Scandinavian Tobacco Group (STG) recently released its 2024 financial report, offering insights especially relevant for those in the premium cigar industry.
In the report, STG CEO Niels Frederiksen and chair of the board of directors Henrik Brandt shared the following on the 2024 performance of their company: “The decline rate in consumption for our main product categories has been volatile in recent years, first driven by the pandemic and then by a subsequent normalization, although more negative than anticipated. For 2024, the global market for handmade cigars remains dominated by U.S. consumption, where we estimate the consumption decline by a mid-single digit percentage rate. For machine-rolled cigars, with our performance primarily relating to Europe, we estimate the consumption decline by slightly more than 3% in the past year.”
They later stated, “2024 was another volatile year for our company, yet we delivered a financial performance in line with our expectations, and we continue to make progress in executing our strategy … 2025 will be year of further investments, where we aim to balance the need for stability and predictability in our core tobacco business while continuing to invest in our growth enablers. We are prioritizing to strengthen the platform from which we can grow further, although it temporarily impacts profit margins, cash flows, and ROIC which is reflected in our financial expectations for the year.”
Here are the highlights you need to know:
Steady growth despite challenges
- Total Net Sales: STG reported DKK 9.2 billion in sales for 2024, a 5.4% increase from 2023.
- Organic Growth: Organic net sales growth was minimal at 0.4%.
- EBITDA Margin: The company’s EBITDA margin was 22.6%, down slightly from 24.1% the previous year.
Fourth quarter performance
- Fourth quarter sales rose 8% to DKK 2.5 billion, despite a 1% decline in organic sales.
- EBITDA improved by 15.4% in Q4, with a margin of 24.3%, attributed to strong sales in smoking tobacco.
Key Influences on Performance
STG’s sales performance was impacted by several factors:
- Decline in Handmade Cigars in the U.S.: This segment experienced a downturn, contributing to slower growth.
- Discontinued NGP (Next Generation Product) Distribution: STG ceased distributing third-party nicotine pouch products in their online business, affecting sales figures.
- Growth Enablers: Investments in new product development and digital transformation are beginning to yield results, contributing 10% of total sales.
Dividend Growth and Future Outlook
STG has proposed an increased dividend of DKK 8.50 per share, marking the ninth consecutive year of dividend growth. Looking ahead, the company expects 2025 revenue to reach between DKK 9.2-9.7 billion, with EBITDA margins projected between 20-23%.
What This Means for Retailers
For premium cigar retailers, STG’s continued investment in machine-rolled cigars and smoking tobacco suggests potential opportunities for growth in these categories. The decline in handmade cigars may signal supply chain challenges, the end of sales increases, and the market reset experienced following the COVID-19 pandemic. Retailers should continue to follow STG’s focus on digital transformation and sustainability. This could influence how STG and other companies market their products, engage with customers, and make products available.
You can read STG’s full 2024 financial report by clicking here.