Street Calls of the Week
Duni AB reported its third-quarter 2025 earnings, highlighting a 3.3% increase in net sales and a significant improvement in its operating margin, which rose from 7.9% to 8.5%. The company’s stock reacted positively, climbing 6.14% following the announcement. According to InvestingPro data, Duni trades near its 52-week high of $11.14, with a market capitalization of $508.2 million. Despite a flat organic growth rate, Duni AB’s strategic initiatives in sustainability and product innovation seem to have bolstered investor confidence, supported by the company’s healthy current ratio of 1.7.
Key Takeaways
- Operating margin improved to 8.5%, indicating enhanced efficiency.
- Net sales increased by 3.3%, with a stronger performance in fixed currencies.
- Stock price surged 6.14%, nearing its 52-week high.
- Continued focus on sustainability and innovation with new product launches.
- Challenges persist in the European market, particularly in Germany.
Company Performance
Duni AB demonstrated resilience in Q3 2025, with net sales reaching SEK 1,972 million, up from SEK 1,910 million in the previous year. The company’s operating income also rose to SEK 168 million from SEK 158 million, reflecting its strategic focus on cost control and efficiency improvements. Despite a flat organic growth rate, the company managed to capture market share in a challenging environment, underscoring its strong competitive position.
Financial Highlights
- Revenue: SEK 1,972 million, up from SEK 1,910 million year-over-year.
- Operating income: SEK 168 million, compared to SEK 158 million last year.
- Operating margin: Improved to 8.5% from 7.9%.
Market Reaction
Duni AB’s stock rose by 6.14% following the earnings announcement, reflecting positive investor sentiment. The stock is trading near its 52-week high of 105, which suggests confidence in the company’s strategic direction and financial health. The market’s reaction aligns with the company’s improved operating margin and innovative product developments.
Outlook & Guidance
Looking ahead, Duni AB has set ambitious financial targets for 2026, aiming for at least 6% annual sales growth and maintaining a 10% operating margin. With its current revenue growth rate of 2.63% and P/E ratio of 21.79, the company appears fairly valued according to InvestingPro’s Fair Value model. The company also updated its sustainability targets, emphasizing significant reductions in emissions and increased use of renewable or recycled materials. These initiatives are expected to reinforce Duni AB’s position as a sustainability leader in the industry. For deeper insights into Duni’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Executive Commentary
CEO Robert Dackeskog highlighted the company’s solid performance despite market challenges, stating, "We had a solid quarter despite the challenging market conditions." He also emphasized Duni AB’s leadership in sustainability, noting, "We are the trusted sustainability leader in our industry."
Risks and Challenges
- Persistent inflation could impact consumer spending and cost structures.
- The slow recovery in the European food service sector, particularly in Germany.
- Flat organic growth may limit potential future revenue increases.
- Increased competition in the takeaway segment from lower-cost alternatives.
- Potential financial expenses and debt levels as discussed during the earnings call.
Q&A
During the earnings call, analysts inquired about the company’s approach to growth, particularly in balancing organic development with acquisitions. There were also questions about financial expenses and debt levels, as well as the challenges posed by the current market conditions, such as reduced restaurant visits and consumer confidence.
Full transcript - Duni AB (DUNI) Q3 2025:
Call Moderator: Hello, and welcome to the Duni Group Q3 Interim 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.
Robert Dackeskog, President and CEO, Duni Group: Hi, everyone, and welcome to this Q3 report for 2025. The headline for this quarter is "Improved Operating Profit Despite Continued Challenging Market Conditions." If we move into the agenda today, as always, we go through the highlights, the market and the outlook, and the summary of Q3, then we will go into our two business areas a little more deeper. We are looking in at our sustainability targets for 2025, and then we will go through our updated targets for 2026, both for the financial and sustainability targets. At the end, we’ll finish off with a Q&A, as always. Highlights for Q3: Our operating profit improved by just over 10% during the quarter, and this was despite continued challenging market conditions. Net sales grew by 7.9% during the period, in fixed currencies, and in variable currency, 3.3%.
