In This Article:
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Reported Net Sales Growth: Increased by 7.1% in Q3 2024.
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Organic Net Sales Growth: Slightly negative at 0.1% in Q3 2024.
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EBITDA Margin: Decreased to 23.4% in Q3 2024; 22.0% for the first nine months.
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Free Cash Flow Before Acquisitions: DKK 275 million in Q3 2024; DKK 327 million for the nine-month period.
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Machine-Rolled Cigars Organic Net Sales Growth: 3% in Q3 2024.
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Handmade Cigars Organic Net Sales Decline: 1% in Q3 2024.
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Next Generation Products Organic Net Sales Growth: 2% in Q3 2024.
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Same-Store Sales Growth: 11% increase in Q3 2024.
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New Store Openings: One new store in Tennessee; total of 12 superstores by end of 2024.
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Net Profit: DKK 297 million in Q3 2024.
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Adjusted Earnings Per Share: Unchanged at DKK 4.1 in Q3 2024.
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Leverage Ratio: Increased to 2.9 times by Q3 2024.
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Corporate Bond Issuance: EUR 300 million with a 4.875% coupon rate.
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Share Buyback Program: Close to 8% of own shares held; DKK 850 million program nearing completion.
Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Scandinavian Tobacco Group AS (SNDVF) reported a 7.1% increase in net sales, with the acquisition of Mac Baren contributing positively.
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The integration of Mac Baren is expected to deliver significant synergies, estimated at DKK 150 million by 2027.
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Investments in machine-rolled cigars have led to improved market share, particularly in France.
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The nicotine brand XQS continues to grow at high double-digit rates, expanding market share in Sweden and launching in the UK and Denmark.
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The company issued a new EUR 300 million corporate bond, securing long-term financing.
Negative Points
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The EBITDA margin decreased to 23.4% in Q3, impacted by investments and the inclusion of Mac Baren.
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Organic net sales growth was slightly negative at -0.1%, affected by the discontinuation of third-party nicotine pouch distribution in the US.
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The US market for handmade cigars continues to contract, with no signs of stabilization.
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Free cash flow before acquisitions decreased significantly compared to the previous year, impacted by operational performance and working capital changes.
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The leverage ratio increased to 2.9 times, influenced by the acquisition of Mac Baren and higher interest rates on new corporate bonds.
Q & A Highlights
Q: What are the reasons behind the continued weak trend in US handmade cigars, and how does this compare to pre-COVID levels? A: Regis Broersma, President and Senior Vice President, explained that different parts of the value chain are performing differently. Retail stores are doing well, with same-store sales up 11%, attributed to the experiential aspect of visiting stores. However, the business-to-business side has seen volume losses. Compared to pre-COVID levels, volumes are slightly below, partly due to a shift towards premiumization over the last five years. There is also a downtrading effect currently. Market share data is limited, but increased promotional spending has slightly improved online market share.