Welcome to the Duni Q3 presentation for 2026. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. I will hand the conference over to the CEO, Robert Dackeskog, and CFO, Magnus Carlsson. Please go ahead.
Thank you. Welcome everyone to Duni Group's third quarter presentation. Our theme today is operational progress in a continued challenging market. We restore delivery stability and return to organic growth while logistic costs and weak European restaurant demand continue to affect profitability to the company. Today in the agenda, we will cover the quarter's highlights, the logistic transition and developments in our offering, followed by market conditions. We will also review group and business area performance, and we will then discuss our strategy and targets, and then a detailed financial run through, and our priorities for the rest of the year before opening for questions at the end. Q3 then in brief. The quarter brought clear progress in delivery performance, organic sales growth reached 1.7%, supported by Australia and higher napkin volumes in Europe. Growth was 3%, including acquisitions and currency effects.
We have worked through the backlog during the summer, which supported sales as delivery capability improved in the quarter. The quarter then carries cost for that we have two warehouses solutions and distributions to customers remain less efficient than we want. High fuel prices added pressure. Our direction remains unchanged. We are completing the operational transition while developing the offering and working on strengthening our market positions going forward. Looking into the main activities in this quarter, and of course, the most important change since the second quarter is the greater stability of our logistic operation. By the end of July, we had cleared the back orders accumulated during the spring. The focus then shifted a bit towards delivery precision and improving the underlying logistic processes. We will come back to that during this.
We are also postponing the transfers of German volumes in Q2, gave us a room to stabilize the operation. During Q3, we are receiving that transfer, and we will complete remaining German volumes during fourth quarter before year end. Of course, our service recovery and cost recovery follow a little bit different timelines here. We have resolved the earlier delivery issues, but of course, dual warehouses arrangements and inefficient distribution still affect the income. Freight costs remained a priority to work with. The freight costs are driven by that the utilization in the trucks are not 100% and the broader fuel prices pressure that we can see in the market continues. We expect the transition-related effects to decrease over the coming quarters. Alongside this work, we continue the sales and administration efficiency program and announcing Q2.
Our immediate priority is to complete the transfer now in a controlled way and improve efficiency without losing that delivery stability we have regained during quarter. Other key activities is that in Dining Solutions, we have pre-orders ahead of the Duni Lighting Solutions platform, which was launched on 1st of October, and that indicates a strong initial interest from restaurants and wholesalers across several European markets. These are, of course, early indication of interest, rather than evidence of full quarter of launch dates, but that will come, of course. Also the recently introduced Softiq and Velviq products are also developed well in the south of Europe. Our concept Duniform brings together machines, packaging, and service with advisory support for customers. A large part of the range transition to pure polypropylene mono material, improving recyclability and compatibility with existing recycling system, which is very important.
The new brand concept makes that integrated offer much clearer. The new PPWR-related requirements enter into force during the quarter, and we have prepared our operation and the full portfolio over several years to meeting this, which we are doing. If we move on to the market development, I think this is a picture we all have seen before. It's the German numbers, the DEHOGA numbers that shows that the market remains difficult, especially then for the food service restaurant. So same picture as in the past quarters. If we also look a little bit into the other countries than Germany, it's a little bit the same trend. It is the food service restaurants that continue to face pressure. We see that the European food service traffic remains broadly flat in the countries. We had the summer here.
There is one area that actually are growing is the morning meal. It's actually gaining share globally. That's maybe longer than term trend we've seen, but still a challenging market. All right, if we look into the key financial for the group, net sales reached SEK 2.033 billion compared with SEK 1.972 billion last year, and that is 3% growth and 1.7% was organic and 0.3% came from acquisitions and then 1.1% from currency. At the constant exchange rates, sales increased by 2%. The operating income was SEK 133 million compared then versus last year with SEK 168 million. Of course, the higher sales therefore did not translate into the high profitability. As I said before, logistic and freight costs, together with a little bit product mix, explain that main pressure on the margins.
If we look a little bit into net sales and operating a little bit more detail for the group then on sales, better delivery capability helped us clear the remaining back orders, and Australia continued to perform well while European restaurant traffic remained weak and customer focused on controlling cost. We see that, of course, the Middle East remained under pressure from the geopolitical situation and lower activity in the hotels and restaurants in that area. On income, the extended warehouse implementation then created cost, as mentioned before, for the Dining Solutions . Freight cost also reflected both from fuel prices and less efficient distribution then. Savings program we have in Europe contributed positively and helped offset increased IT costs from ongoing investments, and Australia contributed positively, while Middle East then did the opposite for that operating income.
