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 |