Directors’ Report – The Group

Duni is one of Europe’s leading suppliers of inspiring table setting concepts and creative packaging solutions for take-away. The Group’s strong position has been achieved by focusing on food, people and design and the ambition to always help the customer create a positive food and drink experience. A combination of high quality products, a well-reputed brand, established customer relations as well as a strong local presence on most European markets have resulted in Duni being a market leader in Europe. Operations are conducted within five business areas: Table Top, Meal Service, Consumer, New Markets and Materials & Services.

The Table Top business area offers Duni’s concepts and products primarily to hotels, restaurants and catering companies. Table Top primarily markets napkins, tablecoverings and candles for the set table. Duni is a market leader within the premium segment in Europe. The business area accounted for approximately 54% (54%) of Duni’s net sales during the year.

The Meal Service business area offers concepts for food packaging and serving products for, e.g. take-away, fresh ready-to-eat food and various types of catering. Customers are mainly companies operating within the restaurant, catering or food production industries. As a niche player in this area, Duni holds a leading position in the Nordic region and has a clear growth agenda on prioritized markets in Europe. The business area accounted for approximately 16% (15%) of Duni’s net sales during the year.

The Consumer business area offers consumer products primarily to the retail trade and  retail outlets in Europe. Customers comprise grocery retail chains, as well as other channels such as various types of retail outlets, for example, garden centers, home furnishing stores, and DIY stores. The business area accounted for approximately 24% (25%) of Duni’s net sales during the year.

The New Markets business area offers Duni’s concepts of attractive quality products and concepts for table setting and packaging, focused on new markets outside Europe. In addition to customer segments such as hotels, restaurants and catering, the business area also addresses its offering to the retail trade. The acquisition of 60% of Terinex Siam in Thailand, which was conducted in August 2016, has been integrated during the year and is a part of New Markets. The business area accounted for approximately 5% (5%) of Duni’s net sales during the year.

The Materials & Services business area comprises those elements that are not accommodated in the other business areas. The business area mainly comprises sales of tissue and airlaid to external customers. Previously, sales of hygiene products were also included; however, these products were discontinued entirely during the first quarter of 2015. The hygiene products business was reported in 2015 as a discontinued operation. The consolidated income statements for 2015 and the years before then have been recalculated and include only continuing operations. The business area accounted for approximately 1% (1%) of Duni’s net sales during the year.

Product and concept development

Within product development, Duni’s work involves new designs, form and color schemes, as well as new materials and solutions. Duni focuses on product and concept development, and possesses a unique strength within form, design and functionality. Duni’s innovation process is characterized by the ability to quickly and flexibly develop new collections, concepts and products which create a clear added value for the various customer categories on the market.

Designs for Duni®

In order to strengthen the Duni brand as an innovative player, Designs for Duni® was created in 2013. This is a unique concept whereby Duni develops products in cooperation with well-known European designers and design houses. The concept positions Duni as the leading design partner at the retailers. It creates an opportunity for higher margin contracts, while at the same time strengthening drawing power and a higher degree of innovation in the product range. During 2016, a new collection was launched together with Jobs, a Swedish brand known for its 40’s and 50’s designs produced by the sisters Lisbet and Gocken Jobs.

Continuous innovation

Products in the Duni ecoecho® premium range are manufactured in innovative materials with a clearly improved environmental profile compared with the standard product range. Focus is placed on aspects such as resource efficiency, renewability, compostability, and responsible forest management.

During 2016, Duni continued to produce products with a high environmental profile. These included, for example, products made from the environmentally conscious material bagasse, as well as an entire compostable range of single-colored napkins carrying the OK Compost® environmental mark. During the year, the collection was expanded to also include several designed products.

Duni has a number of products that replace linen. The tablecovering material Evolin® combines the look and feel of textile and linen tablecoverings with the advantages of single-use products. Evolin is aimed at restaurants and catering firms that perceive an advantage in using linen-like single-use material.

Market development

Global economic prospects are one of the main indicators as regards growth on the HoReCa market. Broad economic growth is positive for the industry. It stimulates consumption within the HoReCa sector, as well as demand for single-use products. The long-term trend continues to point towards an increasing number of restaurant visits and an increase in the number of hotel nights, driven mainly by increasing urbanization, changed consumption patterns and a lifestyle trend whereby consumption of meals on the go is increasing. New restaurant concepts, such as ready-to-eat food in grocery stores, take-away and fast service restaurants are continuing to increase and gain ever larger market shares. After several years of stagnating economic growth, consumers on the mature European markets are showing greater interest in seeking value, and HoReCa companies are competing harder to attain an even greater share of the total mealtime market. On the customer side, continued structural changes are taking place within the restaurant industry, with restaurant chains that operate under joint brands growing at a faster rate than the market in general. This is a development which favors Duni’s sales of customized concepts.