So all in all, positive with organic growth in the quarter and that we cleared the backlog, but freight inefficiency and increased high fuel costs driving costs. Now I am handing over to Magnus to go through a little bit the BAs.
Thank you for that, Robert. Good morning, everyone. I will take you through the two business areas in a little bit more detail. I start off with Dining Solutions. Net sales, as you can see, amounted to SEK 1.2 billion, basically flat from last year. Operating income declined from SEK 140 million to SEK 92 million. That is a decrease of SEK 48 million. The operating margin came in at 7.5% compared to a strong 11.5% last year. Dining Solutions carries the largest share of the logistic transition cost, and this is the main explanations for the decline. On the next slide, I will walk you through the main drivers here. Starting with sales, improved delivery performance allowed us, as Robert said, to clear the remaining back orders from the second quarter. We saw an increased napkin volumes in Europe measured in pallets.
That was actually slightly positive. However, part of this volume that reflects the catch-up from Q2. Underlying demand from our brand and premium assortment remains soft. We also saw at the end of the quarter, once the backlog had been cleared. As Robert said, the market itself gives no support. If you look on the numbers, as Robert showed, visits to the food service restaurants in Germany are actually down 6.1% from January to August. Let us select this number. That is equal to now being around, - 25% versus 2019 levels. Quite significantly. Restaurants continue to face weak consumer demand and elevated cost for labor, food, and energy. Against this backdrop, private label demand remains strong as customers continue to focus on the cost control. We are winning these volumes, but at a clearly lower margins than our branded products.
Geographically, sales to Germany remained weak while we generate the growth in Italy, supported by our cooperation with SETI. That is an acquisition we did two years ago. This illustrates the value of being a more balanced geographically, having a more geo-balanced footprint. Business in the Middle East continued to be negatively affected by the instability we all see. Turning to operating income, the decline of SEK 48 million, as mentioned, is mainly explained by three factors. First, as we have mentioned several times, logistic costs, double warehousing, and inefficiencies in the transition, combined with elevated fuel prices that has led to clearly higher warehousing and transport costs. The majority sits here in Dining Solutions. Second, mix and price, the shift within branded products towards value assortments, a higher share of lower-margin private label deals, and higher customer rebates all put pressure on the gross margins.
And third, Middle East, we see activity being at a distinctly lower level in this region. But there was also some commercial progress alongside these pressures. We secured several customer contracts in the core business, Softiq and Velviq, as Robert mentioned. The Duni Lighting Solutions launch adds another element to the offering. And these developments support the future business, while current financial priority remains restoring a better relationship between the sales, the product mix, and the cost base. So if we summarize, delivery performance has somewhat normalized, and volumes have recovered from a disrupted Q2. The challenge remains that the share of our branded sales, which together with the transition cost, explains why margins are well below our ambition. So if we now move into Food Packaging Solutions, focusing on sustainable food packaging.
So there we see that the net sales increased to SEK 860 million from SEK 751 million last year. That's an increase of 5.1% in comparable currencies. We also see that operating income improved from SEK 27 million to SEK 41 million, and that's an increase in the margin from 3.7% to 5%. So if we look a little bit more in details, growth was driven by Australia and our acquired companies. In Europe, sales were broadly stable with growth in Denmark and Norway were offsetting a weaker development in Germany. Duniform has been mentioned a couple of times lately. That's our all-in-food packaging concept that continue to outperform the rest of the takeaway portfolio, supported by the development in machines. We have services here and packaging solutions. So during the quarter, Duniform also launched a brand-new concept and mono material solutions with improved recyclability, very important.
So the improvement in operating income is mainly explained by gross margins, particularly in Europe, but also in BioPak Group continue to grow and improving their gross margins. But you can also see that the freight cost was burdening around SEK 7 million only in Australia. We also have higher indirect cost here. And lastly, with the new PPWR, the Packaging and Packaging Waste Regulation, these requirements coming into force, we are well-prepared. We have a portfolio that is predominantly fiber-based, and that is a structural advantage versus competitors when we see that the regulation tightens. So if we just summarize quickly, food packaging showed a clear margin improvement versus last year. Margins remain below our target, must be said, but the improvement is driven by gross margin rather than one-offs. So I hand over back to Robert.
