Scandinavian Tobacco Group Reports Weaker 2025 Results Amid Market Headwinds and Strategic Transition
Scandinavian Tobacco Group (STG) reported weaker financial results for Q4 2025 and FY25, reflecting a combination of currency headwinds, weaker consumer sentiment in the United States, operational disruptions related to the rollout of a global ERP system, and structural declines in certain tobacco categories. Despite these challenges, the company maintained profitability and continued investing in its strategic priorities, including the integration of Mac Baren and expansion of its nicotine pouch business.
Q4 2025 Results
In Q4 2025, reported net sales declined 4.6% to kr.2.34 billion, compared with kr.2.46 billion in Q4 2024. Currency movements negatively impacted reported net sales by c.4pp, while organic net sales declined 0.5%. Quarterly profitability deteriorated significantly. EBITDA before special items decreased by 23.5% to kr.456 million, compared with kr.596 million in Q4 2024, with the EBITDA margin before special items falling to 19.5% from 24.3%. The margin decline was driven primarily by unfavorable product and geographic mix as well as increased promotional spending in the North American online business.
Operating expenses increased, with the OPEX ratio rising to 25.0%, compared with 23.9% in the same quarter of the previous year. Special items totaling kr.54 million were recorded in the quarter, including kr.33 million related to the “OneProcess” ERP implementation project and kr.21 million linked to restructuring activities and the integration of Mac Baren.
Quarterly net profit declined by 25.8% to kr.164 million, down from kr.221 million, while adjusted EPS fell sharply to kr.2.6 from kr.3.8, representing a 32% year-on-year decline. Cash flow also weakened significantly. Free cash flow before acquisitions amounted to kr.147 million, compared with kr.604 million in Q4 2024, largely due to working-capital disruptions linked to the ERP rollout.
FY25 Results
For the full year 2025, reported net sales declined 1.8% to kr.9.0 billion, compared with kr.9.2 billion in 2024. On an organic basis, net sales decreased 3.1%, reflecting weaker underlying demand and the discontinuation of third-party nicotine pouch distribution in the company’s online business. Excluding this distribution change, organic net sales would have declined 1.8%.
Profitability declined during the year. EBITDA before special items fell by 17.9% to kr.1.79 billion, down from kr.2.08 billion in 2024, resulting in an EBITDA margin before special items of 19.8%, compared with 22.6% in the prior year. Gross profit before special items amounted to kr.4.0 billion, down from kr.4.28 billion, with the gross margin declining to 44.3% from 46.5%. EBIT declined to kr.1.14 billion, compared with kr.1.38 billion in 2024. Net financial expenses increased to kr.288 million, up from kr.186 million. As a result, profit before tax fell to kr.878 million, compared with kr.1.22 billion in the previous year. After kr.208 million in income taxes, net profit amounted to kr.669 million, down from kr.940 million in 2024.
Earnings per share also declined materially. Adjusted EPS decreased to kr.10.8, compared with kr.13.7 in 2024, while basic EPS fell to kr.8.5 from kr.11.5. Cash generation weakened during the year. Free cash flow (FCF) before acquisitions declined to kr.595 million, compared with kr.931 million in 2024, primarily due to delays in receivable collections related to the implementation of a new ERP system in Europe. Excluding delays in receivables, underlying FCF would be above kr.800 million. Cash flow from operating activities amounted to kr.755 million, compared with kr.1.18 billion the previous year. Capital expenditures totaled kr.182 million, down from kr.264 million in 2024. Investments in property, plant and equipment were kr.158 million, compared with kr.216 million the previous year.
Balance Sheet and Capital Structure
At year-end 2025, total assets amounted to kr.16.3 billion, compared with kr.17.1 billion in 2024. Equity stood at kr.8.57 billion, down from kr.9.22 billion, resulting in an equity ratio of 52.6%. Net interest-bearing debt totaled kr.5.46 billion, slightly higher than kr.5.42 billion in 2024. As a result, the leverage ratio increased to 3.0x net debt to EBITDA, compared with 2.6x at the end of 2024. Returns also declined. Return on invested capital (ROIC) fell to 7.9%, down from 9.4% in 2024, while ROIC excluding goodwill decreased to 12.3% from 14.7%. Average invested capital stood at kr.14.5 billion.
Performance by Product Category
Handmade Cigars: Handmade cigars represented 33% of group net sales in the fourth quarter and 35% for the full year. In Q4, organic net sales increased 1%, although reported sales declined 7% due to currency movements. Sales to U.S. wholesalers and distributors grew 6% organically, supported by mid-single-digit volume growth and low-single-digit price/mix improvements, particularly in the value-for-money segment. Online sales of handmade cigars were broadly unchanged year-on-year, while the company’s retail superstore network delivered approximately 15% growth, driven mainly by new store openings. However, same-store sales declined slightly due to the rebuild of the company’s largest store in Colony, Texas. International shipments outside the United States showed double-digit declines, mainly due to shipment timing rather than weak end-market demand. For the full year 2025, reported net sales in handmade cigars declined 4%, while organic growth was flat.