Duni’s product category in the retail trade focuses primarily on low-price products and private labels. Distribution of parts of the category has also expanded into new channels, such as gardening centers, home furnishing stores and DIY stores. The acquired company Paper+Design is successful in cultivating these retailer categories.

Another sector of the market comprises of the serving of food to companies and institutions. It is primarily the care sector that is taking an increasingly large share of the segment, and the market has experienced stable growth in recent years. Here, there is clear potential for Duni to create growth.

Prospects for the future

The HoReCa industry is greatly influenced by lifestyle changes and trends. Long-term demand is being driven primarily by greater purchasing power combined with changed habits, including an increased proportion of meals being eaten outside the home. In addition, demand for Duni’s products benefits from the fact that an increasing number of restaurants are choosing to replace linen with premium quality single-use solutions. Demand for brand-profiling single-use products is also increasing. Furthermore, the trend towards increased accessibility and convenience connected with meals is continuing, and thus the take-away alternative is continuing to grow. This trend is reinforced by the increase in the number of single households and the fact that urbanization is continuing. The number of restaurant chains that wish to profile their brands through single-use products is also increasing, and this is an area where Duni is well positioned.


The annual report covers the 2016 financial year. ‘Preceding year’ means the 2015 financial year. Duni controls its operations based on what Duni refers to as operating income. Operating income means operating income before restructuring costs and non-realized valuation effects of currency derivatives, fair value allocations and amortization of intangible assets identified in connection with business acquisitions. The hygiene products business that was discontinued at the beginning of 2015 has been removed from the comparison years and is reported as discontinued operations on a line after net income for the year.

Restructuring costs amounted to SEK -10 (-11) m. These relate primarily to organizational changes and efficiency improvements within production in Germany as well as within sales in the Nordic Region. This represents the final part of the program of organizational changes and efficiency improvements that started in 2015, at that time mainly within the Consumer business area and with respect to organizational changes in management. For more information on restructuring costs, see Note 9.

The non-realized valuation effect of currency derivatives reported in the operating income amounts to SEK 0 (0) m.

The operating income is commented on in the text below, exclusive of these non-recurring items.

Bridge between operating income and EBIT

SEK m 2016 2015
Operating income 502 528
Non-realized valuation changes, derivative instruments
Restructuring costs -10 -11
Amortization of intangible assets identified in connection with business acquisitions -27 -27
Fair value allocation in connection with acquisitions -1
Reported operating income (EBIT) 463 490

Net sales

Duni’s net sales from continuing operations amounted to SEK 4,271 (4,200) m, an increase in sales of 1.7%. At unchanged exchange rates from the preceding year, net sales would have been SEK 85 m higher compared with the outcome for 2015, representing an increase in sales of 2.0%. Organic growth, excluding structural changes, amounted to 1.2% at fixed exchange rates.

The Table Top business area reported net sales of SEK 2,293 (2,266) m. At fixed exchange rates, this corresponds to an increase in sales of 1.5%. The business area experienced a weak start to the year in terms of sales but recovered well. Sales in all regions were on par with, or higher than, the preceding year. Demand within the restaurant sector gradually improved during the year.

The Meal Service reported net sales of SEK 666 (616) m. At fixed exchange rates, this corresponds to an increase in sales of 7.9%. A positive trend on all markets resulted in a continued strong rate of growth.

Within the Consumer business area, net sales amounted to SEK 1,039 (1,063) m. At fixed exchange rates, this corresponds to a decrease in sales of 1.4%. The retail trade in Europe is continuing to grow at an annual rate of approximately 2%, while Duni’s sales were slightly lower than in the preceding year. During the year, it was not possible to fully compensate with new customers for the loss of several major customers in 2015. Focus has been placed on working closer to the customers in order to demonstrate the strength in being a total supplier for the set table, and not merely for selective parts.

The New Markets business area reported net sales of SEK 220 (207) m.  At fixed exchange rates, this corresponds to an increase in sales of 6.5%. The acquisition of Terinex Siam, Thailand has been consolidated in New Markets since August. The acquisition has further strengthened Duni’s position in Asia and it is also here that much of the work on developing Duni’s premium range is being concentrated. The markets in Russia and the Middle East experienced a weak start to the year, with stabilization during the second half of the year.