The acquired companies in the UK and Slovenia continued to contribute positively, and they were driving both our top line, the net sales, and operating profit. Now we’re halfway through our decade of action, and we are updating the targets for the financial and sustainability targets. We’ll come back to that later on in the presentation. If we look at the market, the market remains weak. It’s a persistent inflation and a challenging consumer climate in the world and Europe. We have a general decline in the hotel and restaurant sector, where price increases haven’t offset reduced volumes. If we look on the right bottom corner, you can see the German numbers here for the restaurant industry. In volume, which is the real number for the quarter two there, it’s very red. In our main area, gastronomy, it’s minus 3.5%. Actually, it’s struggling also in nominal terms also.
As we all know, the European economic sentiment is pretty tough, and the employment expectation, as you see on the left graph, there is lower going downwards. It’s a challenging time, of course. There is an uneven recovery in the European food service. Some countries show signs of rebound, others continue to lag, making pan-European growth difficult to sustain. You can see that the UK struggles a little bit. Germany, on the other, is emerging with growth prospects and expects, with numbers from SECARNA, to have a 1.6% increase visas for 2026. Hopefully, then Germany has bottomed out. Lowering the VAT from January in Germany should hopefully help the German restaurants’ industry in 2026 and going forward. Italy and Spain have been more stable last year and had a moderate decline last year. It could be they depend more on tourism, which has probably been quite good for those countries.
If we look a little bit ahead, it’s a muted growth outlook. The European food service sector faces a slow and uneven recovery shaped by economic caution and shifting consumer priorities. Looking at the key financials, we have net sales of SEK 1,972 million, and the net sales amounted last year to SEK 1,910 million, so an increase. Operating income ended up at SEK 168 million versus SEK 158 million last year. The operating margin was up from 7.9% to 8.5%. A little bit of summary there. Moving a little bit more into the details on the comments here. Net sales then increased 3.3%, but we had an increase of almost 8% in fixed currencies, mainly driven by the acquired companies like Poppies in the UK and also price increases.
The organic growth is flat, and comparing, for example, to the German restaurants market where that market is down 3% to 4%, it seems that we are taking some shares in the market. We see the trend of focus on cost, of course, in this market environment and where maybe restaurants are choosing a little bit less premium products, so there’s a mix change there. We have a gradual impact of price increase in Europe, and in Australia, BioPak groups continue to grow in local currency. The weak Aussie dollar is impacting the translation to the SEK here. If we look at the operating income, it ended up at 8.5%, and our acquired companies are driving the operating income in the quarter.
We have some lower volumes, and mix effects continue to have a little bit negative impact on the result, but with good cost control and efficiency improvements, it has a positive impact mitigating. Also, the actions in our sales and marketing cost resulted in lower levels, and our change now to focus specialized sales teams for each business area has been implemented. If we look at the inventory level, it has decreased in BioPak, but we have some higher indirect costs, and the weak Aussie dollar has had a negative impact in Australia. Now we’ll move into the business area, which Magnus will come into. Thank you, Robert, and good morning, everyone. As usual, I will now provide a little bit more detailed overview of the two business areas. Start off with Dining Solutions, which includes our table setting products.
Despite currency headwinds, sales increased by SEK 120 million compared to previous year Q3, reaching SEK 1.22 billion. This growth was primarily driven, as Robert said, by acquisitions completed earlier this year and at the end of last year. Profit improved year over year, with a slightly improved margin of 11.5%. As we touched on earlier, the market continues to face challenges. Based on the macroeconomic data and what we’re seeing across our own markets, it appears we reached a floor in the Horeca segment with some signs of stabilization, maybe an improvement compared to last year. The retail segment, however, remains more volatile. For us, it’s largely influenced by tenders, whether won or lost. In the third quarter, we saw a slightly negative development in retail, while Horeca showed modest improvements. We continue to observe a general trend of downtrending with lower prioritization of premium products.
This isn’t unusual in tougher economic times, but it does put pressure on us to meet demand while being even more cost-conscious and efficient in our production processes. On pricing, we’ve seen a positive effect from price increases of around 1.5%. While this is below our initial expectations, it’s still a step in the right direction. On the cost side, pulp and some other raw materials remain below last year’s levels. However, we’re seeing significantly higher inflationary effects in logistics and also on indirect costs, particularly salaries, which have increased well above historical norms. These cost types now have greater impact than pulp alone. Outside Europe, growth has been a key driver for both business areas. During 2025, that growth has clearly slowed. Some markets are significantly down, while others continue to show strong performance.
