Company Announcement
No. 66/2022
Copenhagen, 9 November 2022
Interim report, 1 January - 30 September 2022
Cash Flow and Maintains Full-Year Guidance
For the third quarter of 2022 Scandinavian Tobacco Group delivered 1% negative organic net sales
growth which is in-line with the Company’s performance expectations for the full year. Consumption in
our categories has remained resilient in recent months, and when combined with strong price man-
agement, has resulted in organic net sales remaining relatively stable as compared to last year, despite
the third quarter being impacted by the return to the pre-pandemic market mix. Increasing cost inflation
across the entire value chain and continued promotional pressure in the online business is negatively
impacting the Group’s EBITDA-margin. The plan to improve productivity in the supply chain is being
executed, however, with high complexity in our portfolio we expect part of the issues to persist into
2023.
Q3 Highlights
• Net sales were DKK 2,362 million (DKK 2,182 million) with -1.4% organic growth.
• EBITDA before special items was DKK 631 million (DKK 627 million) with -6.2% organic
growth. The EBITDA margin was 26.7% (28.7%). The third quarter of 2021 was positively
impacted by refunds of certain duties in the US by DKK 31 million.
• Exchange rate developments increased net sales by DKK 196 million and EBITDA before
special items by DKK 43 million.
• Adjusted Earnings Per Share (EPS) were DKK 4.4 (DKK 4.2).
• Free cash flow before acquisitions was DKK 462 million (DKK 564 million).
• Return on Invested Capital was 13.2% (12.9%).
• In the first nine months of 2022, organic net sales decreased by 1.6% to DKK 6,577 million
(DKK 6,221 million), EBITDA before special items decreased by 8.0% organically to DKK
1,707 million (DKK 1,759 million) and free cash flow before acquisitions was at DKK 735 mil-
lion (DKK 1,086 million).
“In the current environment I'm pleased with our performance for the third quarter, delivering solid cash
flows and positive EPS growth, which is in-line with our financial expectations for the full year of 2022.
We are driving productivity improvements in the supply chain, an issue we have faced in recent quar-
ters which continues to be our most important short-term priority,” said CEO Niels Frederiksen.
“While the supply chain issue and the current economic backdrop continue to be challenging, we are
encouraged by the progress we are making on our Rolling Towards 2025 Strategy. Our new super
store in San Antonio is off to a very strong start, and our Growth Incubator completed its second
product launch in the third quarter, with early but encouraging results. As the unprecedented inflation-
ary dynamics continue to play out, we will use the offsetting actions at our disposal to manage in the
2
short-term and are confident in our ability to deliver on our long-term strategy and value aspirations for
our shareholders."
Financial Guidance 2022
Consumption of our products continues to be relatively resilient, pricing remains robust throughout
most product categories and markets, and the Company is making progress on improving productivity
in the supply chain. Consequently, the assumption of an unchanged organic net sales development
for the full year is maintained.
Based on these assumptions, the full-year guidance for 2022 is maintained:
• EBITDA: Organic growth in the range -4% to 0%
• Free cash flow before acquisitions in the range DKK 1.1-1.4 billion
• Adjusted EPS >5% increase
For the fourth quarter of 2022 we expect organic net sales growth and organic EBITDA growth to
resume. Organic net sales growth is expected to be driven by Europe Branded and North America
Online & Retail, whereas North America Branded & Rest of World is expected to deliver declining
organic net sales versus the fourth quarter of 2021. A lower OPEX-ratio is expected to support a return
to organic EBITDA growth in the quarter. The bias in the expectation for organic EBITDA growth for
the full year is currently included in the lower end of the guidance range.
For further information, please contact:
Torben Sand, Head of IR & Communication, phone +45 5084 7222 or torben.sand@st-group.com
Eliza Michael, IR and Communication, phone +45 5080 7619 or eliza.michael@st-group.com
A conference call will be held on 10 November 2022 at 10.00 CEST. Dial-in information and an ac-
companying presentation will be available at investor.st-group.com/investor around 09:00 CEST.
