Company Announcement
No. 29/023
Copenhagen, 8 November 2023
Interim Report, 1 January - 30 September 2023
New Share Buy-Back Programme
For the third quarter of 2023, Scandinavian Tobacco Group A/S (the “Group” or “Scandinavian To-
bacco Group”) delivered 3.9% negative net sales growth, an EBITDA margin of 26.5% and a free cash
flow before acquisitions of DKK 622 million. For the first nine months of 2023, net sales decreased by
1.8% to DKK 6.5 billion, the EBITDA margin was 24.6% and the free cash flow before acquisitions was
positive by DKK 602 million.
Consumer trends for the cigar categories remained unchanged throughout the third quarter. Decreas-
ing volumes are being partly offset by pricing and increasing sales from Growth Enablers (retail stores,
Next Generation Products “NGP” and international sales of handmade cigars). The expectations for
the full year are based on a recovery in net sales growth for the fourth quarter of the year primarily as
result of the positive trend in North America Online & Retail and growth in Europe Branded and com-
parison to a soft fourth quarter last year. The EBITDA margin is expected being somewhat lower than
in the fourth quarter last year as result of category and country mix combined with higher investments
in the Growth Enablers and in stabilising the market share development in Europe Branded. The main
uncertainties to the full year expectations remain the volume development in Europe Branded and
inventory adjustments with customers in the US.
Q3 Highlights
• Net sales decreased by 3.9% to DKK 2.3 billion (DKK 2.4 billion).
• Organic net sales growth was -1.1%.
• The EBITDA margin was 26.5% (26.7%).
• Free cash flow before acquisitions was DKK 622 million (DKK 462 million).
• Adjusted Earnings Per Share (EPS) were DKK 4.1 (DKK 4.4).
• Return on Invested Capital (ROIC) was 12.9% (13.2%).
• Growth Enablers account for close to 8% of Group net sales.
• In the first nine months of 2023, net sales decreased by 1.8% to DKK 6.5 billion (DKK 6.6
billion), organic net sales growth was -1.2%, the EBITDA margin was 24.6% (25.9%), free
cash flow before acquisitions was positive by DKK 602 million (DKK 735 million) and Adjusted
EPS were DKK 10.8 (DKK 11.6).
The Board of Directors has approved a share buy-back programme of a total value of up to DKK 850
million running to the end of February 2025. 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.
Further details of the share buy-back including the specific starting date will be communicated in a
separate Company Announcement.
2
CEO Niels Frederiksen commented:
“With the performance in the third quarter, we are on track to deliver on our revised guidance from
August with both cash flow and margin recovering in the quarter. Although key uncertainties persist,
we continue to make good progress in the online business and the Growth Enablers are also perform-
ing well. Whereas the market share for Europe Branded continued to decline, we remain confident that
the more aggressive initiatives launched over the past few months will support a stabilization”.
Financial guidance 2023
For the financial year 2023, the guidance is unchanged:
• Net sales in the range of DKK 8.7-9.0 billion
• EBITDA margin before special items in the range of 23.5-24.5%
• Free cash flow before acquisitions in the range DKK 1.1-1.3 billion
• Adjusted EPS in the range of DKK 14.0-16.0
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 9 November 2023 at 10.00 CEST. Dial-in information and an accom-
panying presentation will be available at investor.st-group.com/investor around 09:00 CEST.
