Company Announcement
No. 52/2022
Copenhagen, 24 August 2022
Interim report, 1 January - 30 June 2022
full-year guidance for organic EBITDA growth
For the second quarter of 2022 Scandinavian Tobacco Group delivered 2% negative organic net sales
growth and 15% negative organic EBITDA growth against a strong second quarter last year. The
productivity in our supply chain has temporarily been lower than expected resulting in lower production
volumes and higher costs. We do see improvements in the second half of the year, but the delay will
impact full-year net sales and costs negatively.
Q2 Highlights
• Net sales were DKK 2,278 million (DKK 2,156 million) with -1.8% organic growth.
• EBITDA before special items was DKK 544 million (DKK 606 million) with -14.6% organic
growth. The EBITDA margin was 23.9% (28.1%).
• Exchange rate developments increased net sales by DKK 150 million and EBITDA before
special items by DKK 26 million.
• Adjusted Earnings Per Share (EPS) were DKK 3.6 (DKK 4.1).
• Free cash flow before acquisitions was DKK 143 million (DKK 434 million).
• Return on Invested Capital was 13.6% (12.3%).
• In the first 6 months of 2022, net sales decreased by 1.7% organically to DKK 4,215 million
(DKK 4,039 million), EBITDA before special items decreased by 9.0% organically to DKK
1,076 million (DKK 1,133 million) and free cash flow before acquisitions was at DKK 272 mil-
lion (DKK 523 million).
We assess the challenges in the supply chain, which are the primary reason for revising the guidance,
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. The level of the production backlog
has not been reduced as planned and was almost DKK 150 million by the end of July. However, as
the improvements kick in combined with pricing initiatives across the product categories and easier
year-on-year comparisons, we expect to return to EBITDA growth in the second half of the year.
During the summer, we have also seen consumers in the US, especially within handmade cigars,
become more cautious on the back of the macro-economic development and our market mix is return-
ing quickly to pre-pandemic trends. Pricing across most product categories has been strong in the
quarter partly offsetting increasing cost inflation, but the promotion pressure in the online business
continues at a high level.
2
CEO Niels Frederiksen: “2022 has turned out to be a difficult year for Scandinavian Tobacco Group
and we have had to adjust our full-year expectation for organic EBITDA growth. This development is
disappointing and is primarily driven by temporary challenges in our supply chain and to a lesser extent
by more cautious consumer behaviour especially in the important US handmade cigar market. Still,
we maintain our financial expectations of delivering strong cash-flows and positive EPS growth for
2022 and we continue to implement our Rolling Towards 2025 strategy. The acquisition of Room101
as well as the continued expansion of our retail footprint in the US are good examples of this. Overall,
we remain confident in the strength of our underlying business and our cash flows”.
Financial Guidance 2022
We are making progress in improving productivity in our supply-chain and we expect to see improve-
ments in the second half of the year, but the delay will impact full-year net sales and costs negatively.
Furthermore, as we have seen signs of, especially US consumers becoming more cautious, we have
revised our full-year Group sales outlook.
Based on these changes, the full-year guidance for 2022 is revised to:
• EBITDA: Organic growth in the range -4% to 0% (from 0% to 6%)
• Free cash flow before acquisitions in the range DKK 1.1-1.4 billion (unchanged)
• Adjusted EPS >5% increase (unchanged)
The guidance for adjusted EPS has been maintained reflecting the lower EBITDA guidance and the
recent increase in the USD versus DKK.
For the second half of 2022 we expect organic net sales growth and organic EBITDA growth to resume
particularly in the fourth quarter. Organic net sales growth is expected to be driven by accelerating
growth in Europe Branded and about zero growth in North America Online & Retail. We continue to
see negative growth in North America Branded & RoW due to the strong Covid-19 impacts last year.
Furthermore, a lower OPEX-ratio is expected to support a return to organic EBITDA growth in the
second half of the year.
For further information, please contact:
Torben Sand, Head of Investor Relations, phone +45 5084 7222 or torben.sand@st-group.com
A conference call will be held on 25 August 2022 at 10.00 CEST. Dial-in information and an accom-
panying presentation will be available at investor.st-group.com around 09:00 CEST.