3
Key Figures
DKK million
Q3 2022
Q3 2021
9M 2022
9M 2021
FY 2021
INCOME STATEMENT
Net sales
2,362
2,182
6,577
6,221
8,233
Gross profit before special items
1,172
1,102
3,265
3,128
4,113
EBITDA before special items
631
627
1,707
1,759
2,233
Special items
-27
-26
-67
-67
-55
EBIT
514
510
1,374
1,421
1,814
Net financial items
1
-32
-29
-90
-61
-77
Profit before tax
492
489
1,315
1,384
1,769
Income taxes
-111
-106
-296
-300
-378
Net profit
382
383
1,019
1,083
1,391
BALANCE SHEET
Total assets
16,145
14,384
14,584
Equity
9,576
8,686
8,968
Net interest-bearing debt (NIBD)
4,138
3,360
3,266
Investment in property, plant and equipment
66
68
179
157
212
Total capital expenditures
92
76
279
183
240
CASH FLOW STATEMENT
Cash flow from operating activities
551
635
999
1,256
1,567
Cash flow from investing activities
-89
-71
-268
-170
-178
Free cash flow
462
564
731
1,086
1,389
Free cash flow before acquisitions
462
564
735
1,086
1,393
KEY RATIOS
2
Net sales growth
8.2%
-2.2%
5.7%
2.3%
2.8%
Gross margin before special items
49.6%
50.5%
49.6%
50.3%
50.0%
EBITDA margin before special items
26.7%
28.7%
25.9%
28.3%
27.1%
Effective tax percentage
22.5%
21.7%
22.5%
21.7%
21.4%
Equity ratio
59.3%
60.4%
61.5%
Cash conversion
100.7%
96.7%
77.9%
101.7%
108.6%
Organic net sales growth
-1.4%
-2.2%
-1.6%
5.4%
4.5%
Organic EBITDA growth
-6.2%
0.9%
-8.0%
19.5%
18.4%
NIBD / EBITDA before special items
1.9
1.6
1.5
ROIC
13.2%
12.9%
14.5%
ROIC ex. Goodwill
21.9%
21.5%
24.3%
Adjusted earnings per share (DKK)
4.4
4.2
11.6
11.6
14.8
Basic earnings per share (DKK)
4.2
4.0
11.1
11.3
14.6
Diluted earnings per share (DKK)
4.2
4.0
11.1
11.3
14.5
Number of shares issued (‘000)
93,000
97,500
97,500
Number of treasury shares (‘000)
4,113
3,358
4,526
Number of outstanding shares (‘000)
3
91,432
96,220
95,689
Share price at balance date (DKK)
110.50
126.90
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 Q3 2022
In the third quarter of 2022, the Group delivered a financial performance in line with expectations.
Reported net sales increased by 8% to DKK 2,362 million, while organic net sales decreased by 1%.
Exchange rate developments were impacted positively by DKK 196 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 Online & Retail (“NAOR”). North America Branded & Rest of World
(“NABROW”) delivered flat organic net sales growth compared with the third quarter of 2021. Con-
sumer behaviour remains relatively solid in the current macro-economic environment, despite pan-
demic induced impacts now subsiding, with the organic net sales trend for the Group being stable.
Price management and increased cost consciousness are expected to balance the increasing cost
inflation and the prevailing supply chain issue.
Gross margin decreased compared with the same quarter of 2021 to 49.6% (50.5%), which was pri-
marily driven by the change in product and market mix, particularly in NABROW. EBITDA before spe-
cial items was DKK 631 million with 6% negative organic growth resulting in an EBITDA margin before
special items of 26.7% (28.7%). In the third quarter of 2021 EBITDA was positively impacted by a
refund of certain duties in the US of DKK 31 million. OPEX-ratio decreased slightly to 22.9% (23.2%)
despite increased cost inflation but due to tight cost control and prioritisation.
Special items were DKK -27 million (DKK -26 million) mainly driven by the ERP project OneProcess
(see note 3). The Group’s free cash flow before acquisitions declined to DKK 462 million (DKK 564
million) due to changes in working capital. Changes in working capital were negative by DKK -29
million (DKK 136 million) driven by higher inventories and receivables. Special items impacted the
cash flow by DKK -31 million (DKK -41 million). The Group’s leverage ratio (LTM) declined to 1.9x
versus 2.0x by the end of the second quarter 2022.
Divisional split Q3 2022
Net sales EBITDA before special items
Group net sales and EBITDA Q3 2022
Table 1: Net sales
Table 2: EBITDA before special items
Q3
Q3
Change
DKK million
2022
2021
in %
Net sales
2,362
2,182
8.2%
Acquisitions
15
Currency development
-196
Organic net sales
2,166
2,197
-1.4%
Q3
Q3
Change
DKK million
2022
2021
in %
EBITDA
631
627
0.7%
Acquisitions
0
Currency development
-43
Organic EBITDA
588
627
-6.2%
36%
31%
33%
NABROW
EUB
NAOR
49%
35%
16%
+8.2%
DKK 2,362m
+0.7%
DKK 631m
5
Business updates
The Growth Incubator brings its second product to market
The Company’s Growth Incubator, the enabler identifying new paths to growth supporting our Rolling
Towards 2025 strategy, continues to make notable progress.
