STG Reports Lower Q2 2023 Results, Drops Guidance

Scandinavian Tobacco Group (STG)—one of the world’s largest cigar companies—has announced its results for Q2 2023, and they are lower than expected.

• Revenue was DKK 2.2 billion ($320 million), a 2.3 percent decrease YoY.
• The EBITDA margin was 23.1 percent, down from 23.9 percent.
• Free cash flow before acquisitions was DKK 159 million ($23.06 million), down from DKK 143 million.
• Adjusted Earnings Per Share (EPS) were DKK 3.5 (51 cents), down from DKK 3.6.
• Return on Invested Capital (ROIC) was 13.1 percent, down from 13.6 percent.

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.

The company is also lowering its guidance for 2023, a move it says is due to “a more volatile environment than expected and reflective of ongoing inventory adjustments across customers and distributors, slower regain of market shares in Europe, delays in new store openings in US and changes in exchange rates.”

Those changes included:

• 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)

STG says these numbers are “based on some recovery in net sales growth for the second half of the year as well as a free cash flow before acquisitions slightly higher than compared with the second half of 2022.” The company added that performance for July and early August “support the revised outlook.”

“On the back of a volatile environment we had to adjust our guidance even though we are continuing to make good progress on our ambition to grow the size of the company through retail expansion, acquisitions and portfolio diversification,” said Niels Frederiksen, ceo of STG, in an announcement. “In the second quarter, we completed the second acquisition of the year and opened another Cigars International retail Superstore. For the remainder of the year, we are focusing on leveraging the current strength of our online business and on building a stronger momentum in our Europe Branded business.”