3
Key Figures
DKK million
Q2 2022
Q2 2021
6M 2022
6M 2021
FY 2021
INCOME STATEMENT
Net sales
2,278
2,156
4,215
4,039
8,233
Gross profit before special items
1,074
1,071
2,093
2,026
4,113
EBITDA before special items
544
606
1,076
1,133
2,233
Special items
-23
-24
-40
-41
-55
EBIT
433
492
860
911
1,814
Net financial items
1
-44
-21
-57
-32
-77
Profit before tax
400
480
823
894
1,769
Income taxes
-90
-104
-185
-194
-378
Net profit
310
376
638
700
1,391
BALANCE SHEET
Total assets
15,582
14,455
14,584
Equity
9,055
8,323
8,968
Net interest-bearing debt (NIBD)
4,268
3,732
3,266
Investment in property, plant and equipment
59
47
113
89
212
Total capital expenditures
120
61
187
107
240
CASH FLOW STATEMENT
Cash flow from operating activities
258
489
449
621
1,567
Cash flow from investing activities
-119
-56
-180
-98
-178
Free cash flow
140
434
269
523
1,389
Free cash flow before acquisitions
143
434
272
523
1,393
KEY RATIOS
2
Net sales growth
5.7%
2.8%
4.4%
4.8%
2.8%
Gross margin before special items
47.2%
49.7%
49.7%
50.2%
50.0%
EBITDA margin before special items
23.9%
28.1%
25.5%
28.1%
27.1%
Effective tax percentage
22.5%
21.7%
22.5%
21.7%
21.4%
Equity ratio
58.1%
57.6%
61.5%
Cash conversion
77.2%
120.3%
64.3%
86.2%
108.6%
Organic net sales growth
-1.8%
7.5%
-1.7%
9.8%
4.5%
Organic EBITDA growth
-14.6%
20.8%
-9.0%
32.6%
18.4%
NIBD / EBITDA before special items
2.0
1.7
1.5
ROIC
13.6%
12.3%
14.5%
ROIC ex. Goodwill
22.6%
20.5%
24.3%
Adjusted earnings per share (DKK)
3.6
4.1
7.2
7.4
14.8
Basic earnings per share (DKK)
3.4
3.9
6.9
7.3
14.6
Diluted earnings per share (DKK)
3.4
3.9
6.9
7.3
14.5
Number of shares issued (‘000)
93,000
97,500
97,500
Number of treasury shares (‘000)
2,104
2,159
4,526
Number of outstanding shares (‘000)
3
92,250
96,766
95,689
Share price at balance date (DKK)
138.80
128.00
137.30
Dividend per share (DKK)
7.5
Pay-out ratio
52.6%
1. Excl. share of profit of associated companies.
2. See definition/explanation of financial ratios in note 5.8 in the Annual Report 2021.
3. Average number of shares outstanding, including dilutive effect of PSUs.
4
Business overview Q2 2022
In the second quarter of 2022, the Group delivered a financial performance with the EBITDA margin
being somewhat lower than expected. Reported net sales increased by 6% to DKK 2,278 million and
organic net sales decreased by 2%. Exchange rates developments impacted positively by DKK 150
million. The performance was driven by positive organic net sales growth in Europe Branded (“EUB”)
and a negative organic net sales growth in North America Branded & Rest of World (“NABROW”) and
North America Online & Retail (“NAOR”) on the back of the very strong performance in the second
quarter of 2021. Consumer behaviour and market trends have mostly returned to pre-COVID levels
which as expected has impacted our product and market mix compared to last year. Price manage-
ment and higher inventory build-ups are expected to counter increasing cost inflation and supply chain
uncertainty.
The gross margin decreased compared with the same quarter last year to 47.2% (49.7%) primarily
driven by the change in product and market mix particular in NABROW, although the gross margin
also decreased in EUB and NAOR. EBITDA before special items was DKK 544 million with 15% neg-
ative organic growth resulting in an EBITDA margin before special items of 23.9% (28.1%). An in-
crease in the OPEX-ratio to 23.3% (21.6%) is primarily a result of an increase in promotional spending,
cost inflation, consultancy fees and IT-investments.
Special items were DKK -23 million (DKK -24 million) mainly driven by the ERP project OneProcess.
See note 3. The Group’s free cash flow before acquisitions was DKK 143 million (DKK 434 million)
primarily driven by the operational performance and changes in working capital. Changes in working
capital were negative by DKK -124 million (DKK 59 million) and special items impacted the cash flow
by DKK -36 million (DKK -47 million). The Group’s leverage ratio (LTM) was 2.0x.
Divisional split Q2 2022
Net sales EBITDA before special items
Group net sales and EBITDA Q2 2022
Table 1: Net sales
Table 2: EBITDA before special items
Q2
Q2
Change
DKK million
2022
2021
in %
Net sales
2,278
2,156
5.7%
Acquisitions
12
Currency development
-150
Organic net sales
2,128
2,168
-1.8%
Q2
Q2
Change
DKK million
2022
2021
in %
EBITDA
544
606
-10.2%
Acquisitions
0
Currency development
-26
Organic EBITDA
518
606
-14.6%
36%
32%
32%
NABROW
EUB
NAOR
53%
30%
17%
+5.7%
DKK 2,278m
-10.2%
DKK 544m
5
Business updates
Investing in our future growth
The expansion of the retail network continues. Currently, we operate eight retail cigar stores,
whereof seven are super stores. The super store in San Antonio, Texas, which opened in April 2022
has come off to a good start with strong traffic flow and higher than expected net sales. The eight retail
stores account for 8% of net sales in the division NAOR in the second quarter of 2022 and delivered
double-digit net sales growth versus last year. The plan is to open another 5-7 cigar super stores in
the US in the coming 2-3 years.
The Growth Incubator off to a good start
Versa, our combustible hemp brand, was launched in the third quarter of 2021. The distribution of
Versa has since the launch steadily increased with store-by-store net sales improving and reach being
expanded. Combustible hemp products are a new category, which will take time to build, although
initial developments have been positive.
