Scandinavian Tobacco

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Scandinavian Tobacco Group (STG) is the world’s 11th largest publicly traded tobacco company by revenue. 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”).

XQS launch in the UK: April 2024

STG had announced its plan to roll-out of XQS nicotine pouches to additional markets in 2024 as part of its “Growth Enabler” initiatives. In line with this announcement, STG will launch XQS in May 2024 in the UK – the largest nicotine pouch market in Europe, after Scandinavia, accounting for close to 10% of the global category turnover. XQS will be available in four varieties & strengths (Tropical – 8mg, Blueberry Mint – 8mg, Cool Ice – 9.6mg, Arctic Freeze – 11.2mg) and with a recommended RSP of £5.5 (for a can of 20 pouches).

STG claims that XQS pouches are uniquely smaller to ensure a comfortable fit under the lip, release a long-lasting burst and come in fully recyclable packaging. Recall that, in May 2023, STG acquired (substantially) all assets of XQS – a company active in smoke-free products (nicotine pouches), primarily in Sweden. Since the acquisition, STG’s commercial support has turned XQS into the fastest-growing nicotine pouch brand in Sweden – more than doubling in market share to become a top-five brand in the country.

STG had previously test-marketed STRÖM (its own non-tobacco, nicotine pouches) in 250 c-stores in Manchester between Oct 2022 and March 20231.

Q4 2023 & FY23 Results (March 5, 2024)2

“Growth comes at a cost”: Growth investments putting pressure on the margins, EPS and FCF (both FY23 Actuals and FY24 Guidance)

Q4 2023. Net sales: kr.2.3Bn (+5% on organic basis); EBITDA margin: 22.7% (-3.1pp vs. Q4 2022; impacted by increased investments and cost inflation); adj. EPS: kr.3.6 (vs. kr.4.4 in Q4 2022)

– Organic growth in net sales was driven by the Growth Enablers and improved performance in the machine-rolled cigar business in Europe <= two main drivers of the increased investments

– Growth Enablers: international sales of handmade cigars (outside of the US), retail stores and Next Generation Products (NGPs; including distribution of third-party products)

FY23. Net sales: kr.8.7Bn (+0.3% on organic basis); EBITDA margin: 24.1% (-1.8pp); FCF (before acquisitions): kr.1.05Bn (down kr.0.2Bn); adj. EPS: kr.14.4

– Net sales from the Growth Enablers: accounted for close to 10% of net sales in Q4 2023 (compared with 5% in Q4 2022 and 8% in Q3 2023)

FY24 Guidance

– Net sales: kr.8.8-9.1Bn (FY23: kr.8.7Bn; +3% growth based on the mid-point); all three commercial divisions delivering sales growth (highest growth in Europe Branded driven by increasing sales of NGPs and pricing in the core categories)

– EBITDA margin in the range of 22-24% (FY23: 24.1%); negatively impacted by the increased investments in the Growth Enablers, cost inflation and mix deterioration partly offset by pricing and cost optimization

– FCF: kr. 0.8-1.0Bn (negatively impacted by up to kr.300Mn in special investments)

– Adjusted EPS: kr.12.5-14.5 (FY23: kr.14.4) => down by 6% based on the mid-point

Key announcement highlights

– Leverage ratio: 1.9x (vs. 2.1x at the end of Q3 2023)

– Capital Allocation: dividend increased by 2% to kr.8.40 (in addition to the kr.850Mn ongoing share buy-back program)

– STG’s Ambition: Grow the size of the business through acquisitions, geographical expansion and NGPs

– STG completed the acquisition of the Alec Bradley cigar business in March 2023 and XQS International’s NGP (pouch) business in May 2023

– Cigars – USA: Consumption of handmade cigars has still not stabilized following the strong growth during the pandemic, whereas the performance for machine-rolled cigars improved during Q4 2023. Two new retail cigar Superstores opened in 2023 (both located in Texas), bringing the total number of Superstores in the US to 9. Additional openings expected in 2024

– Cigars – International: Sales of handmade cigars continue to deliver double-digit growth. Further expansion of consumer touch-points planned

– NGPs: Roll-out to additional markets planned => XQS (nicotine pouches), STRÖM (non-tobacco, nicotine pouches launched in Sweden in 2022) and !act (a non-tobacco, non-nicotine pouches launched in Denmark in 2023)

Update on the share buy-back program (Feburary 26, 2024)

Since the initiation of the new kr.850Mn share buy-back program in mid-Nov 2023, STG repurchased 1.43Mn shares at an average price of kr120.5 (total transaction value: kr172.4Mn; ~20% of the program completed). STG shares are up +17.7% since the onset of the new program (last close: kr127.1).

