CEO statement
Strengthened earnings and stronger initiatives for increased growth
Additional growth initiatives were taken in 2013 and both sales and profitability were stronger than last year. Sales increased in all business areas and, in total, the Group's net sales (adjusted for exchange rate movements) increased by 4.9%, to SEK 3,803 (3,669) m. Underlying profitability increased to SEK 385 (342) m, entailing an increase in the operating margin to 10.1 (9.3)%.
The year's improvements are essentially an effect of increased market shares which, among other things, led to improved capacity utilization at our production plants. Total demand in Europe within Duni's product segments is assessed as being largely unchanged compared with last year. In southern Europe, the market continued to decline; conversely, we witnessed improved growth in the Nordic region and Central Europe. The growing trend towards more easily available take-away and fast food offerings at the expense of traditional restaurants is continuing.
During 2013, Professional defended the very strong positions it has held for a long time in, primarily, Germany, the Benelux countries, and the Nordic region. At the same time, an offensive strategy has been adopted on selected markets. Southern Europe provides an example, with the business area having developed products and offerings specifically adapted for that market. The work has been successful and contributed to sound growth.
During the year, Consumer has broadened and strengthened its customer offering. Focus will be increasingly placed on the premium concept, "Designs for Duni®", while at the same time we have expanded business with the retail trade's private labels. The year saw several successful product launches and sales successes, among both existing as well as new customers. The Consumer business area's market is stable, with low or zero growth, and is being increasingly driven by fixed-term contracts. In 2013, the business area signed a number of important customer contracts and demonstrated a clearly improved sales trend.
At the beginning of 2013, the initiative was taken to establish a place of business in Southeast Asia, with the objective of taking advantage of the strong growth in the region. It was, therefore, pleasing that as early as the second quarter of 2013 we were able to carry out the acquisition of Song Seng in Singapore.
Duni Song Seng is a leading supplier of single-use packaging for food and drink in Singapore. Customers comprise hotels, restaurants, various types of food chains, as well as hospitals and care centers. Duni Song Seng enjoys a strong position in Singapore and an expanding export business in Asia and the Pacific region. The acquisition represents an important step in Duni's strategy of expanding on growth markets and increases the service level within the growing take-away segment and fast food chains.
Duni Song Seng continued to grow positively during 2013 and the company's profitability is well in line with Duni's financial target of an operating margin in excess of 10%. The next step is to begin the launch of Duni's premium range, and our ambition is to develop the market in the same way as we have done in Europe.
Focus on products for the set table
Duni's core business comprises products which create an ambience around the set table and it is with these products that the Company will grow. A good example is provided by the tablecovering material, Evolin®, in which we have made significant investments in recent years. During 2013, we have continued to roll out Evolin® on the market and this work represents an important tool for maintaining Duni's position as a leading innovator of products for the set table.
In line with our focus on products that enhance the experience around the set table, at the beginning of 2013 we decided to discontinue the hygiene business within the Tissue business area. The assessment was made that the operations will not achieve an acceptable level of profitability within the foreseeable future, and the operations are expected to be wound up in March 2015.
Duni shows respect for society and the environment
Duni's approach to social responsibility is linked to our core business: creating a pleasant atmosphere around the table. The correct atmosphere can be created only with products which are manufactured with respect for society and the environment. At Duni, we regard this as sound common sense.
In "Our Blue Mission” we have a long-term environmental strategy with targets extending until 2020. We are allocating major resources in order to act in a sustainable and responsible manner, while ensuring that this results in carefully considered and responsible business decisions. During 2013, we have worked on attaining compostability certification in respect of our napkin and tablecovering range. We are also witnessing increased demand for products within our Ecoecho™ range. During the year, we launched several new products in order to meet the increased demand.
Customer relations and the brand
During 2014, we will intensify our work on strengthening our customer relations and clarifying what our brand stands for. The Duni brand is well known to our target groups, but we need to vitalise and create additional relevance for our customers. Thus, it is pleasing that, throughout 2014, we will be a main sponsor of Bocuse d’Or Europe – the European professional cooking championship. Such a sponsorship is a 'match made in heaven' for Duni's brand.
During 2013, we strengthened and restructured our commercial organization. With the aim of increasing the degree of specialization and to enhance the focus on prioritized customer segments, the sales organization for the Professional business area has been divided into two sections: one focusing on the Table Top market segment, and one which is cultivating the Meal Service market segment. The change represents a natural step following the restructuring that was commenced in 2012. It creates conditions for more efficient resource utilization and improved integration between market and sales activities. The organizational change has been implemented gradually and is expected to be fully implemented by the end of the first quarter of 2014.
Well equipped for profitable growth
Duni is now better organized, both towards the correct markets and with a focus on efficient sales work. An acquisition in 2013 has enabled us to make strides into the rapidly growing market in Southeast Asia.
Duni has value-generating growth strategies in place and is well equipped to create increased profitable growth in 2014.
Malmö, March 2014
Thomas Gustafsson
President and CEO
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