Thank you, Magnus. Yeah. And if we look at the next page, our strategic framework, then that remains unchanged. The quarter's activities is directly connected to this. And we're really proud of the new lighting platform and our Duniform development, and those will expand our customer offering. SETI, as Magnus mentioned, in Slovenia, supports a stronger presence in the Southern Europe, while BioPak continues to strengthen its Australian position. So completing the logistic transition and implementing then the efficiency program addresses operational performance. And of course, sustainability remains integral to that direction. The targets cover circular input materials and emission together with workplace safety and responsible supplier practices. These measures allow us then to follow progress beyond the financial results, of course.
If we are moving into our targets then, a number of targets, and of course, we can see on sales growth and operating margin, we are a bit way off those, of course, as you all know, in the recent 12 months here. But really working on a lot of activities to strengthen that, of course. If we look into climate target, there we already reached the target for future and really had a good change since 2019. That was a bit of a short summary, and we move into the financials.
Thank you, Robert. If we dig into the numbers now and start by the income statement. We saw that net sales increased by 3.1%. In comparable currencies, growth was 2%, which organic growth was 1.7%, so there you have the numbers. Operating income amounted to SEK 133 million , compared to SEK 168 million last year. That is a decline of SEK 35 million, and the operating margin was 6.5% compared to 8.5%. Again, to repeat ourself a little bit, the main driver, again, is the logistic transition. It had a cost impact of approximately SEK 25 million in the quarter, around a third from double warehousing and around two-thirds from higher freight cost linked to the warehouse quality. But in addition, price and input costs, mainly higher customer rebates and energy, as well as higher transportation costs, driven by elevated fuel prices and tariffs, has reduced the gross profit.
Although pressure on the mix and increased input prices, gross profit was mainly negatively impacted by logistics, less so from other factors because we have efficiency savings and good discipline in pricing, and that has mitigated some of these negative factors. Also mention that currency has contributed positively by around SEK 10 million . All in all, gross margin declined to 22.3% from the relatively strong 25.2% last year. On indirect costs, our cost savings measures has contributed positively and more than offset inflation and higher IT cost in Europe. The cost increase is thereby from Australia, but this also reflects a growing market. Total indirect cost as share of sales was slightly lower than last year, and that is important. Restructuring cost of SEK 21 million were charged in the quarter and were excluded from the operating income.
Can also mention that financial net was SEK -48 million, compared to SEK 14 million last year, mainly reflecting higher net debt and interest on lease liability related to the new setup we have. Net income amounted to SEK 32 million and earnings per share were SEK 0.70, compared to a little bit more than two kronor last year. For the first nine months, net sales amounted to SEK 5.6 billion , down with roughly SEK 100 million and operating income to close to SEK 300 million, also down by SEK 100 million. That corresponds to a margin of 5.3% versus 7%. If we look a little bit on the business areas on the financials. In Dining Solutions, operating income for the first nine months amount to SEK 205 million , compared to SEK 341 million last year, and that is a margin decline to 6.2% from close to 10%.
On a rolling 12-month basis, the margin is 7.5% compared to 10.1% for the full-year of 2025. It is a sharp decline, and it is concentrated in the second and third quarter, and it is mainly explained by the logistic transition and the weaker share of branded sales, not by a structural change in the business. If we look in the Food Packaging Solutions, the trend is opposite. Operating income for the first nine months has increased to SEK 92 million from SEK 57 million, and the margin to 4% from 2.6%. On a rolling 12-month basis, the margin is also 4% compared to 2.9% for the full-year 2025. That is also driven by a steady improvement in the gross margin. For the group, the rolling 12-month operating margin is 6.1% compared to 7.3%. For both business area, this is clearly below the 10% level we have.
In Dining Solutions, the gap is primarily about volumes, branded mix, and the temporary, I must say, transition costs. We know from experience that operational leverage supports margins clearly once the volumes recover. In food packaging, the work is about continuing to safeguard our gross margins, scale the acquired businesses, and work with the cost base. If we now go over to the cash flow, just some words on that. Operating cash flow was SEK 44 million compared to SEK 229 million. Operating EBITDA declined SEK 275 million from SEK 207 million, while capital expenditure was also clearly lower in the quarter. That is reflecting the stricter prioritization of investments we have now. The main difference is working capital, which had a negative impact of SEK 106 million, compared to positive contribution last year.
Accounts receivable has increased by SEK 110 million, and that is reflecting a higher sales towards the end of the quarter as backed up back orders were cleared. Inventory has increased by SEK 55 million, partly value driven by higher input prices. Reducing inventory is a clear priority now going forward. Once the logistics setup has stabilized, we expect working capital to be a source of cash in the fourth quarter, which is seasonally our strongest quarter for cash flow. Finally, the financial position. Net debt amounted to SEK 2.8 billion. That is an increase versus SEK 1.6 billion at year-end. Roughly SEK 600 million of the increase is a lease liability related to our long-term logistic partnership. This is not traditional interest-bearing bank debt that should be considered when you look on the net debt in relation to other key numbers.
