STG Reports Q2 2022 Results, Says Handmade Cigar Sales Will Decline in 2022

Scandinavian Tobacco Group (STG), the world’s largest premium cigar company, has reported its Q2 2022 results and downgraded its guidance.

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

Revenue for the quarter was DKK 2.278 billion ($307.6 million) and EBITDA before special items, a measure of profits, at DKK 544 million ($73.5 million). While revenue—which STG calls “net sales”—was up by 1.8 percent, the EBITDA number was down 14.6 percent.

STG said “the performance is disappointing and below our expectation for the quarter” in a statement.

Furthermore, the company has revised its guidance for 2022 as whole downgrading EBITDA growth from 0 percent as a low estimate to 6 percent as a high estimate to now 0 percent as the high estimate and -4 percent on the low end.

The company explained:

The primary reason for revising the guidance on EBITDA is the lack of improvement in the productivity of our supply chain. We assess the challenges in the supply chain to be of a temporary nature and not structural. We are making progress, but it is taking longer than expected due to a combination of external and internal factors, and the level of the production backlog is not being reduced as planned and was almost DKK 150 million by end of July. We expect to see improvements during the second half of the year, but the delay will impact full-year costs negatively.

In addition, the company reiterated its stance that 2022 would not be as strong of a year for handmade cigar sales, though it’s downgraded that assessment as well:

The hand-made cigar consumers in US have become more cautious on the back of macro-economic developments. Consequently, for 2022 handmade cigar volumes are now expected to decline by more than its long-term trend of about -2% leading to a reduced sales outlook for the Group. We now expect net sales growth about zero (from positive).

STG is the parent company of Cigars International, General Cigar Co., Thompson Cigar, Forged Cigar Co., Agio, and other businesses throughout the U.S. and international markets. Its stock is publicly-traded on the NASDAQ Copenhagen.