Earnings call transcript: Duni AB sees stock dip amid weak market Q2 2025

Duni AB reported its second-quarter earnings for 2025, revealing an earnings per share (EPS) of 1.25. Despite not having a direct forecast for comparison, the market reacted negatively, with the stock price falling by 4.29% in pre-market trading. Revenue for the quarter stood at 1.88 billion USD, highlighting a mixed financial performance amid challenging market conditions. According to InvestingPro data, the company maintains profitability with a trailing twelve-month revenue of $766.65M and a healthy gross profit margin of 24.08%.

Key Takeaways

• Duni AB’s stock fell 4.29% following its earnings announcement.
• Net sales increased by 5.2% in fixed currencies, but organic growth declined by 3.8%.
• Operating margin decreased to 6.4% from 7.2%, with net debt rising due to acquisitions.
• The company launched innovative sustainable products and plans a 10% staff reduction for cost savings.

Company Performance

Duni AB’s overall performance in Q2 2025 was marked by a modest increase in net sales, but this was offset by a decline in organic growth and operating margin. The company’s strategic focus on innovation and sustainability, including the development of BioBinder for BioSoft napkins and other eco-friendly products, positions it well in the market. However, rising net debt and weaker consumer confidence in Europe present challenges.

Financial Highlights

• Revenue: 1.88 billion USD, reflecting a 5.2% increase in fixed currencies.
• Earnings per share: 1.25 USD.
• Operating margin: Decreased to 6.4% from 7.2%.
• Dividend: SEK 5 per share, representing 66% of net income.

Market Reaction

Duni AB’s stock experienced a 4.29% decline in pre-market trading, dropping 4.1 points from the previous close of 95.5. This movement reflects investor concerns over the company’s declining operating margin and increased net debt, despite positive developments in product innovation and strategic acquisitions.

Outlook & Guidance

Looking ahead, Duni AB aims to achieve a 10% operating margin while focusing on operational efficiency and cost management. The company expects a market recovery based on historical trends and plans to enhance its logistics operations by moving its logistics center in 2026. InvestingPro subscribers can access additional insights through comprehensive Pro Research Reports, which provide detailed analysis of Duni AB’s financial health score of 2.54 (rated as GOOD) and other key metrics. The stock currently appears slightly undervalued according to InvestingPro’s Fair Value analysis.

Executive Commentary

CEO Robert Duckiscock noted, "Weak market and economic conditions balanced by targeted measures and acquisitions," emphasizing the company’s strategic response to current challenges. CFO Magnus expressed optimism, stating, "We are well positioned to capitalize on increased volume once the market recovers."

Risks and Challenges

• Economic conditions in Europe remain challenging, with weak consumer confidence and inflation.
• The decline in casual dining and restaurant visits, particularly in Germany, may impact sales.
• The increase in net debt from acquisitions could strain financial flexibility.
• Achieving the targeted 10% operating margin requires successful cost management and market recovery.

Q&A

During the earnings call, analysts inquired about the company’s volume trends, which were reported to be improving towards the quarter’s end. Duni AB also confirmed that inventory levels are now more balanced in Europe and Australia, addressing previous concerns about overstocking.

Full transcript - Duni AB (DUNI) Q2 2025:

Call Moderator: Hello, and welcome to the Duny Group Q2 Interim Report 2000 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 Duckiscock, CEO. Please begin your meeting.

Robert Duckiscock, CEO, Duny Group: Yes. Hello, everyone, and welcome to this interim report for Q2 twenty twenty five. And the headline for this quarter is subdued economic situation balanced by targeted measures and acquisitions. So if we move to the agenda, we will go through this today. And at the end, we will finish off with a Q and A.

So moving into the highlights for the quarter. We see weak market and economic conditions pressured the demand and volumes in many markets, but we saw the quarter ended stronger than it began. The recent acquisitions, Popis and Setti, had a positive impact and structural internal actions and measures were taken to adapt to the market condition. One action is that the sales and marketing organization has been restructured as planned, including integrated sales team in the two respective business areas with a 10% staff reduction. And the expected annual impact of this is approximately SEK 30,000,000, and this will start from Q4 twenty twenty five.

