Swedish tableware and packaging company Duni (STO: DUNI) saw its shares slide on Friday after reporting second-quarter results that missed market expectations, dragged down by costs related to a planned logistics overhaul. The company, whose products are widely used in UK catering and hospitality, posted an operating margin of 6.2% for the three months to June, down from 8.1% a year earlier and below the consensus estimate of 7.0%.
The main culprit, according to the company, was the transition to a new centralised warehouse and distribution system in central Europe. Duni said the migration caused temporary bottlenecks and higher-than-expected warehousing and freight costs. 'The logistics transition has been more disruptive than anticipated in the short term, but it is a necessary investment to support future growth,' the company stated in its earnings release.
Revenue for the quarter came in at SEK 1.85bn, broadly flat year-on-year, as strong demand in the foodservice segment offset weaker sales in the consumer retail channel. The company reiterated its full-year guidance for organic sales growth of 2-4%, but acknowledged that the margin recovery would be back-end loaded. Duni expects operating margin to improve in the second half as the logistics transition stabilises.
For UK investors, Duni's performance offers a cautionary tale about the risks of supply-chain restructuring. The company is a supplier to major UK hospitality chains and contract caterers, and any prolonged disruption could affect product availability or pricing in the domestic market. However, analysts at Nordea noted that the logistics investment should eventually lower Duni's cost base, potentially boosting margins by 1-2 percentage points once fully operational.
The broader European consumer goods sector has been under pressure from rising input costs and cautious consumer spending. Duni's shares have fallen around 12% year-to-date, underperforming the OMX Stockholm 30 index. Investors will be watching the third-quarter trading update closely for signs that the logistics teething problems are easing.