Company announcement 13/2016 - Scandinavian Tobacco Group A/S - Annual Report 2015: Improved underlying margins and strong cash flow

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."

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:

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).