In a sign that people are buying more cigars, Scandinavian Tobacco Group has once again raised its financial guidance for 2020.
The publicly-traded company—whose portfolio includes General Cigar Co, Cigars International, Thompson Cigar and others—had originally expected to be greater than a 2 percent increase in profits for 2020. In August, it raised that guidance to greater than 9 percent growth, now it says it expects EBITDA, a form of profit, to be greater than 13 percent.
In addition, it has upped its free cash flow estimate to greater than DKK 1.25 billion ($210 million), an improvement from its previous guidance of DKK 1 billion.
STG explained the changes:
The high demand, has increased further in the latter part of the year in the Group’s US online distribution channel as well as in the US brick and mortar retail channel and the Group has continued to perform well. January-November 2020, the organic growth in net sales is 7% for the Group and higher than previously expected.
As a consequence of the high demand, the results in the Group’s financial performance in the fourth quarter, are better than expected. The higher volumes from US online and US brick and mortar have positively impacted operational leverage and resulted in stronger profit margins and an increased organic growth in EBITDA. The other business categories perform as expected.
Perhaps most interesting, it said that the negative impacts in the fourth quarter haven’t been as bad as originally thought:
Overall, the fourth quarter results continue to be negatively impacted by the loading in previous quarters and very strong comparison numbers partly driven by the change in sales taxing in France in the fourth quarter of 2019, as referenced in connection with our third quarter announcement.
It was expected that the fourth quarter would see a negative timing impact of payables which did not materialise. For the full year 2020 this is resulting in an estimated >DKK 200 million positive impact on the free cash flow before acquisitions.
STG’s stock closed at DKK 103.50, up .58 percent.