Scandinavian Tobacco Group reported a 53% increase in first-half free cash flow to DKK 422 million, driven by operational efficiency and a DKK 79 million duty drawback refund. Net sales fell 3% to DKK 4.2 billion in H1 2026, primarily due to currency headwinds, though organic net sales remained flat at -0.3%. The company’s shares rose 7.23% to $75.60 following the results.
EBIT declined 2% to DKK 581 million, while EBITDA before special items increased to DKK 835 million, lifting the EBITDA margin by 1.1 percentage points to 19.9%. The second-quarter EBIT margin improved to 16.6%, reflecting stronger performance in North America. Leverage remained stable at 3.0 times, with management noting the divestment of BREAK and Moro brands to Japan Tobacco expected to reduce leverage toward or below the 2.5 times target upon closing, anticipated before year-end 2026.
The transaction, valued at DKK 1.3 billion with estimated post-tax proceeds of DKK 1.0 billion, includes a three-year contract manufacturing agreement. BREAK and Moro collectively represent roughly 4% of net sales and 6% of EBITDA. Scandinavian Tobacco also secured a DKK 1.0 billion credit facility to support the deal.
Product category performance showed mixed trends. Machine-rolled cigars and smoking tobacco saw organic sales decline 4%, with net sales falling to DKK 2.1 billion, though gross margins improved to 51.6%. Handmade cigars posted 6% organic growth, with net sales reaching DKK 1.5 billion and gross margins expanding to 43.3%. Nicotine pouches under the XQS brand grew 12% in Europe, offsetting an overall 5% organic decline in the segment.
Commercial divisions reflected regional disparities. Europe-branded sales fell 8% organically, while North America-branded and rest-of-world sales rose 4% organically, supported by stronger margins. Guidance for full-year 2026 remains unchanged, with reported net sales expected to range between -2% and +2% at constant currencies, EBIT margin before special items projected at 13.0% to 14.5%, and free cash flow before acquisitions and divestments targeted at DKK 950 million to DKK 1.2 billion.