Acquisition of handmade cigar brands Room101
In June, we completed the acquisition of the Room101 cigar brands and accessories. The Room101
cigar brands complement Scandinavian Tobacco Group’s handmade cigar business that feature a
unique portfolio of heritage and boutique brands. Room101 will be represented exclusively by Scan-
dinavian Tobacco Groups distribution network, Forged Cigar Company. The acquisition of Room101
cigars represents our strategy to invest in brands with strong growth potential, and we will continue to
explore opportunities to further expand our market-leading portfolio.
OneProcess
The ERP project OneProcess is an implementation of a group SAP 4/HANA solution. The project is
progressing as planned and currently, the solution is being built based on development of standard
group processes. Testing of the solution and education of the organisation will be executed in the
second half of 2022. The first go-live is planned by the end of the first quarter 2023 in Denmark and
Sweden.
The Sustainability Strategy
In May, we launched a more ambitious and comprehensive sustainability strategy, called Rolling Re-
sponsibly. The sustainability strategy is now an integrated part of the corporate strategy Rolling To-
wards 2025 with the ambition to craft a better tomorrow by elevating our communities and anchoring
climate action in our corporate culture. The ambition is embedded in the two strategic pillars 1) Net
Zero along the Journey of the Leaf and 2) Sustainable Communities Pioneers. Our long-standing focus
and efforts within Diversity, Equity and Inclusion and Corporate Ethics continues and are key compo-
nents of our enhanced sustainability platforms.
Since the launch of Rolling Responsibly the priority has been to reinforce our sustainability organisa-
tion as well as we now formally have committed to SBTi, the Science Based Targets initiative - setting
ambitious emission reduction targets.
Update on financial key metrics
In the second quarter of 2022 the EBITDA margin decreased to 23.9% (28.1%), as result of a
decreasing gross margin, primarily in division NABROW as well as an increase in the Group OPEX-
ratio to 23.3% (21.6%). The gross margin development is primarily attributable to the normalisation of
product and market mix across our businesses following the exceptional high margins delivered under
6
the COVID-19 enforced restrictions last year, whereas the increase in the OPEX-ratio is driven by cost
inflation, consultancy fees and IT-investments. The gross margin as well as the EBITDA margin remain
above the pre-COVID margins realised in 2019.
The 12 months rolling Return on Invested Capital (ROIC) decreased to 13.6% in the second quarter
of 2022 versus 14.5% by the end of 2021 with a DKK 51 million decrease in EBIT (12 months rolling)
and based on an invested capital of DKK 13.0 billion (DKK 12.5 billion).
Capital allocation
On 9 March 2022 Scandinavian Tobacco Group initiated a new share buy-back programme with a
total value of up to DKK 700 million with an expected closure by the end of February 2023. On 19 May
2022 the programme was increased to a total value of up to DKK 1,000 million.
Scandinavian Tobacco Group has during the second quarter of 2022 bought back 1,328,462 shares
at a market value of DKK 192 million. As of 30 June 2022, Scandinavian Tobacco Group had repur-
chased shares at a total market value of DKK 233 million in the DKK 1,000 million programme.
The purpose of the share buy-back programme is to adjust the capital structure and meet obligations
relating to the Group’s share-based incentive programme.
Financial guidance for 2022
The financial guidance for 2022 is revised down for organic EBITDA growth but maintained for free
cash flow before acquisitions and for adjusted EPS growth.
While normalisation for most product categories have materialised during the recent months following
COVID-19, the consumption of handmade cigars for 2022 is now expected to be lower than its struc-
tural volume decline rate of -2%. Additional price adjustments across most of our product categories
are expected to compensate for cost inflation. Organic growth in net sales for the Group is now ex-
pected to be about zero compared with our previous expectation of growth. This implies growth will
resume in the second half of the year.
Organic EBITDA growth is expected to turn positive in the second half of the year as the productivity
in our supply-chain is improving with an associated reduction of the backlog, the year-on-year com-
parison base becomes easier and the balance between our price management initiatives and cost
inflation improves.
Given these considerations, our guidance for 2022 is:
• EBITDA: Organic growth in the range of -4% to 0% (from 0% to 6%)
• Free cash flow before acquisitions in the range of DKK 1.1-1.4 billion (unchanged)
• Adjusted EPS increase >5% (unchanged)
The expectation for the Group´s free cash flow before acquisitions is maintained in the range of DKK
1.1-1.4 billion. The cash flow is still expected to be impacted by investments in the retail expansion in
the US and the ERP-project OneProcess and a negative impact from special items of about DKK 200
million. The negative impact from working capital has been revised to about DKK 300 million from DKK
200 million with the increase in cash out-flow being offset by gains from sale of buildings in relation to
the closure of factories.
7
The adjusted EPS is still expected to increase by more than 5% (from DKK 14.8 in 2021) including a
positive impact from the share repurchases of about DKK 1.0 per share. The unchanged EPS guidance
despite the lower expectation for EBITDA is driven by the stronger USD.
Events after the reporting period
There are no other events than those mentioned in the above that have occurred after 30 June 2022
and that are expected to have material impact on the financial position of the Group.
Forward-looking statements
This report contains forward-looking statements. Such statements are subject to risk and uncertainties
as various factors, many of which are beyond Scandinavian Tobacco Group’s control, may cause
actual developments and results to differ materially from the expectations set out in this report.