At the end of the third quarter of 2022, STRÖM, our first “Modern Whites” product was launched in
Sweden and in a test environment in Manchester, UK. STRÖM is a high-quality brand of tobacco-free
nicotine pouches developed in collaboration with a well-established company with more than 30 years
of experience in developing and manufacturing nicotine products. STRÖM is the next generation of
all-white nicotine pouches, and its proposition is anchored in ‘maturity’ with four differentiating con-
sumer benefits:
1. unique brand design
2. three natural tasting flavours (Fresh Mint, Minty Orange, Juicy Berry)
3. long lasting flavour and nicotine release and
4. delivered in a 100% plant-based plastic can
The launch, although still in its early days, has had a strong start with positive response by retailers in
Sweden.
STRÖM is the second product launch from the Growth Incubator. In the third quarter of 2021, we
launched our combustible hemp brand, Versa, which creates an ideal non-nicotine product for ciga-
rette smokers seeking an alternative to their current tobacco-based choice. Combustible hemp prod-
ucts are a new category within the industry which will take time to build; however, initial developments
have been positive to date.
The Sustainability Strategy
In May 2022, we launched a more ambitious and comprehensive sustainability strategy called Rolling
Responsibly. The new sustainability strategy, which is now fully integrated into the corporate strategy
Rolling Towards 2025, strives to craft a better tomorrow by elevating our communities and anchoring
climate action in our corporate culture. The ambition is embedded in 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 continue and are key components
of our enhanced sustainability platforms.
Since the launch of Rolling Responsibly, the priority has been to reinforce our sustainability organisa-
tion as well as the formal commitment to SBTi (Science Based Targets initiative) - setting ambitious
emission reduction targets.
Update on financial key metrics
In the third quarter of 2022, the EBITDA margin decreased to 26.7% (28.7%) despite a slightly lower
OPEX-ratio as result of a decrease in the gross margin to 49.6% (50.5%) and a DKK 31 million refund
of certain duties in the US, positively impacting the third quarter of 2021. The decrease in the OPEX-
ratio has been realised despite the impact from cost inflation, higher consultancy fees and IT-invest-
ments. The gross margin as well as the EBITDA margin remain above the pre-pandemic margins
realised in 2019.
6
The 12 months rolling Return on Invested Capital (ROIC) decreased to 13.2% versus 14.5% by the
end of 2021 primarily driven by an increase in invested capital of DKK 896 million totalling DKK 13.4
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.
During the third quarter of 2022, Scandinavian Tobacco Group has bought back 2,054,048 shares at
a market value of DKK 247 million. As of 30 September 2022, Scandinavian Tobacco Group had
repurchased shares at a total market value of DKK 480 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 maintained for organic EBITDA growth, free cash flow before ac-
quisitions and for adjusted EPS growth.
While normalisation for most product categories have materialised during the recent months following
the pandemic, the consumption of handmade cigars for 2022 is expected to be lower than its structural
volume decline rate of -2%. Additional price adjustments across most of our product categories are
expected to balance cost inflation. Organic growth in net sales for the Group is expected to be close
to zero driven by growth in Europe Branded and North America Online & Retail in the fourth quarter.
Organic EBITDA growth is expected to turn positive in the fourth quarter of the year due to cost reduc-
tions, and as the balance between our price management initiatives and cost inflation improves. Cur-
rently, the bias in expectation for organic EBITDA growth for the full year is included in the lower end
of the guidance range. The largest potential uncertainties for the fourth quarter are changes in con-
sumer behaviour, slower than anticipated execution of solving the supply chain issue and additional
unexpected cost inflation.
Given these considerations, our guidance for 2022 is maintained:
• EBITDA: Organic growth in the range of -4% to 0%
• Free cash flow before acquisitions in the range of DKK 1.1-1.4 billion
• Adjusted EPS increase >5%
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, the ERP-project OneProcess and a negative impact from special items of about DKK 200
million. The negative impact from working capital is about DKK 500 million from previously DKK 300
million.
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.
7
Events after the reporting period
There are no other events than those mentioned in the above that have occurred after 30 September
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.