3
Key Figures
DKK million
Q3 2023
Q3 2022
9M 2023
9M 2022
FY2022
INCOME STATEMENT
Net sales
2,269
2,362
6,456
6,577
8,762
Gross profit before special items
1,092
1,172
3,115
3,265
4,307
EBITDA before special items
602
631
1,589
1,707
2,270
Special items
-14
-27
-58
-67
35
EBIT
489
514
1,254
1,374
1,953
Net financial items
1
-44
-32
-98
-90
-137
Profit before tax
453
492
1,180
1,315
1,856
Income taxes
-102
-111
-266
-296
-380
Net profit
351
382
914
1,019
1,476
BALANCE SHEET
Total assets
16,484
16,145
15,122
Equity
9,511
9,576
9,342
Net interest-bearing debt (NIBD)
4,482
4,138
3,629
Investment in property, plant and equipment
54
66
142
179
264
Total capital expenditures
75
92
221
279
390
CASH FLOW STATEMENT
Cash flow from operating activities
694
551
813
999
1,393
Cash flow from investing activities
-72
-89
-794
-268
-132
Free cash flow
622
462
19
731
1,261
Free cash flow before acquisitions
622
462
602
735
1,264
KEY RATIOS
2
Net sales growth
-3.9%
8.2%
-1.8%
5.7%
6.4%
Gross margin before special items
48.2%
49.6%
48.3%
49.6%
49.2%
EBITDA margin before special items
26.5%
26.7%
24.6%
25.9%
25.9%
Effective tax percentage
22.5%
22.5%
22.5%
22.5%
20.5%
Equity ratio
57.7%
59.3%
61.8%
Cash conversion
164.6%
100.7%
88.7%
77.9%
87.2%
Organic net sales growth
-1.1%
-1.4%
-1.2%
-1.6%
-0.8%
Organic EBITDA growth
-0.1%
-6.2%
-4.7%
-8.0%
-3.5%
NIBD / EBITDA before special items
2.1
1.9
1.6
ROIC
12.9%
13.2%
14.3%
ROIC ex. Goodwill
20.6%
21.9%
23.6%
Adjusted earnings per share (DKK)
4.1
4.4
10.8
11.6
16.0
Basic earnings per share (DKK)
4.1
4.2
10.6
11.1
16.3
Diluted earnings per share (DKK)
4.0
4.2
10.5
11.1
16.2
Number of shares issued ('000)
87,000
93,000
93,000
Number of treasury shares ('000)
382
4,113
5,751
Number of outstanding shares ('000)
3
86,798
91,432
90,851
Share price at balance date (DKK)
107.50
110.50
122.10
Dividend per share (DKK)
8.3
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 PSUs.
4
Business overview Q3 2023
In the third quarter of 2023, the Group’s reported net sales decreased by 3.9% to DKK 2,269 million
with organic net sales growth being negative by 1.1%. Exchange rates developments impacted net
sales negatively by DKK 119 million while acquisitions had a positive impact. The performance was
composed of positive organic net sales growth in the North America Online & Retail division (“NAOR”)
and negative organic net sales growth in both the North America Branded & Rest of World (“NA-
BROW”) and the Europe Branded (“EUB”) divisions. The development in NABROW continue to be
impacted by consumption of handmade cigars in the US decreasing by more than its structural decline
rate and lower contract manufacturing sales. The development in EUB remains impacted by a higher-
than-normal decrease in volumes in several core markets. The development in the Growth Enablers
(retail stores, Next Generation Products, and international sales of handmade cigars outside the US)
continue to develop well.
The EBITDA margin decreased slightly to 26.5% compared with 26.7% in the same quarter last year.
The gross margin in EUB continue to decrease as result of changes in market and product mix, and
lower production efficiency resulting from lower volumes caused by the market share decline. For both
NAOR and NABROW the gross margin improved compared with the previous quarter and for both
divisions the EBITDA margin reached its highest level for more than a year.
EBITDA before special items was DKK 602 million after negative organic growth of 0.1%. Special
items comprise of an expense of DKK 14 million (DKK 27 million) relating to the ERP implementation
project, OneProcess. Net profit was DKK 351 million (DKK 382 million) with Adjusted Earnings Per
Share at DKK 4.1 (DKK 4.4). The Group’s free cash flow before acquisitions increased to DKK 622
million (DKK 462 million) driven by improvements in working capital. Both net financial costs and taxes
paid increased compared with the third quarter last year. The Group´s leverage ratio was 2.1 times
versus 2.3 times by the end of the second quarter 2023.
Divisional split Q3 2023
Net sales EBITDA before special items
Group net sales and EBITDA Q3 2023
Table 1: Net sales
Table 2: EBITDA before special items
Q3
Q3
Change
DKK million
2023
2022
in %
Net sales
2,269
2,362
-3.9%
Acquisitions
52
Currency development
119
Organic net sales
2,388
2,414
-1.1%
Q3
Q3
Change
DKK million
2023
2022
in %
EBITDA
602
631
-4.6%
Acquisitions
11
Currency development
39
Organic EBITDA
641
642
-0.1%
35%
32%
33%
NA Branded & RoW
Europe Branded
NA Online & Retail
52%
28%
20%
-3.9%
DKK 2,269m
-4.6%
DKK 602m
5
Rolling Towards 2025
The Group’s ambition to grow through a combination of acquisitions, geographic expansion and in
Next Generation Products (“NGPs”) remains on track and contributed to the Group’s financial perfor-
mance in the third quarter.
Mergers and acquisitions
In March 2023, the Group completed the acquisition of the Alec Bradley cigar business, and in May
2023, the Group completed the acquisition of XQS International ABs NGP business. The integration
of both businesses has been completed. Alec Bradley is impacted by the overall volume development
for handmade cigars in the US. XQS has delivered good growth during the third quarter as result of
more points of sales and launches of new product variants.