What’s common across all of them is the increased presence of low-cost Chinese products flooding the market, especially as the U.S. has essentially closed its stores through high tariffs. Despite these headwinds in the quarter, we managed to grow during the quarter and improve our results, thanks in part to our recent acquisitions. We’re also beginning to see healthy synergies gradually taking effect. Turning to the business area of food packaging solutions, which focuses on sustainable food packaging, sales declined by 7%. As for the previous quarter, the main reason is significant FX effects from the weak Australian dollar versus the Swedish SEK. Profit was stable at SEK 27 million, and that means slightly better margin ending on 3.7%. There are essentially two main reasons behind the weak sales performance this quarter. First, we adjust for the negative currency effects. Sales were actually on par with the previous year.
Looking at our business in Europe, volumes are slightly down. However, we’re seeing growth in areas where we believe we can build a competitive advantage. We have mentioned before that DuniForm is a good example. It focuses on food packaging solutions that help customers reduce food waste and cost while still maintaining a superior sustainable offering. The challenge in terms of volume and one reason for continued pressure on our margin is the takeaway segment. This market continues to attract many new players, often offering plastic-based, lower-cost alternatives. While there has been a lot of regulation in recent years, we welcome the increased focus on sustainable solutions and strongly encourage stricter follow-up and enforcement of these systems. Second, BioPak Group continues to show improvement. Inventory levels, as Robert said, have come down, already starting in the second quarter, and now we’re further optimizing in the third quarter.
Gross margin improved, although some of the gains were offset by temporary higher indirect costs. Finally, during the quarter, we made a small but strategically important acquisition through BuyGreen, which is based in Australia. This move strengthens and complements our fiber-based product offering in what is currently our most important market for this business area. I hand over to Robert again. Thank you, Magnus. If we look in first here, I will go through our current sustainability goals and then present later an updated financial and sustainability goals for 2026 and onwards. These are valid through 2025 now, and we have becoming circular at scale, going at zero and living the change. If we look into a little bit what we’ve done in this during the quarter, what we achieved here is what kind of activities we have. We have launched a reliable circular system in Sweden on reusable products.
In going at zero, we have quarterly reporting of climate data, includes Poppies now, which is great. We have been nominated for the German Sustainability Award. These have served us very well during the past year, and we have KPIs on the different ones and really working towards that. From 2026, we have updated the targets, or the Duni Group board has decided to update the Duni Group’s strategic targets effective then from January 2026. The decision marks the halfway point in our decade of action. If we look at the financial targets first, the financial targets have been adjusted to reflect Duni Group’s growth ambitions and profitability focus, while maintaining a balanced approach between organic development and acquisitions. The targets provide a clear direction for the group’s business development going forward.
Regarding growth and sales growth, at least 6% total annual sales growth compared to the previous target of 5% organic growth. The new target includes both organic growth and growth through acquisitions. There we have the ambition to approximate half of the growth will come from organic. If we look at the dividend, the new target will be over 50% compared to the previous target of 40% dividend of the net profit. The operating margin, the target of minimum 10% operating margin remains unchanged. If we look at the sustainability targets, they have been updated now to more clearly support the long-term strategy we have valid through 2030. The focus is on four overarching areas: climate, circularity, supply responsibility, and work environment. For the climate, targets for scope one, two, and three remain unchanged.
Emissions in scope one and two are to be reduced by 57% and scope three by 46% by 2030, in line with our science-based targets to approve climate targets. The scope three target will be reviewed in 2026 to better reflect growth ambitions. The net zero target includes interim goals for 2030 and a final goal on net zero emissions by 2050, which includes the scope three. Regarding circularity, at least 90% renewable or recycled input materials. This replaces the previous target related to the fossil-based plastic and introduces a broader, more business-relevant definition. The next target, supplier responsibility, 100% of the group suppliers must have signed Duni Group’s business partner code of conduct. Looking at work environment, less than 10 work-related injuries with absence, so lost time incidents per 1,000 employees is a target as well.
