Company Announcement
No. 20/2023
Copenhagen, 17 May 2023
Interim Report, 1 January - 31 March 2023
Maintains Full-Year Outlook for 2023
For the first quarter of 2023, Scandinavian Tobacco Group A/S (the “Group” or “Scandinavian Tobacco
Group”) delivered 1.3% net sales growth and an EBITDA-margin of 24.1%, with the guidance for the
full year 2023 maintained. Uncertainties relating to key assumptions like consumer behaviour and cost
inflation remain moderately high, however year-on-year impacts from cost inflation are expected to
decline over the coming quarters.
Consumer demand for handmade cigars in the US in the quarter is still perceived as resilient, although
volume declines remained above its structural decline trend as overflow from the exceptionally strong
two years during the pandemic trails off. Price increases across most product categories supported
the financial performance.
Q1 Highlights
• Net sales increased by 1.3% to DKK 1,963 million (DKK 1,938 million).
• EBITDA before special items was DKK 474 million (DKK 532 million) with an EBITDA margin
of 24.1% (27.4%).
• Free cash flow before acquisitions was DKK -179 million (DKK 129 million).
• Adjusted Earnings Per Share (EPS) were DKK 3.2 (DKK 3.6).
• Return on Invested Capital (ROIC) was 13.6% (14.4%).
• Completion of the Alec Bradley cigar business acquisition, a leading player in the US hand-
made cigar category.
• In April 2023 following the close of the quarter, announcement of the acquisition of XQS, a
brand active in Sweden within the Next Generation Product category space.
CEO Niels Frederiksen: “STG remains on track to deliver on the 2023 guidance with results for the
first quarter being up against strong comparisons in 2022. We have stabilized our production issues,
but we are still recovering from this impact as well as cost inflation into 2023, affecting margins nega-
tively. The Group is making good progress on our ambition to grow the size of the company with two
transactions announced within the last few months.”
Dividend for 2022
At the Annual General Meeting on 13 April 2023, the proposal for an increase in the ordinary divi-
dend of 10% to DKK 8.25 per share was approved.
2
Financial guidance 2023 unchanged
For the financial year 2023, the guidance is maintained.
• Net sales in the range of DKK 9.0-9.3 billion
• EBITDA margin before special items in the range of 24-25%
• Free cash flow before acquisitions in the range DKK 1.2-1.4 billion
• Adjusted EPS in the range of DKK 14.5-16.5
For further information, please contact:
Torben Sand, Head of IR & Communication, phone +45 5084 7222 or torben.sand@st-group.com
Eliza Dabbagh, IR and Communication, phone +45 5080 7619 or eliza.michael@st-group.com
A conference call will be held on 18 May 2023 at 10.00 CEST. Dial-in information and an accompany-
ing presentation will be available at investor.st-group.com/investor around 09:00 CEST.
3
Key Figures
DKK million
Q1 2023
Q1 2022
FY 2022
INCOME STATEMENT
Net sales
1,963
1,938
8,762
Gross profit before special items
979
1,019
4,307
EBITDA before special items
474
532
2,270
Special items
-27
-18
35
EBIT
358
427
1,953
Net financial items
1
-31
-14
-137
Profit before tax
335
423
1,856
Income taxes
-76
-95
-380
Net profit
260
328
1,476
BALANCE SHEET
Total assets
16,194
15,057
15,122
Equity
9,399
9,281
9,342
Net interest-bearing debt (NIBD)
4,416
3,446
3,629
Investment in property, plant and equipment
48
54
264
Total capital expenditures
80
67
390
CASH FLOW STATEMENT
Cash flow from operating activities
-103
190
1,393
Cash flow from investing activities
-590
-61
-132
Free cash flow
-693
129
1,261
Free cash flow before acquisitions
-179
129
1,264
KEY RATIOS
2
Net sales growth
1.3%
2.9%
6.4%
Gross margin before special items
49.9%
52.6%
49.2%
EBITDA margin before special items
24.1%
27.4%
25.9%
Effective tax percentage
22.5%
22.5%
20.5%
Equity ratio
58.0%
61.6%
61.8%
Cash conversion
2.3%
51.1%
87.2%
Organic net sales growth
-0.8%
-1.7%
-0.8%
Organic EBITDA growth
-12.1%
-2.7%
-3.5%
NIBD / EBITDA before special items
2.0
1.5
1.6
ROIC
13.6%
14.4%
14.3%
ROIC ex. Goodwill
22.2%
24.0%
23.6%
Adjusted earnings per share (DKK)
3.2
3.6
16.0
Basic earnings per share (DKK)
3.0
3.5
16.3
Diluted earnings per share (DKK)
3.0
3.5
16.2
Number of shares issued ('000)
93,000
97,500
93,000
Number of treasury shares ('000)
6,382
5,231
5,751
Number of outstanding shares ('000)
3
86,831
92,638
90,851
Share price at balance date (DKK)
136.20
143.80
122.10
Dividend per share (DKK)