Growth Enablers
The Growth Enablers comprise the retail stores, Next Generation Products (including the distribution
of third-party products) and international sales of handmade cigars (i.e., outside of the US).
Cigars International opened two new retail cigar Superstores in 2023, both located in Texas, bringing
the total number of Superstores in the US to nine. The retail stores are delivering valuable contributions
to the Group´s financial performance and with additional openings expected in the second half of the
coming year, the retail stores have become an important part of both NAOR and the Group’s net sales
and growth.
The Growth Incubator continues to explore opportunities outside the core categories. To date, the
Group has launched three products within the NGP category. Versa, the hemp product was launched
in the US in 2021, STRÖM, the non-tobacco, nicotine pouch product was launched in Sweden in 2022
and !act, the non-tobacco, non-nicotine pouch product was launched in Denmark in 2023.
To further enhance our presence in the NGP category, the NGP business of XQS International AB
was acquired in May 2023. XQS products are primarily sold in Sweden and since the acquisition, the
brand has continued to deliver strong performance with double-digit net sales growth.
A roll-out to additional markets for each of the brands within our NGP portfolio is being considered.
Scandinavian Tobacco Group continues to closely monitor investments in these growth opportunities
to assess whether the Group’s presence in the NGP categories is viable and profitable in the mid to
long term.
Net sales from the Growth Enablers accounted for close to 8% of Group net sales in the third quarter
of 2023 compared with 5% in the third quarter 2022 and 7% in the second quarter of 2023.
Update on financial key metrics
In the third quarter of 2023, the EBITDA margin decreased to 26.5% (26.7%), and the gross margin
decreased to 48.2% (49.6%). The OPEX ratio decreased to 21.6% (22.9%).
The 12 months rolling Return on Invested Capital (ROIC) decreased to 12.9% 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 0.6 billion to DKK 14.2 billion compared to 31 December 2022.
6
Sustainability
The Group’s sustainability agenda – Rolling Responsibly – is based on three priorities:
• Preparation to meet regulatory compliance demands set forth by the Corporate Sustainability
Reporting Directive (“CSRD”)
• Reaching our commitments on climate
• Embedding sustainability into key business processes
1) Preparation to meet regulatory compliance demands set forth by CSRD
The CSRD's European Sustainability Reporting Standards (“ESRS”) are now final, and they dictate
that the Double Materiality Assessment (“DMA”) is to define the Group’s reporting requirements. The
Group has finalised the DMA and the sustainability team is now incorporating the quantitative and
qualitative aspects into the material topic workstreams and preparing for data gathering.
2) Reaching climate commitments
The sustainability team continues to gather data and analyse Scope 3 emissions and plan to finalise
this work within the fourth quarter of 2023. The educational roll-out to relevant business partners is
planned for the first half of 2024, which is also when the Group will file the plan for Science Based
Targets initiative (SBTi).
3) Embedding sustainability into key business processes
During the quarter, the sustainability team continued to work across the global organisation to embed
sustainability considerations and initiatives into key business processes. This initiative will continue to
ensure constant progress is being made where the company has operations.
The Rolling Responsibly actions and initiatives implemented support the Group's vision to be the un-
disputed and sustainable global leader in cigars.
7
Outlook 2023
Net sales are expected to be DKK 8.7-9.0 billion reflecting growth in the fourth quarter based on the
positive trend in the online and retail business, increased net sales from the Growth Enablers and
stabilisation in Europe Branded. Exchange rates will - at current levels, - have a negative impact on
the net sales growth in the fourth quarter.
The consumption of products in our categories is perceived as resilient, although the consumption
might deviate from its structural trends in a short to medium term perspective. During the first nine
months of the year, the consumption of handmade cigars in the US continued to decline by more than
its structural decline rate of about 2% per year, whereas the balance between the online and retail
sales channels continued to improve in favour of the online channel.
The consumption of machine-rolled cigars in our key European markets continued on average to de-
velop close to its structural decline rate of up to 3%, although some of our main markets like France
and the UK experience higher than average decline rates. The recovery in our market share perfor-
mance takes longer than originally anticipated, entailing a higher-than-average volume decline for the
year in our machine-rolled cigar business.
In most of our product categories price increases are expected to offset the volume decline. The
Growth Enablers are expected to deliver an increasing contribution to net sales driven by the retail
expansion in the US, international sales of handmade cigars and net sales from Next Generation
Products. However, increasing investment in these growth enablers will impact margins.
In the fourth quarter, the Group EBITDA margin will be impacted negatively by the mentioned invest-
ments in the Growth Enablers, investments in regaining momentum in our machine-rolled cigar busi-
ness in Europe and changes in product and market mix.
