Scandinavian Tobacco Group (STG) Q2 2025 earnings summary

Executive summary

• Q2 2025 net sales were DKK 2,361 million, nearly flat year-over-year, with organic net sales down 4.1% due to discontinued ZYN distribution and lower contract manufacturing sales; Mac Baren acquisition supported growth.

• All three core product categories returned to growth in Q2, reversing Q1 declines, but Next Generation Products saw a -43% organic decline due to ZYN exit; XQS brand delivered double-digit growth.

• EBITDA margin fell to 21.1% from 24.5% last year, mainly due to product mix, ZYN exit, and investments in nicotine pouches and market positions.

• Mac Baren integration is on track, targeting DKK 150 million in synergies by 2027, and growth enablers like U.S. retail and XQS pouches now represent 10% of group net sales.

• ERP system rollout (SAP S/4HANA) continues as planned, with manageable operational issues.

Financial highlights

• Q2 2025 net sales: DKK 2,361 million (-0.2% YoY); organic net sales growth: -4.1%; Mac Baren added 7% to growth, FX -3%.

• EBITDA before special items: DKK 499 million (margin 21.1%), down from DKK 580 million (24.5%) in Q2 2024.

• Net profit: DKK 227 million in Q2; adjusted EPS: DKK 3.3, down from DKK 4.1 in Q2 2024.

• Free cash flow before acquisitions: DKK 119 million (Q2 2024: DKK 177 million); full-year guidance of DKK 800 million–1 billion reaffirmed.

• Leverage ratio increased to 2.9x from 2.6x at end 2024, mainly due to dividend payments.

Outlook and guidance

• Full-year 2025 net sales expected at DKK 9.1–9.5 billion, likely at the lower end due to FX; EBITDA margin guidance maintained at 18–22%.

• Free cash flow before acquisitions expected at DKK 0.8–1.0 billion; adjusted EPS guidance: DKK 10–13.

• Positive organic net sales growth anticipated in H2, supported by new U.S. retail stores, XQS growth, and stabilized market shares.

• Guidance assumes no new acquisitions and current exchange rates; a 10% USD/DKK change would impact net sales by ~5 percentage points.

• Uncertainties remain high, especially regarding U.S. dollar sensitivity and U.S. handmade cigar consumption.