8.25
Pay-out ratio
52.0%
1. Excl. share of profit of associated companies.
2. See definition/explanation of financial ratios in note 5.8 in the Annual Report 2022.
3. Average number of shares outstanding, including dilutive effect of PSU’s.
4
Business overview Q1 2023
In the first quarter of 2023, the Group’s reported net sales increased by 1% to DKK 1,963 million with
organic net sales being negative by 1%. Exchange rates developments and the acquisition of Alec
Bradley, which was acquired as of 1 March 2023, impacted net sales positively by DKK 32 million and
DKK 9 million, respectively. The performance was driven by positive organic net sales growth in Eu-
rope Branded and North America Online & Retail, whereas organic growth as expected was negative
in North America Branded & Rest of World. The demand for handmade cigars in the US is still per-
ceived as resilient, although volumes decreased more than its structural decline rate. The unfavoura-
ble balance between the online and retail channels continues to impact our online business negatively.
The EBITDA margin decreased to 24.1% compared with 27.4% in the same quarter last year primarily
driven by lower gross margins in Europe Branded and North America Branded & Rest of World. The
decrease in gross margin is driven by a combination of changes in market and product mix as well as
the first quarter of 2022 was only marginally impacted by cost inflation. EBITDA before special items
was DKK 474 million with 12% negative organic growth. Special items comprise an expense of DKK
27 million (DKK 18 million) relating to the ERP-implementation project, OneProcess. Net profit was
DKK 260 million (DKK 328 million) with Adjusted Earnings Per Share at DKK 3.2 (DKK 3.6).
The Group’s free cash flow before acquisitions was DKK -179 million (DKK 129 million) driven by the
operational performance, higher financial costs and taxes paid as well as increased inventories. The
Group´s leverage ratio was 2.0 times versus 1.6 times by the end of 2022.
Divisional split Q1 2023
Net sales EBITDA before special items
Group net sales and EBITDA Q1 2023
Table 1: Net sales
Table 2: EBITDA before special items
Q1
Q1
Change
DKK million
2023
2022
in %
Net sales
1,963
1,938
1.3%
Acquisitions
9
Currency development
-32
Organic net sales
1,931
1,947
-0.8%
Q1
Q1
Change
DKK million
2023
2022
in %
EBITDA
474
532
-10.9%
Acquisitions
3
Currency development
-5
Organic EBITDA
469
535
-12.1%
37%
33%
30%
NA Branded & RoW
Europe Branded
NA Online & Retail
57%
28%
15%
+1.3%
DKK 1,963m
-10.9%
DKK 474m
5
Rolling Towards 2025
The Group’s ambition to grow the Company through a combination of acquisitions, geographic expan-
sion and further experimentation in Next Generation Products remains on track.
Mergers and acquisitions
In February 2023, the Group announced the acquisition of the Alec Bradley cigar business in a trans-
action valued at about DKK 500 million. The acquisition is in its integration planning period with the
aim to integrate operations and processes and to streamline the brand’s transition into the Scandina-
vian Tobacco Group portfolio.
In April 2023, the Group announced the acquisition of the XQS International AB’s (“XQS”) Next Gen-
eration Products business in a transaction valued at maximum DKK 150 million assuming all targets
are met in a complementary earn-out agreement. The product portfolio covers both Modern Whites
(without tobacco) and Modern Actives (without tobacco and without nicotine). In 2022, XQS reported
net sales of about DKK 50 million with a low single-digit EBITDA margin and a total volume of almost
3 million cans sold primarily in Sweden.
Growth initiatives
In February 2023, Cigars International opened its eighth retail cigar Superstore in Conroe, Texas. The
implementation of the strategy to expand the retail network in the US further continues, with additional
openings expected during 2023. Each of the seven stores opened before Conroe, remain profitable
and these stores are expected to deliver valuable contributions to net sales and profits.
The Growth Incubator continues to research opportunities outside the Group’s core categories. To
date, the Group has launched three new products and acquired one brand within the Next Generation
Product category.
In April 2023, the Group launched a new Modern Actives product called !act in the Danish market. The
product delivers energy through caffeine. !act has been launched in collaboration with a joint-venture
partner REKOM, the largest entertainment group in Northern Europe.
