Scandinavian Tobacco Group A/S ((DK:STG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Scandinavian Tobacco Group A/S recently held its earnings call, revealing a mixed sentiment with notable achievements in revenue growth and strategic acquisitions, alongside challenges in the core cigar markets. While the company reported solid financial performance, concerns were raised about debt levels and uncertainties in the U.S. consumer market.
Record-Breaking Net Sales
For the first time, Scandinavian Tobacco Group’s net sales surpassed DKK 9 billion. This milestone was largely driven by the inclusion of Mac Baren for six months and other growth enablers, marking a significant achievement for the company.
Significant Shareholder Returns
The company demonstrated its commitment to shareholder value by returning nearly DKK 1.5 billion through dividends and share buybacks, reflecting a strong financial position and confidence in future prospects.
Acquisition of Mac Baren
The strategic acquisition of Mac Baren for over DKK 0.5 billion has bolstered the company’s position in the smoking tobacco categories, adding valuable brands to its portfolio and enhancing its market presence.
Sustainability Progress
Scandinavian Tobacco Group has made significant strides in sustainability, with its annual report now compliant with the EU Corporate Sustainability Reporting Directive and notable progress in climate-related actions.
Growth in Next Generation Products (NGP)
The Next Generation Products category saw impressive growth, with net sales increasing by 9% in Q4 and 118% for the full year, highlighting the company’s successful diversification efforts.
Strong EBITDA Growth in North America
The North America Branded & Rest of World segment reported a 41% increase in EBITDA before special items, achieving an EBITDA margin of 39.3%, underscoring robust performance in these regions.
Decline in Core Cigar Markets
Challenges persist in the core cigar markets, with declining sales and continued uncertainties in U.S. consumer spending impacting the business.
Pressure on Handmade Cigar Pricing
The handmade cigar segment is experiencing pricing pressures due to increased demand for value-for-money products and heightened promotional activities.
Machine-Rolled Cigars Market Decline
The machine-rolled cigars market in key European regions declined by an estimated 2.8%, with future improvements remaining uncertain.
Debt and Leverage Increase
The company’s leverage ratio rose to 2.6x, attributed to capital allocations and the acquisition of Mac Baren, raising concerns about debt levels.
Discontinued Distribution Impact
The discontinuation of third-party distribution has affected growth, significantly impacting both organic and reported growth rates.
Forward-Looking Guidance
Looking ahead to 2025, Scandinavian Tobacco Group expects net sales to range between DKK 9.2 billion and DKK 9.7 billion, with an EBITDA margin projected between 20% and 23%. The company anticipates a free cash flow between DKK 800 million and DKK 1.1 billion, driven by ongoing investments in growth opportunities and integration costs related to Mac Baren. The strategic focus will be on expanding its nicotine pouch brand and retail footprint, particularly in the U.S.
In summary, Scandinavian Tobacco Group A/S’s earnings call reflected a positive sentiment with record-breaking sales and strategic advancements, despite facing challenges in core markets and rising debt levels. The company’s forward-looking guidance suggests a continued focus on growth and expansion, particularly in the U.S. market.