Note 5 – Operating segments

Company management has established operating segments based on the information which is addressed by the strategic decision-making group and used for taking strategic decisions. Since January 1, 2014, operations in Duni are divided into five operating segments.

The strategic decision-making group addresses and evaluates the operations based on lines of business to which the same risks and opportunities apply. Duni regards the Table Top, Meal Service, Consumer, New Markets and Materials & Services lines of business as operating segments; internally within Duni they are designated as business areas.

Table Top provides Duni’s concepts and products to, primarily, hotels, restaurants and the catering trade. Table Top mainly markets napkins, tablecoverings and candles for the set table.

Meal Service provides concepts for food packaging and serving products, e.g. for take-away, fresh ready to eat food and various types of customers in the catering trade. Customers mainly comprise companies with operations in the restaurant, catering or food production industries.

Consumer provides consumer products to, primarily, the retail trade in Europe. Customers comprise grocery retail chains, as well as other channels such as various types of retail outlets, e.g. garden centers, home furnishing stores, and DIY stores.

New Markets provides Duni’s attractive quality product concepts and table setting concepts, as well as packaging solutions, focused on new markets outside Europe. In addition to customer segments such as hotels, restaurants and catering, the business area also directs its offering to the retail trade.

Materials & Services comprises those part of the business that are not accommodated within the other business areas. The business area largely comprises external sales of tissue. The production of hygiene products ceased at the end of March 2015 and is thus no longer included in the business area. Instead, the hygiene products business is reported as discontinued operations. The income statements of the business area and the Group have been recalculated and include only continuing operations. Hygiene products previously accounted for approximately 90% of the sales of Materials & Services.

With the exception of Materials & Services, the business areas largely have a common product offering. Design and packaging solutions are, however, adapted to suit the different sales channels. To a large extent, production and support functions are shared between the business areas. Sales between the business areas take place on market terms.

Shared costs have been allocated based on estimated utilization of resources, which normally corresponds to actual business volumes. The goodwill reported in the former Professional business area has –in light of the background to the goodwill – been essentially allocated to Table Top, while the goodwill attributable to the acquisition of Song Seng and Terinex Siam has been allocated to New Markets.

Group management constitutes the strategic decision-making body in Duni and decides on the allocation of resources within Duni and evaluates the results of the operations. Duni’s group management monitors the operations divided into the five business areas, which are evaluated and controlled based on the underlying operating income, i.e. reported income before restructuring expenses, non-realized valuation effects of currency derivatives, fair value allocations and amortization of intangible assets which are identified in connection with business acquisitions. Interest income and interest expenses are not allocated per segment since they are affected by measures taken by the central treasury function, which manages the Group’s cash liquidity.

Operating segments

2016, SEK m Table Top Meal Service Consumer New Markets Materials & Services Non-allocated TOTAL*
Total net sales 2 293 666 1 067 220 680 4 926
Net sales from other segments 28 628 656
Net sales from external customers 2 293 666 1 039 220 52 0 4 271
Operating income 369 41 65 23 4 502
Non-recurring items -5 -2 -27 -4 0 -38
Reported operating income 364 39 38 19 4 0 463
Financial income 1
Financial expenses -23
Income tax -107
Net income for the year 334
Total assets 2 804 187 1 172 291 33 0 4 487
Total liabilities 794 104 338 72 16 676 2 001
Investments 118 6 46 26 4 0 200
Depreciation/amortization 74 7 68 9 2 0 159
* For 2016, there is no difference between Total and continuing operations.

 

 

2015, SEK m Table Top Meal Service Consumer New Markets Materials & Services Non-allocated Continuing operations Discontinued operations TOTAL
Total net sales 2 266 616 1 070 207 654 4 813 83 4 896
Net sales from other segments 0 7 606 613 0 613
Net sales from external customers 2 266 616 1 063 207 48 0 4 200 83 4 283
Operating income 392 33 84 15 4 528 5 533
Non-recurring items -4 1 -31 -3 0 -37 -1 -38
Reported operating income 388 34 53 12 4 0 490 5 495
Financial income 2 0 2
Financial expenses -33 0 -33
Income tax -113 -1 -114
Net income for the year 346 4 350
Total assets 2 657 183 1 128 169 41 4 178
Total liabilities 796 70 316 70 28 553 1 833
Investments 102 7 42 3 4 158
Depreciation/amortization 73 7 68 5 2 155

Duni controls its operations based on what Duni refers to as underlying operating income. ‘Underlying operating income’ means operating income before restructuring expenses, non-realized valuation effects of currency derivatives, fair value allocations and amortization in connection with business acquisition. See the table below for these items.

SEK m 2016 2015
Non-recurring items
Operating income 502 528
Restructuring expenses -10 -11
Non-realized value effects of derivative instruments
Amortization of intangible assets identified in connection with the business acquisitions -27 -27
Fair value allocations in connection with business
acquisitions
-1
Reported operating income 463 490

The assets and liabilities included in each business area include all operating capital which is used – primarily inventories, accounts receivable and accounts payable. In addition, certain assets which are shared (primarily fixed assets) have been allocated. Duni has chosen not to allocate financial liabilities, with the exception of accounts payable and derivative instruments. See also the table on non-allocated liabilities below and Note 4.2.

SEK m 2016 2015
Non-allocated liabilities
Overdraft facility 14 12
Leasing 3 3
Bank loans 659 537
Total non-allocated liabilities 676 553

Total sales from external customers broken down per product group:

SEK m 2016 2015
Product group
Napkins 2 160 2 113
Tablecoverings 852 870
Candles 179 187
Serving products 421 439
Packaging solutions 372 336
Other 286 255
Sales from external customers, continuing operations 4 271 4 200
Sales from discontinued operations 0 83
Total sales 4 271 4 283

Total net sales from external customers broken down per geographic area:

SEK m 2016 2015
Sales
Sweden 318 317
Rest of the Nordic region 493 486
Germany 1 368 1 368
Rest of Central Europe 1 200 1 204
Southern and Eastern Europe 642 594
Rest of the world 249 231
Sales from external customers, continuing operations 4 271 4 200
Sales from discontinued operations 0 83
Total sales 4 271 4 283

Total tangible and intangible fixed assets broken down per geographic area:

SEK m 2016 2015
Tangible and intangible fixed assets
Sweden 1 532 1 489
Germany 918 901
Rest of Central Europe 2 1
Southern and Eastern Europe 118 113
Rest of the world 262 82
Total tangible and intangible fixed assets 2 832 2 587

Parent Company’s breakdown of net sales per operating segment and geographic area:

Parent Company, SEK m 2016 2015
Operating segment
Table Top 563 600
Meal Service 364 354
Consumer 178 199
New Markets 28 32
Materials & Services 7 7
Total net sales 1 140 1 191
Parent Company, SEK m 2016 2015
Geographic area
Nordic region 728 723
Central Europe 273 327
Southern and Eastern Europe 139 141
Rest of the world 0 0
Total net sales 1 140 1 191