And last, an improved operational cash flow seen in the quarter, and this is by lower inventory levels versus quarter one this year. If we look a little bit on the market outlook and the market data, it’s still a continued weak market, persistent inflation and a challenging consumer climate, as you know. And as you can see on the left graph below that in 2025, the consumer confidence went down versus 2024. The forecast when we went in 2025 was the assumption that it was actually going to be stronger. We’re not seeing that yet.

And on the right side, you can see the German graphs here, which is Auerlot, which actually where the visits went down by 4.8% in Q1. So it’s a still tough market. But the German government has proposed lower to lower the VAT for the restaurants from 19% to 7%, which then hopefully will give a positive impact to the restaurants. When the consumers in Germany will start to come back, it’s hard to say, of course, but historically, they always return of downturns in the economy. If we look at a little bit the market and the restaurants, consumers are trading down to cheaper places.

This graph shows the visits in the big five European countries: UK, Germany, Spain, France and Italy. And we can see that there is a trade down from casual dining to quick service restaurants, but also from quick service to retail, also delivery loss to quick service restaurants. But as I mentioned before here, historically, arrows has gone the other way when the economy is getting better and the restaurants and Jumia has, after the different crisis in 02/2012 and also after the pandemic, always bounced back again. Looking into the key financial. The net sales is increased mainly driven by the acquisitions we’ve done.

The operating profit declined by SEK 14,000,000, mainly driven by lower volumes. And the margin ended up at 6.4% versus 7.2%. We’ll come into this, of course, a little bit more here. So if we look at the net sales, it has increased by 5.2% in fixed currencies. And that was thanks to the contribution from our acquired companies, Popis in The UK and SET in Slovenia, which covers the Southeast Of Europe.

We had negative organic growth of 3.8% in the quarter, coming from a negative mix effect as customers placing lower priority on premium products, selling more tissue compared to, for example, our premium napkins like Dunelin, and of course, then the volume in total. We have a gradual impact of our price increases in Europe to balance the effect of inflation. In the second quarter, BIPAC Group continued to grow, which has its biggest share of sales in the Australian market. If we look at the drivers behind the operating margin, as mentioned here before, was the main driver was lower volumes in sales and the mix effect in the assortment. So in order to mitigate our efficiency, we have taken some measures both in production and logistics, which has strengthened the income in the quarter.

Also measures have been taken to reduce our sales and marketing costs, and that will have an impact from quarter four. Positive is that the normalization of inventory levels throughout the quarter helped improve the result within the APAC Group versus last quarter. And the recent acquisitions within DynaSolutions, Popular and SETI contributed by EUR 21,000,000 in the quarter. Now I’m handing over to Magnus to go through the two business areas in more detail.

Magnus, CFO/Executive, Duny Group: Thank you for that, Robert. So as you surely will now provide a more detailed overview of our two business areas, and I start off, with DynaSolutions, which includes our table setting products. So despite currency headwinds, sales increased by SEK 70,000,000 compared to the previous year, and that’s reaching SEK 1,140,000,000.00. This growth was primarily driven by acquisitions completed earlier this year and at the end of last year. And profit improved slightly year on year with a stable operating margin of 8.7%.

So as Robert mentioned earlier, the second quarter was marked by challenging market conditions, reflecting weak consumer confidence and declining volumes in the Horeca industry, I would say, across all over Europe. The price effect was close to 2%, implying a volume decline of 3% to 4% in the OREKA segment. In retail, however, we experienced a double digit volume drop, primarily due to the loss of a few large contracts, though these were low margin in nature. So as we touched upon in the market outlook section, in tough market conditions, we’ve seen a shift in customer behavior, particularly in the premium segment. Some customers are opting for more cost efficient alternatives over our higher end offerings.

And while we have competitive solutions also in these segments as well, the result has been a negative mix effect, lower margins and reduced cost absorption in our factories. But this behavior mirrors what we observed in previous downturns as Robert said. Still, we remain confident in the strength of our premium offering, thanks to enduring appeal in terms of quality and sustainability and its contribution to the overall dining experience. If you look on the acquisitions made in the past nine months, contributed positively to the profit this quarter, in line with our integration plan. So although full synergies are expected to be realized by 2026, Contribution from the acquisitions were approximately million.

