Scandinavian Tobacco Group - Tobacco Reporter

Sales Dip at Scandinavian Tobacco

Scandinavian Tobacco Group reported net sales of DKK1.95 billion ($281.97 million) for the first quarter of 2024, down 1 percent from the comparable 2023 period. Organically, net sales decreased 2 percent.

Organic net sales growth in the company’s handmade cigars and next-generation oral product categories was offset by decline in machine-rolled cigars and smoking tobacco. The EBITDA margin was impacted by declining volumes in a seasonally small quarter, mix changes and investments in growth, according to the company.

The group expects to deliver organic net sales growth and a material improvement in the EBITDA-margin in the second quarter, and maintains its full-year guidance.

“Despite a slow start to the year and the first quarter profitability being impacted by mix, cost inflation and investments in growth, we maintain our expectations for the full year,” said CEO Niels Frederiksen in a statement.

“Entering the second quarter, we expect the net sales development to improve and we expect to see a more normalized mix, which will impact profitability and cash-flows positively. In the quarter we have continued to execute our strategy with the opening of three Macanudo concepts stores and investments in our growth initiatives. Our growth enablers constituted around 11 percent of net sales in the quarter.”

May 3, 2024

STG Results ‘in Line with Expectations’

Scandinavian Tobacco Group (STG) delivered net sales of DKK8.7 billion ($1.27 billion) in 2023, down slightly from the previous year.

For the fourth quarter of 2023, net sales were DKK2.3 billion. Organic growth of 5 percent for net sales was driven by the group’s “growth enablers,” which in the fourth quarter accounted for close to 10 percent of group net sales, as well as an improved performance in the machine-rolled cigar business in Europe.

The growth enablers comprise three opportunities that currently represent a small proportion of the group’s overall business but that have significant potential to contribute to greater net sales and earnings, according to STG. They are continued retail expansion in the U.S., international growth in handmade cigars and development of next-generation products, such as nicotine pouches and hemp products in key markets.

For the full year 2024, net sales are expected to be in the range of DKK8.8 billion to DKK9.1 billion.

“Despite a challenging consumer environment STG delivered solid results for 2023 due to the commitment and performance of our employees across the globe,” said STG CEO Niels Frederiksen in a statement.

“We continued to execute well on our strategy with two acquisitions, and I am particularly happy to see the progress in our growth enablers, where we saw healthy growth in international handmade cigars, retail expansion and next generation products. As we move into 2024, we are increasing our investments in the growth enablers and we expect 2024 to be a year of growth for STG.”

At the annual general meeting on April 4, 2024, the board of directors will propose an increase in the ordinary dividend of 2 percent to DKK8.40 per share, complementing the up to DKK850 million share buy-back program, which was started in Nov. 2023.

The group’s annual report is here.

March 6, 2024

Sales Down at Scandinavian Tobacco

Scandinavian Tobacco Group (STG) delivered 3.9 percent negative net sales growth, an EBITDA margin of 26.5 percent and a free cash flow before acquisitions of DKK622 million ($89.36 million) for the third quarter of 2023. For the first nine months of 2023, net sales decreased by 1.8 percent to DKK6.5 billion, the EBITDA margin was 24.6 percent and the free cash flow before acquisitions was positive by DKK602 million.

Consumer trends for the cigar categories remained unchanged throughout the third quarter, according to STG. Decreasing volumes were partly offset by pricing and increasing sales from growth enablers, such as retail stores, next-generation products and international sales of handmade cigars.

STG anticipates net sales growth to recover in the fourth quarter, primarily as a result of the positive trend in North America online and retail, along with growth in Europe and comparison to a soft fourth quarter last year. The EBITDA margin is expected to be somewhat lower than in the fourth quarter last year as a result of category and country mix combined with higher investments in the growth enablers and in stabilizing the market share development in Europe branded. The main uncertainties to the full-year expectations remain the volume development in Europe branded and inventory adjustments with customers in the U.S.

