Letter from the Chairman

Delivering for shareholders

Scandinavian tobacco group continues its tradition of delivering attractive shareholder returns despite financial headwinds.

Welcome to our Annual Report for 2017. I am pleased to be reporting for the first time as Chairman of the Board of Directors, particularly as Scandinavian Tobacco Group continues its tradition of delivering high cash flow whilst allowing for attractive shareholder returns.

In 2017, we saw a number of changes to the Board of Directors. We were delighted to welcome Henrik Brandt while Conny Karlsson stepped down ending seven years of service as Swedish Match completed their divestment of shares in Scandinavian Tobacco Group.

2017 was a difficult year for the Group. Early on we encountered issues in our online business in Cigars International, which led to profit downgrade. The business did recover from the weak start and has since improved quarter by quarter. Simultaneously, the Group has consistently delivered on its strategy and significantly improved operational performance.

Despite financial headwinds, we are able to deliver a dividend of DKK 925 million to shareholders – of which DKK 350 million was extraordinary. This is indeed testament to the strong underlying business and cash flow in Scandinavian Tobacco Group

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Niels Frederiksen, CEO and Nigel Northridge, Chairman
Letter from the CEO

Facing the future with confidence

2017 was yet another year that scandinavian tobacco group left stronger than when we entered it.

2017 was a financially challenging year for Scandinavian Tobacco Group. We delivered a financial performance with a negative organic EBITDA growth of 7.4% based on a 2.2% negative organic growth in our net sales. The results were significantly affected by the IT implementation in Cigars International, which prompted a profit downgrade in May 2017.

However, despite these challenges, we have continued to deliver a strong free cash flow allowing us to pay out DKK 925 million to our shareholders. And throughout the year we have strengthened significantly in areas that are prerequisites for future success. As a consequence, 2017 was yet another year that Scandinavian Tobacco Group left stronger than when we entered it.

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We generate

Financial Performance 2017

Net Sales

(DKKm)

6,464
4.2%
2017
6,464
2016
6,746
2015
6,732

Ebitda

(DKKm)

1,232
3.7%
2017
1,232
2016
1,279
2015
1,247

Cash flow from operating activities

(DKKm)

1,049
22.8%
2017
1,049
2016
1,358
2015
1,285

Net profit

(DKKm)

712
4.4%
2017
712
2016
681
2015
668

Net sales per category

HANDMADE CIGARS

(DKKm)

1,921
2017
1,921
2016
2,067
2015
1,935

MACHINE-MADE CIGARS

(DKKm)

2,491
2017
2,491
2016
2,593
2015
2,702

PIPE TOBACCO

(DKKm)

544
2017
544
2016
569
2015
629

FINE-CUT TOBACCO

(DKKm)

598
2017
598
2016
652
2015
583

Other

(DKKm)

909
2017
909
2016
864
2015
882
Global reach

Our presence

relentless focus on smoking enjoyment and on becoming the undisputed leader in cigars and pipe tobacco. this is key to how we ensure sustainable shareholder value.

Employees world wide

7,300

Sales company countries

Australia, Belgium, Canada, Croatia, Denmark, France, Germany, The Netherlands, Italy, New Zealand, Portugal, Slovenia, Spain, Sweden, UK & USA

Our positions

A world leader in cigars and traditonal pipe tobacco

#1

In handmade cigars in the US

#1

In online retail of handmade cigars in the US

#1

In fine-cut tobacco in the US and Denmark

#1

In traditional pipe tobacco globally

Our promise

Fuelled by curiosity, we source nature’s finest and passionately nurture our tobaccos and brands with the promise to create moments of great enjoyment for smokers

We believe that this promise will make us the undisputed, global leader in cigars and pipe tobacco.

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Annual report 2017

Annual report 2017

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