The free cash flow before acquisitions is expected to deliver another sound contribution in the fourth
quarter driven by the operational performance and continued improvement of the working capital.
The largest uncertainties for the outlook are changes in consumer behaviour, the volume development
in Europe Branded, changes in market and product mix and larger inventory adjustments by distribu-
tors.
Given these considerations the guidance for 2023 is unchanged:
• Reported net sales in the range of DKK 8.7-9.0 billion.
• EBITDA-margin before special items in the range of 23.5-24.5%.
• Free cash flow before acquisitions in the range of DKK 1.1-1.3 billion.
• Adjusted EPS in the range of DKK 14.0-16.0.
The guidance 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 400 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.
8
Events after the reporting period
There are no other events than those mentioned in the above that have occurred after 30 September
2023 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 2024
Annual Report 2023 5 March 2024
Annual General Meeting 4 April 2024
Interim report Q1 2024 2 May 2024
Interim report Q2 2024 22 August 2024
Interim report Q3 2024 12 November 2024
9
Europe Branded
During the third quarter of 2023 net sales decreased by 3.5% compared to the third quarter of 2022
and the EBITDA margin decreased to 24.6%. The development in net sales was driven by total mar-
kets, which declined by close to 3% measured by volume and a further decrease in our market shares
in machine-rolled cigars partly offset by solid pricing across all product categories.
The development in consumer demand for machine-rolled cigars in Europe remains unchanged
though with variations across markets. Several of Scandinavian Tobacco Group’s main markets, like
France and the UK, are impacted by higher decline rates than the European average. Market volumes
declined by close to 10% in France and the UK. Germany, the Netherlands, and Italy were all close to
the same market volumes as in the third quarter of 2022.
According to preliminary data, the market share index for our key markets was 29.3% for the third
quarter 2023 versus 29.8% for the second quarter of 2023 and 31.1% for the full year of 2022. The
decline in the weighted market share index is a result of our relatively strong position in markets like
France and the UK which experienced higher decline rates.
Third Quarter Development, 2018-2023
Net sales decreased by 3.5% to DKK 716 million during the quarter driven by a 4.8% decrease in
organic net sales partly offset by the impact from acquisitions. The negative organic growth was driven
by machine-rolled cigars and pipe tobacco (smoking tobacco), whereas the most important positive
contributions to net sales growth were handmade cigars, fine cut (smoking tobacco) in Germany and
NGPs. Pricing for most product categories was solid with price/mix impact for the largest product cat-
egory, machine-rolled cigars being up by almost 7% compared with the third quarter of last year.
EBITDA before special items decreased to DKK 176 million (DKK 231 million) with an EBITDA margin
before special items of 24.6% (31.1%). The margin development was driven by a decreasing gross
margin as result of the scale impact on production efficiency from the decline in volumes and changes
in market and product mix, primarily relating to a decline in net sales in France as well as a strong
comparison in the third quarter last year. The OPEX ratio increased driven by cost inflation and in-
creasing investments in Next Generation Products.
First nine months of 2023
Net sales for the first nine months of 2023 increased to DKK 2,069 million with an organic growth of
0.1%. Gross profit before special items decreased by 6% to DKK 1,058 million and the gross margin
was 51.1% (54.9%). EBITDA before special items decreased by 13% to DKK 487 million with an
EBITDA margin of 23.5% (27.3%).
10%
15%
20%
25%
30%
35%
400
500
600
700
800
Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
10
North America Branded & Rest of World
During the third quarter of 2023 net sales decreased by 4.9% compared to the third quarter of 2022
and the EBITDA margin increased to 39.7%. The third quarter of 2023 continued to be impacted by
lower contract manufacturing volumes as well as lower volumes of handmade cigars in the US. These
developments were partly offset by solid pricing across product categories and the inclusion of the
Alec Bradley brand to the handmade cigar portfolio.
Consumer demand for cigars is considered resilient, although volumes of handmade cigars in the US
continue to decline by more than the structural decline rate after the exceptionally strong two years
during the pandemic.
Third Quarter Development, 2018-2023
Net sales decreased by 4.9% to DKK 809 million during the quarter as a result of a 2.6% decrease in
organic net sales and a net impact from exchange rate developments and acquisitions of close to 2%.
The development was primarily a result of lower volumes of handmade cigars in the US. All product
categories delivered solid price/mix impact.
EBITDA before special items decreased to DKK 321 million (DKK 326 million) with an EBITDA margin
before special items of 39.7% (38.3%). The development in the profitability was result of an increase
in the gross margin driven by the improved price and mix.