And this was partly offset by volume decline in our core business. Nevertheless, we are well positioned to capitalize on increased volume once the market recovers. Finally, we continue to see growth opportunities outside Europe, particularly in the APAC region, which remains relatively immature in terms of the premium fiber based Dining Solutions offers. However, as you have seen also this spring and summer, we have huge geopolitical uncertainties driven by conflicts in Middle East and discussions, I guess, on global tariffs that has created a more cautious market environment. So while we don’t foresee any direct threats to our markets, the indirect effects of reduced consumer willingness to spend on travel and by extension also maybe on dialing are being felt.

Return to business area food packaging solutions, which focuses on sustainable food packaging. Sales declined by 7%, primarily due to weak quarter in Europe and negative currency translation effects from a stronger Swedish krona. So although improvement from the first quarter, which was very weak, you see that profit decreased to SEK 22,000,000 from SEK 40,000,000 last year. That corresponds to an operating margin of 3%. There are essentially two main reasons behind the weak sales performance in this quarter.

Firstly, organic growth was 0.6, so it’s nearly in line with the same period last year. So the primary driver of the overall sales decline was the weak Australian dollar, particularly against the Swedish krona, which has strengthened by more than 10% in the period. And this currency effect accounts for the majority of the top line decrease. Additionally, we observed continued softness in the European takeaway market with lower sales compared to last year. But on a more positive note, sales outside Europe, especially in Australia, continued to show organic growth when measured in fixed currencies.

We also saw continued growth in our Duliform system, which we mentioned earlier. This system comprising sealed machines, trays, and films is designed is designed to optimize food packaging processes. It’s an area where we are currently accelerating efforts backed by strong customer recognition, and the system offers a clear competitive advantage by prioritizing food safety, operational efficiency and user friendliness. During the quarter, we completed the restructuring of our commercial and marketing functions, as Robert mentioned. This is an important step towards increasing efficiency in a rapidly evolving market.

And more important, this change allow us to strengthen our focus and expertise across our distinct business areas. So the restructuring will impact both business areas, delivering annual savings of approximately SEK 30,000,000. Majority will be realized with dining solution, but also in food packaging solutions. So we remain convinced that the more specialized and capable sales force is essential for future success. So as the demands of restaurants and hotels operators grow, particularly around materials and regulatory compliance, we are well positioned to provide meaningful support and create real value.

So food packaging is undergoing a fundamental transformation driven by evolving legislation, shifting customer expectations and emerging business models centered around recycle, reuse and compostable solutions. And Duny has long been a leader in developing innovative materials and packaging solutions, and we are committed to stay in the forefront. So key focus going forward will be our ability to clearly communicate and demonstrate these future ready solutions to both existing and new customers. So I hand back to Robert again.

Robert Duckiscock, CEO, Duny Group: Thank you. Yeah. And looking at our sustainability initiatives, we have three becoming circular scale, going at zero and leaving the change. In the quarter, there has not been any major activities, but a lot of small one, of course, and which we’re working on. And if we look at circular scale, we’re on track on adaptation to the European Union deforestation, also launching new products within improved recyclability.

Our KPI on virgin fossil plastic here is to reach 50%. At the moment, we are at 63. If we look at going at zero, index are at 38 in the quarter, and we have had a reduction with 62% since 2019. The target this year is 37 in index, so a lot of small steps to be taken there. And the third one, leaving the change, which we’re measuring EcoVadis, we are measuring once a year, and our goal is to become platinum level there.

And as mentioned last quarter, we are reviewing the goals now since scope three is coming up as well as part of the going at zero. If we look at our strategy and our strategic priorities, the first point is that we want to increase our innovative offering to customers and consumers. Here, we have worked very hard to be the first one in the world with a BioBinder in Airlaid for BioSoft napkins. We are all stable and can offer both recyclable, reusable products, including systems, and in addition, composted products. And going forward, we are focusing on both improve our current assortment to match the needs of of our customers today, but also focusing on innovate and grow in our existing concept like uniform, where we, as Magnus mentioned, we acquired LINE PACK in Finland in order to strengthen the service part in Duoform.

The second priority is that we want to grow our positions in Europe and Asia Pacific. And with the acquisitions in UK with Popvis and SETI, which is in the Southeast in Slovenia, we are covering and diversifying our presence in Europe and the dependency on Germany. The third priority is to enhance our operational efficiency and enable regional differentiation. We have increased our operational efficiency in production and logistic and also being we’re working with more efficient seeing our sales and marketing as Magnus was into here. And, and the important thing that we specialize sales now, and sales and marketing for each BA.

