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2/20/2008 8:00 AM

Interim Report for Duni AB (publ) 1 July – 31 December 2007

Sales increased by 4.7% and operating margin reached 11.6%

1 July – 31 December 2007
• Net sales increased by 4.7% to SEK 2,091 m (1,997).
• Income after tax for the continuing operations amounted to SEK 96 m (15).
• Earnings per share for the continuing operations amounted, after dilution, to SEK 2.04 (0.31).
• Operating income increased to SEK 242 m (172) with an ascending operating margin from 8.6% to 11.6%.
• Continued strong growth within the Professional business area: 6.6% (3.2%) and all business areas reported improved operating income.
• The Board proposes a dividend of SEK 1.80 per share or SEK 85 m.

1 October – 31 December 2007
• Net sales increased by 1.2% to SEK 1,124 m (1,111).
• Income after tax for the continuing operations amounted to SEK 58 m (20).
• Earnings per share for the continuing operations amounted, after dilution, to SEK 1.23 (0.41).
• Operating income increased to SEK 145 m (100), with an ascending operating margin from 9.0% to 12.9%.

CEO's comments
On November 14, Duni was listed on the OMX Nordic Exchange in Stockholm. This was an important milestone in the Company's history that we are all proud of.

The main reason for our success in creating interest and confidence among investors in a tough stock market climate is that Duni continues to develop positively. During the split financial year, sales have continued to increase and profitability has further improved.

Within Professional, sales increased by 6.6% and the operating margin reached 14.6%. Growth in southern and eastern Europe has remained very strong. In addition, gross margins have strengthened across the board thanks to an improved mix, combined with increased productivity and price increases that compensate for higher raw material costs. Somewhat weaker sales growth during the final quarter of the year is due to a phase shift between the quarters.

In terms of sales, Retail performed less strongly during the second half of the year. This is mainly due to less sales on the UK market, on which there was strong price competition, and with the retail sector continuing to prioritise its own brands. On the other hand, the important markets in the Nordic region and Germany have performed well. Furthermore, it is pleasing to note the result of our changes within Retail, with a focus on category work and the brand, combined with strong cost control, have resulted in an improved operating margin.

Our sales within the Tissue business area have also enjoyed a strong half year. Sales of airlaid, primarily within the hygiene sector, have accounted for most of the increase, and the continued focus on cost efficiency has borne fruit.

The trend of rising raw material prices has continued during the year. Thus, Duni has implemented further price increases, which mainly take effect during the first quarter of 2008.

We enter the new year with a strong product range and a focused organisation. The European market has lately shown a weakening economic trend, but we consider the overall market situation for Duni’s products to be favourable and see good opportunities for continued growth, says Fredrik von Oelreich, CEO Duni.

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- New group structure and reporting
During 2006 and at the beginning of 2007, Duni completed the work of concentrating its operations to its core business, in principle corresponding to the former Duni Europe. The American businesses, Duni Corporation and Duni Supply Corporation, were sold in August 2006 and the sale of the flight catering business was completed in March 2007, when Duni AB sold the shares in deSter Holdings B.V. In order to facilitate a relevant comparison between the years, only the new Group structure is reported in full and designated in this report as "continuing operations".

- Net sales increased by 4.7%
During the period 1 July – 31 December 2007, net sales showed a growth by SEK 94 m to SEK 2,091 m (1,997). Exchange rate fluctuations had an insignificant effect on net sales.

Net sales for the period 1 October – 31 December 2007 rose by SEK 13 m to SEK 1,124 m (1,111). Exchange rate fluctuations had a marginal positive effect on net sales for the period October-December 2007.

The weaker increase in net sales during 1 October – 31 December 2007 was mainly attributable to the Retail business area and a certain phase shift between quarters.

- Improved income
Operating income (EBIT) increased to SEK 242 m (172) for the period 1 July – 31 December 2007. The gross margin was 27.1% (25.1%). The operating margin increased from 8.6% to 11.6%. Exchange rate fluctuations had an insignificant effect on operating income.

Operating income (EBIT) increased to SEK 145 m (100) for the period 1 October – 31 December 2007. The gross margin was 28.1% (24.9%). The operating margin increased from 9.0% to 12.9%. Exchange rate fluctuations had an insignificant positive effect on operating income.

Continued growth in sales combined with increased productivity and sound cost control have contributed to a substantial improvement in operating income for the period. The half-year and quarter of the previous year were affected by non-recurring costs of SEK 19 m and SEK 17 m respectively.

Income after financial items for the quarter was SEK 100 m (38). Income after tax was SEK 58 m (20).

- Business area reporting
Duni's operations are divided into three business areas.

The Professional business area (sales to hotels, restaurants and catering companies) accounted for 66.0% of Duni’s net sales during 1 July – 31 December 2007 and for 64.1% during the period 1 October – 31 December 2007.

The Retail business area (primarily focused on sales to the consumer market via retail trade) accounted for 21.1% of net sales during 1 July – 31 December 2007 and for 23.8% during the period 1 October – 31 December 2007.