All group targets will be reported quarterly, with the exception of scope three, which is reported annually. All right, if we look into the financials, Magnus. Thank you, Robert. Let’s now turn to the income statement and summarize the key drivers behind this quarter’s performance. As mentioned, organic growth was close to zero. However, acquisitions contributed positively, adding nearly 8% to the top line. At the same time, a stronger Swedish krona had a negative impact of almost 5%. Taken together, total sales increased by 3.2%. It’s important to highlight a key factor when looking at the gross margin here. In the third quarter last year, we had a one-time negative impact of SEK 125 million, and that was related to restructuring costs for a new warehouse solution.
When we adjust for that, last year’s gross margin was 23.7%, meaning we’ve still achieved an improvement of roughly 1.5 percentage points this quarter. Admin costs were elevated during the quarter, partly driven by activities outside Europe. Some of these costs are linked to IT investments and changes in our ERP systems. Others are considered temporarily high and being actively addressed. EBIT for the quarter came in at SEK 151 million. This is an increase of SEK 50 million, nearly 10% when adjusted for last year’s restructuring costs, as said. Operating income is now running on SEK 576 million on a rolling 12-month basis, with EBIT slightly above SEK 500 million. If we look a little bit more on the business areas, Dining Solutions is now rolling above our 10% target, which is a positive milestone. On the other hand, food packaging is clearly below.
Both areas show potential when coming back to historical levels, and improving these figures remains a key focus for us. Dining Solutions is currently challenged by lower volumes and underutilized production capacity. However, there is clear potential for operational leverage with higher volumes. Food packaging has faced significant headwinds over the past three years. The industry has undergone major changes. Regulatory volatility has created, as we have said many times, a dynamic and competitive business climate. We see many new players enter the market, which has added complexity but also brought innovation. We welcome and we are inspired by these innovations and new entrants. With that said, it’s worth noting that of the roughly 300 startups in the reusable segment that emerged three or four years ago, very few remain active today. We are here for the long run.
We continue to actively engage in material development, innovation, and exploring new revenue models to ensure we stay ahead and deliver long-term value. Looking on the operating cash flow, in the third quarter, it continues to be positive and aligned with last year. Operating cash flow is slightly above EBITDA, indicating a very healthy cash conversion. Inventory continues down and contributes to the quarter. CapEx, as you see, is slightly above last year, also for the rolling 12 months versus 2024. That is explained by both investments in our factories, but also in IT. If we take a little bit of a look on the financial position, it remains robust. Net debt has increased compared to the previous year. That is primarily driven by recent acquisition. As mentioned before, inventories are going down and optimized throughout the group.
Return on capital employed has declined a little bit year over year, but stabilized now around 24% to 25%, excluding goodwill. This is not an external target, as we just talked about, but it is an important internal metric that we actively monitor. We are committed to improving it through careful evaluation and optimizing of our capital allocation decisions. Finally, if we look on the financial targets valid for the whole of 2025, organic growth is close to zero for the last 12 months. As we have said now many times, driven by weak consumer demand, basically on all markets. We do see pockets of growth, which mitigates the overall very weak DACH area and the numbers we have seen in the last two to three years. Operating margins remain at 7.4%. That’s the same as the previous quarter. It is below our target of 10%.
As said in the AGM meeting in May, a dividend of SEK 5 per share was approved. This corresponds to 66% of net income when we adjust for these restructuring costs. That exceeds our target of distributing at least 40% of net income, now going to 50% from 2026. Thanks for listening. I hand over now to Robert. Just a short summary here. We had a solid quarter despite the challenging market conditions. I think that can sum up the quarter. We are the trusted sustainability leader in our industry. We’re actually, we’re here 365 days. Every day we are there. We’re a stable company that can deliver. I think halfway now through the decade of action, we are updating our targets. Thank you for listening in. We move over to Q&A.
Call Moderator: Thank you. If you do wish to ask an audio question, please press star one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star two to cancel. Once again, please press star one to register for a question. There will be a brief pause while questions are being registered. Our first question comes from the line of Erik Sandstedt with Kepler Chevreux. Please go ahead.