Financial calendar for 2023
Annual Report 2022 8 March, 2023
Annual General Meeting 13 April, 2023
Interim report Q1 2023 17 May, 2023
Interim report Q2 2023 29 August, 2023
Interim report Q3 2023 8 November, 2023
8
Divisional Update
North America Online & Retail
Net sales increased by 11% to DKK 770 million during the quarter with a 16% positive contribution
from exchange rates. Organic net sales growth was negative by 6% driven by a negative contribution
in the online channel being partly offset by an organic growth of about 18% in the retail super stores.
In the third quarter of 2022 organic net sales in the division were impacted by the channel dynamics
between retail and online sales channels. With a higher proportion of online than retail sales in the
division – retail accounts for 8% of net sales – NAOR currently underperforms the general market
development. While average order value is increasing, pricing opportunities in the online channel re-
main restricted by the prevailing competitive situation in the market.
Our online channel experienced another double-digit decline in the active customer base versus the
third quarter of 2021 with website traffic being impacted by the delayed shift back to online trade from
retail. It is expected that the balance between online and retail will improve in favour of online in the
coming quarters. The active consumer file remains above pre-pandemic levels in 2019.
The retail business continues to deliver solid double-digit organic net sales growth versus last year. In
the third 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 expecta-
tions in the first months since the opening.
Quarterly development, Q3 2021-Q3 2022
EBITDA before special items decreased by 3% to DKK 110 million with an EBITDA margin before
special items of 14.3% (16.2%). The margin development was driven by an increase in the OPEX ratio
due to increased expenses relating to IT-investments, the new automated warehouse system in Beth-
lehem, Pennsylvania, as well as the scale impact on declining sales volumes. The gross margin was
unchanged at 40.1% (40.0%) as pricing partly offset general cost inflation.
First nine months of 2022
Net sales for the first nine months of 2022 increased by 6% to DKK 2,075 million driven by a positive
exchange rate development. Organic net sales growth was negative by 7%. Gross profit before special
items increased by 4% and the gross margin was 39.5% (40.1%). EBITDA before special items de-
creased by 17% to DKK 286 million with an EBITDA margin of 13.8% (17.5%).
-10%
-5%
0%
5%
10%
400
500
600
700
800
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly net sales
Net sales (DKK million) Organic sales growth
0%
5%
10%
15%
20%
0
40
80
120
160
200
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
9
North America Branded & RoW
Net sales increased by 11% to DKK 851 million during the quarter with a 11% positive contribution
from exchange rates. Net sales were positively impacted by price increases, the continued recovery
in Global Travel Retail and the change of distribution model in Australia. This was offset by the decline
in sales to US online distributors, as well as the decision to cease sales to Russia and Belarus.
Consumer demand for cigars and smoking tobacco remains resilient, and the financial performance in
the division continues to be robust. However, consumers have become more cautious with changes
in consumer spending as a result of macro-economic developments. The reversal to pre-pandemic
product and market mix have continued. Following two years of exceptionally strong growth, the con-
sumption of handmade cigars in the US continued to decline from its peak last year, with the online
sales channel having the strongest decline rates.
Quarterly development, Q3 2021-Q3 2022
EBITDA before special items decreased by 3% to DKK 326 million with an EBITDA margin before
special items of 38.3% (43.7%). The decrease in margin is primarily a result of the refund of certain
duties in the US of DKK 31 million in the third quarter of 2021 and the normalisation of market and
product mix in the division. The OPEX ratio increased to 14.6% (11.2%). Excluding the duty refund the
OPEX ratio was 15.3% in the third quarter last year. The underlying improvement is primarily a result
of the change of distribution model in Australia.
First nine months of 2022
Net sales for the first nine months of 2022 increased by 10% to DKK 2,443 million and organic growth
was positive by 2%. Gross profit before special items increased by 8% to DKK 1,313 million and the
gross margin was 53.8% (54.7%). EBITDA before special items increased by 4% to DKK 959 million
with an EBITDA margin of 39.3% (41.4%). Excluding the duty refund, the EBITDA-margin was 40.0%
for the first nine months of 2021.
-10%
0%
10%
20%
30%
400
550
700
850
1000
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly net sales
Net sales (DKK million) Organic sales growth
25%
30%
35%
40%
45%
100
175
250
325
400
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
10
Europe Branded
Net sales increased by 3% to DKK 742 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 1%. For
all product categories pricing remained a key focus area, with price/mix impact for machine-rolled
cigars, the largest product category, being up by more than 5%.