Following the latest transactions, STG owns a total of 1.8Mn shares, corresponding to 2.08% of the total share capital (versus 0.44% at the beginning of the program). The share buy-back program will run until February 28, 2025 unless terminated earlier and STG is authorized to acquire up to 10% of the share capital.

Capital Markets Day – 20233

STG underlines “Moderation & Avoidance (of Smoking)” as a global trend: consumers not willing to compromise on the comforting indulgences while looking for (better) alternatives. STG is planning to capitalize on this trend by launching XQS nicotine pouches in ~10 markets in 2024.

STG’s NGP portfolio has less than 1% weight in total net sales and currently includes 4 different products in 4 countries: nicotine pouches in Sweden and UK, energy pouches (no tobacco & no nicotine) in Denmark and hemp product in the US. In addition to the organic growth aspired, STG’s strategic screening (for M&A opportunities to grow/strengthen its brand portfolio) now includes NGPs (white pouches: no tobacco, with or without nicotine).

Share buy-back program

The new kr.850Mn share buy-back program will start on November 13, 2023 and run until February 28, 2025 unless terminated earlier4. STG currently holds a total of ~382k of own shares (0.44% of share capital) and is authorized to acquire up to 10% of the share capital (i.e. 8.7Mn shares). Based on the last closing price (kr.109.3), new share buy-back amount corresponds to ~7.8Mn shares – or, roughly 9% of the share capital.

STG appointed Nordea Bank as the lead manager for the buy-back program. The maximum number of shares that may be purchased on each business day will not exceed 25% of the average daily trading volume over the last 20 trading days.

Two major shareholders, Chr. Augustinus Fabrikker Aktieselskab (27.3%) and C.W. Obel A/S (12.6%), will maintain their long-term ownership share of 25%-30% and 10%-15%, respectively – thereby, participating in the share buy-back program on a pro-rata basis. 

Q3 2023 Results5,6

Both net revenue (-3.9% reported; -1.1% organic) and EBITDA (-4.6% reported, before special items) are under pressure, mainly due to softer cigar volumes (partly offset by pricing), trade inventory adjustments in the US and persistent market share decline in Europe.

Key announcement highlights:

– Increasing sales from Growth Enablers (accounting 8% of total sales): retail stores (now 9 Superstores in the US), NGPs (including online sales of ZYN in the US) and international sales of handmade cigars (YTD net sales growth of 25+%)

– 3 NGPs: Versa, the hemp product in the US (2021); STRÖM, non-tobacco, nicotine pouch in Sweden (2022); !act, non-tobacco, non-nicotine pouch in Denmark (2023)

– Double-digit net sales growth from XQS nicotine pouches (acquired in May 2023, primarily sold in Sweden)

– Still assessing NGP roll-out to additional markets and whether the STG’s presence in the NGP categories is viable and profitable in the mid to long term

– Adjusted EPS: kr.4.1 (vs. kr.4.4 in Q3 2022)

– New share buy-back program of a total value of up to kr.850Mn running to the end of Feb 2025.

– FY23 guidance remains unchanged (see below)

Q2 2023 Results7

Both net revenue (-2.3% reported; -1.8% organic) and EBITDA (-5.5% reported, before special items; -2.9% organic) are under pressure, mainly due to trade inventory adjustments, unfavorable market share progression in Europe and delayed store openings in the US.

FY23 Guidance

– Net sales: kr.8.7-9.0Bn (initial guidance: kr.9.0-9.3Bn)

– EBITDA margin: 23.5-24.5% (initial: 24-25%)

– Free cash flow: kr.1.1-1.3Bn (initial: kr.1.2-1.4Bn)

– Adjusted EPS: kr.14.0-16.0 (initial: kr.14.5-16.5)

NGP Initiatives

STG is actively exploring the opportunities in NGP/RRP and Beyond Nicotine categories. In May 2023, STG acquired (substantially) all assets of XQS – a company active in smoke-free products (nicotine pouches), primarily in Sweden. In 2022, XQS reported kr50Mn net sales (with a low single-digit EBITDA margin) and 3Mn cans sales volume. Moreover, in April 2023, STG launched !act, a caffeine pouch product without tobacco/nicotine, in Denmark. STG considers roll-out of XQS and !act to additional markets.

However, STG also notes that they are “assessing whether their presence in the NGPs is viable and profitable in the mid- to long-term”.


  1. STG to launch XQS nicotine pouches – Better Retailing ↩︎
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  4. Scandinavian Tobacco Group A/S: Initiation of new share ( ↩︎
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