The Group continues to closely monitor these growth opportunities to assess whether the Group’s
presence in the Next Generation Product categories is viable and profitable in the mid to long term.
Update on financial key metrics
In the first quarter of 2023, the EBITDA margin decreased to 24.1% (27.4%) and gross margin de-
creased to 49.9% (52.6%). The OPEX-ratio increased to 25.8% (25.2%).
The 12 months rolling Return on Invested Capital (ROIC) decreased slightly to 13.6% versus 14.3%
by the end of 2022 driven by the development in EBIT (12 months rolling) and an increase in invested
capital of DKK 0.2 billion to DKK 13.9 billion compared to 31 December 2022.
6
Sustainability
The Group’s sustainability strategy – Rolling Responsibly – continues to make good progress. New
data collection methods and reporting processes will be implemented, and the Center of Excellence
continues to assess impactful environmental, social and governance initiatives for the communities in
which we operate in. The Group’s vision to be the undisputed and sustainable global leader in cigars
remains unchanged.
Capital Allocation
During the first quarter of 2023, the Company bought back 0.81 million shares at a market value of
DKK 96 million under the programme that was initiated in 2022 and closed at the end of February
2023.
7
Outlook 2023
Overall, the consumption of products in our categories is perceived as resilient. The consumption of
handmade cigars in the US currently decline at a slightly faster pace than its structural decline rate of
about 2% on the back of the exceptional growth delivered in 2020 and 2021. The consumption of
machine-rolled cigars in our key European markets continue to develop close to its structural decline
rate of about 2-3%. In total the volume impact for the year is expected to be close to normal levels.
Price increases are expected to more than offset the volume decline. Additionally, a small contribution
to net sales growth is expected from the growth enablers, the retail expansion in the US and the Next
Generation Products. Including the impact from acquisitions and based on the current exchange rates,
the expectation to reported net sales is maintained in the range of DKK 9.0-9.3 billion.
The EBITDA margin is assumed to be impacted positively by price increases and improved productivity
in our factories compared with last year and the EBITDA margin is assumed to be impacted negatively
by cost inflation, mix changes as well as investments in the next generation product category, store
openings in the US retail markets and the roll-out of our sustainability strategy, Rolling Responsibly.
The expectation for the EBITDA margin before special items is maintained in the range of 24-25%.
The EBITDA margin is expected to increase in North America Online & Retail, to remain about un-
changed for Europe Branded and to decrease in North America Branded & Rest of World.
The largest uncertainties for net sales and the EBITDA margin are changes in consumer behaviour,
including the development in our US online business, major changes in market and product mix as
well as unexpected cost inflation.
Given these considerations the guidance for 2023 is maintained:
• Reported net sales in the range of DKK 9.0-9.3 billion.
• EBITDA-margin before special items in the range of 24-25%.
• Free cash flow before acquisitions in the range of DKK 1.2-1.4 billion.
• Adjusted EPS in the range of DKK 14.5-16.5.
The financial performance for Scandinavian Tobacco Group for the full year 2023 rests on several
assumptions:
• No contribution or expenses related to potential new acquisitions.
• The effective tax rate is expected to be in the range of 22-23%
• Working capital is expected to deliver a positive contribution.
• Capital expenditure, net is expected at up to DKK 500 million.
• Guidance and assumptions are based on current exchange rates*
* A 10% change in the USD/DKK exchange rate would impact group net sales by approximately 5 percentage points with
EBITDA margins being only marginally impacted.
Events after the reporting period
On 23 April 2023, Scandinavian Tobacco Group announced an agreement on the terms and conditions
for the acquisition of substantially all assets of the Swedish company XQS International AB (“XQS”).
The transaction is expected to close shortly. The transaction value consists of an upfront payment as
well as an earn-out agreement and assuming all targets are met, the total purchase will be about DKK
150 million.
8
XQS is active within Next Generation Products with a portfolio of pouches in Modern Whites (without
tobacco, with nicotine) and Modern Actives (without tobacco, without nicotine). The products are pri-
marily sold in Sweden. In 2022, XQS reported net sales of almost DKK 50 million with almost 3 million
cans sold. The EBITDA margin was minimal.
The acquisition of the XQS business expands Scandinavian Tobacco Group’s presence within the
Modern Whites category, which was initiated by the launch of STRÖM nicotine pouches last year. To
support further growth, the intention is to invest in a roll-out of XQS and STRÖM to more markets.
There are no other events than those mentioned in the above that have occurred after 31 March 2023
and that are expected to have material impact on the financial position of the Group.