The Tissue business area (production of airlaid and tissue-based material for tabletop products and hygiene applications) represented 12.9% of sales to external customers during the period 1 July – 30 December 2007 and for 12.1% during the period 1 October – 31 December 2007.

The Professional and Retail business areas have, to a large extent, a common product range. Design and packaging solutions are adapted to suit the different sales channels. Production and support functions are shared to a large degree by the business areas. Duni report the results for the business areas on an EBIT level, after allocation of common costs over the respective business areas.

- Professional business area
Sales and profitability increased favourably during the period. The markets in southern and eastern Europe demonstrated continued strong growth. The important markets of Benelux, France and UK also demonstrated very positive sales development. Net sales increased by 6.6% to SEK 1,380 m (1,295) for the period 1 July – 30 December 2007.

Operating income increased to SEK 202 m (146). The operating margin was 14.6% (11.3%). The increase in operating income was an effect of continued healthy growth, improved productivity and the full impact of the price increases, implemented to compensate for rising raw material costs.

Net sales for the period 1 October – 31 December grew by 2.6%, to SEK 721 m (703). A lower growth rate in sales was due to phasing between the quarters and that the growth during the strong Christmas season is typically somewhat lower than for the year as a whole. Operating income increased by to SEK 112 m (82) with a operating margin of 15.5% (11.7%).

- Retail business area
Net turnover fell by 0.5% to SEK 441 m (443) for the period 1 July – 31 December 2007. The lower sales where primarily due to more intensive competition in the UK. Furthermore, Retail has terminated certain unprofitable customer agreements that will affect future sales development. However, this will not have any significant impact on the operating income.

Operating income improved to SEK 14 m (1). The operating margin was 3.2% (0.2%). The improvement was contributed to successes with the category work in the Nordic region, Germany and Benelux, combined with sound cost control and enhanced productivity.

Net sales for the period 1 October – 31 December declined to SEK 268 m (282). Operating income increased to SEK 20 m (9). The operating margin was 7.5% (3.2%).

- Tissue business area
Net sales were up 4.2% to SEK 270 m (259) for the period 1 July – 31 December 2007.

Operating profit increased to SEK 26 m (25). The increase in income follows from higher volumes and improved cost efficiency, which largely compensates for the increase in raw material costs. The operating margin was 9.6% (9.7%).

Net sales for the period 1 October – 31 December increased 7.9% to SEK 136 m (126). Operating income was up to SEK 13 m (10). The operating margin was 9.6% (7.9%).

- Cash flow
The Group’s cash flow from operations during the period 1 July – 31 December 2007 was SEK 350 m (242). Cash flow including investment activities amounted to SEK 266 m (571). The same period last year included a cash flow of SEK 441 m from the divestment of the Duni Americas business area. Duni’s net investments in the continuing operations amounted to SEK 83 m (73).

- Operating capital
During the period, capital tied up in inventory was practically unchanged to SEK 500 m. Accounts receivables decreased by SEK 107 m to SEK 546 m (653), which is explained by seasonality variations.

Depreciation and write downs for the period amounted to SEK 46 m (41) for the continuing operations.

- Financial net
The financial net for the period was SEK -77 m (-144). In connection with the IPO, a refinancing of Duni's credit facilities was carried out. The new financing resulted in realisation of previous transaction costs associated with borrowing and affected the financial net for the period 1 October – 31 December by SEK 21 m. This did not affect the cash balance. The financial net for this period was SEK -45 m (-62). External interest expenses were lower than last year thanks to the new financing structure.

- Taxes
The total reported tax costs was SEK -68 m (-13), due to the significantly improved income.
During the period 1 October – 31 December, further provisions of SEK 5.5 m were made regarding a pending tax audit in Germany and there was a write-down of SEK 2.5 m regarding losses carried forward which could not be utilised by Duni's branch in Turkey, which is being wound up. On 1 January 2008, the corporate income tax rate in Germany was reduced, which will contribute to a lower tax cost for Duni.
During the period 1 July – 31 December 2007, deferred tax asset relating to losses carried forward were reduced by SEK 28 m.

- Personnel
On 31 December 2007, there were 2,001 (1,999) employees. 924 of the employees were engaged in production. Duni’s production units are located in Bramsche in Germany, in Poznan in Poland and in Bengtsfors in Sweden.

- Acquisitions
No acquisitions were carried out during the period.

- New establishment
No new establishments were made during the period.

- Risk factors for Duni
A number of risk factors may affect Duni’s operations in terms of both operational and financial risks. Operational risks are normally managed by the respective operating unit and financial risks by the Treasury Department.

Operational risks
Duni is currently exposed to risks which are directly connected to the ongoing business operations. Managing the impact of fluctuations in the prices of raw materials constitutes an important element for maintaining profitability. The development of attractive collections in particular the Christmas collection is fundamental for Duni achieving strong sales and income growth.

Financial risks
Financial risks are primarily risks directly related to exchange rates, interest rates and credit risks. Risk management within Duni is regulated by a finance policy approved by the Board of Directors. The risks for the Group are in all essential respects also relevant to the parent company. Duni’s management of financial risks is described in greater detail in the Annual Report of 30 June 2007.

