Scandinavian Tobacco Group (STG) has decided to reduce the number of production sites in the group from 12 to 11 by closing Scandinavian Tobacco Group Lane Ltd´s facility in Tucker, Georgia in the US and moving production to its production facilities in Assens and Holstebro, Denmark and Santiago, the Dominican Republic. The closure is expected to be completed by the end of 2020.
The facility in Tucker manufactures brands within the group´s portfolios of pipe tobacco, fine-cut tobacco, and little cigars. As these markets are declining, excess capacity across STG’s manufacturing footprint has been established. The closure of the facility in Tucker will adjust the capacity to current and projected volumes and is expected to improve the Group’s overall annual cost structure by more than DKK 20 million when fully implemented by the end of 2020. The transfer of production is expected to incur investments of about DKK 30 million. The decision to close the facility in Tucker will regrettably result in terminations of positions at Scandinavian Tobacco Group Lane Ltd. The affected employees will be offered outplacement support.
STG says this announcement has no impact on the group´s financial guidance for 2019, except for special items. Special costs related to the closure are expected of about DKK 120 million and will be expensed in 2019. Special costs for the Group, excluding costs related to the acquisition of Royal Agio, are now expected to be about DKK 205 million in 2019 (previously DKK 85 million). DKK 20 million of the special cost is expected to have a cash flow effect in 2020, while the closure of the factory will result in non-cash impairment costs of about DKK 100 million. Possible proceeds from the sale of land and buildings have not been included in the above figures.