelerate when the market improves. Finally, financial position, I think that remains robust. The increase in debt is linked to acquisitions that we have done, and that has contributed to the profit. Inventories are down compared to last year, significantly down from Q1 early in the year, and where we now experience an unplanned increase. So if we consolidate our German warehouse, moving from a lot of several satellite warehouses to one central site, we expect further improvement, also in stock days.
I think also this will future-proof our distribution. It will improve our cost efficiency and also enable new technologies for future shipments and for the benefit of our customers. Finally, if you look on the return on capital employed, it has declined year-over-year. As mentioned before, this is an important metric for us, and we remain very committed to improve over time for disciplined capital allocation. Finally, a few comments on our financial targets, which now will be updated from 2026. If we look on 2025, organic growth ended the year negative -2.1%, impacted by the weak Q4 , I would say. The macro environment has been challenging, and despite clear progress in several areas, it was not enough to offset this decline. Operating margin closed at 7.3%. That is actually stable versus last quarter, but again, it's below our 10% target.
The board proposes a dividend of 5 SEK per share, and that is unchanged, as Robert said, from last year. This corresponds to a payout ratio of 75% of net income. That is above our target of 40%. From January this year, 2026, our updated financial targets are that we will aim for 6% total growth from the previous 5% organic growth target. Just for reference, in 2025, it landed in 6.1% in comparable FX rates. We remained the operating target of 10%, and the dividend payout is increased from 40%-50% of net income. We also have updated our sustainability targets to 2030, which we will return to as we move into 2026. So with that, I thank you all for listening, and I'll hand back to Robert for some concluding remarks.
Yeah, thank you. Yeah, summary 2025 then. Yeah, net sales increased for the full year despite the challenging market condition and geopolitical uncertainty in the world. Of course, then, as I mentioned, we talked around this during the presentation. Organic growth declined during the year, and that's, of course, impacting the underlying profitability. We have done a lot to strengthen our company and our long-term capabilities. We have taken the opportunity during the year now to streamline our production, new logistics solution, and also streamlining in our sales and marketing organizations that will have a positive effect in 2026. We took further restructuring and changes in Q4, as Magnus said. Just to close up here, SEK 5 per share is the board of directors' proposal. As Magnus went through, the updated group targets now are in place from 1st of January, 2026.
With that, I hand over to questions and answers. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you do wish to ask an audio question, please press star 1 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star 2 to cancel. Once again, that would be star 1 to ask a question. Your first question comes from the lineup. Johan Fred with SEB, please go ahead.
Yes, thank you. Operator, good morning, guys, and thank you for taking my questions. Firstly, can you say anything about the development throughout the quarter in terms of the sales trend? And also, with the lower VAT in Germany now in place, are you seeing any early indications from this, from the industry in general?
Yeah, thank you for the question. Yeah, I'll start with the first one. Yeah, I think, as we mentioned a bit during the quarter, November was mainly where we saw a big drop, and that, yeah, it's always hard to see everything, but we see that we had lower Christmas sales this year. And there we have some really premium products in that, so that's affecting the mix of the lower quality. I think November was the big drop in that sense, and at the end of the quarter was more equal to the end year. Yeah, and second question, yeah, it's hard already to see anything.
I think even if the restaurant doesn't lower the prices maybe, or if they keep the profit, I think that is for us, it's positive in that sense that they get a better profitability maybe in the restaurants, and they can actually then invest a little bit more in more premium products. I think that's the case if they don't lower the price. If they lower the prices, that's, of course, a benefit for the consumer. But yeah, we haven't seen or heard anything yet. It's a bit early, I think. Yeah.
I could maybe add in on that. There is, as you know, we are selling mainly for wholesalers, and then the wholesaler sells to restaurants. So there is a bit of a lagging effect as well. If the restaurant picks up, hopefully, then it could be a good sale for the wholesalers, and then they will buy more from us. So there is a natural lagging effect as well. But I think there are two aspects in this. As Robert mentioned, there is this financial aspect of actually the prices will go down, at least not increase. But there's also a psychological aspect to this that the government signals that they encourage people to go after these, and that is something we should not underestimate as well. So we remain positive.
Makes perfect sense. Just to follow up there to you, Magnus, perhaps, what's the sort of timing effect? If we assume that we see a pickup in sort of restaurant demand during Q1, is this something that would impact your sellout to wholesalers in Q2, or is there a larger time lag?
Yeah, no, of course, it depends on the article in itself. But if you look on the inventory days for our wholesalers, I think that would be reasonable to assume such a development. Yes.
Perfect. Thank you. And you mentioned in the report that restaurant customers outperformed retail in Q4. Can you provide any more color on the volume trends you're seeing throughout the quarter and potentially in early 2026 as well? And do you expect this retail weakness to persist given the contract-facing issues?
I think if you look at the retail, that is the facing. So we're moving out of some contracts and then moving into others. I think that's the facing, what we see there. I think for the Horeca sector, of course, it's a little bit down in general, but it's less down maybe than the retail. And of course, it's mainly driven by mix. I think Magnus mentioned it, that we see the shift in value, so to say, but the number of napkins in a way is actually the same. So for us, if it's a visitor, so that's a positive that we actually keep the contact and the sales to each customer, even if they maybe take a less valuable product. So the value of it goes down, but still the number of the sheer volume of napkins is stable in that sense.
If that, yeah, I don't know. That answered the question.
Yes. Thank you so much. Those were all my questions for now. Thank you so much for taking the time.
No, thank you, Johan.