- Transactions with related parties
“Related parties” means Duni Holding AB. During the period, financial transactions have been carried out. Duni AB has paid a net amount of SEK 11 m on behalf of Duni Holding AB, which was further invoiced to Duni Holding AB.

- Changes in Board of Directors
At Extraordinary General Meeting held on 10 August 2007, Pia Rudengren and Harry Klagsbrun were elected members of Duni’s Board of Directors. Pia Rudengren is the Chairman of Q-Med AB, and a member of the Boards of Biophausia AB, Zodiak Television AB and Varyag Resources AB. Harry Klagsbrun is employed at EQT Partners AB. Harry Klagsbrun was previously vice President and a member of the Group Executive Committee at SEB, in charge of its Asset Management Division. Harry Klagsbrun has previously worked as CEO of the Alfred Berg Group. Pia Rudengren and Harry Klagsbrun brings capital markets and SSE listing experience to the Duni Board.

- Events post 31 December
Commencing 1 January 2008, Duni's financial year is once again the calendar year.

- Earnings per share
The period's earnings per share for continuing operations, after dilution, were SEK 2.04 (0.31), equal to SEK 2.04 (0.32) per share before dilution.

- Proposed dividend
The Board of Directors proposes a dividend of SEK 1.80 per share or SEK 85 m. The Board assess that the proposed dividend provides scope for the Board to fulfil its obligations and carry out planed investments.

12 May 2008 is proposed as the record date for the right to receive dividends.

- Annual General Meeting 2008
Duni AB (publ)'s Annual General Meeting will be held at 3.00pm on 7 May 2008 at Palladium (Södergatan 15) in Malmö. The Annual Report will be available for shareholders latest two weeks before the Annual General Meeting. Shareholders wishing to submit a proposal to Duni's Nomination Committee or who wish to have a matter addressed at the Annual General Meeting may do so by e-mail to valberedning@duni.com or bolagsstamma@duni.com or by letter to Duni AB, Att: Valberedningen or Bolagsstämma, Box 237, 201 22 Malmö, not later than 19 March 2008.

- Composition of the Nomination Committee
The Nomination Committee is a shareholder committee which is responsible for nominating those persons who are to be proposed to the Annual General Meeting for election to Duni's Board of Directors. The Nomination Committee submits proposals regarding the Chairman of the Board and other directors. It also produces proposals regarding fees to the Board including the allocation between the Chairman and other directors, as well as any compensation for committee work. The proposals are presented at the Annual General Meeting.
Duni's Nomination Committee for the 2008 Annual General Meeting consists of four members: Peter Nilsson (Chairman of Duni AB and Chairman of the Nomination Committee), Harry Klagsbrun (EQT Partners), Rune Andersson (Mellby Gård) and Anders Oscarsson (SEB Fonder).

- Interim reporting
Quarter I 29th of April, 2008.
Quarter II 30th of July, 2008
Quarter III 29th of October, 2008

- Outlook for 2008
The European market has lately shown a weakening economic trend, but Duni continues to see favourable market conditions for its products. Duni has announced new price increases which take into consideration, amongst other things, continued increases in raw material prices.

- The parent company
Net sales amounted to SEK 701 m (614) for the period 1 July – 31 December 2007. Income after financial items amounted to SEK - 81 m (- 111). The income includes a capital gain from the sale of Duni Americas of SEK 15 m (52).

The external interest expenses were higher in the previous year due to the previous structure, since both the Duni Americas and de Ster business areas were still in the Company.

Net debt amounts to SEK 1,158 m, of which SEK 73 m is attributable to subsidiaries. Net investments amounted to SEK 16 m (18).

- Accounting principles
This interim report is prepared in accordance with IAS 34 and according to the Swedish Financial Accounting Standards Council’s recommendations RR 31 and, with regard to the parent company, RR 32. The accounting principles applied comply with those described in the annual report of 30 June 2007.

- Information in the report
The information is such that Duni is obliged to publish pursuant to the Securities Markets Act. The information will be disclosed to the media for publication at 8.00am on 20 February. This report has been prepared in both a Swedish and an English version. In the event of any discrepancy between the two, the Swedish version shall apply.

- Report from the Board and the CEO
The Board and the CEO certify that this report provides a true and fair view of the Group’s financial position and results and describes the material risks and uncertainties facing the Group and the companies included in the Group.

Malmö, 19 February 2008

Peter Nilsson, Chairman of the Board
Sanna Suvanto-Harsaae, Board Member
Harry Klagsbrun, Board Member
Göran Lundqvist, Board Member
Dr. Gerold Linzbach, Board Member
Gun Nilsson, Board Member
Pia Rudengren, Board Member
Göran Andreasson, Employee Representative
Per-Åke Halvordsson, Employee Representative
Fredrik von Oelreich, President and CEO

Duni AB (publ)
Box 237
201 22 Malmö
Tel.: +46 40-10 62 00
www.duni.com
Registration no.: 556536-7488

Additional information is provided by:
Fredrik von Oelreich, President and CEO, Tel.: +46 40 10 62 00
Johan L. Malmqvist, CFO, Tel.: +46 40-10 62 00