Strong Quarter for Scandinavian Tobacco

Scandinavian Tobacco Group (STG) delivered better-than-expected results with growth in net sales, earnings and free cash flow before acquisitions. The results were driven by increased consumption of handmade cigars and a strong volume growth in the U.S. online business.

Net sales grew organically by 4.6 percent to DKK2.1 billion ($335.7 million). EBITDA before special items was DKK489 million after 19.1 percent organic growth. The EBITDA margin was 23.3 percent. Agio Cigars, which was acquired on January 2, 2020, contributed as planned.

In the first 6 months of 2020, net sales grew 4.9 percent organically to DKK3.8 billion, and EBITDA before special items grew 21 percent organically to DKK815 million.

The negative impact of the Covid-19 pandemic on STG’s business has been less profound than the company anticipated earlier in the year. According to STG, tobacco consumption across markets and categories has displayed significant resilience and increased consumption of handmade cigars brought on by the change in consumer behavior in the U.S. is likely to continue for the rest of the year.

While visibility around the financial outlook remains lower than normal and financial performance in the quarter was positively impacted by phasing in certain markets, the group raised its 2020 full-year guidance on Aug. 14  based on the year-to-date numbers, a strong performance in the month of July, a successful initial integration of Agio Cigars and assuming no material disruptions to the group’s supply-chain.

“Our strong performance in the quarter is based on an overall increased consumption of handmade cigars in the U.S. as more people work from home and by the skills and hard work of our employees around the world who have been working diligently to mitigate the impacts of the pandemic and keep the business moving forward,” said STG CEO Niels Frederiksen in a press release. “Additionally, a successful initial integration of Agio Cigars and the continued execution of ‘Fueling the Growth’ are also positively affecting our cost efficiency in the quarter.”