Scandinavian Tobacco Group A/S

For the first half of 2026, reported net sales were DKK 4.2 billion, down 3% year over year, with a 3% negative FX impact. For Q2, reported net sales declined 1%, including a 1% FX headwind. EBITDA margin before special items improved by around 1 percentage point in the half year, while EBIT margin before special items was unchanged year over year for both the half year and Q2. Free cash flow before acquisitions was DKK 422 million in the first half, up nearly DKK 150 million year over year, and was DKK 264 million in Q2. The company kept full-year 2026 guidance unchanged: constant-currency net sales of minus 2% to plus 2%, EBIT margin before special items of 13% to 14.5%, free cash flow before acquisitions of DKK 950 million to DKK 1.2 billion, and leverage moving toward 2.5x by year-end. It also reiterated that the BREAK/Moro divestment is not expected to affect 2026 guidance ranges for net sales, EBIT margin, or EPS.

Niels Frederiksen said Focus2030 is progressing in line with the plan laid out at the Capital Markets Day, with priorities unchanged: stabilize machine-rolled cigars and smoking tobacco, grow handmade cigars, and accelerate nicotine pouches. He emphasized that the company is taking “small steps in the right direction” and said the first half showed signs of stabilization across core categories. His tone was cautious but constructive, noting a quality issue hurt Europe Branded, but also pointing to improving gross margins, share gains in some markets, and continued momentum in handmade cigars and XQS.

Marianne Bock focused on the mechanics behind the quarter: duty drawback refunds lifted other income to DKK 79 million in the half year versus DKK 18 million last year, and the related benefit to EBIT was about DKK 50 million in the half year. She said trademark amortization increased DKK 38 million in the half year and should be nearly DKK 75 million for the full year, while special items were negative DKK 135 million versus negative DKK 105 million a year ago, mainly from Focus2030 reorganization and SAP implementation costs. She also said leverage was 3x, cash flow is tracking to full-year expectations, and the BREAK/Moro sale should bring leverage below 2.5x, with about DKK 1 billion of proceeds after tax.

Analysts pressed management on Europe Branded’s prolonged decline, asking whether consumers are migrating to cheaper alternatives and how much the France quality issue and portfolio streamlining will continue to weigh on sales. Niels said the category is still challenged, but he does not see a clear correlation to broader migration, and he said the company is more concerned about excise alignment and potential migration to vape in economy products. Questions also focused on the BREAK/Moro sale and buybacks; management said the brands were accretive historically, the deal is not seen as having major antitrust risk, and it is too early to discuss resuming share repurchases. On XQS, Niels said the Mint and Menthol launch in Sweden and the U.K. is early but encouraging, though the battle against strong competitors like Velo will take time.