Scandinavian Tobacco Group (STG) has released its second quarter financial report for 2019, showing a 0.9 percent drop in organic growth and net sales amounting to DKK 1,818 million ($269.51 million) for the quarter.
The report showed the EBITDA (earnings before interest, taxes, depreciation, and amortization) before special items amounted to DKK 398 million ($59 million), an organic growth of 5.5 percent. EBITDA margin before special items was 21.9 percent, showing a margin improvement of 1.2 percent points. In total, free cash flow before acquisitions amounted to DKK 243 million.
In the second quarter, STG saw 1.6 percent organic growth in net sales in North America online and retail, which was offset by negative organic growth in the net sales in North America branded, region machine-made cigars and region smoking tobacco and accessories of 4.2 percent, 1.4 percent, and 1.6 percent, respectively. This resulted in the 0.9 percent decline in organic growth. EBITDA margins did, however, improve in North America online and retail, region machine-made cigars and region smoking tobacco and accessories, but still declined in the company’s North America branded business.
Niels Fredericksen, CEO of STG, commented: “We are delivering an organic EBITDA growth of 5.5 percent and a free cash flow of DKK 243 million in the quarter. We saw positive organic sales growth in North America Online & Retail and in Machine-Made Cigars we are seeing a stable market share in key European markets. The execution of our transformational program Fuelling the Growth continues to positively affect our Group wide operational performance and cost efficiency.”
STG is the parent company of General Cigar Company, Cigars International and Thompson Cigar Co. In the past year, STG has launched a new program titled “Fueling the Growth” to increase shareholder value and stimulate growth [read more here]. This has led to organizational changes that have resulted in some key personnel receiving new positions and responsibilities in the company, including General Cigar Company president Regis Broersma [read more here] and other personnel being let go. While STG acknowledges its North American business, General Cigar Company, continues to experience some losses, the program does appear to be having some positive impacts on the company overall with positive organic sales growth in the recent quarter and a stable market share in key European markets, according to Fredericksen. Scandinavian Tobacco Group’s stock saw a gain of 3.40 percent following the release of its second quarter financials.