Key points:
1. In 2024, Scandinavian Tobacco Group's net sales exceeded 9 billion Danish krone ($13 billion) for the first time, with XQS nicotine pouches continuing to achieve double-digit growth.
2. The decrease in organic growth rate in the fourth quarter was due to the termination of distribution of third-party Next Generation Products (NGP) in the online business and a decrease in sales of handmade cigars in the United States.
3. Sales expectations for 2025 are expected to be impacted by major acquisitions and business adjustments.
Denmark's Scandinavian Tobacco Group A/S announced its full-year financial results for 2024 on March 6.
The report showed that net sales for 2024 increased by 5.4% to 9.2 billion Danish Krone ($1.3 billion), with an organic growth rate of 0.4%. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) before special items fell 1.3% to 2.1 billion Danish Krone ($0.3 billion), with an EBITDA profit margin of 22.6%. Free cash flow before acquisitions totaled 0.9 billion Danish Krone ($0.1 billion), while adjusted earnings per share were 13.7 Danish Krone ($2).
In Q4 2024, net sales rose 8.0% to 2.5 billion Danish Krone ($360 million), though organic growth declined by 1.0%. EBITDA before special items grew 15.4%, with an EBITDA margin of 24.3%. Free cash flow before acquisitions was 600 million Danish Krone ($88 million).
The decline in organic growth was linked to the end of third-party NGP product distribution in the online business and lower sales of hand-rolled cigars in the U.S. XQS nicotine pouches saw double-digit growth, while machine-made cigarettes and tobacco products grew at a low single-digit rate.
The improvement in Q4 EBITDA was mainly driven by strong performance in tobacco products. However, profit margins were partially impacted by investments in growth drivers, including the machine-made cigarette business, and the termination of the NGP distribution business.
The company also predicts that the net sales for 2025 will be positively affected by the full year impact of the acquisition by Mac Baren, while the net sales reported will be negatively affected by the divestment of the NGP distribution business and the small lighter business in France that was discontinued since the third quarter of 2024.
The expectations for 2025 include:
- The report shows that net sales are between 9.2 billion and 9.7 billion Danish kroner (approximately $1.3 to $1.4 billion).
- The EBITDA profit margin before special items is between 20-23%.
- Free cash flow before acquisitions is between 0.8 billion and 1.1 billion Danish kroner (approximately $110 to $160 million).
- The adjusted earnings per share range from 11.0-14.0.
CEO Niels Frederiksen stated that
"In 2024, we faced challenges but achieved a milestone with our first-ever net sales surpassing 9 billion Danish krone ($13 billion), and reached an EBITDA profit margin of 22.6%. During this period, we invested in growth-driving factors and the transformation of our core cigar business. In 2024, we returned 1.5 billion Danish krone ($2 billion) to shareholders and proposed a dividend of 8.50 Danish krone ($1.2) per share, marking the ninth consecutive year of dividend increase."
"We are pleased with the progress we have made towards achieving the goals set in our five-year strategic plan "Towards 2025." Since its launch in 2020, we have strengthened our brand presence in the United States and Europe, expanded our product portfolio to include next-generation products, and introduced an updated sustainability strategy. We have completed multiple acquisitions, our growth drivers have garnered attention, and we are building a more robust platform through numerous efforts in IT and digitization. We have made good progress in building a solid foundation, from which we can further develop."
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