Scandinavian Tobacco Group A/S

Q1 2026 reported net sales were DKK 1.9 billion. Organic net sales declined 0.6%, after a 5.2% negative currency impact from the weaker U.S. dollar. EBITDA before special items was unchanged year over year and the EBITDA margin improved to 17.2% from 16.1%. EBIT margin before special items was 10.4%, in line with last year, and free cash flow before acquisitions was DKK 158 million, also in line with Q1 last year. Special items were negative DKK 76 million versus negative DKK 70 million last year, and leverage was unchanged at 3x. For 2026, the company still expects constant-currency net sales growth 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 EBITDA before special items more or less in line with DKK 1.8 billion. Management also reiterated that trademark amortization will increase by nearly DKK 75 million for the year, weighing EBIT margin by 0.9 percentage points.

Niels Frederiksen framed Q1 as the first step of Focus2030 and said the company is “off to a good start,” with the strategy proceeding as planned. He emphasized early stabilization in European machine-rolled cigars, 8% organic growth in handmade cigars, and continued market-share gains for XQS in Sweden, while saying the group is prioritizing power brands, simplification, and cost improvements. His tone was constructive but cautious, repeatedly noting that one quarter does not change a trend and that geopolitical and macro uncertainty remain elevated.

Marianne Bock highlighted that Q1 is typically the weakest quarter, but said the company still delivered stable EBITDA before special items despite lower sales. She pointed to the DKK 1.9 billion in reported net sales, the 17.2% EBITDA margin, DKK 158 million of free cash flow before acquisitions, and leverage at 3x. She also detailed DKK 76 million of special items, including DKK 33 million for Focus2030 and DKK 31 million for SAP, and said special costs in 2026 are still expected to total about DKK 275 million. She added that free cash flow benefited from recovery of receivables delayed from Q4 and that leverage should move toward the 2.5x target by year-end, mostly in the second half.

Analysts focused on nicotine pouches, the improvement in Europe Branded margins despite lower sales, the confidence behind full-year guidance, online competition, and the return of Cuban cigars. Management said the Q1 nicotine pouch decline was largely timing and inventory-related, and that underlying in-market growth was strong, with category volumes up 21% in Sweden, Denmark and the U.K. and XQS volumes up 38%. On Europe Branded, they said the margin rebound mainly reflected normalization after SAP-related issues last year, while online margin pressure was linked to pricing competition, tariff pass-through challenges, and the introduction of free shipping on the biggest online site. On Cuban cigars, management said availability outside the U.S. has improved but that long-term decline in Cuban share outside the U.S. continues, and they still aim to grow their international handmade cigar business.