Company Announcement
No. 13/2016

10 March 2016

Annual Report 2015

Improved Underlying Margins and Strong Cash Flow

Scandinavian Tobacco Group A/S - a world leading manufacturer of cigars and traditional pipe tobacco - announces its result for the fourth quarter and full year 2015.


Highlights 2015: 

  • Net sales increased by 9.9% to DKK 6,732 million - organic growth of 0.3%
  • Reported EBITDA increased by 5.9% to DKK 1,247 million - organic growth
    in EBITDA of 2.2%
  • Profitability improvement leading to adjusted EBITDA margin of 20.5% (20.3%)
  • Net profit increased by 4.3% to DKK 668 million
  • Cash flow from operating activities increased by 21.7% to DKK 1,285 million
  • Net sales and EBITDA margin delivered in accordance with our guidanceWe achieved approx. 10% of the cost savings which in total are expected to amount to DKK 140 million annually in 2018 as a result of our optimisation and efficiency programme initiated in 2015. DKK 225 million of the expected DKK 500 million in inventory reductions by 2018 were achieved during the year.
  • The Board of Directors proposes an ordinary dividend per share of DKK 5.00 corresponding to a 17% increase vs. 2014 and a 75% pay-out ratio of the net profit


 CEO Niels Frederiksen comments:

"In 2015, we made significant progress in optimising our business and we plan for more. We report improved organic growth in EBITDA and improved cash flow. We have increased productivity and successfully realised synergies from our 2014 acquisition of the Belgian cigar manufacturer Verellen. Our initiated optimisation and efficiency programme is expected to deliver tangible cost savings and working capital improvements. Our financial performance for 2015 supports our expectations for 2016."

Guidance maintained for 2016
Our guidance for 2016 is unchanged. We expect an organic growth in net sales of 1-3% and an organic growth in EBITDA of 3-5%. Capex is expected to be approx. DKK 250 million including capex of DKK 100 million related to the implementation of the revised EU Tobacco Products Directive.
 

The annual report for 2015 is available for download on: investor.st-group.com.

Conference Call and Webcast
 
A conference call and webcast will be held on 10 March 2016 at 10:00 AM CET.

Presentation materials will be available online approx. one hour before the meeting on investor.st-group.com.

Dial-in details:

Denmark: +45 32 71 16 58
The UK: +44 20 3427 1904
The US: +1 212 444 0895
Passcode:  8042614

Webcast:          http://edge.media-server.com/m/p/8v9cvh6c


 For further information, please contact:
 
For media enquiries:
Kaspar Bach Habersaat, Director of Group Communications, phone: +45 7220 7152 or kaspar.bach@st-group.com.

For investor enquiries:
Torben Sand, Head of Investor Relations, phone: +45 7220 7126 or torben.sand@st-group.com.


Financial Highlights for Q4 2015


Strong performance in handmade cigars contributed to organic growth of 2.7%
Net sales increased by 8.4% to DKK 1,767 million (DKK 1,630 million). Organic net sales growth was 2.7% driven by continued strong net sales development in our handmade cigars category. Net sales of fine-cut tobacco were negatively impacted by a terminated distribution agreement for third party products and stock building on the Danish-German border at the end of 2014.

Gross profit increased by 2.6% - margins impacted in Q4
In total, gross profit increased by 2.6% to DKK 822 million (DKK 801 million) implying a gross margin of 46.5% (49.1%). The margin declined due to, in particular, the reversal of certain pension provisions in the machine-made cigars category which had a positive effect on Q4 2014.

Gross margin developed positively for handmade cigars and fine-cut tobacco whereas gross margins decreased for machine-made cigars and pipe tobacco.

EBITDA margin of 17.4%
Reported EBITDA decreased by 0.5% to DKK 308 million (DKK 310 million). Adjusted EBITDA decreased by 13.3%.

Reported EBITDA margin was 17.4% (19.0%). Adjusted EBITDA margin was 18.9% (22.5%). The quarter included non-recurring items of DKK 25.7 million related to incentive plans, restructuring of management in our US handmade cigars business and preparations related to the revised EU Tobacco Products Directive.