Also, the move of our logistics center in 2026 will enhance our efficiency.

Magnus, CFO/Executive, Duny Group: Now we’re going into the financials. Thank you, Robert. So, usually, we start with the income statement and then trying to summarize the key drivers behind this quarter’s performance. I think we touched upon many of those already. But as you can see, sales were nearly on par with previous year, and this is primarily driven by the acquisitions of Siete and Poppis.

So if we adjust for these acquisitions and at fixed currency rates, organic growth declined by 3.8%. As mentioned earlier, the price effect was close to 2%. This is slightly below our expectations or targets. We are facing challenges from negative mix effects with a higher share of private label and tender business diluting the impact of these price increases. So inflationary pressures remains, I think notably from salary increases as well as other cost areas.

The main reason for the one percentage point you can see a decline in the gross profit is primary lower absorption in our production facilities due to the decreased volumes and also these negative mix effects. So we continue to work diligently to mitigate these impacts through efficiency improvements across our production setup, infrastructure and indirect costs as we touched upon. These efforts are aimed not only at offsetting the effects of weak demand, but more importantly at enabling a strong operational leverage when the volumes recover. So overall, the operating margin decreased by 0.8 percentage points ending at 6.4%. I think it’s also worth mentioning the adjustments you can see here amounting to a 194,000,000 SEK, over the rolling twelve months period.

Of this, as you might remember, 125,000,000 relates to restructuring costs recognized in Q3 twenty twenty four for our new main warehouse in Metpen, Germany. And these logistic investments will enable significant savings in handling costs and more importantly, future proof our ability to deliver efficiently to our customers

Robert Duckiscock, CEO, Duny Group: Looking a little bit more on

Magnus, CFO/Executive, Duny Group: the business areas. It is clear that both are currently performing below the financial target of 10% operating margin. This is of course something we are addressing precisely through a range of initiatives, although against a challenging market backdrop. So at present, we are trailing the from the target by 2.5 percentage points. Considering our historical performance and a return on capital employed above 25, it is evident that this gap needs to be addressed across both business areas in a balanced and focused manner.

So if we look on operating cash flow, in the second quarter it was positive, largely driven by a significant reduction in inventory levels. As mentioned in the previous quarter, as some of you might remember, we took targeted actions to address elevated inventory, particularly outside Europe and within the BioPack Group. So we’re now pleased to report that these efforts yielded a result in Q2, contributing not only to improved cash flow, but also to reduce costs and a positive impact on BioPack Group’s profitability. And if you look on the CapEx, it remained in line with previous year and also in line with the level of depreciation. So our financial position remains robust.

Net debt has increased compared to previous year, and this is primarily due to recent acquisitions. And as highlighted in April, we have focused on reducing inventory levels, which has a positive effect on the second quarter and contributed to reducing the net debt. Return on capital employed has declined year over year, While not on an external target as such, this is important for us in our internal metrics that we actively monitor. We are committed to improving it through careful evaluation and optimizing our capital allocation decisions. So if we look on our financial targets, organic growth for the last twelve months landed on minus 0.8%.

And this is again primarily driven by weak consumer demand across all markets, most notable still in the DACH region. And as Robert mentioned earlier, macro indicators for the Roeka sector in Europe have deteriorated in some ways significantly. Despite this, we have managed to partially offset the decline through growth in selected segments in Europe and even more so outside Europe, particularly in Australia. And I stated this spring, the key drivers for improved consumer confidence remain lower interest rates, increased disposable income, and, for sure, a more stable geopolitical environment. So while there are some encouraging signs for this, such as the proposed government support we see in Germany for for VAT reduction, The latest statistics still show that the European consumer remain cautious, I would say.

So our rolling twelve months operating margin currently stands at 7.3%. This is below our 10% target. Closing this gap will require continued focus on improving gross margin and reducing the proportion of indirect costs. We are confident we are in a good position for a strong operational leverage when we see increasing volumes. And finally, at the AGM in May, dividend of SEK 5 per share was approved.

This corresponds to 66% of net income if you adjust for restructuring costs, And this exceeds our target of distributing at least 40% of the net income. So I hand back to Robert. Thanks for listening, and have a really nice summer.

Robert Duckiscock, CEO, Duny Group: Yeah. Thank you. And, yeah, just a short summary of the quarter and of today’s presentation. I think, yeah, main main things here are weak market and economic conditions, of course, as we mentioned. And the recent acquisitions had had a positive impact and they enabled growth for us.