Once again, if you would like to ask a question, simply press star 1 on your telephone keypad. We do have our next question coming from the line of Erik Sandstedt with Kepler Cheuvreux. Please go ahead.
Hi. Thank you very much. Just a few questions from my side as well. I know you talked about the German market in the presentation here, looking a little bit more sort of at the short-term aspects. But could you say anything about how you see sort of more medium to long-term trends in the German market, which is obviously important for you? So just be a little bit interested to hear your view on Germany.
Yeah, I think, yeah, it's, of course, not super simple to see in the future, but I think the German market, I mean, has been hit pretty bad after the COVID. I think people haven't really gone back to the restaurants. That if you compare to maybe the Nordics or the south of Europe, bigger, we can see that in the numbers. And of course, it's been a tough year for the German economy in general and maybe a little bit depressing in that sense. And I think what we see on a high level then is that, of course, people have put maybe money in the bank account a lot, and we see maybe some, yeah, research that says if you get more money now in 2026, what will you do? And of course, there's both traveling and, of course, restaurants visits will go up.
But I think that's also just guessing in a way, but that will take a while maybe during the beginning of the year here in general, I think, for the German consumer. But I think when people get better, we tend to want to go out, more socialize. So on a high level, it will be more visits to the market in that sense. And I think that the Circana that projects a bit, it's up. This is stabilizing and it's going up. That's their prediction. And yeah, let's hope that's the case.
Yeah, thanks. And then specifically on Sweden, I'm just a little bit interested in your view on whether you think there would be any impacts from the lower food VAT reduction here and whether there will be any channel shifts because it will impact retail but not restaurants as far as I'm concerned?
Yeah, I can start maybe here. Interesting, actually, that maybe the restaurant doesn't get the same benefit maybe in that. But I think it could be interesting for us, especially in Duniform and so on, because there's a lot of retail packaged food there. So for retail, people maybe tend to go to pick up the lunch or dinner in the retail sector instead. And there's a benefit, I think, for Duni to grasp and the potential. And then, of course, I think restaurant will be on the same level as it is today in terms of how people perceive the cost going out and so on. So maybe that's not the change. And maybe just because for us then, important is that we have a very low share of our sales in Sweden as well.
So, I think Germany and UK is, of course, the most important market for us that they work. And, of course, we have Switzerland and the Benelux and also south, of course. So, Sweden is a pretty small part, but definitely, I think potentially in the packaging side here for us going forward with the actually drop in retail of the VAT.
Yeah, that makes sense. Then in terms of organic growth, you will start to face somewhat sort of less easy comparison figures going forward. Organic growth in Q1 last year was up 1.5%. I mean, can you maybe share your view on how confident you are in returning to positive organic growth during 2026, and to what extent do you need to see the market improving, and what can you do sort of more in terms of internal self-help and so forth?
If I may start then, of course, we do not do any projections. In this very high uncertainty, it's very difficult to do so. But I can say that, of course, we have a new sales growth target of 6%, and that is important for us, and part of that should come from organic growth. So that's what we spend every day working hard on. Yes, you're right, Eric, that we are meeting slightly higher numbers where we had, they were slightly positive last year. Of course, we aim to grow, and then we actually, if you look on 2024 and 2025, it's been two tough years. So we actually are on a clearly lower level than we were, for instance, in 2023. And that in itself is on a lower platform where you can mathematically say that we should now start growing.
If we see some tailwind from the market, it should go up. The macro data, and was Robert talking about the Circana data, is indicating that there should be growth gradually over 2026. So bearing in mind the market, we should get some tailwind from that. And of course, we are trying to find pockets of growth that should further boost this. So we remain positive, although it is still a tough environment.
I think, I mean, what we can do internally then is that, I mean, we've done a lot of changes now in how we go to market a little bit, that we actually have two separate business areas with full responsibility with the sales as well. So we don't have one who sells everything. They are very specialized today. And also trying to then change a little bit more to maybe, yeah, different new types of inside sales and also digital sales a little bit more also. And I think, yeah, so we are trying to shift a little bit to the environment that is at stake at the moment. So yeah, we are really, yeah, looking forward to see what that could bring in 2026.
Yeah, thanks. Then just finally, more of a medium-term question, perhaps, on sustainability. I know you discussed it a little bit here at the presentation, but there is a lot of new regulation coming up here over the course of the next few years. How can you leverage that and take advantage of that to sort of improve, yeah, market share gains and your position in the market?
Yeah, I think that's, of course, one of our main assets in a way. We are really focusing on that. And we have, I mean, all the challenges with actually following the regulations and what's happening, we are on top of that. And there we can contribute to a lot of customers, actually helping them then to navigate in this. And I think we have really good examples of, for example, PFAS. We were the first one who took out that and helping our customers then to shift. And I think this will, I mean, it takes a lot of time, I think, in order to come through. But I think with the new, for example, PPWR now coming in more and more in force here in 2028, actually. So a lot of things need to change with the customers as well.
I think that is one of our things that we actually, in a way, sell also service in this area where we're actually going to help them navigate. I think that's something we're really focusing on.
Perfect. Thank you very much.
Thank you. Thank you.
And again, if you would like to ask a question, simply press star 1 on your telephone keypad. I'm showing no further questions at this time. I would like to turn it back to Robert Dackeskog for closing remarks.
Yeah, thank you for listening in to the full year report here for 2025. I think we'll soon hear from us again here after Q1 and looking forward to 2026. Thank you.
Thank you, presenters. Ladies and gentlemen, this now concludes our presentation. Thank you all for attending. You may now disconnect.