STG’s board of directors has approved a share buyback program of up to DKK850 million running to the end of February 2025. “With the performance in the third quarter, we are on track to deliver on our revised guidance from August with both cash flow and margin recovering in the quarter,” said CEO Niels Frederiksen in a statement.

“Although key uncertainties persist, we continue to make good progress in the online business, and the growth enablers are also performing well. Whereas the market share for Europe branded continued to decline, we remain confident that the more aggressive initiatives launched over the past few months will support a stabilization.”

November 9, 2023

Volatile Environment Weakens STG Quarter

Scandinavian Tobacco Group (STG) posted net sales of DKK2.2 billion ($320.09 million) in the second quarter of 2023, down 2.3 percent from the comparable 2022 quarter. Its EBITDA margin was 23.1 percent, and free cash flow before acquisitions amounted to DKK159 million.

The group reports that it lowered its full-year guidance to net sales between DKK8.7 billion and DKK9 billion following a more volatile than expected trading environment. According to STG, the adjustment reflects ongoing inventory adjustments among customers and distributors, slower regain of market shares in Europe, delays in new store openings in the U.S. and changes in exchange rates.

“On the back of a volatile environment, we had to adjust our guidance even though we are continuing to make good progress on our ambition to grow the size of the company through retail expansion, acquisitions and portfolio diversification,” said STG CEO Niels Frederiksen in a statement.

“In the second quarter, we completed the second acquisition of the year and opened another Cigars International retail superstore. For the remainder of the year, we are focusing on leveraging the current strength of our online business and on building a stronger momentum in our Europe branded business.”

The company expects some recovery in net sales growth for the second half of the year as well as slightly higher free cash flow before acquisitions than in the second half of 2022.

August 29, 2023

Scandinavian Welcomes Employee Rep

The employees of the parent company Scandinavian Tobacco Group have elected a new employee representative for the company’s board of directors, according to a press release.

The newly elected employee representative, Karsten Dam Larsen, replaces the employee-elected representative Trine Eriksen, whose mandate expired in connection with an internal merger of some Danish companies in the group.

Karsten Dam Larsen joins the board of directors effective June 22 and for the remainder of the ordinary term of the current employee-elected board members, which runs until Scandinavian Tobacco Group’s annual general meeting in 2027.

June 23, 2023

Scandinavian Tobacco Reduces Share Capital

Scandinavian Tobacco Group will reduce its share capital from DKK93 million ($13.4 million) to DKK87 million by canceling some of its treasury shares, the company announced on its website. The board of directors resolved to complete the capital reduction on May 25, 2023, and the reduction of the share capital has been registered with the Danish Business Authority.

Following the capital reduction, the company’s share capital amounts to nominally DKK87 million divided into 87 million shares of DKK1 each. The total number of voting rights is 87 million.

May 25, 2023

STG Reports Modest Sales Increase

Scandinavian Tobacco Group (STG) reported net sales of DKK1.96 billion ($285.53 million) in the first quarter of 2023, up 1.3 percent from the comparable 2022 period. EBITDA before special items was DKK474 million with an EBITDA margin of 24.1 percent.

During the quarter, STG completed the acquisition of Alec Bradley, a leading player in the U.S. handmade cigar category. In April 2023, following the close of the quarter, the company announced the acquisition of XQS, a brand active in Sweden within the next-generation product category space.

While still struggling with uncertainties relating to consumer behavior, the company expects year-on-year impacts from inflation to decline over the coming quarters. “Consumer demand for handmade cigars in the U.S. in the quarter is still perceived as resilient, although volume declines remained above its structural decline trend as overflow from the exceptionally strong two years during the pandemic trails off,” the company wrote in a statement.

“STG remains on track to deliver on the 2023 guidance with results for the first quarter being up against strong comparisons in 2022,” said CEO Niels Frederiksen. “We have stabilized our production issues, but we are still recovering from this impact as well as cost inflation into 2023, affecting margins negatively. The group is making good progress on our ambition to grow the size of the company with two transactions announced within the last few months.”

