STG Announces Lower Revenue, Higher Profits for Q3 2019

It would appear that some of the cost cutting measures taken by Scandinavian Tobacco Group (STG) are working.

STG—the parent of General Cigar Co., Cigars International, Thompson Cigar and others—has announced its financial results for Q3 2019 and some of the news is good.

Most importantly, the company reported an EBITDA before special items—a measure of profit—of DKK 446 million ($68.7 million), an improvement of 5.4 percent compared to Q2. It also says that its profit margin improved to 24.2 percent, up from 21.1 percent.

The company generated DKK 1.846 billion ($272.16 million) in the third quarter, down 4.5 percent compared to the same quarter last year.

“In the third quarter of the year we deliver organic EBITDA growth of 5.4%, continued margin improvements and a strong free cash flow despite a disappointing development in organic net sales,” said Niels Frederiksen, ceo of STG, in a statement. “This follows better than expected progress from our transformational program Fuelling the Growth and continued cash flow focus across our business. During the quarter we were also able to announce our intention to acquire Royal Agio Cigars; a significant step in support of our ambition to become the undisputed leader in cigars and pipe tobacco.”

The Q3 numbers are good enough that STG has revised some of its guidance for 2019. Specifically, the company says that free cash flow will now be “about (DKK) 1 billion,” up from an earlier estimate of greater than DKK 750 million.

STG shares, which are publicly traded on NASDAQ Copenhagen, are down nearly 6 percent following the announcement.