8
Divisional update
North America Online & Retail
In the second quarter of 2022 organic net sales were impacted by a decrease in the consumption of
handmade cigars in the US market and the channel shift back to retail from online impacting year-on-
year comparisons. Pricing opportunities in the online channel is challenged by an increased caution
amongst consumers following the macro-economic developments and the prevailing competitive situ-
ation in the market.
Our online channel experienced a 12% decline in the active customer base versus the second quarter
of 2021 and is driven by lower traffic across our various e-commerce platforms. The decline rate is on
par with the first quarter of 2022. It is expected that the year-on-year development will improve in the
coming quarters as the comparison base normalises. Compared to pre-COVID levels in 2019, the
active consumer file is 6% stronger.
The retail business continues to perform according to plan with solid double-digit organic net sales
growth versus last year. In the quarter retail accounted for 8% of net sales in the division. The new
super store in San Antonio, Texas which opened in April has come off to a good start with net sales
exceeding expectations in the first months since the opening.
Quarterly development, Q2 2021-Q2 2022
Net sales increased by 5% to DKK 737 million during the quarter with a 12% positive contribution from
exchange rates. Organic net sales growth was negative by 8% driven by a negative contribution in the
online channel being partly offset by an about 18% organic growth in the retail super stores. Pricing
opportunities remain restricted by the competitive environment.
EBITDA before special items decreased by 24% to DKK 101 million with an EBITDA margin before
special items of 13.7% (18.8%). The margin development was primarily driven by an increase in the
OPEX ratio as result of significantly increased IT expenses, a normalisation of promotional spending
and higher distribution costs. The gross margin declined to 38.7% (39.4%).
First six months of 2022
Net sales for the first six months of 2022 increased by 3% to DKK 1,305 million driven by a positive
exchange rate development. Organic net sales growth was negative by 7.0%. Gross profit before spe-
cial items increased by 1% and the gross margin was 39.2% (40.1%). EBITDA before special items
decreased by 24% to DKK 176 million with an EBITDA margin of 13.5% (18.2%).
-10%
-5%
0%
5%
10%
400
500
600
700
800
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly net sales
Net sales (DKK million) Organic sales growth
0%
5%
10%
15%
20%
0
40
80
120
160
200
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
9
North America Branded & RoW
The financial performance has been impacted by a normalisation to pre-COVID dynamics in most
product categories and markets. Smoking tobacco volumes are back to its structural trend and the
pandemic induced changes in market mix have reversed to normal like Norwegian domestic sales
moving back to the border and Global Travel Retail. Following two years of exceptional strong growth,
the consumption of handmade cigars in US has resumed to its declining trend in 2022 and the channel
mix between retail and online has returned to its pre-COVID levels. Recently, we have seen indications
of handmade cigar consumers becoming more cautious on the back of the macro-economic develop-
ment which could impact volumes in the coming quarters.
Despite the changed market dynamics and comparison to a very strong second quarter last year,
organic net sales growth in the second quarter of 2022 was almost flat.
Quarterly development, Q2 2021-Q2 2022
Net sales increased by 8% to DKK 819 million during the quarter with a 8% positive contribution from
exchange rates. Organic net sales growth was negative by 1% driven by declining volumes of hand-
made cigars and smoking tobacco partly offset by price increases. Net sales were positively impacted
by the continued recovery in Global Travel Retail, the change of distribution model in Australia and an
increase in contract manufacturing versus the second quarter in 2021. The development is also im-
pacted by the decision to cease sales to Russia and Belarus.
EBITDA before special items decreased by 2% to DKK 305 million with an EBITDA margin before
special items of 37.2% (40.9%). The negative margin development is a result of a normalisation of
market and product mix in the division following an exceptionally strong gross margin in 2021, which
was driven by the mix changes caused by the COVID-19 pandemic. The OPEX ratio decreased to
13.6% (14.5%). The improvement is primarily a result of the change of distribution model in Australia.
First six months of 2022
Net sales for the first six months of 2022 increased by 10% to DKK 1,593 million and organic growth
was positive by 3%. Gross profit before special items increased by 9% to DKK 864 million and the
gross margin was 54.2% (54.7%). EBITDA before special items increased by 8% to DKK 633 million
with an EBITDA margin of 39.7% (40.2%).
-10%
0%
10%
20%
30%
400
550
700
850
1000
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly net sales
Net sales (DKK million) Organic sales growth
25%
30%
35%
40%
45%
100
175
250
325
400
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
10
Europe Branded
Consumer demand for machine-rolled cigars in Europe remains relatively stable with an average neg-
ative volume development of about 3% though with variations between markets. Disciplined pricing
initiatives counters general cost inflation. During the second quarter of 2022 the structural volume
decline of machine-rolled cigars continued but we managed to more than offset the volume decline
with price increases. The UK, Iberia and Italy delivered positive organic net sales growth while the
other key markets delivered negative growth. All markets delivered strong price/mix increases. The
supply issue with the associated backlog is not solved primarily impacting the market share perfor-
mance in France and the Netherlands.
In the second quarter of 2022, the market share index for our key markets was 30.5% versus 32.9%
in the second quarter of 2021 and 31.5% in the first quarter of 2022. The decline in market share is
driven by supply issues still impacting net sales and a strong focus on compensating cost inflation with
price management.
