📊 Key Financial Results (Q1 2025)
- Reported net sales: DKK 2.0 billion (+1.3% year-over-year).
- Organic net sales growth: -8.8%, due to:
- Lower consumption of handmade cigars in the U.S.
- End of online distribution of ZYN in the U.S.
- Temporary supply issues caused by SAP implementation in European factories.
- EBITDA before special items: DKK 317 million (↓5.3%).
- EBITDA margin: 16.1% (↓1 percentage point).
- Adjusted EPS: DKK 1.5 (↓from DKK 1.8).
- Free cash flow (before acquisitions): DKK 156 million (↑from DKK -126 million).
🌍 Key Factors
- The U.S. accounts for 45% of the Group’s total sales.
- New 10% import tariffs in the U.S. and the depreciation of the U.S. dollar against the Danish krone negatively impacted results.
- Price adjustments were implemented to partially offset these effects.
📉 Revised Outlook for 2025
- Expected net sales: DKK 9.1–9.5 billion (previously: 9.2–9.7).
- Expected EBITDA margin: 18–22% (previously: 20–23%).
- Expected adjusted EPS: DKK 10–13 (previously: 11–14).
- Expected free cash flow: DKK 0.8–1.0 billion.
What are the main challenges for STG?
🔻 1. Decline in Organic Sales
- Organic net sales dropped by 8.8%, mainly due to:
- Reduced demand for handmade cigars in the U.S., which is STG’s largest market.
- The termination of online distribution of ZYN (a nicotine pouch product) in the U.S.
⚙️ 2. Operational Disruptions
- The implementation of SAP systems in European factories caused temporary supply chain issues, affecting product availability and delivery timelines.
💱 3. Currency and Trade Pressures
- The depreciation of the U.S. dollar against the Danish krone reduced the value of U.S. revenues when converted to DKK.
- New 10% import tariffs in the U.S. increased costs for imported products, squeezing margins.
📉 4. Margin Compression
- EBITDA margin fell from 17.1% to 16.1%, reflecting:
- Higher input costs.
- Lower economies of scale due to reduced volumes.
- Limited ability to fully pass on cost increases to consumers.
🧾 5. Revised Outlook
- STG had to lower its full-year guidance for revenue, margins, and earnings per share, which may affect investor confidence.
🧪 6. Product Transition and Innovation Pressure
- The company is investing in next-generation products (like nicotine pouches), but these are still in early growth stages and not yet offsetting declines in traditional tobacco segments.
🧭 Conclusion
While total sales increased slightly thanks to acquisitions (e.g., Mac Baren) and growth in products like XQS nicotine pouches, organic business performance was affected by external and operational challenges. The company maintains a long-term growth strategy but has adjusted its full-year expectations accordingly.
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Disclaimer
The user kapirey has a position in CPSE:STG. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
