Scandinavian Tobacco Group - Tobacco Reporter

Scandinavian Completes Share Buyback

Scandinavian Tobacco Group has completed its share buyback program, which was initiated on March 9, 2022, and which was increased on May 19, 2022, to an aggregated value of up to DKK1 billion ($143.08 million). As of Feb. 28, 2023, Scandinavian Tobacco Group has purchased a total of 6,114,093 shares with an aggregated transaction value of DKK775 million.

The purpose of the program has been to adjust the company’s capital structure and meet obligations relating to the group’s share-based incentive program. At the annual general meeting on April 13, 2023, the board of directors intends to propose a reduction of the company’s share capital as result of the share buyback.

In related news, Scandinavian Tobacco Group completed the acquisition of substantially all assets of Alec Bradley Cigar Distributors and associated companies.

March 1, 2023

General Cigar Appeals Cohiba Ruling

Scandinavian Tobacco Group’s (STG) General Cigar Co. has appealed the Trademark Trial and Appeal Board’s (TTAB) December 2022 cancelation of the Cohiba trademark registration in the United States.

“By initiating this lawsuit to appeal the TTAB decision and to obtain a declaration of its rights, General Cigar expects the court will ultimately rule it has exclusive U.S. rights to the Cohiba marks,” Regis Broersma, president of STG’s North America and Rest of the World division was quoted as saying by Cigar Journal.

STG and Empresa Cubana del Tabaco (Cubatabaco) have fought over the U.S. rights to the Cohiba trademark since 1997. The TTAB sided in favor of the Cuban cigar conglomerate in its claim on the name, saying that General Cigar Co.’s registrations on the Cohiba trademark are to be canceled due to a violation of an international agreement that dates back to 1929.

However, General Cigar believes the TTAB decision is improperly based on the re-litigation of a claim that was decided in General Cigar’s favor by a U.S. Court of Appeals for the 2nd Circuit more than a decade ago.

In February 2005, the 2nd Circuit Court of Appeals in New York ruled unanimously in favor of General Cigar.

While there are more trademark conflicts between Cuban and American cigar companies, Cohiba is a unique case due to both its prominence on the global stage and its creation by the state-run tobacco company after the Cuban Revolution, whereas other brands with Cuban roots that General Cigar Co. owns, such as Partagas, Hoyo de Monterrey and La Gloria Cubana, were assumed by the Cuban government in 1959.

While the lawsuit moves forward, General Cigar said it will continue to manufacture, market, sell and enforce its Cohiba trademarks.

February 27, 2023

Scandinavian to Acquire Alec Bradley Cigars

Scandinavian Tobacco Group has agreed on the terms and conditions for the acquisition of substantially all assets of Alec Bradley Cigar Distributors Inc. and associated companies, according to a company press release.

The transaction is valued at $72.5 million (DKK500 million) on a debt and cash-free basis (the enterprise value) and is expected to be closed shortly. The acquisition will be fully financed by cash at hand and debt.

The Alec Bradley brand is a material addition to the company’s portfolio of premium cigars.

Based in Fort Lauderdale, Florida, Alec Bradley reported annual net sales in 2021 of $25 million and an EBITDA margin before special items of 24 percent. Both net sales and EBITDA margin improved during 2022.

CEO of Scandinavian Tobacco Group Niels Frederiksen said, “The acquisition of the Alec Bradley cigar business is another important step toward our ambition of becoming the undisputed and sustainable global leader in cigars.

Through this bolt-on acquisition, we will expand our portfolio of highly regarded premium cigars in the U.S. and international markets, delivering material value to our shareholders. We will also leverage the Alec Bradley brand portfolio to deliver increased excitement to the handmade cigar category through product innovation and brand activations, benefitting both the cigar enthusiasts and our trade partners.”

The transaction is expected to be margin accretive, EPS accretive and ROIC accretive when fully integrated. The company leverage ratio (net interest-bearing debt/EBITDA) will, when the transaction proceeds to completion, increase by less than 0.2x.

At the end of the third quarter of 2022, the company’s leverage ratio was 1.9x. Further details of the expected financial impact of the acquisition will be communicated in connection with the announcement of Scandinavian Tobacco Group’s full-year 2022 results on March 8, 2023.

February 23, 2023

STG: Stable Sales Despite Headwinds

Scandinavian Tobacco Group’s (STG’s) organic net sales declined by 1 percent in the third quarter of 2022, in line with the company’s performance expectations for the full year.

Consumption in the company’s product categories has remained resilient in recent months, according to STG. When combined with strong price management, this has resulted in organic net sales remaining relatively stable as compared to last year, despite the third quarter being impacted by the return to the prepandemic market mix, the firm explained in a press note.

STG said that increasing cost inflation across the entire value chain and continued promotional pressure in the online business is negatively impacting the group’s EBITDA margin. While the group has been working to improve productivity in its supply chain, STG expects these issues to persist into 2023 due in part to its complex portfolio.

“In the current environment, I’m pleased with our performance for the third quarter, delivering solid cash flows and positive EPS growth.”

Niels Frederiksen, CEO, STG

“In the current environment, I’m pleased with our performance for the third quarter, delivering solid cash flows and positive EPS growth, which is in line with our financial expectations for the full year of 2022,” said STG CEO Niels Frederiksen. “We are driving productivity improvements in the supply chain, an issue we have faced in recent quarters, which continues to be our most important short-term priority.”

