STRONG PERFORMANCE IN HANDMADE CIGAR SALES

Net sales increased by 10.4% to DKK 4,965 million (4,496). In local currencies, net sales were up by 1.9% compared to the first nine months of 2014.

The increase in net sales was driven by strong performance in the handmade cigar sales in the US and the acquisition of Belgian cigar manufacturer Verellen in September 2014. Handmade and machine-made cigars account for approx. two-thirds of our Group’s total net sales.

* The ‘Other’ category comprises several businesses, among others contract manufacturing and the distribution of pipes, lighters, matches, tubes, papers and filters.

Gross profit was DKK 2,417 million, corresponding to a gross margin of 48.7% (47.7%).

To improve productivity, a detailed programme has been initiated. The programme includes the rationalisation of the number of cigar formats and the number of stock keeping units coupled with the announcement of a sizeable reduction of the workforce in our machine-made cigar business. These steps have resulted in non-recurring restructuring costs with an impact on EBITDA of DKK 112 million.

EBITDA increased by DKK 72 million to DKK 939 million (867) which corresponds to an EBITDA margin of 18.9% (19.3%). Adjusted for non-recurring items relating to the rationalisation programme, the EBITDA margin was 21.2%. EBITDA was positively impacted by higher net sales, gross margin improvements, positive currency effects and the acquisition of Verellen.

Net profit increased to DKK 493 million (462) driven by a higher EBITDA.

Our Group delivered a strong cash flow from operating activities showing an increase of 21.5% to DKK 897 million January-September 2015 compared to last year.

CEO Niels Frederiksen says:

”We continued delivering solid performance. I am particularly pleased with the growth in our US handmade cigar business and that we overall improve our profitability. Furthermore, we have initiated a rationalisation programme that facilitates improved efficiency in our supply chain. We believe that this will further strengthen our competitive position.”

In September, our Group announced the appointment of Vincent Crepy as Executive Vice President for our Supply Chain for machine-made cigars and smoking tobacco. Vincent Crepy has an extensive track record in leading and transforming supply chains with Ventura Foods, Reckitt Benckiser and Procter & Gamble in Europe, Australia, New Zealand and the US.

For further information please contact:

Director of Group Communications Kaspar Bach Habersaat, kaspar.bach@st-group.com or phone +45 7220 7152.