Quarterly development, Q2 2021-Q2 2022
Net sales increased by 4% to DKK 721 million during the quarter with a positive impact from the ac-
quisition of Moderno Opificio del Sigaro Italiano of almost 2%. Organic net sales growth was slightly
above 2%. For all product categories pricing remained a key focus area with price/mix impact for the
largest product category, machine-rolled cigars being up by about 6%.
EBITDA before special items decreased by 10% to DKK 173 million with an EBITDA margin before
special items of 24.0% (27.6%). The margin development is driven by lower supply-chain productivity
and increasing expenses for freight and distribution.
First six months of 2022
Net sales for the first six months of 2022 were unchanged at DKK 1,317 million and organic growth
was negative by -2%. Gross profit before special items decreased by 1% to DKK 717 million and the
gross margin was 54.5% (54.9%). EBITDA before special items decreased by 10% to DKK 332 million
with an EBITDA margin of 25.2% (28.0%).
-10%
-5%
0%
5%
10%
400
500
600
700
800
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly net sales
Net sales (DKK million) Organic sales growth
20%
23%
25%
28%
30%
50
100
150
200
250
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
11
Quarterly Financial Data
2022
DKK million Q2 Q1 Q4 Q3 Q2 6M 6M 12M
Reported data
Net sales 2,278 1,938 2,012 2,182 2,156 4,215 4,039 8,233
Gross profit before special items 1,074 1,019 985 1,102 1,071 2,093 2,026 4,113
EBITDA before special items 544 532 474 627 606 1,076 1,133 2,233
Special items -23 -18 13 -26 -24 -40 -41 -55
EBIT 433 427 393 510 492 860 911 1,814
Net financial items -44 -14 -16 -29 -21 -57 -32 -77
Profit before tax 400 423 385 489 480 823 894 1,769
Income taxes -90 -95 -78 -106 -104 -185 -194 -378
Net profit 310 328 307 383 376 638 700 1,391
Other financial key data
Organic EBITDA grow th -14.6% -2.7% 14.2% 0.9% 20.8% -9.0% 32.6% 18.4%
Organic net sales grow th -1.8% -1.7% 1.8% -2.2% 7.5% -1.7% 9.8% 4.5%
Gross margin before special items 47.2% 52.6% 49.0% 50.5% 49.7% 49.7% 50.2% 50.0%
EBITDA margin before special items 23.9% 27.4% 23.5% 28.7% 28.1% 25.5% 28.1% 27.1%
Free cash flow before acquisitions 143 129 307 564 434 272 523 1,393
North America Online & Retail
Net sales 737 568 658 696 703 1,305 1,267 2,620
Gross profit before special items 285 227 264 279 277 512 508 1,050
EBITDA before special items 101 75 125 113 132 176 231 470
Net sales grow th 4.9% 0.8% 2.9% -6.6% -10.8% 3.1% -0.8% -1.6%
Organic net sales grow th -7.5% -6.3% -1.2% -5.7% -2.0% -7.0% 8.9% 2.4%
Gross margin before special items 38.7% 39.9% 40.1% 40.0% 39.4% 39.2% 40.1% 40.1%
EBITDA margin before special items 13.7% 13.2% 19.1% 16.2% 18.8% 13.5% 18.2% 17.9%
North America Branded & RoW
Net sales 819 773 656 768 761 1,593 1,454 2,877
Gross profit before special items 416 448 346 422 422 864 795 1,562
EBITDA before special items 305 328 215 335 311 633 585 1,135
Net sales grow th 7.7% 11.6% 14.6% 4.7% 21.0% 9.6% 19.0% 13.8%
Organic net sales grow th -0.5% 6.6% 10.4% 4.3% 25.6% 2.9% 24.2% 15.3%
Gross margin before special items 50.8% 57.9% 52.8% 54.9% 55.4% 54.2% 54.7% 54.3%
EBITDA margin before special items 37.2% 42.4% 32.9% 43.7% 40.9% 39.7% 40.2% 39.5%
Europe Branded
Net sales 721 596 699 718 692 1,317 1,318 2,735
Gross profit before special items 373 345 375 402 373 717 723 1,501
EBITDA before special items 173 159 171 214 191 332 370 754
Net sales grow th 4.2% -4.8% -1.7% -4.6% 1.8% -0.1% -2.6% -2.9%
Organic net sales grow th 2.4% -6.6% -2.3% -5.1% 1.7% -1.9% -2.4% -3.1%
Gross margin before special items 51.7% 57.8% 53.7% 56.1% 53.8% 54.5% 54.9% 54.9%
EBITDA margin before special items 24.0% 26.7% 24.4% 29.8% 27.6% 25.2% 28.0% 27.6%
Group costs
EBITDA before special items -34 -31 -38 -36 -28 -65 -52 -126
2022
2021
2021
12
MANAGEMENT STATEMENT
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
13
STATEMENT OF COMPREHENSIVE INCOME
1 JANUARY - 30 JUNE
CONSOLIDATED INCOME STATEMENT
DKK million
Q2 2022
Q2 2021
6M 2022
6M 2021
Net sales
1, 2
Cost of goods sold
1, 2
-1,203.7
-1,084.5
-2,122.1
-2,012.7
Gross profit before special items
1, 2
Other external costs
1, 2
-296.5
-240.3
-561.9
-473.3
Staff costs
2
-233.3
-224.8
-455.7
-419.8
Earnings before interest, tax, depreciation, amortisation
and special items (EBITDA before special items)
2
Depreciation and impairment
-47.1
-49.9
-93.1
-100.2
Earnings before interest, tax, amortisation and special
items (EBITA before special items)
Amortisation and impairment
-41.6
-40.2
-82.3
-80.7
Earnings before interest, tax and special items
(EBIT before special items)
Special items, costs and impairment
3
-22.7
-24.1
-40.4
-40.9
Earnings before interest and tax (EBIT)
Share of profit of associated companies, net of tax
Financial income
Financial costs
-74.5
-31.7