Annual General Meeting
At the Annual General Meeting held on 13 April 2023, the shareholders approved a dividend of DKK
8.25 per share resulting in a total dividend pay-out of about DKK 715 million.
It was also approved to reduce the share capital by cancelling treasury shares of a nominal value of
DKK 6,000,000. Following the reduction, which is expected on 25 May 2023, the nominal value of the
Group’s share capital will be DKK 87,000,000, which corresponds to 87,000,000 shares.
The shareholders re-elected Henrik Brandt, Henrik Amsinck, Dianne Blixt, Marlene Forsell, Claus
Gregersen and Anders Obel as members of the Board of Directors. The Board of Directors has ap-
pointed Henrik Brandt as Chairman of the Board of Directors. Employee-elected members of the Board
of Directors are Mark Draper, Trine Eriksen and Thomas Thomsen.
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.
9
Divisional update
Europe Branded
During the first quarter 2023 net sales increased by 8% compared with the first quarter of 2022 and
the EBITDA margin decreased to 22.3%. The growth in net sales was primarily driven by smoking
tobacco and solid pricing across product categories.
Consumer demand for machine-rolled cigars in Europe continue to be resilient to the macro-economic
environment with the volume decline rate being stable at an annual decline rate of 2%.
Preliminary data show the market-share index for our key markets was 30.7% for the first quarter 2023
versus 30.6% for the fourth quarter of 2022 and 31.1% for the full year of 2022. Price increases remain
a key priority to off-set declining volumes and inflationary effects.
First Quarter Development, 2018-2023
Net sales increased by 8% to DKK 641 million during the quarter with organic net sales growth slightly
above 8%. The solid growth was driven by smoking tobacco and handmade cigars, whereas machine-
rolled cigars delivered a slightly negative growth primarily as result of lower volumes in France, Bene-
lux and the UK. Pricing for all product categories was solid with price/mix impact for the largest product
category, machine-rolled cigars being up by almost 7%.
EBITDA before special items decreased to DKK 143 million (DKK 159 million) with an EBITDA margin
before special items of 22.3% (26.7%). The margin development was driven by a decreasing gross
margin as result of changes in market and product mix as well cost inflation only impacting the first
quarter of 2022 marginally. The primary drivers behind the mix changes are the decreasing net sales
in France, the UK and Benelux and higher net sales of smoking tobacco in Germany. The OPEX ratio
was almost unchanged despite increasing investments in Next Generation Products.
10%
15%
20%
25%
30%
300
400
500
600
700
Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
10
North America Branded & RoW
During the first quarter 2023 net sales decreased by 7% compared with the first quarter of 2022 and
the EBITDA margin decreased to 38.8%. The first quarter of 2022 was exceptionally strong including
the benefits from the change in market mix following the pandemic, a positive impact from the change
of distribution model in Australia a.o. The first quarter of 2023 has been impacted by solid pricing
across product categories and the acquisition of the Alec Bradley cigar business.
Consumer demand for cigars is still considered resilient, although volumes of handmade cigars in the
US continue to decline by more than the expected structural decline rate as overflow from the excep-
tionally strong two years during the pandemic trails off. The Alec Bradley business, which was acquired
as of 1 March, constitutes a material addition to the Group’s portfolio of handmade cigars and the
integration planning process are meeting all milestones.
The nicotine pouch product STRÖM continues to perform well and with the expected takeover of XQS,
the Group’s portfolio within the Next Generation Product category will be further strengthened. These
products are created and developed out of the Growth Incubator and are sold via our commercial
divisions.
First Quarter Development, 2018-2023
Net sales decreased by 7% to DKK 720 million during the quarter. Organic growth was negative by
9% with exchange rates and net sales from acquisitions being about 1% each. The organic decline
was primarily a result of the quarter being up against an exceptionally strong first quarter in 2022 as
well as the solid pricing in US handmade cigars couldn’t fully offset declining volumes. All product
categories delivering solid price/mix impact.
EBITDA before special items decreased to DKK 280 million (DKK 328 million) with an EBITDA margin
before special items of 38.8% (42.4%). The decrease in profitability was primarily the result of the
gross margin comparing to an exceptionally strong first quarter of 2022, where the gross margin was
improved by strong net sales in Norway as well as the impacts from implementation of a new distribu-
tion model in Australia. The OPEX ratio in the quarter was almost unchanged compared with the same
quarter last year.
25%
30%
35%
40%
45%
400
500
600
700
800
Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
11
North America Online & Retail
During the first quarter 2023 net sales increased by 6% compared with the first quarter of 2022 and
the EBITDA margin improved to 13.9%. Organic net sales increased for the first time in eight quarters
driven by improved performance in the online business and continued growth in the retail business.
