Release Date: March 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Scandinavian Tobacco Group AS (SNDVF, Financial) reported net sales exceeding DKK9 billion for the first time, driven by the acquisition of Mac Baren and growth enablers.
- The company returned almost DKK1.5 billion to shareholders through dividends and share buybacks.
- The acquisition of Mac Baren is expected to generate synergies of DKK150 million by 2027, enhancing the company's position in smoking tobacco categories.
- The company's nicotine pouch brand XQS showed high-double-digit growth, particularly in Sweden, contributing positively to the next generation products category.
- Scandinavian Tobacco Group AS (SNDVF) has made significant progress in its sustainability agenda, aligning with the EU corporate sustainability reporting directive.
Negative Points
- The EBITDA margin decreased to 22.6% from the previous year, impacted by investments in growth enablers and market position strengthening.
- The market for handmade cigars in the US remains challenged by uncertain consumer sentiments, with consumption declining by a mid-single digit percentage.
- Machine-rolled cigars in Europe saw a market decline of 2.8%, with uncertainties about whether this trend will continue.
- The company's leverage ratio increased to 2.6 times, up from 1.9 times at the end of 2023, due to capital allocations and the Mac Baren acquisition.
- Scandinavian Tobacco Group AS (SNDVF) does not anticipate initiating a new share buyback during 2025, aiming to maintain flexibility in its capital structure.
Q & A Highlights
Q: Can you elaborate on the risk of ending up at the low end of the 2025 guidance range?
A: Marianne Roerslev Bock, CFO, explained that extraordinary circumstances would be required to reach the lower end of the guidance. The US market, which constitutes half of their turnover, is unpredictable due to low consumer sentiment. While they have some levers to react, including cost-cutting, the management team is committed to exploring new initiatives.
Q: Are there any regulatory or tariff changes in the US market that could impact your business?
A: Niels Frederiksen, CEO, noted that the regulatory agenda around tobacco and nicotine products is becoming less of a priority, which is positive for the industry. Tariffs are less concerning, as most handmade cigar products are imported from countries likely low on the administration's list. However, consumer sentiment remains a significant concern.
Q: Will there be a pause in share buybacks in 2025?
A: Marianne Roerslev Bock confirmed that they do not anticipate initiating a new share buyback in 2025. The focus is on maintaining flexibility in their capital structure to allow for acquisitions or necessary investments.
Q: Can you provide details on the extraordinary items of DKK148 million and the expected special items for 2025?
A: Marianne Roerslev Bock explained that approximately one-third of the extraordinary items are related to reorganizations, with another third to the ERP system, and the remainder to Mac Baren. For 2025, similar allocations are expected.
Q: What are the expectations for net financials in 2025?
A: Marianne Roerslev Bock indicated that net financials would be higher due to a new bond issued in November with a higher interest rate. The increase is expected to be around 3 percentage points higher, translating to approximately DKK20 million per quarter.
Q: What are the input cost assumptions in your 2025 guidance?
A: Marianne Roerslev Bock stated that the overall cost base is expected to remain stable, with some increases in tobacco costs offset by other factors. However, declining volumes will increase the cost per cigar.
Q: Can you discuss the growth expectations for the NGP business and the performance of new retail stores in North America?
A: Niels Frederiksen highlighted that the NGP business is focused on Scandinavia and the UK, with strong growth in Sweden. The new retail stores are showing positive initial results, but more time is needed to assess their performance fully.
Q: What is driving growth in the Swedish nicotine pouch market?
A: Niels Frederiksen explained that growth is driven by expanded distribution and strong innovations, with market share gains coming from both larger and smaller players.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