Sales marketing organization is restructured as planned, and expected impact is approximately 30,000,000 from Q4 twenty twenty five. And we see an improved operational cash flow driven by the lower inventory levels, as Magnus talked about. So yes, thank you for listening, and now we hand over to a Q and A. Thank you.

Call Moderator: Thank If you wish to withdraw your question, you may do so by pressing 2 again to cancel. Once again, please press star then the number 1 to register for a question. There will be a brief pause whilst question are being registered. Thank you. That is Your first question comes from the line of Johan Feb from SEB.

Please go ahead.

Johan Feb, Analyst, SEB: Good morning, guys. Thank you for taking my questions. First one on the sales trend during the quarter. You stated that the quarter ended stronger than it started. Are you referring to the volume trend here?

And essentially, my question is, could you elaborate on the sales development seen during the quarter? That would be helpful. Thank you.

Robert Duckiscock, CEO, Duny Group: Yes. Thank you for your question. Yes, think we saw a really tough start in the quarter in April, May mainly and with the volumes in the market. And, yeah, at the end of quarter in June, the the volumes actually gone up. So the customer, hopefully, then, yeah, that would be a continuous we we don’t know.

No one knows the future, of course. But, yeah, definitely, the volumes, yeah, was a bit of a shift there. And, of course, as you know, in quarter one, we had a lift in in volumes as well. So, yeah, we expected maybe a good evening in April and May, but it was a bit lower there. But definitely, the volumes are better in the end of the quarter.

Johan Feb, Analyst, SEB: That’s very helpful. Thank you. So given that volume has been negative now over the last couple of years essentially, do you think we are sort of close to the bottom in terms of volumes?

Robert Duckiscock, CEO, Duny Group: Yes. Of course, it’s hard to tell, as you know. But but if we look at the consumer confidence and all that, that that is a bit on it feels like it’s rock bottom in a way. And as I referred to before, in a way, you have 02/2012, and after the pandemic, it bounced back. I think when we went into the year, the predictions from some research and so on showed that, yeah, the the first quarter would be maybe a little bit tough, and I think that’s what we predicted in a way.

It’s been maybe a bit tougher than we anticipated. And the second quarter then was supposed to pick up. But looking maybe at the, yeah, the curve we showed here, it’s still a little bit negative trend versus 24% than in the consumer confidence.

Johan Feb, Analyst, SEB: Yes. Got it. Got it. And the final one on the inventory levels in Food Packaging, which have been an issue for the last couple of quarters. I note in your report that you’ve seen a significant improvement.

Could you elaborate on sort of what the current inventory situation is, versus Europe, etcetera? That would be helpful.

Magnus, CFO/Executive, Duny Group: Yeah. Thank you for the question. Yes, it has been reduced since it went up quite sharply, as we said, in Q1. And as we mentioned after the Q1 report, there was a lot of focus to take it down again in Q2, which we succeeded with. So I think the inventory now in both in Europe and in Australia is much more in balance.

There is an overall challenge, I think, for both areas in terms of that we are still shifting the portfolio quite a lot. We need to address new legislation and so on, which puts a challenge on on planning and and being control of each and every item in the inventory. But I think we learned a lot over the last years. And some of the mistakes, we should be we should be honest in saying that, I think we will not do again. And there is super focus of keeping it as low as possible and efficient.

But at the same time, it’s also important to be able to deliver to the customer. And this is not rocket science, but it’s it’s sometimes more tricky in reality than you think. But I think we are in a much, much better situation and and more in balance.

Johan Feb, Analyst, SEB: Got it. Those were all my questions for now. Thank you so much for taking the time, guys.

Robert Duckiscock, CEO, Duny Group: Thank you.

Call Moderator: Thank you. There are no further question at this time. I will now turn the call back to mister Robert Douglas Cook for any closing remarks.

Robert Duckiscock, CEO, Duny Group: Yeah. Thank you for listening in, and I just wanna wish you a great summer. And, yeah, and please make a lot of visits to the restaurants in in Europe and and visit many festivals and also choose takeaway when you’re not out and about. So, yeah, have a great summer.

Call Moderator: Thank you. And this now concludes our presentation. Thank you all for attending. You may now disconnect.

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