Machine-Rolled Cigars and Smoking Tobacco: Machine-rolled cigars and smoking tobacco accounted for 51% of group net sales in Q4 and 50% for the full year. Reported net sales declined 2% in the quarter, while organic growth was flat. Machine-rolled cigars delivered low single-digit organic growth, supported by strong performance in Spain, whereas smoking tobacco declined low single digits, primarily due to weaker fine-cut tobacco sales. Market data indicate that machine-rolled cigar volumes declined 2.8% in the fourth quarter and 1.2% for the full year across key European markets. The company’s volume market share stabilized at 26.3% in Q4, compared with the third quarter. For the full year, market share was estimated at 26.8%, down from 27.9% in 2024. Full-year reported net sales increased 2%, supported by the acquisition of Mac Baren, which contributed roughly 5 percentage points of growth, while organic net sales declined 1%.
Next Generation Products: Next Generation Products (NGP), primarily nicotine pouches, accounted for 5% of group net sales. In Q4, reported net sales increased 42% and organic growth reached 37%, driven by strong performance of the XQS nicotine pouch brand. XQS delivered 87% organic net sales growth in the quarter. For the full year, however, the NGP category recorded organic net sales decline of 17%, largely reflecting the discontinuation of the distribution of third-party nicotine pouch products, including ZYN, and a streamlining of the company’s pouch business. Despite this, XQS delivered 55% organic growth during the year – with strong share gains in Sweden (market share: 12.3%) and sales doubling in the UK (market share: ~1%).
Other Products: The Other category, which includes accessories and certain distribution activities, accounted for 11% of Q4 sales and delivered organic net sales decline of 17% in the quarter and 15% for the full year.
Dividend Proposal
The Board of Directors proposed an ordinary dividend of kr.4.50 per share for 2026, corresponding to a payout ratio of 42%. This compares with a kr.8.50 dividend paid in 2025, representing a significant reduction following the company’s shift toward a payout-ratio-based dividend policy under its new strategy.
Focus2030 Strategy
In November 2025, the company launched a new five-year strategy called Focus2030, replacing the previous Rolling Towards 2025 plan. The strategy aims to strengthen the company’s position as a global cigar leader while improving capital efficiency and profitability.
The financial ambitions under Focus2030 include:
– Return on invested capital above 11%, compared with 7.9% in 2025
– Low single-digit compound annual growth in EBIT
– Free cash flow before acquisitions above kr.1.2 billion, compared with kr.595 million in 2025
The strategy is built around three main priorities:
– Stabilizing the machine-rolled cigar and smoking tobacco business, which remains a major contributor to profits and cash flow. The company aims to increase its market share in key European markets from below 27% to above 29% by 2030 while simplifying its product portfolio by roughly 50%.
– Growing the handmade cigar business, targeting higher sales and market share in the United States. The company aims to increase its U.S. market share of own brands from about 13% to more than 15% by 2030, while expanding its retail superstore network fom 15 to around 25.
– Accelerating the nicotine pouch business, including expansion into additional markets and strengthening the company’s presence in the mint segment.
2026 Outlook
For 2026, Scandinavian Tobacco Group expects reported net sales growth at constant exchange rates in the range of -2% to +2%. Market conditions are expected to remain broadly consistent with historical trends, with continued volume declines in traditional tobacco categories. Specifically, the company expects machine-rolled cigar volumes in Europe to decline about 3%, handmade cigar consumption to decline about 4% while the pricing actions, stable market share, growth in U.S. retail, and expansion of nicotine pouches are expected to partly offset these declines.
The company forecasts an EBIT margin before special items between 13.0% and 14.5%, compared with 14.9% in 2025, reflecting ongoing investments and higher amortization expenses related to brand portfolio adjustments. Free cash flow before acquisitions is expected to reach kr.950 million to kr.1.2 billion, benefiting from the recovery of delayed receivable collections that negatively impacted 2025 cash flow. Adjusted EPS is expected to range between kr.9 and kr.11, while the effective tax rate is expected to be approximately 23–24%. STG underlines that a 10% change in the USD/DKK exchange rate would impact group net sales by roughly 5pp, though the effect on margins would be limited.
Other Developments
The company disclosed a potential tax dispute with Belgian customs authorities concerning the disposal of tobacco waste without proper formalities. Authorities may seek to levy excise duties and penalties as if the waste had been sold on the market. The company believes it can demonstrate that the waste was destroyed and therefore does not expect to be liable, though the outcome remains uncertain. No other material events occurred after the reporting period that would affect the company’s financial position.
Download STG FY25 Results – Press Release
Download STG FY25 Presentation
STG: Background Information
Scandinavian Tobacco Group (STG) is among the Top-20 largest publicly traded tobacco company by market cap in the world. STG became a pure-play cigar & pipe tobacco manufacturer, following the acquisition of its cigarette & snus business (“House of Prince”) by BAT in 2008. With operations mainly in Europe & the USA, STG owns well-known brands like Macanudo, La Gloria Cubana, Panter, Signature, La Paz, Café Crème, Cohiba, Partagas and Captain Black. Since 2022, STG is exploring opportunities to enter the Next Generations Products (NGP) category in order to complement its core cigar & pipe tobacco range (portfolio diversification) and to re-ignite revenue growth (“Growth Enablers”).