The performance continues to be negatively impacted by the channel dynamics between retail and
online sales channels and fierce competition in the online channel. NAOR’s high proportion of online
sales compared with retail sales implies the division continue to underperform the general market
development as result of the channel mix and loss of market share. Retail accounts for an increasing
share of net sales in NAOR and was in the quarter close to 9%.
First Quarter Development, 2018-2023
Net sales increased by 6% to DKK 602 million during the quarter composed of a 1% organic net sales
growth and an exchange rate effect of almost 5%. Online delivered a slightly negative organic net
sales growth being offset by solid growth in retail.
Online continued to experience a decline in the active customer base versus the same quarter last
year reflecting the balance between online and retail continues to be skewed toward retail. We con-
tinue to expect the balance to reverse in favour of online, though it is taking longer than originally
anticipated. The decrease in volumes was partly offset by a strong price/mix impact. The distribution
of ZYN products is developing positively and contributed to the online business almost being on par
with the same quarter of last year.
Retail delivered solid double-digit organic net sales growth versus last year driven by new store open-
ings. Net sales from existing stores were essentially flat versus the first quarter of last year.
EBITDA before special items increased to DKK 83 million (DKK 75 million) with an EBITDA margin
before special items of 13.9% (13.2%). The margin development is primarily driven by price manage-
ment and as cost inflation may still come into play in the coming quarters, it remains a key priority to
protect margins.
5%
10%
15%
20%
25%
200
300
400
500
600
700
Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
12
Quarterly Financial Data
DKK million Q1 Q4 Q3 Q2 Q1 FY
Reported data
Net sales 1,963 2,185 2,362 2,278 1,938 8,762
Gross profit before special items 979 1,042 1,172 1,074 1,019 4,307
EBITDA before special items 474 563 631 544 532 2,270
Special items -27 103 -27 -23 -18 35
EBIT 358 579 514 433 427 1,953
Net financial items -31 -47 -32 -44 -14 -137
Profit before tax 335 541 492 400 423 1,856
Income taxes -76 -84 -111 -90 -95 -380
Net profit 260 457 382 310 328 1,476
Other financial key data
Organic EBITDA grow th -12.1% 13.3% -6.2% -14.6% -2.7% -3.5%
Organic net sales grow th -0.8% 1.7% -1.4% -1.8% -1.7% -0.8%
Gross margin before special items 49.9% 47.7% 49.6% 47.2% 52.6% 49.2%
EBITDA margin before special items 24.1% 25.8% 26.7% 23.9% 27.4% 25.9%
Free cash flow before acquisitions -179 530 462 143 129 1,264
North America Online & Retail
Net sales 602 703 770 737 568 2,778
Gross profit before special items 242 278 308 285 227 1,098
EBITDA before special items 83 117 110 101 75 403
Net sales grow th 5.9% 6.9% 10.5% 4.9% 0.8% 6.0%
Organic net sales grow th 1.3% -4.8% -5.6% -7.5% -6.3% -6.1%
Gross margin before special items 40.2% 39.5% 40.1% 38.7% 39.9% 39.5%
EBITDA margin before special items 13.9% 16.7% 14.3% 13.7% 13.2% 14.5%
North America Branded & RoW
Net sales 720 751 851 819 773 3,194
Gross profit before special items 396 385 450 416 448 1,698
EBITDA before special items 280 267 326 305 328 1,226
Net sales grow th -6.9% 14.5% 10.7% 7.7% 11.6% 11.0%
Organic net sales grow th -9.2% 7.4% -0.2% -0.5% 6.6% 3.1%
Gross margin before special items 55.1% 51.2% 52.9% 50.8% 57.9% 53.2%
EBITDA margin before special items 38.8% 35.5% 38.3% 37.2% 42.4% 38.4%
Europe Branded
Net sales 641 731 742 721 596 2,790
Gross profit before special items 341 380 414 373 345 1,511
EBITDA before special items 143 209 231 173 159 772
Net sales grow th 7.6% 4.6% 3.4% 4.2% -4.8% 2.0%
Organic net sales grow th 8.3% 2.4% 1.4% 2.4% -6.6% 0.1%
Gross margin before special items 53.2% 51.9% 55.8% 51.7% 57.8% 54.2%
EBITDA margin before special items 22.3% 28.6% 31.1% 24.0% 26.7% 27.7%
Group costs
EBITDA before special items -32 -30 -36 -34 -31 -131
2023
2022
13
MANAGEMENT STATEMENT
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
CHAIRMAN
14
STATEMENT OF COMPREHENSIVE INCOME
1 JANUARY - 31 MARCH
CONSOLIDATED INCOME STATEMENT
DKK million
Note
Q1 2023
Q1 2022
Net sales
1, 2
Cost of goods sold
1, 2
-983.7
-918.4
