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

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."

Guidance maintained for 2016
Our guidance for 2016 is unchanged. We expect an organic growth in net sales of 1-3% and an organic growth in EBITDA of 3-5%. Capex is expected to be approx. DKK 250 million including capex of DKK 100 million related to the implementation of the revised EU Tobacco Products Directive.
 

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:

Denmark:	[phone]
The UK:	[phone]
The US:	[phone]
Passcode:	8042614

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: [phone] or [e-mail].

For investor enquiries:
Torben Sand, Head of Investor Relations, phone: [phone] or [e-mail].


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).

Scandinavian Tobacco Group - Key Figures
DKKm	2015	2014	2013			Q4 15	Q4 14
Income statement
Net sales	6,732	6,126	5,925			1,767	1,630
Gross profit	3,239	2,947	2,915			822	801
EBITDA	1,247	1,177	1,175			308	310
Net profit	668	640	573			174	178
Balance sheet
Total assets	14,544	14,162	13,196			14,544	14,162
Equity	8,998	9,087	8,333			8,998	9,087
Net interest-bearing debt (NIBD)	3,011	2,698	2,808			3,011	2,698
Cash flow statement
Cash flow from operating activities (CFFO)	1,285	1,056	745			389	318
Free cash flow	1,057	585	427			326	306
Total capital expenditures	236	215	302			64	63
Key ratios
Gross profit, adjusted 1)	3,282	2,947	2,915			822	801
EBITDA, adjusted 1)	1,385	1,247	1,198			334	367
Net sales growth	9.9%	3.4%	-0.9%			8.4%	-
Organic net sales growth 1) + 2)	0.3%	2.9%	0.7%			2.7%	-
Organic EBITDA growth 1) + 2)	2.2%	4.8%	-5.6%			-13.3%	-
Gross margin	48.1%	48.1%	49.2%			46.5%	49.1%
Gross margin, adjusted 1) + 2)	48.7%	48.1%	49.2%			46.5%	49.1%
EBITDA margin	18.5%	19.2%	19.8%			17.4%	19.0%
EBITDA margin, adjusted 1) + 2)	20.5%	20.3%	20.2%			18.9%	22.5%
NIBD / adjusted EBITDA 1)	2.2	2.2	2.3			-	-
ROIC 3)	7.4%	7.7%	6.5%			-	-
ROIC 3, ex. goodwill and trademarks 2010 merger	13.3%	13.7%	11.8%			-	-
Dividend per share (DKK) 4)	14.0	4.3	3.8			-	-
Payout ratio	210%	67%	67%			-	-
1) Adjusted net sales, gross profit and EBITDA are defined as excluding non-recurring items
2) Organic growth rates are defined as growth in adjusted net sales and EBITDA - excluding currencies and acquisitions
3) EBIT / (12 mth average invested capital)
4) In 2015 an extraordinary dividend was paid of DKK 9.00 per share (DKK 900 million)

