Scandinavian Tobacco Group (STG) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 7.1% year-over-year to DKK 2,431 million, mainly due to the Mac Baren acquisition, while organic net sales were nearly flat at -0.1% as US third-party nicotine pouch distribution ended.

• EBITDA margin before special items declined to 23.4%, reflecting investments, Mac Baren's lower profitability, and a strong prior-year comparison.

• Mac Baren acquisition integration plan completed, with expected DKK 150 million in annual synergies by 2027 and special costs of DKK 150 million.

• Discontinuation of third-party nicotine pouch distribution in the US impacted growth, while next-generation products (XQS) delivered high double-digit growth.

• Issued a EUR 300 million corporate bond in September to secure long-term financing and updated guidance to reflect Mac Baren's impact.

Financial highlights

• Q3 2024 reported net sales: DKK 2,431 million, up 7.1% year-over-year; organic growth -0.1%.

• EBITDA before special items: DKK 568 million (down from DKK 602 million); EBITDA margin 23.4% (down from 26.5%).

• Net profit: DKK 297 million, down from DKK 351 million in Q3 2023; adjusted EPS stable at DKK 4.1.

• Free cash flow before acquisitions: DKK 275 million in Q3, DKK 327 million for nine months.

• Gross margin before special items: 46.3% (down from 48.2%); ROIC: 9.8% (down from 12.9%).

Outlook and guidance

• Full-year 2024 net sales expected at DKK 9.1 billion, with EBITDA margin before special items of 22%-23%.

• Free cash flow before acquisitions forecasted at DKK 0.8-0.9 billion; adjusted EPS at DKK 12.5.

• Guidance updated to include Mac Baren; excluding Mac Baren, results expected at lower end due to US cigar market decline and loss of third-party NGP distribution.

• Q4 2024 expected to see slightly declining organic net sales growth and unchanged EBITDA margin versus Q4 2023.

• Next-generation product net sales to rise over 50% year-over-year.