First nine months of 2023
Net sales for the first nine months of 2023 decreased by 5.8% to DKK 2,301 million and organic growth
was negative by 5.8%. Gross profit before special items decreased by 7% to DKK 1,227 million and
the gross margin was 53.3% (53.8%). EBITDA before special items decreased by 10% to DKK 861
million with an EBITDA margin of 37.4% (39.3%).
25%
30%
35%
40%
45%
500
600
700
800
900
Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
11
North America Online & Retail
During the third quarter of 2023 net sales decreased by 3.2% compared to the third quarter of 2022
and the EBITDA margin improved to 17.4%. Organic net sales growth was 4.4% driven by a positive
momentum in the online business and double-digit growth in the retail business.
The performance in NAOR´s online business continues to be supported by the online sales channel
regaining share from the retail sales channel. NAOR’s high proportion of online sales compared with
retail sales implies the division currently perform better than the general market development. The
performance is also result of a more dynamic promotion strategy as well as continued strong growth
in the distribution of third-party products. Retail accounts for about 9% of total net sales in NAOR in
the third quarter.
Third Quarter Development, 2018-2023
Net sales decreased by 3.2% to DKK 745 million during the quarter composed of a 4.4% organic net
sales growth and a negative exchange rate effect of almost 8%. Both Online and Retail delivered
positive organic net sales growth in the quarter with the growth in Retail being driven by the opening
of new stores.
The active customer base in Online continued to decline versus the same quarter last year, however,
it remained broadly unchanged versus the two previous quarters. The decline in the active customer
base is being offset by mix, higher spend per customer, and price increases. The balance between
Online and Retail purchasing of cigars has reversed further in favour of online supporting the division’s
net sales development. Both the distribution of the NGP product ZYN and our retail stores continue to
support net sales growth for NAOR.
EBITDA before special items increased to DKK 129 million (DKK 110 million) with an EBITDA margin
before special items of 17.4% (14.3%). The margin development is primarily driven by scale as well
as efficiency improvements, including the impact from the modernisation of our warehouse facilities.
First nine months of 2023
Net sales for the first nine months of 2023 increased by 0.5% to DKK 2,086 million driven by organic
net sales growth of 2.9% and a 2% negative impact from exchange rate developments. Gross profit
before special items increased by 1% and the gross margin was 39.8% (39.5%). EBITDA before spe-
cial items increased by 17% to DKK 334 million with an EBITDA margin of 16.0% (13.8%).
5%
10%
15%
20%
25%
300
400
500
600
700
800
Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
12
Quarterly Financial Data
2023
DKK million Q3 Q2 Q1 Q4 Q3 9M 9M 12M
Reported data
Net sales 2,269 2,225 1,963 2,185 2,362 6,456 6,577 8,762
Gross profit before special items 1,092 1,044 979 1,042 1,172 3,115 3,265 4,307
EBITDA before special items 602 514 474 563 631 1,589 1,707 2,270
Special items -14 -16 -27 103 -27 -58 -67 35
EBIT 489 406 358 579 514 1,254 1,374 1,953
Net financial items -44 -22 -31 -47 -32 -98 -90 -137
Profit before tax 453 392 335 541 492 1,180 1,315 1,856
Income taxes -102 -88 -76 -84 -111 -266 -296 -380
Net profit 351 304 260 457 382 914 1,019 1,476
Other financial key data
Organic EBITDA grow th -0.1% -2.9% -12.1% 13.3% -6.2% -4.7% -8.0% -3.5%
Organic net sales grow th -1.1% -1.8% -0.8% 1.7% -1.4% -1.2% -1.6% -0.8%
Gross margin before special items 48.2% 46.9% 49.9% 47.7% 49.6% 48.3% 49.6% 49.2%
EBITDA margin before special items 26.5% 23.1% 24.1% 25.8% 26.7% 24.6% 25.9% 25.9%
Free cash flow before acquisitions 622 159 -179 530 462 602 735 1,264
North America Online & Retail
Net sales 745 740 602 703 770 2,086 2,075 2,778
Gross profit before special items 299 290 242 278 308 831 820 1,098
EBITDA before special items 129 122 83 117 110 334 286 403
Net sales grow th -3.2% 0.4% 5.9% 6.9% 10.5% 0.5% 5.7% 6.0%