The Materials & Services business area reported net sales of SEK 52 (48) m. At fixed exchange rates, this corresponds to a decrease in sales of 9.0%.


Operating income for continuing operations amounted to SEK 502 (528) m. At unchanged exchange rates from the preceding year, operating income for the year would have been SEK 1 m lower. The gross margin was 28.8% (29.6%) and the operating margin weakened from 12.6% to 11.8%. Margins on the UK market were adversely affected by the weak pound. Table Top was affected by weak demand on the German market during the first half of the year. During the year, Duni continued with great success in entrenching its unique position within environmentally conscious materials. This explains a large part of the increase within the Meal Service business area. The integration of Terinex Siam, Thailand, is proceeding according to plan and current work is focused on improved production efficiency as well as strengthening Duni’s presence on neighboring markets such as Southeast Asia and Australia.

The finance net was SEK -22 (-31) m. The negative translation effects were SEK 10 m better than in the preceding year. Income before tax for continuing operations was SEK 441 (459) m.

A tax expense of SEK 107 (113) m is reported for the financial year. The effective tax rate is 24.3% (24.6%). The tax expense for the year includes adjustments and one-off effects from the preceding year of SEK 0.4 (-1.4) m. During the year, the deferred tax asset related to loss carry-forwards was reduced by SEK 35 (29) m and is expected to be fully utilized during 2017.

Net income for the year amounted to SEK 334 (346) m, of which non-controlling interests amounted to SEK 2 m in 2016. Net income for the year for discontinued operations amounted to SEK 0 (4) m.


The Group’s net investments for continuing operations excluding acquisitions amounted to SEK 176 (161) m. This is a somewhat higher investment level due to an investment in capacity and efficiency at the paper mill in Skåpafors, Dalsland. Apart from this, the investments related primarily to the Group’s production plants in Poland, Germany and Sweden. Depreciation/amortization as well as the reversal of write-downs in respect of continuing operations amounted to SEK 159 (158) m.

Cash flow and financial position

The Group’s operating cash flow was SEK 446 (623) m. Apart from a low contribution from the business, cash flow was negatively affected at the beginning of the year by a major payment of income tax with respect to the years 2014 and 2015. The acquisition of Terinex Siam, Thailand affected cash flow by SEK -103 m. During the year, a supplemental purchase price of SEK 21 m was paid out with respect to the acquisition of Duni Song Seng in Singapore.

The Group’s balance sheet total on December 31 amounted to SEK 4,487 (4,178) m.

The Group’s interest-bearing net debt amounted to SEK 757 m, compared with SEK 584 m on December 31, 2015.

Operational and financial risks

Duni is exposed to a number of operational risks which it is important to manage.

The development of attractive product ranges, particularly the Christmas collection, is very important in order for Duni to achieve satisfactory sales and income growth. Duni addresses this issue by constantly developing its range. Approximately 25% of the collection is replaced each year in response to, and to create, new trends.

A weaker economic climate over an extended period of time in Europe could lead to a reduction in the number of restaurant visits, reduced consumption and increased price competition, which might impact on volumes and gross margins.

The Board’s audit committee conducts annual reviews of the Company’s operational and financial risks based on the risk analysis produced by management. This also includes environmental risks as well as risks related to entry onto new markets such as anti-corruption, fraud and social aspects such as conditions from an employment law perspective.

Duni’s finance management and its handling of financial risks are regulated by a finance policy adopted by the Board of Directors. This work is presided over and managed by the Group’s Treasury, which is included as a unit within the Parent Company. The Group divides the financial risks into market risks (consisting of currency risks, price risks and interest rate risks), as well as credit risks and liquidity risks. These risks are controlled in an overall risk management policy which focuses on unforeseeability on the financial markets and endeavors to minimize potential adverse effects on the Group’s financial results. See also Note 3 regarding risk management.

Legal disputes

Upon closing of the accounts, there were a few disputes with customers and suppliers involving small amounts. Provisions have been made in the annual accounts which, in the management’s opinion, cover any negative outcome of these disputes. See also Note 35, Pledged assets and contingent liabilities.