-130.2
-56.3
Profit before tax
Income taxes
-90.0
-104.2
-185.2
-194.1
Net profit for the period
Earnings per share
Basic earnings per share (DKK)
Diluted earnings per share (DKK)
OTHER COMPREHENSIVE INCOME
Items that will be recycled subsequently to the Consolidated Income Statement, when specific conditions are met:
Cash flow hedges, realisation of previously deferred
(gains)/losses to financial items
Cash flow hedges, deferred gains/losses incurred during the
period
Tax of cash flow hedges
-0.6
-0.4
-1.9
-0.8
Foreign exchange adjustments on net investments in foreign
operations
-74.3
Other comprehensive income for the period, net of tax
-72.5
Total comprehensive income for the period
14
Net sales
In the second quarter of 2022, net sales were DKK 2,278 million (DKK 2,156 million). Adjusted for
positive exchange rate impact of DKK 150 million and the acquisition of Moderno Opificio del Sigaro
Italiano of DKK 12 million, the organic growth in net sales was negative by 1.8%. For the first six
months of 2022, net sales came to DKK 4,215 million (DKK 4,039 million).
Profit
Gross profit before special items in the second quarter of 2022 was DKK 1,074 million (DKK 1,071
million) driven by a positive impact from exchange rates being offset by a decrease in the gross margin
primarily driven by the change in product and market mix particular in NABROW. Gross margin before
special items was 47.2% (49.7%) with decreasing margins in all three divisions.
Operating expenses in the second quarter increased to DKK 530 million (DKK 465 million) driven by
the inflating freight, distribution and utility costs, increased consultancy and IT costs, as well as in-
creased travel activities as result of diminishing COVID-19 restrictions. The OPEX ratio increased to
23.3% (21.6%) driven by the higher cost base compared to net sales in the second quarter.
EBITDA before special items in the second quarter of 2022 amounted to DKK 544 million (DKK 606
million). The development is explained by slightly improved net sales, being more than offset by the
increase in operating expenses. Exchange rate developments impacted positively by DKK 26 million.
Organic EBITDA growth was negative by 14.6%.
EBITDA margin before special items in the second quarter of 2022 was 23.9% (28.1%).
During the second quarter DKK 23 million (DKK 24 million) have been expensed as special items.
Special items relating to the integration of Agio Cigars was DKK 2 million (DKK 18 million). DKK 5
million have been expensed in relation to the production footprint (DKK 6 million). Cost expensed in
relation to Project OneProcess was DKK 16 million. See note 3 for an overview of special items.
Net profit for the second quarter was DKK 310 million (DKK 376 million). Earnings Per Share (“EPS”)
were DKK 3.4 (DKK 3.9). EPS adjusted for special items, fair value adjustments and currency
gains/losses, net of tax decreased to DKK 3.6 (DKK 4.1).
In the first six months of 2022, gross profit before special items was DKK 2,093 million (DKK 2,026
million) with a gross margin of 49.7% (50.2%). EBITDA before special items was DKK 1,076 million
(DKK 1,133 million) with an EBITDA margin of 25.5% (28.1%) Special items were DKK -40 million
(DKK -41 million), net profit was DKK 638 million (DKK 700 million) with EPS adjusted for special
items, fair value adjustments and currency gains/losses, net of tax decreased to DKK 7.2 (DKK 7.4).
Quarterly development, Q2 2021-Q2 2022
-3%
0%
3%
6%
9%
1,800
1,950
2,100
2,250
2,400
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly net sales
Net sales (DKK million) Organic sales growth
20%
23%
25%
28%
30%
300
400
500
600
700
Q2 2021 Q3 Q4 Q1 2022 Q2
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
15
CONSOLIDATED BALANCE SHEET
ASSETS
DKK million
30 Jun 2022
30 Jun 2021
31 Dec 2021
INTANGIBLE ASSETS
Goodwill
Trademarks
IT software
Other intangible assets
Total intangible assets
Property, plant and equipment
Investments in associated companies
Deferred income tax assets
Total non-current assets
Inventories
Trade receivables
Other receivables
Corporate tax
Prepayments
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
16
CONSOLIDATED BALANCE SHEET
EQUITY AND LIABILITIES
DKK million
30 Jun 2022
30 Jun 2021
31 Dec 2021
Share capital
Reserve for hedging
-0.1
-11.5
-6.9
Reserve for currency translation
Treasury shares
-307.5
-258.9
-570.5
Retained earnings
Total equity
Borrowings
Deferred income tax liabilities
Pension obligations
Other provisions
Leasing liabilities
Other liabilities
Total non-current liabilities
Trade payables
Corporate tax
Other provisions
Leasing liabilities
Other liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Net interest-bearing debt
Net interest-bearing debt increased by DKK 1,002 million to DKK 4,268 million versus the end of 2021.