Organic net sales grow th 4.4% 2.7% 1.3% -4.8% -5.6% 2.9% -6.5% -6.1%
Gross margin before special items 40.1% 39.2% 40.2% 39.5% 40.1% 39.8% 39.5% 39.5%
EBITDA margin before special items 17.4% 16.4% 13.9% 16.7% 14.3% 16.0% 13.8% 14.5%
North America Branded & RoW
Net sales 809 773 720 751 851 2,301 2,443 3,194
Gross profit before special items 435 397 395 385 450 1,227 1,313 1,698
EBITDA before special items 321 265 276 267 326 861 959 1,226
Net sales grow th -4.9% -5.7% -6.9% 14.5% 10.7% -5.8% 10.0% 11.0%
Organic net sales grow th -2.6% -6.1% -9.2% 7.4% -0.2% -5.8% 1.8% 3.1%
Gross margin before special items 53.8% 51.3% 55.1% 51.2% 52.9% 53.3% 53.8% 53.2%
EBITDA margin before special items 39.7% 34.2% 38.3% 35.5% 38.3% 37.4% 39.3% 38.4%
Europe Branded
Net sales 716 712 641 731 742 2,069 2,059 2,790
Gross profit before special items 359 357 342 380 414 1,058 1,131 1,511
EBITDA before special items 176 164 146 209 231 487 563 772
Net sales grow th -3.5% -1.3% 7.6% 4.6% 3.4% 0.5% 1.1% 2.0%
Organic net sales grow th -4.8% -1.4% 8.3% 2.4% 1.4% 0.1% -0.7% 0.1%
Gross margin before special items 50.1% 50.1% 53.2% 51.9% 55.8% 51.1% 54.9% 54.2%
EBITDA margin before special items 24.6% 23.1% 22.8% 28.6% 31.1% 23.5% 27.3% 27.7%
Group costs
EBITDA before special items -25 -37 -32 -30 -36 -93 -101 -131
2023
2022
2022
13
MANAGEMENT STATEMENT
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
CHAIRMAN
14
STATEMENT OF COMPREHENSIVE INCOME
1 JANUARY - 30 SEPTEMBER
CONSOLIDATED INCOME STATEMENT
DKK million
Q3 2023
Q3 2022
9M 2023
9M 2022
Net sales
1, 2
Cost of goods sold
1, 2
-1,176.3
-1,189.9
-3,341.0
-3,312.0
Gross profit before special items
1, 2
Other external costs
1, 2
-277.8
-320.4
-847.5
-882.3
Staff costs
2
-212.6
-220.7
-678.7
-676.4
Earnings before interest, tax, depreciation, amortisation
and special items (EBITDA before special items)
2
Depreciation and impairment
-52.3
-46.3
-147.1
-139.4
Earnings before interest, tax, amortisation and special
items (EBITA before special items)
Amortisation and impairment
-46.2
-43.4
-130.8
-125.7
Earnings before interest, tax and special items
(EBIT before special items)
Special items, costs and impairment
3
-14.2
-26.9
-57.8
-67.3
Earnings before interest and tax (EBIT)
Share of profit of associated companies, net of tax
Financial income
Financial costs
-105.7
-88.4
-259.2
-218.6
Profit before tax
Income taxes
-102.0
-110.7
-265.5
-295.9
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
-1.9
Foreign exchange adjustments on net investments in foreign
operations
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
15
Net sales
In the third quarter of 2023, net sales were DKK 2,269 million (DKK 2,362 million). Adjusted for a
negative exchange rate impact of DKK 119 million and acquisitions of DKK 52 million, the organic
growth in net sales was negative by 1.1%. For the first nine months of 2023, net sales came to DKK
6,456 million (DKK 6,577 million) with organic net sales growth being negative by 1.2%.
Profit
Gross profit before special items for the third quarter of 2023 was DKK 1,092 million (DKK 1,172 mil-
lion) explained by a decrease in the gross margin before special items to 48.2% (49.6%). The gross
margin declined in Europe Branded but was partly offset by a margin increase in North America
Branded & Rest of World.
Operating expenses for the third quarter decreased compared to same quarter last year and stood at
DKK 490 million (DKK 541 million). The OPEX ratio decreased to 21.6% (22.9%).
EBITDA before special items for the third quarter of 2023 amounted to DKK 602 million (DKK 631
million). Organic EBITDA growth was negative by 0.1%.
EBITDA margin before special items for the third quarter of 2023 was 26.5% (26.7%). The develop-
ment is explained by a decreasing gross margin partly offset by a decrease in the OPEX-ratio.
During the quarter DKK 14 million (DKK 27 million) have been expensed as special items, all relating
to the ERP implementation project, OneProcess.
Net profit was DKK 351 million (DKK 382 million). Earnings Per Share (EPS) were DKK 4.1 (DKK
4.2). Earnings Per Share adjusted for special items, fair value adjustments and currency
gains/losses, net of tax decreased to DKK 4.1 (DKK 4.4).
