STG Q3 2023 Revenues Drop by 3.9 Percent

Scandinavian Tobacco Group, the publicly-traded tobacco company that is a giant in the premium cigar space, has announced its Q3 2023 results. It’s a down quarter for the company, though one that it says is in line with the company’s updated guidance.

• Revenue was DKK 2.3 billion ($330 million), a 3.9 percent decrease YoY.
• The EBITDA margin was 26.5 percent, down from 26.7 percent.
• Free cash flow before acquisitions was DKK 622 million ($89.3 million), up from DKK 462 million.
• Adjusted Earnings Per Share (EPS) were DKK 4.1 (59 cents), down from DKK 4.4.
• Return on Invested Capital (ROIC) was 12.9 percent, down from 13.1 percent.

STG also disclosed that growth enablers accounted to “close to 8 percent of group net sales.” The company says growth enablers include retail stores, Next Generation Products “NGP” and international sales of handmade cigars. In its Q2 2023 results, STG said growth enablers accounted for just over 3 percent of net sales.

The decline in revenue compared to 2022 was expected for the company. STG’s announcement says that volumes have decreased, which explains the drop in revenue. Furthermore, the company cited volumes with its European branded segment, which is largely driven by mass-market little cigars, and inventory adjustments with customers in the U.S. as the “main uncertainties” for the remainder of 2023.

That said, STG says it expects that North American retail stores and European branded segments will do better in Q4 2023 than they did in Q4 2022.

STG, which is publicly traded on the NASDAQ Copenhagen, has a large premium cigar portfolio that includes retailers such as Cigars International, Cigar.com, Cigarbid.com, Thompson Cigar, PipesandCigars.com and Cigora. It also owns General Cigar Co. and Forged Cigar Co., which sell Cohiba, La Gloria Cubana, Partagas and other brands in the U.S. In both the U.S. and international markets, it sells Agio, Alec Bradley, CAO, Macanudo, Room101 and Toraño. STG also has a strong machine-made cigar business, especially in Europe, as well as units that include pipe tobacco, roll-your-own and tobacco-free nicotine products.

Quarter	Net Sales (In Millions of DKK)	EBIDTA Before Special Items (In Millions of DKK)	Free Cash Flow (In Millions of DKK)
Q3 2023	2,300	Not Announced	622
Q2 2023	2,200	Not Announced	159
Q1 2023	1,963	474	(179)
Q4 2022	2,185	563	530
Q3 2023	2,362	631	462
Q2 2022	2,278	544	143
Q1 2022	1,938	532	129
Q4 2021	2,012	474	307
Q3 2021	2,182	627	564
Q2 2021	2,156	606	434
Q1 2021	1,883	527	89
Q4 2020	1,992	397	238
Q3 2020	2,231	914	609

The company’s guidance remains unchanged from the August 2023 adjustments:

• Net sales in the range of DKK 8.7-9 billion (Previously DKK 9-9.3 billion)
• EBITDA margin before special items in the range of 23.5-24.5 percent (Previously 24-25 percent)
• Free cash flow before acquisitions in the range DKK 1.1-1.3 billion (Previously DKK 1.2-1.4 billion)
• Adjusted EPS in the range of DKK 14-16 (Previously DKK 14.5-16.5)

“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 Niels Frederiksen, ceo of STG, 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.”

The company has also announced that the STG Board of Directors has approved of a share buyback program totaling DKK 850 million ($122.04 million), which will run through the end of February 2025.