Interim Report for Duni AB (publ) 1 January – 31 December 2009

2/17/2010 2:00 AM EST

1 January – 31 December 2009
- Net sales increased by 3.0% to SEK 4,220 m (4,099).
- Earnings per share for continuing operations amounted, after dilution, to SEK 7.15 (4.06).
- A very strong cash flow during the past twelve months leads to a decrease in net debt by SEK 469 m to SEK 631 m (1,100).
- The board proposes a dividend of SEK 2.50 (1.80) per share.

1 October – 31 December 2009
- Net sales increased by 1.0% to SEK 1,157 m (1,145).
- Earnings per share for continuing operations amounted, after dilution, to SEK 2.79 (0.76).
- Operating income in all business areas improved compared with the same period of last year.

Key financials
12 months 12 months 3 months 3 months
Jan-Dec Jan-Dec Oct-Dec Oct-Dec
2009 2008 2009 2008
Net sales, SEK m 4 220 4 099 1 157 1 145
Operating income1), SEK m 436 414 167 145
Operating margin1), % 10.3% 10.1% 14.4% 12.7%
Income after financial
items, SEK m 444 251 166 39
Net income2), SEK m 336 191 131 36
1) Before an unrealized valuation effect of derivatives, due to the non-application of hedge accounting, of SEK 54 m (-48) 1 January – 31 December, SEK 6 m (-39) 1 October – 31 December and before restructuring costs of SEK 2 m (41) 1 January – 31 December, SEK 0 m (41) 1 October – 31 December.
2) With respect to continuing operations.

CEO’s comments
"Duni delivered a strong fourth quarter with an operating income of SEK 167 m, compared with SEK 145 m last year. The important Christmas season turned out well with a volume development that demonstrates continued stabilization. A modest improvement was noted within the Professional business area, while Retail lost approximately 3% in volume during the period.

Sales in the quarter were up 1% at SEK 1,157 m. It is worth noting that the weak Swedish krona had significantly less impact than in preceding quarters. At fixed exchange rates, sales were unchanged. The gross margin strengthened considerably, 3 percentage points, during the final quarter of the year. This is mainly due to the fact that increases in raw material cost have not yet been impacted on the product cost. At the same time, we see an effect of cost savings, an improved product mix and, primarily within Retail, also an improved customer mix.

The Professional business area performed well. The operating margin reached 17.8%, compared with 16.2% in the fourth quarter of 2008. Central Europe continues to deliver strong results and we noted a modest volume growth on the German market. Eastern Europe experienced yet another tough quarter. But our belief in growth in the region in the longer term remains intact and, during the quarter, we have taken further steps to strengthen our sales organization, with the emphasis on Russia.

Within Retail, which is even more seasonally dependent, operating income improved somewhat with an operating margin of 10.1%. On a full-year basis, the operating margin reached 2.2%, thereby taking a small step towards our target 5%, despite tough market conditions. A strong focus on customer profitability combined with sound cost control and a systematic product range optimization has yielded results. Now the challenge is to grow with profitable customers based on a more efficient sales and marketing approach.

The improved demand for hygiene products in the Tissue business area continued during the fourth quarter. Both sales and operating margin were slightly better than last year. An operating margin of 3% is, however, below the normal historical level.

Despite the weak economy in 2009, Duni has succeeded in advancing its positions thanks to a strong brand, continued high pace of product development and a successful sales model. We are emerging strongly from the crisis which will enable us to continue our future investments for profitable growth.

At present, we still see a slow recovery in the short term. Despite this, prices of important raw materials have continued to increase rapidly, which poses a challenge when demand continues to be at a low level. It is also important to note that a stronger Swedish krona has a negative impact on Duni’s result," says Fredrik von Oelreich, President and CEO, Duni.