In the first nine months of 2023, gross profit before special items was DKK 3,115 million (DKK 3,265
million) with a gross margin of 48.3% (49.6%). EBITDA before special items was DKK 1.589 million
(DKK 1,707 million) with an EBITDA margin of 24.6% (25.9%). Special items were DKK -58 million
(DKK -67 million), net profit was DKK 914 million (DKK 1,019 million) with EPS adjusted for special
items, fair value adjustments and currency gains/losses, net of tax decreased to DKK 10.8 (DKK 11.6).
Third Quarter Development, 2018-2023
10%
14%
18%
22%
26%
30%
1000
1300
1600
1900
2200
2500
Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023
Net sales and EBITDA margin b.s.i.
Net Sales (DKK million) EBITDA margin
16
CONSOLIDATED BALANCE SHEET
ASSETS
DKK million
30 Sep 2023
30 Sep 2022
31 Dec 2022
INTANGIBLE ASSETS
Goodwill
Trademarks
IT software
Other intangible assets
Intangible assets under development
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
17
CONSOLIDATED BALANCE SHEET
EQUITY AND LIABILITIES
DKK million
30 Sep 2023
30 Sep 2022
31 Dec 2022
Share capital
Reserve for currency translation
Treasury shares
-56.2
-548.8
-748.1
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 853 million to DKK 4,482 million versus the end of 2022.
The development is explained mainly by the acquisition of the Alec Bradley cigar business and the
XQS business as well as purchase of own shares in the first quarter of the year and dividend payment
in April 2023. The leverage ratio (net interest-bearing debt to LTM EBITDA before special items) in-
creased to 2.1x (1.6x on 31 December 2022) but decreased compared with the end of the second
quarter 2023 (2.3x).
Return on Invested Capital
The return on invested capital (ROIC) decreased to 12.9% versus 14.3% by the end of 2022, explained
by a DKK 121 million decrease in EBIT (12 months rolling), driven by the operational performance,
and a slightly increased invested capital of DKK 14.2 billion (DKK 13.7 billion).
18
CONSOLIDATED CASH FLOW STATEMENT
1 JANUARY - 30 SEPTEMBER
DKK million
Q3 2023
Q3 2022
9M 2023
9M 2022
Net profit for the period
Depreciation, amortisation and impairment
Adjustments
Changes in working capital
-28.7
-291.1
-421.9
Special items, paid
-17.0
-30.8
-64.2
-106.9
Cash flow from operating activities before financial
items
Financial income received
Financial costs paid
-81.8
-66.5
-174.7
-125.3
Cash flow from operating activities before tax
Tax payments
-135.0
-14.6
-319.0
-142.8
Cash flow from operating activities
Acquisitions
-582.5
-3.7
Investment in intangible assets
-20.7
-26.2
-79.0
-100.1
Investment in property, plant and equipment
-54.1
-65.8
-141.9
-178.5
Sale of property, plant and equipment
Dividend from associated companies
Cash flow from investing activities
-71.6
-88.6
-794.0
-268.4
Free cash flow
Repayment of lease liabilities
-18.9
-16.6
-50.6
-48.0
RCF
-660.0
-245.3
Repayment bank loans
-1.0
-1.0
-3.2
-3.1
Dividend payment
-714.6
-692.0
Purchase of treasury shares
-236.6
-103.8
-564.3
Cash flow from financing activities
-679.9
-499.5
-864.2
Net cash flow for the period
-57.8
-37.2
-133.2
Cash and cash equivalents, net at 1 July / 1 January
Exchange gains/losses on cash and cash equivalents
-0.4
-0.4
-6.4
-3.3
Net cash flow for the period
-57.8
-37.2
-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 2023 was DKK 391
million (DKK 580 million). The development was driven by the operational result, higher net financial
costs paid, as well as higher tax payments.
19
Changes in working capital in the third quarter of 2023 had a positive impact on the cash flow of DKK
303 million (negative DKK 29 million) mainly due to increased trade payables and other liabilities as
well as inventory reductions.
Cash flow from investing activities amounted to DKK -72 million in the third quarter of 2023 (DKK -89
million). The decrease was driven by the by a lower level of CAPEX investments.
Free cash flow before acquisitions in the third quarter of 2023 was positive by DKK 622 million (posi-
tive DKK 462 million). The cash conversion ratio was 165% (101%).
For the first nine months of 2023 cash flow from operations before changes in working capital was
DKK 1,104 million (DKK 1,421 million). The less negative impact from working capital compared to
last year is driven by an increase in trade payables and other liabilities, as both inventory and trade
receivables remained at approximately the same level. Free cash flow before acquisitions was posi-
tive DKK 602 million (positive DKK 735 million) and the cash conversion ratio was 89% (78%).
