By Timothy S. Donahue
Top Takeaways:
- Earnings decline: Scandinavian Tobacco Group reported 2025 revenue of DKK 9.04 billion (US$1.41 billion).
- Market pressure: The company cited U.S. tariffs, fierce price competition in retail cigars and weaker consumer sentiment as key drivers.
- New strategy ahead: STG aims to achieve ROIC above 11% by 2030 under its new Focus2030 strategy.
Scandinavian Tobacco Group reported weaker financial results for 2025 as the global cigar maker navigated tariffs, price competition, and softer demand in its largest market.
The Denmark-based company reported revenue of DKK 9.036 billion (US$1.41 billion), with organic growth declining by 1.8%, while EBITDA before special items dropped 13.9% to DKK 1.791 billion ($278 million). The company’s EBITDA margin decreased to 19.8%, down from 22.6% in 2024.
Free cash flow before acquisitions decreased by 36.1% to DKK 595 million ($92.7 million), while adjusted earnings per share dropped 21.17% to DKK 10.8 ($1.68). Return on invested capital fell to 7.9% from 9.4% the previous year.
STG lowered its full-year guidance twice in 2025, first following U.S. tariffs imposed during the Trump administration in April, and again during its third-quarter update. The company ultimately missed its revised revenue and free cash flow targets after a weak fourth quarter.
Management cited several reasons for the weaker performance, including tariffs, the rollout of a new enterprise resource planning system in Europe that increased receivables, and “fierce price competition” in its retail cigar business, reports halfwheel.
The company also highlighted declining consumption in its biggest market.
In a company statement, CEO Niels Frederiksen and Chairman Henrik Brandt said the global handmade cigar market still heavily relies on U.S. demand, estimating U.S. consumption declined at a mid-single-digit percentage in 2025.
Despite the decline, the company stated it kept steady net sales in handmade cigars by expanding distribution through retail and online channels and raising prices on branded products.
For machine-rolled cigars, STG estimated the European market declined by 1%–2%, and the company also lost some market share as it struggled with inventory availability during the rollout of its global SAP enterprise system.
STG said machine-made cigars and smoking tobacco make up about 50% of net sales, while handmade cigars account for roughly 35% of the company’s business.
The company’s North American retail segment experienced a 7.5% sales decline, partly due to losing a Zyn distribution agreement in mid-2024. STG noted that 88% of its retail sales are from online and catalog channels, with the remaining 12% coming from physical stores.
STG currently operates 15 retail stores and plans to expand to 25 locations by 2030.
Looking ahead, the company launched a new long-term strategy called Focus2030, aiming to improve profitability and capital efficiency. Under this plan, STG seeks to increase return on invested capital to over 11% by 2030, driven by higher operating profit and free cash flow exceeding DKK 1.2 billion ($187 million).
The company said it will keep evaluating acquisitions and divestments of non-core assets to support that strategy.
For 2026, STG anticipates net sales growth at constant currencies of approximately 2%, EBITDA margins between 13% and 14.5%, free cash flow before acquisitions ranging from DKK 950 million to DKK 1.2 billion ($148 million–$187 million), and earnings per share between DKK 9 and DKK 11 ($1.40–$1.71).