The remainder reflects the dividend, acquisitions, and the weak cash flow during the first nine months. Strengthening cash flow and reducing net debt is of course our top financial priority for the coming quarters. Thank you for listening. I will now hand back to Robert for concluding remarks.
Thank you. Yeah. Some summary here. We enter the final quarter then with a more stable logistic operation and with growth, selling more napkins, which is important for us, of course, in this market. Looking at the profitability that, of course, as we said, here remains under pressure from the logistic and freight costs and a bit less favorable product mix, even if we are selling more napkins then. We expect the logistic transition, then the related effects cost to decrease gradually here. At the same time, we are continuing to develop the business. A lot of focus on the lighting launch, the Duni Lighting Solutions portfolio offering and our stronger Southern European presence and also of course, continued growth in Australia to support that effort.
Yeah, of course, all the changes we are doing in production, logistic, and then with the portfolio should give us a stronger operational platform entering into 2027. Of course, our focus is to convert that progress into more efficient operations and a better financial performance in the end. Thank you for listening in, and we welcome your questions. Thank you.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Fredrik Reuterhäll from SEB. Please go ahead.
Good morning, Robert and Magnus.
Good morning.
Morning. I had a question regarding the mix for the SEK 25 million logistic cost, but you gave the split there, and as I understood or heard correctly, it was 1/3 due to double warehousing and 2/3 higher freight cost. What is the view on the higher freight cost going forward? Is this a level that will be consistent or will it come down over time?
Yeah. It should come down because today we have some inefficiencies when we load the trucks with the fill rate, but also the cost for forwarders has been a bit higher than it should be. So that's something both those we are working on to take down.
Okay, good. Thank you. How large a share of the Q3 sales is backlog catch-up, would you say? Just rough number.
Yeah. It is always hard to say in a way because some customer order and maybe do not order, or maybe they order again and so on. So it is a bit hard to say, but yeah.
No, I would say a couple of percentages. It is a minor part. It is an important part, but it helps the organic growth, so to say. So, it supports that one.
Okay. Did end of Q3 show any sign of customers trading back the mix? Did you see anything or?
Sorry, question again.
Did you see anything that customers are trading back? I mean, going from private label to—
Yeah.
—higher end at the end of the quarter?
Yeah, you could say we are doing some campaigns here, big campaigns actually, and we see that we target, we have 4,000 customers that maybe bought the product one, two years back but haven't bought. We see that maybe 60% of those has bought back higher quality products. That could be actually if they're going from maybe just tissue to two-ply to three-ply. Of course, what we're targeting at is that they're going into our main premium products like Dunisoft, Dunilin, those sub-brands in a way, and we see that we get some traction with the end users there. We're focusing a lot on Germany, of course, because there we get the traction. Let's say if we take the customers we approach, we have 60% success right there. So we see some good signs there.
When it turns, you should scale pretty fast, right?
Yeah, a good momentum in the market supports premium brand sales, of course. A healthy industry wants to spend money on things that they think is good, and we know that they appreciate Duni's product. So that we are confident with should support with the better economic climate.
My next question is regarding the financial costs, like SEK 50 million in the quarter, up from SEK 28 million last quarter. What is driving the jump there?
I think there are a lot of different items, but I would say it is mainly two. Of course, we have higher debt now than compared to previous, and also the interest rates are slightly higher as well. That is one. The other one is the leasing, interest rates connected to leasing. So I think those are the main two items.
Okay. My last question in operating cash flow. How fast do you think you will decrease the inventory levels to more normal level? Would it take place in next quarter or it take a couple of quarters?
I think there are two aspects in this. Normally, we see a seasonal decrease by the end of Q4, that we actually lower the inventories once the Christmas season is over. That is something we should expect, that we always aim for. The other aspect is to see, once we get stability and all the processes is optimized, of course, there is room for improvement also on the inventory levels that should go down. That's maybe a little bit longer, more of a not seasonal dependent, but an ambition to take down the inventory days for a longer period.
Okay. That's enough. Thank you very much. That was all for me.
Yeah. Thank you for the questions.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Yeah. Thank you. We know it's a busy day today, a lot of reports. So, yeah, thank you for listening and see you in a couple of months. Thanks. Bye-bye.