Scandinavian Tobacco Group reported a 53% year-over-year increase in free cash flow before acquisitions to DKK 422 million for the first half of 2026, as sales stabilized despite a 3% reported net sales decline driven entirely by currency effects.
Organic net sales remained essentially flat at -0.3%, with absolute net sales totaling DKK 4.19 billion. EBIT before special items expanded to DKK 581 million, a 2% decline from the prior-year period, while the EBIT margin before special items rose to 13.8% from 13.7%. EBITDA before special items increased to DKK 835 million, with the margin expanding by 1.1 percentage points to 19.9%, supported by DKK 79 million in duty drawback refunds.
Free cash flow in the second quarter alone more than doubled to DKK 264 million, compared with DKK 119 million in Q2 2025. The company’s leverage ratio remained stable at 3.0 times, with a target to reduce it toward or below 2.5 times.
Scandinavian Tobacco confirmed plans to divest its BREAK and Moro fine-cut tobacco brands to Japan Tobacco, with the transaction valued at DKK 1.3 billion and expected to close before the end of 2026. The divested brands contributed nearly 4% to net sales, slightly more to gross profit, and approximately 6% to EBITDA. A three-year contract manufacturing agreement with Japan Tobacco is also in place.
Product category performance showed mixed trends. Machine-rolled cigars and smoking tobacco saw organic sales decline by 4%, with net sales falling to DKK 2.09 billion. Handmade cigars recorded organic growth of 6%, reaching DKK 1.54 billion in net sales. Next-generation nicotine pouches, including the XQS brand, grew 12% in Europe despite an overall 5% organic decline in the category for the first half of the year.
Commercial divisions reflected divergent performance. Europe Branded reported an 8% organic net sales decline to DKK 1.42 billion, while North America Branded & Rest of World grew 4% organically to DKK 1.45 billion. North America Online & Retail also expanded 4% organically.
Full-year 2026 guidance calls for reported net sales growth of between -2% and +2% in constant currencies, an EBIT margin before special items of 13.0% to 14.5%, and free cash flow before acquisitions and divestments of DKK 950 million to DKK 1.20 billion. Adjusted earnings per share are projected in the range of DKK 9 to 11, with a P/E ratio of 9.12 and a dividend yield of 6.4%.
CEO Niels Frederiksen stated that the company’s Focus2030 priorities remain unchanged, noting stabilization in combined tobacco categories. CFO Marianne Rørslev Bock highlighted the DKK 150 million improvement in free cash flow compared with the first half of 2025.