“While the supply chain issue and the current economic backdrop continue to be challenging, we are encouraged by the progress we are making on our Rolling Toward 2025 Strategy. Our new superstore in San Antonio is off to a very strong start, and our Growth Incubator completed its second product launch in the third quarter, with early but encouraging results. As the unprecedented inflationary dynamics continue to play out, we will use the offsetting actions at our disposal to manage in the short term and are confident in our ability to deliver on our long-term strategy and value aspirations for our shareholders.”

November 10, 2022

STG’s Quarterly Sales Down in ‘Difficult’ Year

Scandinavian Tobacco Group’s (STG) net sales and EBITDA declined 2 percent and 15 percent, respectively, for the second quarter of 2022 against a strong second quarter last year. The company cited lower-than-expected productivity in its supply chain, resulting in lower production volumes and higher costs. While anticipating improvements in the second half of the year, STG expects the delay to impact its full-year net sales and costs negatively.

According to STG, the level of the production backlog was almost DKK150 million ($20.12 million) by the end of July. “However, as the improvements kick in combined with pricing initiatives across the product categories and easier year-on-year comparisons, we expect to return to EBITDA growth in the second half of the year,” the company wrote in a statement.

“2022 has turned out to be a difficult year for Scandinavian Tobacco Group, and we have had to adjust our full-year expectation for organic EBITDA growth,” said STG CEO Niels Frederiksen. “This development is disappointing and is primarily driven by temporary challenges in our supply chain and to a lesser extent by more cautious consumer behavior especially in the important U.S. handmade cigar market.

“Still, we maintain our financial expectations of delivering strong cash flows and positive EPS growth for 2022, and we continue to implement our Rolling Toward 2025 strategy. The acquisition of Room101 as well as the continued expansion of our retail footprint in the U.S. are good examples of this. Overall, we remain confident in the strength of our underlying business and our cash flow.”

August 25, 2022

Scandinavian Tobacco Reduces Share Capital

Participants in the March 31 annual general meeting of Scandinavian Tobacco Group adopted a proposal by the board of directors to reduce the company’s share capital by nominally DKK4.5 million ($638,224) from nominally DKK97.5 million to nominally DKK93 million by canceling some of the company’s treasury shares.

On May 4, the board of directors resolved to complete the capital reduction, 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 DKK93 million divided into 93 million shares of DKK1 each. The total number of voting rights is 93 million.

The updated Articles of Association can be found on the company’s website.

May 5, 2022

Strong Cigar Sales Boost STG’s Results

Scandinavian Tobacco Group (STG) reported net sales of DKK8.23 billion ($1.21 billion) in 2021, up 4.5 percent organically from the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) before special items grew by 18.4 percent organically to DKK2.23 billion, with free cash flow before acquisitions stable at DKK1.39 billion.

Net sales for the fourth quarter were DKK2.01 billion, reflecting 1.8 percent organic growth over the comparable quarter in 2020. EBITDA before special items was DKK474 million, up from DKK397 million in the previous year’s quarter.

The fourth-quarter results were driven by continued strong demand for handmade cigars in the U.S., price increases across most product categories and continued cost efficiencies. The integration of Agio Cigars approaches completion, according to STG.

“We deliver particularly strong financial results for 2021 based on a strong demand for handmade cigars in the U.S., Agio synergies and a favorable market mix,” said STG CEO Niels Frederiksen in a statement. “During the year, we showed good progress on our strategy ‘Rolling Toward 2025’ across the business and edged closer to our vision of becoming the undisputed global leader in cigars.”

STG expects organic EBITDA growth in 2022 to be in the range of 0 percent to 6 percent.

At the annual general meeting on March 31, 2022, the board of directors will propose an increase in the ordinary dividend of 15 percent to DKK7.50 per share. The board has also approved a new share buyback program with a value of up to DKK700 million to adjust the capital structure and meet obligations relating to the group’s share-based incentive program.

March 9, 2022

Henrik Brandt Tapped as Next STG Chairman

Scandinavian Tobacco Group’s (STG) board of directors intends to elect Henrik Brandt as chairman following Nigel Northridge’s decision to retire at the company’s next annual general meeting.

Northridge has informed the board of directors that he will not stand for reelection at the annual general meeting on March 31, 2022.

Northridge joined the board of directors in 2016 and has been chairman of the board of directors since 2017.

Subject to the elections at the annual general meeting in March 2022, the board of directors will elect Brandt as the new chairman of the board of directors. Brandt joined the board in 2017 as vice chairman.

“Nigel has been the chairman during a period of significant change and growth for Scandinavian Tobacco Group,” said Brandt in a statement. “During his tenure, the company has developed from being newly listed to a stronger company with a clear strategy in place for the future. Nigel deserves a lot of credit for having led this development. I also wish to thank the board of directors for their confidence in me as they express their intention to elect me as the future chairman.”

“It has always been my desire to retire in my mid-60s in order to spend more time with my wife and grandchildren,” said Northridge. “I have been honored to chair the board of directors of Scandinavian Tobacco Group for the past five years, and I have throughout enjoyed the cooperation with the board of directors and the strong leadership of the company. I am confident that Scandinavian Tobacco Group is well-positioned for continued growth and development. I wish my successor, my colleagues on the board of directors, the management and all employees of the company the very best for the future.”

Brandt has extensive executive and nonexecutive experience in leading international, publicly listed and private equity businesses. His career has included executive positions at the House of Prince, STG and Royal Unibrew.

In addition to being vice chairman of the board of directors of STG, Brandt is chairman of the board of Toms Gruppen, Fritz Hansen, Intervare and Danish Bake Holding. He is also a member of the board of directors of Ferd Holding, the Gerda and Victor B. Strands Foundation, Gerda and Victor B. Strand Holding and Social Grill.

January 25, 2022

Tag: Scandinavian Tobacco Group