The development was primarily driven by exchange rate changes, the purchase of own shares partly
being offset by the positive free cash flow from operations. The leverage ratio (net interest-bearing
debt to LTM EBITDA before special items) increased to 2.0x (1.5x at 31 December 2021).
Return on Invested Capital
The return on invested capital (ROIC) decreased to 13.6% versus 14.5% by the end of 2021 driven by
an increase in invested capital of DKK 488 million totalling DKK 13.0 billion (DKK 12.5 billion), and a
decrease of DKK 51 million in EBIT (12 months rolling) driven by the operational performance.
17
CONSOLIDATED CASH FLOW STATEMENT
1 JANUARY - 30 JUNE
DKK million
Q2 2022
Q2 2021
6M 2022
6M 2021
Net profit for the period
Depreciation, amortisation and impairment
Adjustments
Changes in working capital
-123.9
-393.2
-221.1
Special items, paid
-35.9
-47.2
-76.1
-100.4
Cash flow from operating activities before financial
items
Financial income received
Financial costs paid
-35.1
-29.4
-58.8
-47.6
Cash flow from operating activities before tax
Tax payments
-94.6
-108.8
-128.2
-156.9
Cash flow from operating activities
Acquisitions
-3.7
-3.7
Investment in intangible assets
-61.1
-13.6
-73.9
-18.1
Investment in property, plant and equipment
-58.9
-47.3
-112.7
-88.8
Sale of property, plant and equipment
Dividend from associated companies
Cash flow from investing activities
-118.6
-55.6
-179.8
-98.4
Free cash flow
Repayment of lease liabilities
-16.5
-13.4
-31.4
-29.3
Other financing
-21.5
RCF
Repayment bank loans
-0.9
-2.1
Dividend payment
-692.0
-626.7
-692.0
-626.7
Purchase of treasury shares
-194.3
-153.1
-327.7
-294.8
Cash flow from financing activities
-181.5
-376.5
-364.7
-417.2
Net cash flow for the period
-42.0
-96.0
Cash and cash equivalents, net at 1 April / 1 January
Exchange gains/losses on cash and cash equivalents
-1.3
-2.9
Net cash flow for the period
-42.0
-96.0
Cash and cash equivalents, net at 30 June
Cash flows
Cash flow from operations before changes in working capital in the second quarter of 2022 was DKK
382 million (DKK 430 million). The development was driven by the lower operational results.
18
Working capital in the second quarter of 2022 had a negative impact on the cash flow by DKK 124
million (positive of DKK 59 million) mainly due to sales tying up cash in receivables as well as lower
level of other liabilities.
Cash flow from investing activities amounted to DKK -119 million (DKK -56 million). The increase was
driven by higher investments in intangible- and tangible assets, comprising the acquisition of
Room101, OneProcess and retail expansion.
Free cash flow before acquisitions in the second quarter of 2022 was positive by DKK 143 million
(DKK 434 million). The cash conversion ratio was 77% (120%).
For the first six months of 2022 cash flow from operations before changes in working capital was
DKK 842 million (DKK 842 million). Working capital had a negative impact of DKK 393 million (DKK
-221 million) with a significant impact from a higher level of inventories, increase in receivables and
prepayments and a lower level of trade payables, provisions and other liabilities. Free cash flow be-
fore acquisitions was DKK 272 million (DKK 523 million) and the cash conversion ratio was 64%
(86%).
19
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 30 JUNE 2022
DKK million
Share
capital
Reserve
for
hedging
Reserve
for cur-
rency
transla-
tion
Treasury
shares
Retained
earnings
Total
Equity at 1 January 2022
-6.9
-570.5
Comprehensive income for the period
Net profit for the period
Other comprehensive income
Cash flow hedges
Tax of cash flow hedges
-1.9
-1.9
Foreign exchange adjustments on net investments
in foreign operations
Total other comprehensive income
Total comprehensive income for the period
Transactions with shareholders
Capital reduction
-4.5
-565.0
Purchase of treasury shares
-336.0
-336.0
Share-based payments
Settlement of vested PSUs
-29.6
Settlement in cash of vested PSU's
-6.2
-6.2
Dividend paid to shareholders
-731.3
-731.3
Dividend, treasury shares
Total transactions with shareholders
-4.5
-1,287.2
-1,028.6
Equity at 30 June 2022
-0.1
-307.5
Equity
Total shareholders’ equity as at 30 June 2022 amounted to DKK 9,055 million (DKK 8,968 million at
31 December 2021). The equity was positively impacted by profit for the period and a positive impact
from foreign exchange adjustments on net investments in foreign operations partly offset by ongoing
share buy-back programme and dividend payment to shareholders. As at 30 June 2022 the equity
ratio was 58.1% (61.5% at 31 December 2021).