Gross profit before special items
1, 2
Other external costs
1, 2
-262.1
-265.4
Staff costs
2
-243.5
-222.4
Earnings before interest, tax, depreciation, amortisation
and special items (EBITDA before special items)
2
Depreciation and impairment
-46.3
-46.0
Earnings before interest, tax, amortisation and special
items (EBITA before special items)
Amortisation and impairment
-41.7
-40.7
Earnings before interest, tax and special items (EBIT be-
fore special items)
Special items, costs and impairment
3
-27.2
-17.7
Earnings before interest and tax (EBIT)
Share of profit of associated companies, net of tax
Financial income
Financial costs
-88.1
-55.7
Profit before tax
Income taxes
-75.5
-95.2
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
-1.3
Foreign exchange adjustments on net investments
in foreign operations
-108.3
Other comprehensive income for the period, net of tax
-108.3
Total comprehensive income for the period
15
Net sales
In the first quarter of 2023, net sales were DKK 1,963 million (DKK 1,938 million). Adjusted for a pos-
itive exchange rate impact of DKK 32 million and acquisitions of DKK 9 million, the organic growth in
net sales was negative by 0.8%.
Profit
Gross profit before special items for the first quarter of 2023 was DKK 979 million (DKK 1,019 million)
explained by a decrease in the gross margin before special items to 49.9% (52.6%). The gross margin
declined in North America Branded & Rest of World, and Europe Branded, only partly offset by a slight
margin increase in North America Online & Retail.
Operating expenses for the first quarter increased by 4% to DKK 506 million (DKK 488 million) mainly
explained by increased staff costs compared to Q1 last year. The OPEX-ratio increased to 25.8%
(25.2%).
EBITDA before special items for the first quarter of 2023 amounted to DKK 474 million (DKK 532
million). The development is explained by the decreased gross margin as well as the increased OPEX-
ratio. Organic EBITDA growth was negative by 12%.
EBITDA margin before special items for the first quarter of 2023 was 24.1% (27.4%).
During the quarter DKK 27 million (DKK 18 million) have been expensed as special items, all relating
to OneProcess (DKK 6 million).
Net profit was DKK 260 million (DKK 328 million). Earnings Per Share (EPS) were DKK 3.0 (DKK
3.5). Earnings Per Share adjusted for special items, fair value adjustments and currency
gains/losses, net of tax decreased to DKK 3.2 (DKK 3.6).
First Quarter Development, 2018-2023
10%
14%
18%
22%
26%
30%
1000
1300
1600
1900
2200
2500
Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
16
CONSOLIDATED BALANCE SHEET
ASSETS
DKK million
31 Mar 2023
31 Mar 2022
31 Dec 2022
INTANGIBLE ASSETS
Goodwill
5,331.5
Trademarks
2,987.6
IT software
50.5
Other intangible assets
195.1
Intangible assets under development
125.4
Total intangible assets
8,690.1
Property, plant and equipment
1,739.6
Investments in associated companies
223.6
Deferred income tax assets
104.6
Total non-current assets
10,757.9
Inventories
3,248.9
Trade receivables
884.6
Other receivables
86.4
Corporate tax
21.4
Prepayments
100.7
Cash and cash equivalents
22.2
Assets classified as held for sale
-
Total current assets
4,364.2
Total assets
15,122.1
17
CONSOLIDATED BALANCE SHEET
EQUITY AND LIABILITIES
DKK million
31 Mar 2023
31 Mar 2022
31 Dec 2022
Share capital
93.0
Reserve for hedging
-2.5
-
Reserve for currency translation
963.8
Treasury shares
-818.9
-678.2
-748.1
Retained earnings
9,032.9
Total equity
9,341.6
Borrowings
3,101.1
Deferred income tax liabilities
673.5
Pension obligations
204.7
Other provisions
17.9
Leasing liabilities
275.1
Other liabilities
31.0
Total non-current liabilities
4,303.3
Credit facilities
-
Trade payables
506.8
Corporate tax
207.4
Other provisions
19.8
Leasing liabilities
56.3
Other liabilities
686.9
Total current liabilities
1,477.2
Total liabilities
5,780.5
Total equity and liabilities
15,122.1
Equity
Total shareholders’ equity as of 31 March 2023 amounted to DKK 9,399 million (DKK 9,342 million on
31 December 2022). The equity was negatively impacted by foreign exchange adjustments on net
investments in foreign operations and by share buy-back programme, partly offset by the positive im-
pact from profit for the period. As of 31 March 2023, the equity ratio was 58.0% (61.8% on 31 Decem-
ber 2022).