Consumer demand for machine-rolled cigars in Europe remains resilient to macro-economic develop-
ments with the average negative volume development in our key markets at approximately 3%. Disci-
plined pricing initiatives offset inflationary pressure in the supply chain. During the third quarter of 2022,
the volume decline of machine-rolled cigars continued at its structural trend. Benelux, Iberia, Italy and
Germany delivered positive organic net sales growth while the other key markets delivered negative
growth. All markets delivered solid price/mix increases. The supply chain issues continued to impact
the market share performance in France and Benelux.
In the third quarter of 2022, the market share index for our key markets was 30.4% versus 32.1% in
the third quarter of 2021 and 30.5% in the second quarter of 2022. The market share development is
driven by supply issues still impacting net sales and a strong focus on compensating cost inflation with
price management.
Quarterly development, Q3 2021-Q3 2022
EBITDA before special items increased by 8% to DKK 231 million with an all-time-high EBITDA margin
before special items of 31.1% (29.8%). The margin development is driven by a reduction of the OPEX-
ratio to 24.7% (26.2%) as result of cost efficiencies stemming from the Agio integration and general
cost reductions.
First nine months of 2022
Net sales for the first nine months of 2022 increased by 1% to DKK 2,059 million and organic growth
was negative by -1%. Gross profit before special items increased by 1% to DKK 1,131 million with the
gross margin at 54.9% (55.3%). EBITDA before special items decreased by 4% to DKK 563 million
with an EBITDA margin of 27.3% (28.7%).
-10%
-5%
0%
5%
10%
400
500
600
700
800
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly net sales
Net sales (DKK million) Organic sales growth
23%
25%
28%
30%
33%
50
100
150
200
250
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
11
Quarterly Financial Data
2022
DKK million Q3 Q2 Q1 Q4 Q3 9M 9M 12M
Reported data
Net sales 2,362 2,278 1,938 2,012 2,182 6,577 6,221 8,233
Gross profit before special items 1,172 1,074 1,019 985 1,102 3,265 3,128 4,113
EBITDA before special items 631 544 532 474 627 1,707 1,759 2,233
Special items -27 -23 -18 13 -26 -67 -67 -55
EBIT 514 433 427 393 510 1,374 1,421 1,814
Net financial items -32 -44 -14 -16 -29 -90 -61 -77
Profit before tax 492 400 423 385 489 1,315 1,384 1,769
Income taxes -111 -90 -95 -78 -106 -296 -300 -378
Net profit 382 310 328 307 383 1,019 1,083 1,391
Other financial key data
Organic EBITDA grow th -6.2% -14.6% -2.7% 14.2% 0.9% -8.0% 19.5% 18.4%
Organic net sales grow th -1.4% -1.8% -1.7% 1.8% -2.2% -1.6% 5.4% 4.5%
Gross margin before special items 49.6% 47.2% 52.6% 49.0% 50.5% 49.6% 50.3% 50.0%
EBITDA margin before special items 26.7% 23.9% 27.4% 23.5% 28.7% 25.9% 28.3% 27.1%
Free cash flow before acquisitions 462 143 129 307 564 735 1,086 1,393
North America Online & Retail
Net sales 770 737 568 658 696 2,075 1,963 2,620
Gross profit before special items 308 285 227 264 279 820 786 1,050
EBITDA before special items 110 101 75 125 113 286 344 470
Net sales grow th 10.5% 4.9% 0.8% 2.9% -6.6% 5.7% -3.0% -1.6%
Organic net sales grow th -5.6% -7.5% -6.3% -1.2% -5.7% -6.5% 3.5% 2.4%
Gross margin before special items 40.1% 38.7% 39.9% 40.1% 40.0% 39.5% 40.1% 40.1%
EBITDA margin before special items 14.3% 13.7% 13.2% 19.1% 16.2% 13.8% 17.5% 17.9%
North America Branded & RoW
Net sales 851 819 773 656 768 2,443 2,222 2,877
Gross profit before special items 450 416 448 346 422 1,313 1,216 1,562
EBITDA before special items 326 305 328 215 335 959 920 1,135
Net sales grow th 10.7% 7.7% 11.6% 14.6% 4.7% 10.0% 13.6% 13.8%
Organic net sales grow th -0.2% -0.5% 6.6% 10.4% 4.3% 1.8% 16.7% 15.3%
Gross margin before special items 52.9% 50.8% 57.9% 52.8% 54.9% 53.8% 54.7% 54.3%
EBITDA margin before special items 38.3% 37.2% 42.4% 32.9% 43.7% 39.3% 41.4% 39.5%
Europe Branded
Net sales 742 721 596 699 718 2,059 2,036 2,735
Gross profit before special items 414 373 345 375 402 1,131 1,125 1,501
