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1. Company Snapshot

1.a. Company Description

Scandinavian Tobacco Group A/S manufactures and sells cigars and pipe tobacco in the United States, Europe, and internationally.The company offers fine-cut tobacco, and machine-rolled and handmade cigars.It markets its products under the Bali Shag, Balmoral, Borkum Riff, Break, Bugler, Café Crème, CAO, Captain Black, Clan, Cohiba, Colts, Crossroad, Cubero, Erinmore, Escort, Hajenus, Henri Wintermans, Kite, La Gloria Cubana, La Paz, M by Colts, Macanudo, Mehari's, Mercator, Panter, Partagas, Petit, Signature, SLS SALSA, Stanwell, Talon, Tiedemanns, W.Ø. Larsen, and Winchester brand names.


The company sells its products through online, catalogue, and retail channels.In addition, it offers contract manufacturing and licensing services for third parties; and sells accessories.Scandinavian Tobacco Group A/S was founded in 1750 and is based in Gentofte, Denmark.

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1.b. Last Insights on STG

Recent negative drivers behind Scandinavian Tobacco Group A/S's performance include a major shareholder's announcement on May 1, 2025, indicating a change in control, and a reduction of share capital on May 15, 2025, resulting in the cancellation of 6,000,000 treasury shares. This move has led to a decrease in the company's share capital from DKK 86,000,000 to DKK 80,000,000. Additionally, as of May 16, 2025, the company's treasury shares represent 1.58% of the share capital, further impacting its capital structure.

1.c. Company Highlights

2. Scandinavian Tobacco Group's Q3 2025 Earnings: A Closer Look

Scandinavian Tobacco Group reported a 3% decline in net sales for Q3 2025, but achieved 0.3% organic growth in constant currencies. The EBITDA margin stood at 22%, down from the same quarter last year, primarily due to changes in product and market mix. The company's EPS came in at 3.4, slightly below estimates of 3.57. Despite the decline in EPS, the free cash flow before acquisitions is on track to meet the expected range of DKK 800 million to DKK 1 billion for the full year, as noted by CFO Marianne Rorslev Bock, "Free cash flow expectation remains in the DKK 800 million to DKK 1 billion range due to stronger performance in the fourth quarter."

Publication Date: Nov -18

📋 Highlights
  • Organic Sales Growth: 0.3% organic growth in constant currencies despite 3% reported net sales decline, indicating currency impact.
  • EBITDA Margin: 22% margin, down from prior-year due to mix changes but improved from Q1-Q2 2025.
  • Free Cash Flow: On track for DKK 800M–1B annual target, driven by Q4 performance and integration synergies (DKK 150M from Mac Baren).
  • Growth Enablers: Handmade cigars and nicotine pouches delivered double-digit Q3 growth, while U.S. machine-rolled cigars fell 0.6% year-to-date.
  • Updated Guidance: Narrowed EBITDA margin range to 19.5–20.5% for 2025, reflecting improved visibility and sales forecast of DKK 9.1–9.2B.

Segmental Performance

The company's three commercial divisions showed varied performance. Europe Branded reported a 2% decline in net sales but achieved 0.3% organic growth. North America Branded and Rest of the World saw a 4% decline in reported net sales but recorded 4% organic growth. North America Online and Retail also reported a 3% decline in net sales but achieved 4% organic growth. The growth enablers, including handmade cigars and nicotine pouches, delivered double-digit growth in the third quarter, with the handmade cigars market in the U.S. showing signs of stabilization.

Valuation Metrics

With a P/E Ratio of 8.72 and an EV/EBITDA of 7.21, the stock appears to be reasonably valued. The Dividend Yield stands at 9.58%, indicating an attractive return for income investors. The Net Debt / EBITDA ratio of 3.17x suggests that the company's leverage is relatively high, but the leverage ratio remained unchanged at 2.9x despite a decrease in interest-bearing debt. The ROIC of 5.33% and ROE of 9.07% indicate a decent return on capital and equity, respectively.