Net interest-bearing debt
Net interest-bearing debt increased by DKK 787 million to DKK 4,416 million versus the end of 2022.
The development is explained by mainly the acquisition of the Alec Bradley cigar business and pur-
chase of own shares. The leverage ratio (net interest-bearing debt to LTM EBITDA before special
items) increased to 2.0x (1.6x on 31 December 2022).
Return on Invested Capital
The return on invested capital (ROIC) decreased to 13.6% versus 14.3% by the end of 2022, explained
by a DKK 69 million decrease in EBIT (12 months rolling), driven by the operational performance, and
a slightly increased invested capital of DKK 13.9 billion (DKK 13.7 billion).
18
CONSOLIDATED CASH FLOW STATEMENT
1 JANUARY - 31 MARCH
DKK million
Q1 2023
Q1 2022
Net profit for the period
Depreciation, amortisation and impairment
Adjustments
Changes in working capital
-452.5
-269.3
Special items, paid
-28.2
-40.2
Cash flow from operating activities before financial items
-2.7
Financial income received
Financial costs paid
-56.1
-23.7
Cash flow from operating activities before tax
-46.5
Tax payments
-56.2
-33.6
Cash flow from operating activities
-102.7
Acquisitions
-513.6
Investment in intangible assets
-32.1
-12.8
Investment in property, plant and equipment
-47.8
-53.8
Sale of property, plant and equipment
Dividend from associated companies
Cash flow from investing activities
-590.1
-61.2
Free cash flow
-692.8
Repayment of lease liabilities
-15.8
-14.9
RCF
-33.7
Repayment bank loans
-1.1
-1.2
Purchase of treasury shares
-103.8
-133.4
Cash flow from financing activities
-183.2
Net cash flow for the period
-34.2
-54.0
Cash and cash equivalents, net at 1 January
Exchange gains/losses on cash and cash equivalents
-5.6
-1.6
Net cash flow for the period
-34.2
-54.0
Cash and cash equivalents, net at 31 March
-17.6
Cash flows
Cash flow from operations before changes in working capital in the first quarter of 2023 was DKK 350
million (DKK 460 million). The development was driven by the operational result, higher net financial
costs paid, as well as higher tax payments.
Changes in working capital in the first quarter of 2023 had a negative impact on the cash flow of DKK
453 million (negative DKK 269 million) mainly due to increased inventories driven by higher safety
stock levels, preparations for Track & Trace in Europe and tax stamps.
19
Cash flow from investing activities amounted to DKK -590 million (DKK -61 million). The increase was
driven by the acquisition of Alec Bradley cigar business.
Free cash flow before acquisitions in the first quarter of 2023 was negative by DKK 179 million (posi-
tive DKK 129 million). The cash conversion ratio was 2.3% (51.1%).
20
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 31 MARCH 2023
DKK million
Share
capital
Reserve for
currency
translation
Treasury
shares
Retained
earnings
Total
Equity at 1 January 2023
-748.1
Comprehensive income for the period
Net profit for the period
Other comprehensive income
Foreign exchange adjustments on net invest-
ments in foreign operations
-108.3
-108.3
Total other comprehensive income
-108.3
-108.3
Total comprehensive income for the period
-108.3
Transactions with shareholders
Purchase of treasury shares
-95.9
-95.9
Share-based payments
Settlement of vested PSUs
-25.1
Total transactions with shareholders
-70.8
-22.9
-93.7
Equity at 31 March 2023
-818.9
1 JANUARY – 31 MARCH 2022
DKK million
Share
capital
Reserve
for
hedging
Reserve
for
currency
translation
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
-1.3
-1.3
Foreign exchange adjustments on net
investments in foreign operations
Total other comprehensive income
Total comprehensive income
for the period
Transactions with shareholders
Purchase of treasury shares
-137.3
-137.3
Share-based payments
Settlement of vested PSUs
-29.6
Total transactions with shareholders
-107.7
-27.3
-135.0
Equity at 31 March 2022
-2.5
-678.2
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 2022.
Accounting policies
This report has been prepared in accordance with the accounting policies set out in the Annual Re-
port for 2022.