EBITDA before special items 231 173 159 171 214 563 584 754
Net sales grow th 3.4% 4.2% -4.8% -1.7% -4.6% 1.1% -3.3% -2.9%
Organic net sales grow th 1.4% 2.4% -6.6% -2.3% -5.1% -0.7% -3.4% -3.1%
Gross margin before special items 55.8% 51.7% 57.8% 53.7% 56.1% 54.9% 55.3% 54.9%
EBITDA margin before special items 31.1% 24.0% 26.7% 24.4% 29.8% 27.3% 28.7% 27.6%
Group costs
EBITDA before special items -36 -34 -31 -38 -36 -101 -88 -126
2022
2021
2021
12
MANAGEMENT STATEMENT
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
13
STATEMENT OF COMPREHENSIVE INCOME
1 JANUARY - 30 SEPTEMBER
CONSOLIDATED INCOME STATEMENT
DKK million
Q3 2022
Q3 2021
9M 2022
9M 2021
Net sales
1, 2
Cost of goods sold
1, 2
-1,189.9
-1,080.0
-3,312.0
-3,092.7
Gross profit before special items
1, 2
Other external costs
1, 2
-320.4
-279.5
-882.3
-752.8
Staff costs
2
-220.7
-226.9
-676.4
-646.7
Other income
Earnings before interest, tax, depreciation,
amortisation and special items (EBITDA before
special items)
2
Depreciation and impairment
-46.3
-50.2
-139.4
-150.4
Earnings before interest, tax, amortisation and
special items (EBITA before special items)
Amortisation and impairment
-43.4
-40.2
-125.7
-120.9
Earnings before interest, tax and special items
(EBIT before special items)
Special items, costs and impairment
3
-26.9
-26.3
-67.3
-67.2
Earnings before interest and tax (EBIT)
Share of profit of associated companies, net of tax
Financial income
Financial costs
-88.4
-42.1
-218.6
-98.4
Profit before tax
Income taxes
-110.7
-106.2
-295.9
-300.3
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, deferred gains/losses incurred
during the period
Tax of cash flow hedges
-0.3
-1.9
-1.1
Foreign exchange adjustments on net invest-
ments in foreign operations
Other comprehensive income for the period,
net of tax
Total comprehensive income for the period
14
Net sales
In the third quarter of 2022, net sales were DKK 2,362 million (DKK 2,182 million). Adjusted for positive
exchange rate impact of DKK 196 million and the acquisition of Moderno Opificio del Sigaro Italiano of
DKK 15 million, the organic growth in net sales was negative by 1.4%. For the first nine months of
2022, net sales came to DKK 6,577 million (DKK 6,221 million).
Profit
Gross profit before special items in the third quarter of 2022 was DKK 1,172 million (DKK 1,102 million)
driven by a positive impact from exchange rates being partly offset by a decrease in gross margins in
North America Branded & Rest of World and Europe Branded caused by change in product and market
mix. Gross margin before special items was 49.6% (50.5%).
Operating expenses in the third quarter increased to DKK 541 million (DKK 506 million) driven by the
inflating freight, distribution and utility costs, increased consultancy and IT costs, as well as increased
travel activities as result of diminishing COVID-19 restrictions. The OPEX ratio decreased slightly to
22.9% (23.2%) despite the increasing cost inflation.
EBITDA before special items in the third quarter of 2022 amounted to DKK 631 million (DKK 627
million). The development is explained by improved net sales, being partly offset by the increase in
operating expenses. Furthermore, the third quarter of 2021 was positively impacted by other income
of DKK 31 million. Exchange rate developments impacted positively by DKK 43 million. Organic
EBITDA growth was negative by 6.2%.
EBITDA margin before special items in the third quarter of 2022 was 26.7% (28.7%).
During the third quarter DKK 27 million (DKK 26 million) have been expensed as special items. Special
items relating to the integration of Agio Cigars was DKK 4 million (DKK 4 million). DKK 2 million has
been expensed in relation to the production footprint (DKK 7 million). Cost expensed in relation to
Project OneProcess was DKK 21 million (DKK nil million). Refer to note 3 for an overview of special
items.
Net profit for the third quarter was DKK 382 million (DKK 383 million). Earnings Per Share (“EPS”)
were DKK 4.2 (DKK 4.0). EPS adjusted for special items, fair value adjustments and currency
gains/losses, net of tax decreased to DKK 4.4 (DKK 4.2).