In accordance with an adopted environmental strategy, Duni works according to policies and goals covering development and information concerning products, efficient and controlled production, as well as knowledge and communication from an environmental perspective. Prior to new contracts for the purchase of goods for resale, an audit is first carried out at the supplier’s plant based on the code of conduct. Audits are also carried out on a regular basis at existing suppliers based on a risk assessment which takes into account the suppliers’ location, previous results and type of production. The audit focuses on human rights such as the risk of child labor and involuntary labor, as well as working conditions, pay conditions and working hours.

Duni has also been granted FSC® certification, license number FSC-C014985 (Forest Stewardship Council) certification regarding the sale, production and distribution of, among other products, napkins, tablecoverings and serving products. This means that Duni’s cellulose products are sourced from sustainable forests.

Rexcell Tissue & Airlaid AB conducts two operations which are subject to permit requirements pursuant to the Swedish Environmental Code. The Group holds permits for the production of 65,000 tonnes of wet laid tissue per year and 52,000 tonnes of airlaid tissue per year at the mill in Skåpafors and 10,000 tonnes of airlaid tissue in Dals Långed. The mills hold permits issued by the Administrative Board in Västra Götaland County regarding emissions of carbon dioxide, CO2. The allocation of emission rights comprises 2,196 tonnes in 2016 for Dals Långed and 18,794 tonnes in 2016 for Skåpafors. The total number of emission rights will decline each year up to 2020, when Dals Långed will be granted emission rights equivalent to 2,027 tonnes per year and Skåpafors 17,349 tonnes per year. Since the plant in Dals Långed is not in operation, the emission rights belonging to Dals Långed will be dormant as from 2017. In total, 11,367 tonnes were used during 2016.

Employees and work environment

Duni operates based on four core values which provide guidance in the day-to-day work and clarify how things are done “the Duni way”. The core values – Ownership, Added value, Open mind, and Will to win – find concrete expression in a number of operational principles which, taken together, are aimed at creating profitable growth, organizational efficiency, and increased customer satisfaction.

Good working conditions, clear goals and structures combined with regular support to employees constitute the foundations for creating growth and profit. Human Resources (HR) has the task of supporting management, supervisors and employees in order to stimulate employee development, increase involvement, and drive and coordinate change processes. HR also assists in the work of ensuring a sound work environment for all employees. Since 2014, development plans have been gradually produced whereby all employees in the organization shall have clear, individualized goals which are followed up. Duni’s Code of Conduct for employees also includes the work environment. An employee survey covering all employees in the Group is carried out every second year, and was carried out in 2016. The survey includes questions regarding the employees’ work environment. Systematic work on the work environment is carried out at Duni’s plants, and is audited through internal audits based on Duni’s Code of Conduct. Each month, Group management and the Board receive key statistics concerning accidents and sick leave due to accidents at the plants.

Duni’s Board has a clear policy that all employees must be aware of, and prevent, corruption. In addition to compliance with the Code of Conduct, there is also a business ethics policy for all employees and suppliers. This policy states how Duni as a company, and its employees, must observe accepted business practice and act in accordance with the Group’s ethical standards and expectations. The business ethics policy states particularly how managers and employees are to act in contact with customers, suppliers, owners, competitors and other external parties. Duni also expects that all third parties, suppliers and external parties with whom Duni co-operates shall comply with Duni’s ethics policy and applicable legislation in each country.

Duni also has a whistleblower policy which clarifies that any suspicion of fraudulent behavior, corruption or other similar situations that are witnessed must be reported without delay. Reporting may take place anonymously and the recipients are always the HR Director, the CFO and the Chairman of the Board’s Audit Committee.

On December 31, 2016 there were 2,279 employees. On December 31, 2015 there were 2,082 employees. 966 (901) of the employees are employed within production. Duni’s production plants are located in Bramsche and Wolkenstein in Germany, Poznan in Poland, Bengtfors in Sweden and in Bangkok, Thailand.

The Board’s work

Since the Annual General Meeting held on May 3, 2016, the Board of Directors comprises five members and two employee representatives. Two alternate employee representative also always attend board meetings. During the year, the Board held nine meetings at which minutes were taken. For further information on the work of the Board, see the Corporate Governance Report.

Remuneration for the CEO and senior executives

Principles regarding the CEO and senior executives, as proposed to the 2017 Annual General Meeting, to be applicable in 2017, correspond in all essential respects to the established principles which were adopted by the 2016 Annual General Meeting. For information regarding remuneration to the CEO and senior executives and relevant guidelines, see the Corporate Governance Report and Note 13.

Foreign companies and branches

Duni conducts operations under its own management and has employees in 20 countries.