The third quarter 2019 financial report from Scandinavian Tobacco Group (STG) is out and shows that the company has delivered net sales of DKK 1,846 million and EBITDA (earnings before interest, tax, depreciation and amortization) before special items of DKK 446 million.
In the third quarter, STG delivered positive organic growth in EBITDA of 5.4 percent with EBITDA margins improving by 1.9 percent, driven mostly by region smoking tobacco & accessories and the company’s North American branded business, General Cigar Company. Organic growth in net sales was down by 4.5 percent, driven by all of the company’s divisions. In the first nine months of 2019, the company reported negative organic net stales growth of 2.4 percent and organic EBITDA growth of 5.8 percent, generating a free cash flow before acquisitions of DKK 819 million and an EPS (earnings per share) of DKK 4.7. EPS adjusted for special items were DKK 5.9.
Niels Frederiksen, CEO of Scandinavian Tobacco Group, commented: “In the third quarter of the year we deliver organic EBITDA growth of 5.4 percent, continued margin improvements and a strong free cash flow despite a disappointing development in organic net sales. This follows better than expected progress from our transformational program Fuelling the Growth and continued cash flow focus across our business. During the quarter we were also able to announce our intention to acquire Royal Agio Cigars; a significant step in support of our ambition to become the undisputed leader in cigars and pipe tobacco.”
STG has revised its full-year guidance for free cash flow, revising it up and setting it at about 1 billion from the previous >750 million. Special items are expected to be about DKK 200 million. The revised expectation includes transaction costs associated with acquiring Royal Agio Cigars for about DKK 20 million [read more here], costs for the closure of STG Lane Ltd.’s facility in Tucker, Georgia [read more here], and lower than previously anticipated costs related to the company’s Fueling the Growth program [read more here]. The guidance for organic growth in EBITDA is unchanged. For the fourth quarter of 2019, STG predicts that the development in organic net sales will remain weak.