At the Annual General Meeting held on 31 March 2022 the shareholders approved to reduce the
share capital by nominally DKK 4,500,000 by cancelling some of the Company’s treasury shares. Af-
ter the reduction, which took place 4 May 2022, the nominal value of the Company’s share capital is
DKK 93,000,000. Please refer to Company Announcement 29/2022.
20
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 30 JUNE 2021
DKK million
Share
capital
Reserve
for
hedging
Reserve
for cur-
rency
transla-
tion
Treasury
shares
Retained
earnings
Total
Equity at 1 January 2021
-14.5
-227.7
Comprehensive income for the period
Net profit for the period
Other comprehensive income
Cash flow hedges
Tax of cash flow hedges
-0.8
-0.8
Foreign exchange adjustments on net
investments in foreign operations
Total other comprehensive income
Total comprehensive income for the
period
Transactions with shareholders
Capital reduction
-2.5
-244.7
Purchase of treasury shares
-294.8
-294.8
Share-based payments
Settlement of vested PSUs
-16.4
Settlement in cash of vested PSU's
-4.5
-4.5
Dividend paid to shareholders
-650.0
-650.0
Dividend, treasury shares
Total transactions with shareholders
-2.5
-31.2
-885.5
-919.2
Equity at 30 June 2021
-11.5
-258.9
21
NOTES
NOTE 1
BASIS OF PREPARATION
This unaudited report has been prepared in accordance with IAS 34 and additional Danish disclosure
requirements for listed companies.
Significant accounting estimates
The estimates made by STG in the determination of the carrying amounts of assets and liabilities are
based on assumptions that are subject to future events. For a description of risks and accounting es-
timates, see the Annual Report for 2021.
Accounting policies
This report has been prepared in accordance with the accounting policies set out in the Annual Re-
port for 2021.
Based on an assessment of new or amended and revised accounting standards and interpretations
(‘IFRS’) issued by the International Accounting Standards Board (IASB) and IFRS, endorsed by the
European Union, effective on or after 1 January 2022, it has been assessed that the application of
these new IFRS has not had a material impact on the Consolidated Financial Statements for the first
half of 2022, and the Group does not anticipate any significant impact on future periods from the
adoption of these new IFRS. The Group has adopted all new, amended, and revised standards and
interpretations.
NOTE 2
SEGMENT INFORMATION AND NET SALES
6M 2022
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not al-
located
Total
DKK million
Net sales
1,305.4
1,592.7
1,317.3
-
4,215.4
Cost of goods sold
-793.2
-729.0
-599.9
-
-2,122.1
Gross profit before special items
512.2
863.7
717.4
-
2,093.3
Staff and other external costs
-336.5
-230.6
-385.6
-64.9
-1,017.6
EBITDA before special items
175.7
633.1
331.8
-64.9
1,075.7
Depreciation and impairment
-93.1
-93.1
Amortisation and impairment
-82.3
-82.3
EBIT before special items
-240.3
900.3
Special items, costs and impairment
-40.4
-40.4
EBIT
-280.7
859.9
Share of profit of associated
companies, net of tax
20.4
20.4
Financial income
72.9
72.9
Financial costs
-130.2
-130.2
Profit before tax
-317.6
823.0
22
NOTE 2
SEGMENT INFORMATION AND NET SALES (continued)
6M 2021
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not al-
located
Total
DKK million
Net sales
1,266.6
1,453.6
1,318.4
-
4,038.6
Cost of goods sold
-758.7
-658.9
-595.1
-
-2,012.7
Gross profit before special items
507.9
794.7
723.3
-
2,025.9
Staff and other external costs
-277.3
-209.7
-353.7
-52.4
-893.1
EBITDA before special items
230.6
585.0
369.6
-52.4
1,132.8
Depreciation and impairment
-100.2
-100.2
Amortisation and impairment
-80.7
-80.7
EBIT before special items
-233.3
951.9
Special items, costs and impairment
-40.9
-40.9
EBIT
-274.2
911.0
Share of profit of associated
companies, net of tax
15.6
15.6
Financial income
24.1
24.1
Financial costs
-56.3
-56.3
Profit before tax
-290.8
894.4
DKK million
6M 2022
6M 2021
Category split, net sales
Handmade cigars
1,548.6
1,474.1
Machine-rolled cigars
1,451.0
1,426.4
Smoking tobacco
611.8
590.6
Accessories and CMA
604.0
547.5
Total net sales
4,215.4
4,038.6
Licence income and other sales of DKK 32.1 million (DKK 22.5 million) are included in the category 'Accessories
and Contract Manufacturing'.
DKK million
6M 2022
6M 2021
Geographical split, net sales
Americas
2,253.5
2,132.0
Europe
1,621.3
1,688.4
Rest of World
340.6
218.2
Total net sales
4,215.4
4,038.6
23
NOTE 3
SPECIAL ITEMS
DKK million
6M 2022
6M 2021
Integration and transactions costs (Agio Cigars)
5.0
23.1
Production footprint
13.5
17.8
OneProcess
21.9
-
Total special items
40.4
40.9