Top Takeaways:

• STG reported a 0.3% organic sales increase in Q3 2025, with EBITDA margin improving sequentially to 22%, though still below last year’s level.
• Management reaffirmed confidence in FY25 performance and narrowed full-year guidance, maintaining EBITDA margin expectations at 19.5%–20.5% and free cash flow at DKK 800 million–1 billion.
• Executives highlighted stable handmade-cigar trends, strong nicotine pouch growth led by XQS, and progress in integration at Mac Baren, while acknowledging SAP-related disruptions in Europe.

Scandinavian Tobacco Group achieved modest organic growth and sequential margin improvement in the third quarter of 2025. Management highlighted stabilizing trends in key categories, ongoing execution of integration projects, and a narrowing of full-year financial expectations.

At the company’s earnings call, CEO Niels Frederiksen described the period as one where results “continue to improve compared to the previous quarters,” adding that recent performance “supports the expectations for the full year we communicated in August.”

STG reported that Q3 organic net sales grew by 0.3%, while reported revenue fell 3% due to currency headwinds. Frederiksen noted that year-over-year comparisons are now “more clean,” explaining, “It is more than one year since we acquired Mac Baren, and it is more than one year since the distribution of ZYN nicotine pouches in the U.S. was discontinued.”

He added that both handmade cigars and nicotine pouches “delivered growth in the quarter,” while machine-rolled cigars and smoking tobacco declined.

The EBITDA margin was 22%, lower than last year but better than earlier quarters. “Compared with last year, the lower margin is primarily the result of changes in product and market mix and investments in our market positions in both machine-rolled cigars and our online business,” Frederiksen said.

Free cash flow before acquisitions remains on track to reach DKK 800 million–1 billion for the year.

As STG nears the end of its five-year strategy cycle, the company plans to reveal a new strategic plan at a virtual capital markets event on November 20. Frederiksen said the company is “on track to deliver almost DKK 150 million in synergies” from its Mac Baren integration by 2027, highlighting progress in consolidating online retail platforms and restructuring U.S. operations.

He also noted the continued expansion of STG’s cigar superstores, mentioning that “during the fourth quarter, we are opening another two new cigar superstores in the U.S., bringing the total to 15 by year’s end.”

Frederiksen acknowledged operational disruptions caused by the SAP S/4HANA rollout earlier this year, which negatively impacted market share for machine-rolled cigars.

“The rollout does create ongoing operational issues and has affected our machine-rolled cigar market share negatively in the quarter,” he said. He added that STG expects to “be on top of these problems towards the end of 2025” and has deployed additional resources to stabilize the system.

Handmade cigars remained a bright spot, with Frederiksen reporting that the category delivered nearly 6% organic net sales growth in the quarter. He stated that all four business streams—U.S. business-to-business, online retail, brick-and-mortar stores, and international markets—showed improvement.

“Sales in our retail stores continue to increase, driven by new store openings, but more recently also a slight positive same-store sales development,” he said. International handmade cigar sales saw double-digit growth after temporary shipment declines earlier in the year.

In machine-rolled cigars, Frederiksen described European market trends as stabilizing but cautioned against reading too much into quarter-to-quarter improvements.

“We remain uncertain whether this is only a temporary or a sustainable improvement,” he said, reaffirming the company’s base-case assumption of a 2%–3% annual decline in category volume. STG’s market share in the segment declined, largely due to SAP-related delivery issues in Belgium, the Netherlands and parts of France.

STG’s nicotine pouch business—led by its flagship XQS brand—was a notable highlight, posting 23% organic growth for the quarter. Frederiksen said XQS “delivered 75% growth” during the quarter and now accounts for over “13% of the total market” in Sweden. Growth in the U.S. also continues to improve gradually. He noted, however, that STG does not plan to enter the U.S. nicotine pouch market with XQS. “We actually do not own the XQS trademark in the U.S.… our focus on nicotine pouches is Europe,” he said.

CFO Marianne Rørslev Bock reported mixed performance across the company’s commercial divisions. The EuroBranded division saw EBITDA before special items remain “nearly unchanged,” with the EBITDA margin improving slightly to 22.9%.

North America branded revenue declined 4% on a reported basis due to currency, though organic net sales grew modestly. Online and retail delivered 4% organic growth, supported by new store openings and improving online pricing, though EBITDA margin slipped to 13.7% due to higher promotional activity.

At the group level, Bock said special costs of DKK 41 million in the quarter were mainly related to SAP implementation and Mac Baren integration. Third-quarter net profit was DKK 227 million, with an adjusted EPS of DKK 3.4. Free cash flow before acquisitions was DKK 173 million, and the company reaffirmed its forecast of at least DKK 800 million for the full year. She told analysts that if currency adjustments and the discontinued ZYN contract are excluded, the underlying decline in EBITDA for the first nine months would have been “closer to 6%.”

During the Q&A session, analysts pressed executives on full-year guidance, nicotine-pouch expansion, and market-share recovery in Europe. Addressing guidance, Bock said, “We are expecting net sales growth also in the fourth quarter,” and confirmed that new store openings would add costs but remain within expectations.

When asked about introducing XQS in the U.S., Frederiksen reiterated, “Our focus on nicotine pouches is Europe.”

Frederiksen also directly addressed the European machine-rolled cigar industry, saying, “It is, of course, super frustrating… that we have supply issues into the European machine-rolled cigar market.” He added that STG is confident that once inventory availability stabilizes, “we should see market share progressing, unfortunately from a lower level.”

Closing the call, Frederiksen said that performance through October supports narrowing full-year revenue expectations to DKK 9.1 billion–9.2 billion and tightening the EBITDA-margin range to 19.5%–20.5%. “The financial performance during the first nine months of the year and in October supports the expectations for the full year,” he said.