Robert Dackeskog, President and CEO, Duni Group: Thank you. Yeah, Erik Sandstedt here with Kepler Chevreux. Got a few questions. Firstly, on the new financial targets, you’re raising the dividend policy, but also allude to perhaps making more acquisitions as part of that sales growth target. Wondering a little bit how we should think about the balance here. Is there room for both, and what would you prioritize and so forth? Thank you for the question. I think it’s room for both, absolutely. I think that’s important as well that we have both of these. I think we have proven that historically as well that it’s important with acquisitions actually for us. I think this new target more reflects Duni and what’s Duni going to be in the future. Thanks.
Also on the M&A side, in terms of that sales growth target, should we think about the potential M&A contribution as you’re making sort of several smaller acquisitions every year to come up to that 3% target in addition to organic sales growth, or will it be much more ad hoc where you could do sort of bigger ones occasionally, obviously depending on what’s available and so forth? I think it’s the latter maybe. It actually depends on a little bit. We know the market. If you look at maybe the core of, you know, with the napkins and everything there, we have a pretty good idea. There are smaller companies. There are a few bigger, maybe not huge, huge, but yeah, so I think it’s a little bit both actually. It’s a bit ad hoc in that sense depending on what’s available in the market also. Thanks.
Finally, in terms of the financial targets, you previously had a target of 5% organic growth, and now it should be around half of that 6%. So, 3% implied. Is it simply because there are tougher markets to do sort of 5% organic growth? Was there more pricing in the previous target? Could you maybe just elaborate a little bit on that mix within that target? Thank you, Erik. No, I think 5% as we historically have and still have organically, I think is quite ambitious in our industry and also reflecting that over the last 10 years, acquisition has been very important for us. That’s also reflecting that we consider this continuous importance. Of course, the ambition is always a little bit higher, but I think this is a more balanced view of where we’re coming from and also indicating where we’re going.
That’s a little bit how we see it. Yeah, that makes sense. Finally, just a couple of questions on the actual Q3 results here, maybe on the detailed side, but financial expenses were quite low or basically in line with Q3 last year despite much more debt on the balance sheets right now. Was there anything extraordinary in there, or is that level sort of a good run rate also going forward? No, I would say there’s always a bit of a mix in that. I would not say it was something else sticking out. It sometimes goes up and down. You have much more debt now after the acquisitions you’ve made and still financial expenses were, I think, even $1 million lower than in the same period last year. That’s on the detailed side, but still struck me as being quite low in relation to debt levels. That’s correct.
Everything else is the same, normally the interest rate goes up when you have higher debt. This is a situation for the acquisitions. Again, there are other items in that that sometimes explains why we have a little bit up or a little bit down. Also, the interest rate has come down a little bit as well. Thanks. Finally, could you say anything about the development throughout the quarter in terms of organic sales growth? You can say the European market, as we stated, is challenging in terms of volume. We try to work with the mix and sell the right things as well. It’s volume, and I think it reflects the number of visits actually in the restaurants that hasn’t returned really to the European market. You can see especially the UK and some other markets, Germany has maybe still 15% to 20% less visits than versus 2019.
For us, selling napkins, it’s one napkin per visit anyway. That is maybe the challenge we have in terms of the organic growth in the market. I think there are, I mean, we see that it’s a challenging time for many companies actually. There are things happening in the market as well. We are here 365 days per year. We can deliver every day. We’re a stable company. In these times, we have a really good benefit of that actually to our customers that they can rely on us in that. Maybe I can just add on if the question was if we see some patterns over the quarter specifically. It is a bit challenging to get real-time data specifically on restaurant development. It’s normally lagging. You need to rely on other types of data, consumer confidence, and so on.
However, I would be surprised that we should see some dramatic changes from Q2. I think we have reached some kind of a floor when it comes to the health of the consumer. Hopefully, we will see some kind of improvement going forward. I don’t think it will be dramatic, bearing in mind the uncertainty we’re still facing on high level. Yeah, perfect. Thank you very much. Thank you.
Call Moderator: Thank you. Once again, if you would like to ask a question, please press star one to register a question. I’m showing no further questions at this time. I would like to turn the call back to Robert Dackeskog for closing remarks.
Robert Dackeskog, President and CEO, Duni Group: Thank you for listening in and for the questions. We see each other next quarter. Have a nice day and weekend. Thank you.
Call Moderator: Thank you. Ladies and gentlemen, this now concludes our presentation. Thank you all for attending. You may now disconnect.
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