Acquisition Leads to Sales Growth for STG

Acquisition Leads to Sales Growth for STG
Handmade cigar sales rise, but machine-made cigar sales fall

Scandinavian Tobacco Group, the parent company of Macanudo maker General Cigar and mega-retailer Cigars International, reported modest increases in sales and profits for 2018.

Net sales were 6.7 billion Danish kroner ($1 billion), up 3.9 percent from the 6.46 billion DKK reported in 2017, thanks in large part to the acquisition of Thompson Cigar in early 2018 for $62 million. Discounting the effects of the acquisition, sales were essentially flat, up 0.4 percent over 2018 levels.

Gross profit rose by 2.7 percent, to 3.219 billion DKK ($488 million), while organic gross profit was flat, at 3.282 billion DKK ($498 million). The term “organic gross profit” indicates the profit margin independent of the acquisition.

Scandinavian Tobacco Group, known as STG, makes and markets all varieties of cigars, but handmade cigar sales are outperforming the other categories. Handmade cigar sales for STG were 2.4 billion DKK ($364 million) in 2018, up 26 percent from 1.9 billion ($288 million) in 2017. Discounting for the acquisition of Thompson, net sales had growth of 5.6 percent. Handmade cigar sales for STG have grown consistently since 2010, with the exception of 2017.

In addition to Macanudo, STG owns such major cigar brands as the non-Cuban versions of Partagas, Hoyo de Monterrey, Punch and La Gloria Cubana.

Machine-made cigars, by contrast, have declined steadily for STG since 2015. They dropped by 5 percent in 2018, as sales from handmade cigars (35 percent) matched those of machine-made cigars (35 percent). Pipe tobacco, fine-cut tobacco and accessories and contract manufacturing made up the balance of sales.

Europe is STG’s most important market, accounting for 51 percent of revenues in 2018. America made up 41 percent of sales, with the rest of the world delivering 8 percent of the company’s revenues.

STG makes its headquarters in Copenhagen, Denmark. General Cigar is headquartered in Richmond, Virginia, and Cigars International is headquartered in Bethlehem, Pennsylvania.