20
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 30 SEPTEMBER 2023
DKK million
Share
capital
Reserve
for
currency
transla-
tion
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
Total other comprehensive income
Total comprehensive income for the period
Transactions with shareholders
Capital reduction
-6.0
-756.7
Purchase of treasury shares
-95.9
-95.9
Share-based payments
Settlement of vested PSUs
-25.1
Settlement in cash of vested PSU's
-7.0
-7.0
Dividend paid to shareholders
-767.3
-767.3
Dividend, treasury shares
-
Total transactions with shareholders
-6.0
-1,496.5
-810.6
Equity at 30 September 2023
-56.2
Equity
Total shareholders’ equity as of 30 September 2023 amounted to DKK 9,511 million (DKK 9,342 mil-
lion at 31 December 2022). The equity was positively impacted by profit for the period and impact
from foreign exchange adjustments on net investments in foreign operations. This was partly offset
by negative impact from purchase of treasury shares and dividend payment to shareholders. As of
30 September 2023, the equity ratio was 57.7% (61.8% at 31 December 2022).
At the Annual General Meeting held on 13 April 2023 the shareholders approved to reduce the share
capital by nominally DKK 6,000,000 by cancelling treasury shares. After the reduction, which took
place 25 May 2023, the nominal value of the Company’s share capital is DKK 87,000,000. Please
refer to Company Announcement 21/2023.
21
STATEMENT OF CHANGES IN GROUP EQUITY
1 JANUARY - 30 SEPTEMBER 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
-1.9
-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
22
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 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
9M 2023
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not allo-
cated
Total
DKK million
Net sales
2,086.2
2,301.3
2,068.9
-
6,456.4
Cost of goods sold
-1,255.5
-1,074.6
-1,010.9
-
-3,341.0
Gross profit before special items
830.7
1,226.7
1,058.0
-
3,115.4
Staff and other external costs
-496.5
-365.3
-571.4
-93.0
-1,526.2
EBITDA before special items
334.2
861.4
486.6
-93.0
1,589.2
Depreciation and impairment
-147.1
-147.1
Amortisation and impairment
-130.8
-130.8
EBIT before special items
-370.9
1,311.3
Special items, costs and impairment
-57.8
-57.8
EBIT
-428.7
1,253.5
Share of profit of associated
companies, net of tax
24.2
24.2
Financial income
161.4
161.4
Financial costs
-259.2
-259.2
Profit before tax
-502.3
1,179.9
23
SEGMENT INFORMATION AND NET SALES (continued)
9M 2022
North
America
Online &
Retail
North
America
Branded
& RoW
Europe
Branded
Group
costs /
not allo-
cated
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
DKK million
9M 2023
9M 2022
Category split, net sales
Handmade cigars
2,409.5
2,474.6
Machine-rolled cigars
2,260.7
2,251.7
Smoking tobacco
925.7
946.5
Accessories and CMA
860.5
904.5
Total net sales
6,456.4
6,577.3
License income and other sales of DKK 61.4 million (DKK 48.2 million) are included in the category 'Accessories and
Contract Manufacturing'.
DKK million
9M 2023
9M 2022
Geographical split, net sales
Americas
3,567.1
3,552.3
Europe
2,496.4
2,522.9
Rest of World
392.9
502.1
Total net sales
6,456.4
6,577.3
24
NOTE 3
SPECIAL ITEMS
DKK million
9M 2023
9M 2022
Integration and transactions costs (Agio Cigars)
-
8.6
Production footprint
-
15.7
OneProcess
57.8
43.0
Total special items
57.8
67.3
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.
25
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
XQS International AB ("XQS")
With effect from 31 May 2023, Scandinavian Tobacco Group A/S acquired, substantially all assets of
XQS International AB ("XQS"). The transaction value consists of an upfront payment in cash as well
as an earn-out agreement.
The below disclosure for the business combination is considered provisional as the figures are based
on the unaudited balance of XQS.
The provisional figures can be changed up until 31 May 2024.
XQS
XQS is active in smoke-free products and its products are primarily sold in Sweden.
XQS reported annual net sales in 2022 of DKK 50 million with a low single-digit EBITDA margin and
a total volume of 3 million cans.
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.
26
BUSINESS COMBINATIONS (continued)
Provisional
fair value at
date of
acquisition
DKK million
Trademarks
80.1
Other Intangible assets
53.4
Fixed assets
0.3
Inventories
4.9
Trade receivables
13.6
Other receivables
1.4
Total assets
153.7
Trade payables
12.0
Other liabilities
2.6
Total liabilities
14.5
Acquired net assets
139.1
Total consideration transferred including value of earn-out
139.1