STG Reports Better Than Expected Q1 Earnings, Raises Guidance

Scandinavian Tobacco Group A/S (STG) says the demand for handmade cigars in the U.S. remains strong, helping to fuel the company to a stronger than expected Q1 2021.

It generated revenues of DKK 1.883 billion ($303.9 million), up 12.5 percent compared to 2020. Profits-wise, STG says it earned DKK 527 million ($85.1 million), a 49.1 percent increase, in EBITDA. The profit margin also increased from 18.5 percent to 28 percent.

There are a number of factors for these increases including previously-instituted cost-cutting measures, an accelerated integration of Agio Cigars—which the company acquired in 2020—and the increased demand for premium cigars in the U.S. STG is the parent company of Cigars International, General Cigar Co., Thompson Cigar, Forged Cigar Co. and others.

Interestingly, the company says that the demand for premium cigars in the U.S. is increasingly challenging to predict. In its statement about the quarterly results, it said:

The COVID-19 pandemic is creating significant uncertainty for Scandinavian Tobacco Group in the second half of the year. Consumption of handmade cigars and purchasing patterns between online and brick & mortar retail stores in the US cannot be forecasted with the normal level of accuracy.

That being said, STG is raising its guidance for 2021:

• EBITDA: Organic growth in the range of 12%-18% (>7%)
• Free cash flow before acquisitions: In the range of DKK 1.0-1.3 billion (>DKK 1.0 billion)
• Adjusted Earnings Per Share >25% increase (>10% increase)

“Despite the continued challenges and uncertainty created by the COVID-19 pandemic, our business continues to do well,” said Niels Frederiksen, ceo of STG, in a statement. “For the first quarter of the year we can present strong growth in both net sales and EBITDA. I am particularly pleased to see that numerous initiatives across the organization are resulting in strong net sales, growing market shares as well as increased operational performance and efficiency.”

STG is traded on the NASDAQ Copenhagen.