Guidance and Outlook

The company has narrowed the ranges for net sales, EBITDA margin, and EPS, with an updated range for reported net sales of DKK 9.1 billion to DKK 9.2 billion. The full-year EBITDA margin is expected to be between 19.5% and 20.5%. For Q4, the company expects net sales growth and believes the EBITDA margin range is realistic. Analysts estimate next year's revenue growth at -0.3%, indicating a challenging environment, but the company's growth enablers and strategic initiatives are expected to drive long-term growth.

Strategic Initiatives

The company's 5-year strategy is progressing well, with the integration of Mac Baren expected to yield synergies of almost DKK 150 million. The introduction of new products and the expansion of online sales channels are also key focus areas. Niels Frederiksen mentioned that the supply of Cuban cigars has normalized, and the organization is supplementing its portfolio with non-Cuban cigars, supporting the long-term trend of non-Cuban cigars gaining market share.

3. NewsRoom

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Scandinavian Tobacco Group announces financial ambitions and new flexible shareholder return policy ahead of Capital Markets Day

Nov -19

Source:

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Scandinavian Tobacco Group AS (SNDVF) Q3 2025 Earnings Call Highlights: Navigating Growth ...

Nov -12

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Scandinavian Tobacco Group A/S Reports Third Quarter 2025 Results and Narrows Expectation Ranges for Full-Year.

Nov -11

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.17%)

6. Segments

North America Branded and Rest of World

Expected Growth: 1.2%

North America Branded growth driven by premiumization, innovation, and market share gains. Rest of World growth fueled by emerging markets' increasing demand for Scandinavian Tobacco Group's products, particularly in Asia and Latin America, as well as expansion into new markets.

Europe Branded

Expected Growth: 0.8%

The 0.8% growth of Europe Branded from Scandinavian Tobacco Group A/S is driven by increasing demand for premium tobacco products, particularly in the Nordic region. Strengthening brand portfolios, such as Cafe Crema and Henrik's, contribute to market share gains. Additionally, strategic pricing and cost-saving initiatives support profitability, offsetting declining volumes in certain markets.

North America Online and Retail

Expected Growth: 1.5%

The 1.5% growth in North America Online and Retail from Scandinavian Tobacco Group A/S is driven by increasing online sales, expansion of e-commerce platforms, and strategic partnerships. Additionally, the growing demand for premium and specialty tobacco products, coupled with effective marketing and promotional strategies, contribute to the segment's growth.

7. Detailed Products

Cigars

Scandinavian Tobacco Group A/S offers a wide range of cigars, including handmade and machine-made cigars, in various flavors and sizes.

Pipe Tobacco

The company provides a variety of pipe tobacco blends, including aromatic, non-aromatic, and flavored options.

Snus

Scandinavian Tobacco Group A/S offers a range of snus products, including portioned and loose snus, in various flavors and strengths.

Chewing Tobacco

The company provides a range of chewing tobacco products, including loose-leaf and pouched options, in various flavors and strengths.

Lighting Products

Scandinavian Tobacco Group A/S offers a range of lighting products, including lighters, matches, and other accessories.

8. Scandinavian Tobacco Group A/S's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Scandinavian Tobacco Group A/S is moderate due to the presence of alternative products such as e-cigarettes and heat-not-burn devices.

Bargaining Power Of Customers

The bargaining power of customers is low due to the fragmented nature of the market and the lack of large-scale buyers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the presence of a few large suppliers of tobacco and other raw materials.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including regulatory hurdles and the need for significant capital investment.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the market, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 28.26%
Debt Cost 5.89%
Equity Weight 71.74%
Equity Cost 7.83%
WACC 7.28%
Leverage 39.39%

11. Quality Control: Scandinavian Tobacco Group A/S passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 6.1/10

Value: 8.1

Growth: 4.0

Quality: 5.3

Yield: 9.4

Momentum: 1.5

Volatility: 8.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

91.5$

Current Price

91.5$

Potential

-0.00%

Expected Cash-Flows