Scandinavian Tobacco Group A/S: Interim Report, 1 January - 30 September 2023

Company Announcement
No. 29/023

                                                                                                       Copenhagen, 8 November 2023

Interim Report, 1 January - 30 September 2023

Scandinavian Tobacco Group A/S Maintains Outlook and Approves New Share Buy-Back Programme

For the third quarter of 2023, Scandinavian Tobacco Group A/S (the “Group” or “Scandinavian Tobacco Group”) delivered 3.9% negative net sales growth, an EBITDA margin of 26.5% and a free cash flow before acquisitions of DKK 622 million. For the first nine months of 2023, net sales decreased by 1.8% to DKK 6.5 billion, the EBITDA margin was 24.6% and the free cash flow before acquisitions was positive by DKK 602 million.

Consumer trends for the cigar categories remained unchanged throughout the third quarter. Decreasing volumes are being partly offset by pricing and increasing sales from Growth Enablers (retail stores, Next Generation Products “NGP” and international sales of handmade cigars). The expectations for the full year are based on a recovery in net sales growth for the fourth quarter of the year primarily as result of the positive trend in North America Online & Retail and growth in Europe Branded and comparison to a soft fourth quarter last year. The EBITDA margin is expected being somewhat lower than in the fourth quarter last year as result of category and country mix combined with higher investments in the Growth Enablers and in stabilising 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 US.   

Q3 Highlights

• Net sales decreased by 3.9% to DKK 2.3 billion (DKK 2.4 billion).
• Organic net sales growth was -1.1%.
• The EBITDA margin was 26.5% (26.7%).
• Free cash flow before acquisitions was DKK 622 million (DKK 462 million).
• Adjusted Earnings Per Share (EPS) were DKK 4.1 (DKK 4.4).
• Return on Invested Capital (ROIC) was 12.9% (13.2%).
• Growth Enablers account for close to 8% of Group net sales.

• In the first nine months of 2023, net sales decreased by 1.8% to DKK 6.5 billion (DKK 6.6 billion), organic net sales growth was -1.2%, the EBITDA margin was 24.6% (25.9%), free cash flow before acquisitions was positive by DKK 602 million (DKK 735 million) and Adjusted EPS were DKK 10.8 (DKK 11.6).

The Board of Directors has approved a share buy-back programme of a total value of up to DKK 850 million running to the end of February 2025. The purpose of the share buy-back programme is to adjust the capital structure and meet obligations relating to the Group´s share-based incentive programme. Further details of the share buy-back including the specific starting date will be communicated in a separate Company Announcement.

CEO Niels Frederiksen commented:
“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. 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”.

Financial guidance 2023

For the financial year 2023, the guidance is unchanged: 

• Net sales in the range of DKK 8.7-9.0 billion
• EBITDA margin before special items in the range of 23.5-24.5%
• Free cash flow before acquisitions in the range DKK 1.1-1.3 billion
• Adjusted EPS in the range of DKK 14.0-16.0

For further information, please contact:
Torben Sand, Head of IR & Communication, phone +45 5084 7222 or torben.sand@st-group.com
Eliza Dabbagh, IR and Communication, phone +45 5080 7619 or eliza.michael@st-group.com

A conference call will be held on 9 November 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.

Attachment

• Interim report Q3 2023

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