Scandinavian Tobacco Group (STG) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales rose 6.3% to DKK 2,366 million, with 4.8% organic growth driven by next-generation products and handmade cigars; EBITDA margin recovered to 24.5% from 23.1% year-over-year.

• Adjusted EPS increased to DKK 4.1 from DKK 3.5; free cash flow before acquisitions was DKK 177 million, up from DKK 159 million.

• The Mac Baren acquisition (DKK 535 million, completed 1 July 2024) will add about 8% to group net sales annually, expanding the portfolio in smoking tobacco and nicotine pouches.

• Growth Enablers now account for 12% of group net sales, with NGP at 6%.

• A new commercial structure was implemented to enhance consumer focus, agility, and execution.

Financial highlights

• Q2 2024 net sales: DKK 2,366 million (Q2 2023: DKK 2,225 million); H1 2024: DKK 4,314 million.

• EBITDA before special items: DKK 580 million (Q2 2023: DKK 514 million); margin 24.5%.

• Net profit: DKK 297 million (Q2 2023: DKK 304 million); Adjusted EPS: DKK 4.1 (Q2 2023: DKK 3.5).

• Free cash flow before acquisitions: DKK 177 million (Q2 2023: DKK 159 million); ROIC: 10.5% (Q2 2023: 13.1%).

• Gross margin stable at 46.9%; OpEx ratio improved to 23.0% from 23.8%.

Outlook and guidance

• 2024 guidance maintained: net sales DKK 8.8–9.1 billion, EBITDA margin 22–24%, free cash flow before acquisitions DKK 0.8–1.0 billion, adjusted EPS DKK 12.5–14.5.

• Guidance excludes Mac Baren impact, to be updated with Q3 results.

• Organic net sales of handmade cigars expected to grow; next-generation products to increase by over 50%.

• Growth Enablers expected to account for about 10% of group net sales for the full year.

• Second half expected to see net sales growth but lower EBITDA margin due to NGP expansion and strong Q3 2023 comparison.