In the first nine months of 2022, gross profit before special items was DKK 3,265 million (DKK 3,128
million) with a gross margin of 49.6% (50.3%). EBITDA before special items was DKK 1,707 million
(DKK 1,759 million) with an EBITDA margin of 25.9% (28.3%) Special items were DKK -67 million
(DKK -67 million), net profit was DKK 1,019 million (DKK 1,083 million) while EPS adjusted for special
items, fair value adjustments and currency gains/losses, net of tax remained flat at DKK 11.6 (DKK
11.6).
Quarterly development, Q3 2021-Q3 2022
-4%
-2%
0%
2%
4%
1,800
1,950
2,100
2,250
2,400
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly net sales
Net sales (DKK million) Organic sales growth
20%
23%
25%
28%
30%
300
400
500
600
700
Q3 2021 Q4 Q1 2022 Q2 Q3
Quarterly EBITDA b.s.i.
EBITDA (DKK million) EBITDA margin
15
CONSOLIDATED BALANCE SHEET
ASSETS
DKK million
30 Sep 2022
30 Sep 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 Sep 2022
30 Sep 2021
31 Dec 2021
Share capital
Reserve for hedging
-10.1
-6.9
Reserve for currency translation
Treasury shares
-548.8
-419.1
-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 872 million to DKK 4,138 million versus the end of 2021.
The development was driven by the purchase of own shares, exchange rate changes and increased
leasing liabilities. The leverage ratio (net interest-bearing debt to LTM EBITDA before special items)
increased to 1.9x (1.5x at 31 December 2021).
Return on Invested Capital
The return on invested capital (ROIC) decreased to 13.2% versus 14.5% by the end of 2021 driven by
an increase in invested capital of DKK 896 million, totalling to DKK 13.4 billion (DKK 12.5 billion), and
a decrease of DKK 47 million in EBIT (12 months rolling) driven by the operational performance.
17
CONSOLIDATED CASH FLOW STATEMENT
1 JANUARY - 30 SEPTEMBER
DKK million
Q3 2022
Q3 2021
9M 2022
9M 2021
Net profit for the period
Depreciation, amortisation and impairment
Adjustments
Changes in working capital
-28.7
-421.9
-84.9
Special items, paid
-30.8
-41.4
-106.9
-141.8
Cash flow from operating activities before financial
items
Financial income received
Financial costs paid
-66.5
-49.4
-125.3
-97.0
Cash flow from operating activities before tax
Tax payments
-14.6
-69.6
-142.8
-226.5
Cash flow from operating activities
Acquisitions
-3.7
Investment in intangible assets
-26.2
-8.3
-100.1
-26.4
Investment in property, plant and equipment
-65.8
-67.7
-178.5
-156.5
Sale of property, plant and equipment
Dividend from associated companies
Cash flow from investing activities
-88.6
-71.4
-268.4
-169.8
Free cash flow
Repayment of lease liabilities
-16.6
-14.3
-48.0
-43.6
Other financing
-21.5
RCF
-245.3
-492.2
Repayment bank loans
-1.0
-3.1
Dividend payment
-692.0
-626.7
Purchase of treasury shares
-236.6
-160.2
-564.3
-455.0
Cash flow from financing activities
-499.5
-666.7
-864.2
-1,083.9
Net cash flow for the period
-37.2
-102.9
-133.2
Cash and cash equivalents, net at 1 July / 1 January
Exchange gains/losses on cash and cash equivalents
-0.4
-3.3
Net cash flow for the period
-37.2
-102.9
-133.2
Cash and cash equivalents, net at 30 September
Cash flows
Cash flow from operations before changes in working capital in the third quarter of 2022 was DKK 580
million (DKK 499 million). The development was driven by tax payments and lower net financial costs.
18
Working capital in the third quarter of 2022 had a negative impact on the cash flow by DKK 29 million
(positive of DKK 136 million) mainly due to inventory increase, sales tying up cash in receivables as
well as lower level of other liabilities.
Cash flow from investing activities in the third quarter amounted to DKK -89 million (DKK -71 million).
The increase was driven by higher investments in intangible assets related to OneProcess.
Free cash flow before acquisitions in the third quarter of 2022 was positive by DKK 462 million (DKK
564 million). The cash conversion ratio was 101% (97%).
