Scandinavian Tobacco Group A/S (STG), the parent of Cigars International and General Cigar Co., announced its 2017 financial results.
As expected, the results were not positive.
In early 2017 Cigars International began upgrading its IT infrastructure, including its enterprise resource planning (ERP) and warehouse management system, two of the main systems that run the company, which is the world’s largest retailer of premium cigars.
That update did not go according to plan and Cigars International experienced massive difficulties both fulfilling orders and tracking the problems with orders. In May, those issues forced STG to downgrade its stock guidance for 2017 from a positive growth year to negative growth.
EBITDA was 1.232 billion DKK ($203.55) down from 1.279 billion DKK ($184.6 million) in 2016, a 3.67 percent decrease. Adjusted revenue dropped 4.2 percent to 6.464 billion DKK ($1.07 billion) from 6.746 billion DKK the year before.
“2017 was a financially challenging year for Scandinavian Tobacco Group. We delivered a financial performance with a negative organic EBITDA growth of 7.4% based on a 2.2% negative organic growth in our net sales,” said Niels Frederiksen, ceo of STG, in a letter to investors. “The results were significantly affected by the IT implementation in Cigars International, which prompted a pro t downgrade in May 2017.”
A dividend of 5.75 DKK (95 cents) per share has been proposed.
The company earned a gross profit of 794.8 million DKK ($131.3 million) from sales of handmade cigars. It generated 1.92 billion DKK ($317.33 million) in handmade cigars sales across its brand.
STG has identified six must wins for 2018:
- Win in Machine-Made Cigars — Increase market share and optimise and manage prices effectively.
- Accelerate in North America — With the creation of one American business unit we are well positioned to accelerate growth and improve efficiency.
- Drive M&A — Develop and execute M&A strategy to strengthen our position.
- Lead Performance to the Next Level — Improve efficiencies by developing leaner, faster and more agile operations.
- Enable a Winning Organisation — Invest in stronger HR Capabilities, create global excellence centres and increase focus on accountability and performance.
- Raise It capabilities — Bring IT to the next level to fully support and guide the business.
The company is predicting a more than 3 percent growth for EBITDA in 2018.
Shares of STG closed at 113.50 DKK ($18.75) down over 7 percent.