Reported net profit for the quarter decreased by 2.2% to DKK 174 million (DKK 178 million).

Cash flow increased by 22.1%
Cash flow from operating activities increased by 22.1% to DKK 389 million (DKK 318 million) driven by reduction in working capital. Free cash flow amounted to DKK 326 million (DKK 306 million).

Capital expenditures amounted to DKK 64 million (DKK 63 million).

Scandinavian Tobacco Group - Key Figures      
DKKm 2015 2014 2013     Q4 15 Q4 14
               
Income statement              
Net sales 6,732 6,126 5,925     1,767 1,630
Gross profit 3,239 2,947 2,915     822 801
EBITDA 1,247 1,177 1,175     308 310
Net profit 668 640 573     174 178
               
Balance sheet              
Total assets 14,544 14,162 13,196     14,544 14,162
Equity 8,998 9,087 8,333     8,998 9,087
Net interest-bearing debt (NIBD) 3,011 2,698 2,808     3,011 2,698
               
Cash flow statement              
Cash flow from operating activities (CFFO) 1,285 1,056 745     389 318
Free cash flow 1,057 585 427     326 306
               
Total capital expenditures 236 215 302     64 63
               
Key ratios              
Gross profit, adjusted 1) 3,282 2,947 2,915     822 801
EBITDA, adjusted 1) 1,385 1,247 1,198     334 367
               
Net sales growth 9.9% 3.4% -0.9%     8.4% -
Organic net sales growth 1) + 2) 0.3% 2.9% 0.7%     2.7% -
Organic EBITDA growth 1) + 2) 2.2% 4.8% -5.6%     -13.3% -
               
Gross margin 48.1% 48.1% 49.2%     46.5% 49.1%
Gross margin, adjusted 1) + 2) 48.7% 48.1% 49.2%     46.5% 49.1%
EBITDA margin 18.5% 19.2% 19.8%     17.4% 19.0%
EBITDA margin, adjusted 1) + 2) 20.5% 20.3% 20.2%     18.9% 22.5%
               
NIBD / adjusted EBITDA 1) 2.2 2.2   2.3     - -
ROIC 3) 7.4% 7.7% 6.5%     - -
ROIC 3, ex. goodwill and trademarks 2010 merger 13.3% 13.7% 11.8%     - -
               
Dividend per share (DKK) 4) 14.0 4.3 3.8     - -
Payout ratio 210% 67% 67%     - -
               
1) Adjusted net sales, gross profit and EBITDA are defined as excluding non-recurring items    
2) Organic growth rates are defined as growth in adjusted net sales and EBITDA - excluding currencies and acquisitions 
3) EBIT / (12 mth average invested capital) 
4) In 2015 an extraordinary dividend was paid of DKK 9.00 per share (DKK 900 million)

Key Data Per Category              
  2015 2014 2013     Q4 15 Q4 14
               
Net sales (DKKm)              
Handmade cigars 1,935 1,514 1,368     497 407
Machine-made cigars 2,702 2,595 2,513     711 710
Pipe tobacco 629 569 567     170 140
Fine-cut tobacco 583 562 522     144 155
Other 882 886 956     245 219
Group total 6,732 6,126 5,925     1,767 1,630
               
Gross profit (DKKm)              
Handmade cigars 843 656 603     217 174
Machine-made cigars 1,372 1,341 1,362     354 392
Pipe tobacco 378 340 333     91 83
Fine-cut tobacco 342 300 274     76 79
Other 304 310 342     84 74
Group total 3,239 2,947 2,915     822 801
               
Organic net sales growth (%)              
Handmade cigars 7.9% 9.6% 2.3%     7.0% -
Machine-made cigars -2.3% 2.2% -2.6%     -1.1% -
Pipe tobacco 1.6% 0.5% 5.4%     14.6% -
Fine-cut tobacco -1.3% 8.8% 7.3%     -10.6% -
Other -4.5% -6.6% 1.2%     8.9% -
Group total 0.3% 2.9% 0.7%     2.7% -
               