May 18, 2023

Scandinavian Tobacco Group Acquires XQS

Scandinavian Tobacco Group is acquiring substantially all assets of XQS International in Sweden The transaction value consists of an upfront payment as well as an earnout agreement, STG announced in a press note.

Assuming all targets are met, the total purchase price will be about DKK150 million ($22.19 million), and it will be fully financed by cash at hand and debt.

XQS is active in smoke-free products, and its products are primarily sold in Sweden. In 2022, XQS’ reported net sales were about DKK50 million with a low single-digit EBITDA margin and a total volume of 3 million cans.

April 24, 2023

STG Announces Annual Meeting

Scandinavian Tobacco Group’s annual general meeting will be held Thursday, April 13, 2023, at 4:30 p.m. (CEST) at the office of Kromann Reumert, Sundkrogsgade 5, 2100 Copenhagen.

Instead of attending in person, shareholders have the opportunity to follow the general meeting via live webcast transmission on the Investor Portal (available at http://investor.st-group.com). The general meeting and the webcast will commence on April 13, 2023, at 4:30 p.m. (CEST).

March 21, 2023

Scandinavian Tobacco Reports 2022 Results

For the full year of 2022, Scandinavian Tobacco Group delivered a 3.5 percent negative organic EBITDA growth in line with the guidance range of minus-4 percent to 0 percent, free cash flow before acquisitions at DKK1.3 billion ($184.5 million) and an increase in adjusted earnings per share (EPS) of 8 percent. The EBITDA margin before special items was 25.9 percent. For the full year of 2023, net sales and EBITDA margin before special items are expected in the range of DKK9 billion to DKK9.3 billion and 24 percent to 25 percent, respectively.

For the fourth quarter of 2022, organic EBITDA increased by 13 percent with an EBITDA margin before special items at 25.8 percent, and the free cash flow before acquisitions was DKK530 million. These results were driven by a resilient demand for most product categories, including handmade cigars in the U.S., price increases across most product categories and continued cost efficiencies.

Net sales for the fourth quarter were DKK2.19 billion with 1.7 percent organic growth. EBITDA before special items was DKK563 million with 13.3 percent organic growth. The EBITDA margin was 25.8 percent. Adjusted earnings per share were DKK4.4. Return on invested capital was 14.3 percent.

For the full year of 2022, net sales decreased by 0.8 percent organically to DKK8.76 billion, and EBITDA before special items decreased by 3.5 percent organically to DKK2.27 billion with free cash flow before acquisitions at DKK1.26 billion.

“In the current environment, I’m pleased we can deliver a solid performance for the fourth quarter and the full year, which is in line with our financial expectations,” said CEO Niels Frederiksen. “In a challenging year, we have made good progress on our strategy ‘Rolling Toward 2025.’ Our vision is to become the undisputed and sustainable global leader in cigars, and the recent acquisition of the Alec Bradley cigar business brings us one step closer to achieving this. Our ambition of becoming a larger company, to grow our EBITDA margin over time and to generate outstanding cash flow are all important pillars for creating continuous shareholder value. I am confident we will make further progress in 2023 on our long-term strategy.”

At the annual general meeting on April 13, 2023, the board of directors will propose an increase in the ordinary dividend of 10 percent to DKK8.25 per share.

For the financial year 2023, guidance metric for the group will be changed. In the financial statements going forward, the group will report on and publish expectations for reported net sales and EBITDA margin before special items instead of organic EBITDA growth. The new guidance metrics will better reflect the group’s operational performance and will increase transparency from divisional performance to group level.

A conference call will be held on March 9, 2023, at 10:00 CEST. Dial-in information and an accompanying presentation will be available at investor.st-group.com/investor around 09:00 CEST.

March 9, 2023

Tag: Scandinavian Tobacco Group