For the first quarter of 2021, Scandinavian Tobacco Group (STG) delivered a stronger than expected organic growth in net sales and earnings before interest, taxes, depreciation and amortization (EBITDA). The results were driven by a continued high demand in handmade cigars in the U.S., synergies from the integration of Agio Cigars and the transformational program Fueling the Growth, according to STG. Additionally, the results were positively impacted by timing of orders between quarters.
Net sales were DKK1.88 billion ($304.53 million), reflecting with 12.5 percent organic growth. EBITDA before special items was DKK527 million, with 49.1 percent organic growth. The EBITDA margin was 28 percent compared with 18.5 percent in the comparable 2020 quarter.
The integration of Agio Cigars is ahead of plan, according to STG, which has revised expected cost savings upward.
“Demand and consumer behavior remain positively impacted by the Covid-19 pandemic with high consumption of handmade cigars and smoking tobacco products in the U.S.,” the company wrote in a press release. “The integration of Agio Cigars is running ahead of schedule and is now expected to deliver about DKK100 million in synergies for the year and about DKK250 million run-rate by the end of 2022. The combined market shares for machine-rolled cigars in key European markets continue to develop satisfactorily.”
Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well.
At the same time, STG noted that Covid-19 is creating significant uncertainty in the second half of the year. “Consumption of handmade cigars and purchasing patterns between online and brick-and-mortar retail stores in the U.S. cannot be forecasted with the normal level of accuracy,” the company stated. “Both are factors with significant impact on the group’s performance. Consequently, a range is introduced for the expected organic EBITDA performance as well as the cash flow before acquisitions.
For 2021, the company now expects organic EBITDA growth in the range of 12 percent to 18 percent, up 7 percent over the earlier forecast.
“Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well,” said STG CEO Niels Frederiksen. “For the first quarter of the year, we can present strong growth in both net sales and EBITDA. I am particularly pleased to see that numerous initiatives across the organization are resulting in strong net sales, growing market shares as well as increased operational performance and efficiency.”