Volume impact (%)              
Handmade cigars 6.6% 7.3% -3.0%     10.1% -
Machine-made cigars -5.7% -0.6% -4.2%     -4.0% -
Pipe tobacco -5.1% -3.1% 1.5%     9.9% -
Fine-cut tobacco -6.0% 1.1% 0.7%     -16.9% -
Other - - -     - -
Group total - - -     - -
               
Price/Mix impact (%)              
Handmade cigars 1.3% 2.3% 5.3%     -3.0% -
Machine-made cigars 3.4% 2.8% 1.6%     2.9% -
Pipe tobacco 6.7% 3.6% 3.9%     4.7% -
Fine-cut tobacco 4.7% 7.7% 6.6%     6.2% -
Other - - -     - -
Group total - - -     - -
               
Gross margin (%)              
Handmade cigars 43.6% 43.3% 44.1%     43.7% 42.7%
Machine-made cigars 1) 50.8% 51.7% 54.2%     49.8% 55.2%
Pipe tobacco 60.1% 59.8% 58.8%     53.6% 59.5%
Fine-cut tobacco 58.5% 53.4% 52.5%     52.8% 51.1%
Other 34.5% 35.0% 35.8%     34.2% 33.5%
Group total 1) 48.1% 48.1% 49.2%     46.5% 49.1%
1) 2015 incl. non-recurring items of DKK -43.7m in gross profit and DKK -6.9m in net sales. Adjusted gross margin is 52.2% (machine-made cigars) and 48.7% (Group)    

Adjustments to Net Sales, Gross Profit and EBITDA        
DKKm 2015 2014 2013     Q4 15 Q4 14
Net sales              
Reported 6,732 6,126 5,925     1,767 1,630
Non-recurring items 7 0 0     0 0
Net sales, adjusted 6,739 6,126 5,925     1,767 1,630
               
Gross profit              
Reported 3,239 2,947 2,915     822 801
Non-recurring items 44 0 0     0 0
Gross profit, adjusted 3,282 2,947 2,915     822 801
               
EBITDA              
Reported 1,247 1,177 1,175     308 310
Non-recurring items 138 69 24     26 57
EBITDA, adjusted 1,385 1,247 1,198     334 367
               

About Scandinavian Tobacco Group
Scandinavian Tobacco Group A/S with its subsidiaries (the "Group") is a world leading producer of cigars and traditional pipe tobacco. The Group also produces fine-cut tobacco and sells tobacco-related accessories. The Group produces and sells 3 billion cigars and 5,000 tonnes of pipe and fine-cut tobacco annually. Scandinavian Tobacco Group believes it is the only company globally with a core strategic focus on production and distribution in all of these tobacco categories.

Scandinavian Tobacco Group holds market-leading positions in the machine-made cigar market in Europe, the handmade cigar market in the US, the online and catalogue retail sales of cigars in the US, the traditional pipe tobacco market globally and in selected fine-cut tobacco markets.

Scandinavian Tobacco Group has a diversified portfolio of more than 200 brands providing a complementary range of established global brands and local champions.  In the cigar segment, the brand portfolio comprises Café Crème, La Paz, Macanudo, CAO, Partagas (US) and Cohiba (US). Pipe tobacco brands include Captain Black, Erinmore, Borkum Riff and W.Ø. Larsen, while leading fine-cut tobacco brands include Bugler, Break, Escort, Bali Shag and Tiedemanns.

As at 31 December 2015, the Group employed approx. 8,100 people in the Dominican Republic, Honduras, Nicaragua, Indonesia, Europe, New Zealand, Australia, Canada and the US.

For more information please visit www.st-group.com.

Scandinavian Tobacco Group A/S
Sydmarken 42
DK-2860 Søborg
Denmark

CVR 31 08 01 85
 

Annual Report 2015
Press release (PDF)


This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Scandinavian Tobacco Group A/S via Globenewswire
HUG#1993241
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