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• Reported Net Sales: Increased by 1.3% in Q1 2025, driven by the acquisition of Mac Baren and strong growth in nicotine pouches.

• Organic Net Sales Growth: Decreased by 8.8%, impacted by the discontinuation of the ZYN distribution agreement.

• EBITDA Margin: Decreased by 1 percentage point to 16.1% due to lower sales of cigars and changes in product mix.

• Free Cash Flow Before Acquisitions: Positive DKK156 million, an improvement from the previous year's negative DKK126 million.

• Adjusted Earnings Per Share: Revised downward to DKK10 to DKK13 per share, reflecting adjusted EBITDA expectations.

• Net Profit: Declined to DKK52 million in the first quarter.

• Leverage Ratio: Decreased to 2.5 times from 2.6 times at the end of 2024.

• US Market Impact: Accounts for approximately 45% of net sales; affected by a 5% depreciation of the US dollar against the Danish kroner.

• Handmade Cigars Organic Net Sales: Decreased by 9.1% due to negative consumer sentiment and import tariffs.

• Machine-Rolled Cigars Market Share: Declined to 26.9% in Q1 2025 from 28.1% in Q4 2024.

• Smoking Tobacco Reported Net Sales: Increased by 44%, driven by Mac Baren acquisition and 7% organic growth.

• Next Generation Products Organic Net Sales: Decreased by 43%, impacted by the discontinuation of ZYN distribution.

• Warning! GuruFocus has detected 4 Warning Signs with BOM:539336.

Release Date: May 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Scandinavian Tobacco Group AS (SNDVF) reported a 1.3% increase in net sales for the first quarter, driven by the acquisition of Mac Baren and strong growth in the nicotine pouch brand XQS.

• The integration of Mac Baren is progressing well, with significant steps taken in the US, including consolidating distribution and streamlining online sales channels.

• The company's retail channel delivered strong double-digit net sales growth, emphasizing the value of investments in this area.

• The free cash flow before acquisitions was significantly stronger than the previous year, driven by changes in working capital.

• The company remains committed to investing in long-term growth opportunities, including strengthening market positions in core categories and expanding nicotine pouch brands into new markets.

Negative Points

• The company adjusted its financial expectations for 2025 due to a weaker US dollar and increased tariffs on imported goods, impacting the handmade cigar business.

• Reported net sales for 2025 are now expected to be lower than previously anticipated, with a revised range of DKK9.1 billion to DKK9.5 billion.

• The EBITDA margin is expected to be negatively impacted by more than 0.5 percentage points due to tariff-related price adjustments.

• Organic growth decreased by almost 9% in the first quarter, with lower sales of handmade cigars and machine-rolled cigars contributing to the decline.

• The company's market share in Europe for machine-rolled cigars has been declining, attributed to both internal challenges and competitive pricing pressures.