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 2023, 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
quarter of 2023, 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
3M 2023
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not
allocated
Total
DKK million
Net sales
601.8
719.8
641.3
-
1,962.9
Cost of goods sold
-360.0
-323.4
-300.3
-
-983.7
Gross profit before special items
241.8
396.4
341.0
-
979.2
Staff and other external costs
-158.4
-116.8
-198.3
-32.1
-505.6
EBITDA before special items
83.4
279.6
142.7
-32.1
473.6
Depreciation and impairment
-46.3
-46.3
Amortisation and impairment
-41.7
-41.7
EBIT before special items
-120.1
385.6
Special items, costs and impairment
-27.2
-27.2
EBIT
-147.3
358.4
Share of profit of associated
companies, net of tax
8.3
8.3
Financial income
56.7
56.7
Financial costs
-88.1
-88.1
Profit before tax
-170.4
335.3
22
SEGMENT INFORMATION AND NET SALES (continued)
3M 2022
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not
allocated
Total
DKK million
Net sales
568.5
773.4
595.8
-
1,937.7
Cost of goods sold
-341.5
-325.7
-251.2
-
-918.4
Gross profit before special items
227.0
447.7
344.6
-
1,019.3
Staff and other external costs
-152.0
-119.5
-185.6
-30.7
-487.8
EBITDA before special items
75.0
328.2
159.0
-30.7
531.5
Depreciation and impairment
-46.0
-46.0
Amortisation and impairment
-40.7
-40.7
EBIT before special items
-117.4
444.8
Special items, costs and impairment
-17.7
-17.7
EBIT
-135.1
427.1
Share of profit of associated
companies, net of tax
9.8
9.8
Financial income
42.0
42.0
Financial costs
-55.7
-55.7
Profit before tax
-139.0
423.2
DKK million
3M 2023
3M 2022
Category split, net sales
Handmade cigars
680.8
684.1
Machine-rolled cigars
696.7
660.8
Smoking tobacco
321.8
300.2
Accessories and CMA
263.6
292.6
Total net sales
1,962.9
1,937.7
Licence income and other sales of DKK 24.9 million (DKK 17.5 million) are included in the category 'Accessories
and Contract Manufacturing'.
DKK million
3M 2023
3M 2022
Geographical split, net sales
Americas
1,051.9
1,013.8
Europe
795.6
760.8
Rest of World
115.4
163.1
Total net sales
1,962.9
1,937.7
23
NOTE 3
SPECIAL ITEMS
DKK million
3M 2023
3M 2022
Integration and transactions costs (Agio Cigars)
-
2.6
Production footprint
-
8.7
OneProcess
27.2
6.4
Total special items
27.2
17.7
NOTE 4
BUSINESS COMBINATIONS
Alec Bradley Cigar Distributors Inc. and associated companies
With effect from 1 March 2023, Scandinavian Tobacco Group A/S acquired, substantially all assets
of Alec Bradley Cigar Distributors Inc. and associated companies (“Alec Bradley”). The total consid-
eration of USD 72.5 million was paid in cash.
The below disclosure for the business combination is considered provisional as the figures are based
on the unaudited balance of Alec Bradley.
The provisional figures can be changed up until 29 February 2024.
Alec Bradley
Alec Bradley is a family-owned business established in 1996 by entrepreneur Alan Rubin and is
based in Fort Lauderdale, Florida.
The business model is asset-light with outsourcing of the cigar production and with approximately 30
full-time employees in the US and Canada.
Alec Bradley reported annual net sales in 2021 of USD 25 million and an EBITDA margin before spe-
cial items of 24%. Both net sales and EBITDA margin improved during 2022 where Alec Bradley sold
almost 10 million cigars – an increase of 5% versus 2021 – primarily in the US and Canada, but also
in international markets.
Brands within the Alec Bradley portfolio include among others Prensado, Kintsugi, Alec Bradley Dou-
ble Broadleaf, Fine and Rare and Black Market.
Fair value of acquired net assets
Net assets are provisional and may be adjusted and off-balance sheet items may be recorded within
12 months of the acquisition date in compliance with IFRS 3.
Transaction costs
Total transaction costs related to the acquisition are considered immaterial and therefore not dis-
closed.
24
BUSINESS COMBINATIONS (continued)
DKK million
Provisional
fair value at
date of
acquisition
Trademarks
294.6
Other Intangible assets
196.4
Inventories
14.3
Trade receivables
18.7
Prepayments
0.8
Total assets
524.8
Trade payables
10.7
Other liabilities
0.5
Total liabilities
11.2
Acquired net assets
513.6
Consideration transferred
513.6