For the first nine months of 2022 cash flow from operations before changes in working capital was
DKK 1,421 million (DKK 1,341 million). Working capital had a negative impact of DKK 422 million
(DKK -85 million) with a significant impact from a higher level of inventories, increase in receivables
and prepayments partly offset by a higher level of trade payables. Free cash flow before acquisitions
was DKK 735 million (DKK 1,086 million) and the cash conversion ratio was 78% (102%).
19
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 30 SEPTEMBER 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
-577.4
-577.4
Share-based payments
Settlement of vested PSUs
-29.6
Settlement in cash of vested PSU's
-7.2
-7.2
Dividend paid to shareholders
-731.3
-731.3
Dividend, treasury shares
Total transactions with shareholders
-4.5
-1,279.1
-1,261.9
Equity at 30 September 2022
-548.8
Equity
Total shareholders’ equity as of 30 September 2022 amounted to DKK 9,576 million (DKK 8,968 mil-
lion 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 was partly offset
by the ongoing share buy-back programme and dividend payment to shareholders. As of 30 Septem-
ber 2022, the equity ratio was 59.3% (61.5% at 31 December 2021).
At the Annual General Meeting held on 31 March 2022, shareholders approved to reduce the share
capital by nominally DKK 4,500,000 by cancelling some of the Company’s treasury shares. After 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 SEPTEMBER 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
-1.1
-1.1
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
-455.0
-455.0
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
-191.4
-877.0
-1,070.9
Equity at 30 September 2021
-10.1
-419.1
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
three quarters 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 stand-
ards and interpretations.
NOTE 2
SEGMENT INFORMATION AND NET SALES
9M 2022
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not al-
located
Total
DKK million
Net sales
2,074.9
2,443.3
2,059.1
-
6,577.3
Cost of goods sold
-1,254.5
-1,129.9
-927.6
-
-3,312.0
Gross profit before special items
820.4
1,313.4
1,131.5
-
3,265.3
Staff and other external costs
-534.6
-354.2
-569.0
-100.9
-1,558.7
EBITDA before special items
285.8
959.2
562.5
-100.9
1,706.6
Depreciation and impairment
-139.4
-139.4
Amortisation and impairment
- 125.7
-125.7
EBIT before special items
-366.6
1,441.5
Special items, costs and impairment
-67.3
-67.3
EBIT
-433.3
1,374.2
Share of profit of associated
companies, net of tax
30.6
30.6
Financial income
129.0
129.0
Financial costs
-218.6
-218.6
Profit before tax
-492.3
1,315.2
22
NOTE 2
SEGMENT INFORMATION AND NET SALES (continued)
9M 2021
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not al-
located
Total
DKK million
Net sales
1,962.9
2,221.7
2,035.9
-
6,220.5
Cost of goods sold
-1,176.6
-1,005.4
-910.7
-
-3,092.7
Gross profit before special items
786.3
1,216.3
1,125.2
-
3,127.8
Staff and other external costs
-442.7
-327.0
-541.6
-88.2
-1,399.5
Other income
-
31.0
-
-
31.0
EBITDA before special items
343.6
920.3
583.6
-88.2
1,759.3
Depreciation and impairment
-150.4
-150.4
Amortisation and impairment
-120.9
-120.9
EBIT before special items
-359.5
1,488.0
Special items, costs and impairment
-67.2
-67.2
EBIT
-426.7
1,420.8
Share of profit of associated
companies, net of tax
23.9
23.9
Financial income
37.4
37.4
Financial costs
-98.4
-98.4
Profit before tax
-463.8
1,383.7
DKK million
9M 2022
9M 2021
Category split, net sales
Handmade cigars
2,474.6
2,293.2
Machine-rolled cigars
2,251.7
2,193.7
Smoking tobacco
946.5
925.8
Accessories and CMA
904.5
807.8
Total net sales
6,577.3
6,220.5
Licence income and other sales of DKK 48.2 million (DKK 37.8 million) are included in the category 'Accessories
and Contract Manufacturing'.
DKK million
9M 2022
9M 2021
Geographical split, net sales
Americas
3,552.3
3,295.4
Europe
2,522.9
2,601.6
Rest of World
502.1
323.5
Total net sales
6,577.3
6,220.5
23
NOTE 3
SPECIAL ITEMS
DKK million
9M 2022
9M 2021
Integration and transactions costs (Agio Cigars)
8.6
26.9
Fuelling the Growth programme
-
1.9
Production footprint
15.7
25.0
OneProcess
43.0
-
Reversal of impairments, tangible assets
-
-41.6
Impairment intangible assets
-
55.0
Total special items
67.3
67.2