Key Data Per Category
	2015	2014	2013			Q4 15	Q4 14
Net sales (DKKm)
Handmade cigars	1,935	1,514	1,368			497	407
Machine-made cigars	2,702	2,595	2,513			711	710
Pipe tobacco	629	569	567			170	140
Fine-cut tobacco	583	562	522			144	155
Other	882	886	956			245	219
Group total	6,732	6,126	5,925			1,767	1,630
Gross profit (DKKm)
Handmade cigars	843	656	603			217	174
Machine-made cigars	1,372	1,341	1,362			354	392
Pipe tobacco	378	340	333			91	83
Fine-cut tobacco	342	300	274			76	79
Other	304	310	342			84	74
Group total	3,239	2,947	2,915			822	801
Organic net sales growth (%)
Handmade cigars	7.9%	9.6%	2.3%			7.0%	-
Machine-made cigars	-2.3%	2.2%	-2.6%			-1.1%	-
Pipe tobacco	1.6%	0.5%	5.4%			14.6%	-
Fine-cut tobacco	-1.3%	8.8%	7.3%			-10.6%	-
Other	-4.5%	-6.6%	1.2%			8.9%	-
Group total	0.3%	2.9%	0.7%			2.7%	-
Volume impact (%)
Handmade cigars	6.6%	7.3%	-3.0%			10.1%	-
Machine-made cigars	-5.7%	-0.6%	-4.2%			-4.0%	-
Pipe tobacco	-5.1%	-3.1%	1.5%			9.9%	-
Fine-cut tobacco	-6.0%	1.1%	0.7%			-16.9%	-
Other	-	-	-			-	-
Group total	-	-	-			-	-
Price/Mix impact (%)
Handmade cigars	1.3%	2.3%	5.3%			-3.0%	-
Machine-made cigars	3.4%	2.8%	1.6%			2.9%	-
Pipe tobacco	6.7%	3.6%	3.9%			4.7%	-
Fine-cut tobacco	4.7%	7.7%	6.6%			6.2%	-
Other	-	-	-			-	-
Group total	-	-	-			-	-
Gross margin (%)
Handmade cigars	43.6%	43.3%	44.1%			43.7%	42.7%
Machine-made cigars 1)	50.8%	51.7%	54.2%			49.8%	55.2%
Pipe tobacco	60.1%	59.8%	58.8%			53.6%	59.5%
Fine-cut tobacco	58.5%	53.4%	52.5%			52.8%	51.1%
Other	34.5%	35.0%	35.8%			34.2%	33.5%
Group total 1)	48.1%	48.1%	49.2%			46.5%	49.1%
1) 2015 incl. non-recurring items of DKK -43.7m in gross profit and DKK -6.9m in net sales. Adjusted gross margin is 52.2% (machine-made cigars) and 48.7% (Group)

Adjustments to Net Sales, Gross Profit and EBITDA
DKKm	2015	2014	2013			Q4 15	Q4 14
Net sales
Reported	6,732	6,126	5,925			1,767	1,630
Non-recurring items	7	0	0			0	0
Net sales, adjusted	6,739	6,126	5,925			1,767	1,630
Gross profit
Reported	3,239	2,947	2,915			822	801
Non-recurring items	44	0	0			0	0
Gross profit, adjusted	3,282	2,947	2,915			822	801
EBITDA
Reported	1,247	1,177	1,175			308	310
Non-recurring items	138	69	24			26	57
EBITDA, adjusted	1,385	1,247	1,198			334	367

About Scandinavian Tobacco Group
Scandinavian Tobacco Group A/S with its subsidiaries (the "Group") is a world leading producer of cigars and traditional pipe tobacco. The Group also produces fine-cut tobacco and sells tobacco-related accessories. The Group produces and sells 3 billion cigars and 5,000 tonnes of pipe and fine-cut tobacco annually. Scandinavian Tobacco Group believes it is the only company globally with a core strategic focus on production and distribution in all of these tobacco categories.

Scandinavian Tobacco Group holds market-leading positions in the machine-made cigar market in Europe, the handmade cigar market in the US, the online and catalogue retail sales of cigars in the US, the traditional pipe tobacco market globally and in selected fine-cut tobacco markets.

Scandinavian Tobacco Group has a diversified portfolio of more than 200 brands providing a complementary range of established global brands and local champions.  In the cigar segment, the brand portfolio comprises Café Crème, La Paz, Macanudo, CAO, Partagas (US) and Cohiba (US). Pipe tobacco brands include Captain Black, Erinmore, Borkum Riff and W.Ø. Larsen, while leading fine-cut tobacco brands include Bugler, Break, Escort, Bali Shag and Tiedemanns.

As at 31 December 2015, the Group employed approx. 8,100 people in the Dominican Republic, Honduras, Nicaragua, Indonesia, Europe, New Zealand, Australia, Canada and the US.

For more information please visit www.st-group.com.

Scandinavian Tobacco Group A/S
Sydmarken 42
DK-2860 Søborg
Denmark

CVR 31 08 01 85
 

Annual Report 2015
Press release (PDF)

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Scandinavian Tobacco Group A/S via Globenewswire

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