BUSINESS WIRE
·Net sales for the fourth quarter increased to 3,628 MSEK (3,527) and 13,162 MSEK (12,551) for the full year
·Operating profit excluding larger one time items* for the fourth quarter increased to 864 MSEK (795) and 3,017 MSEK (2,730) for the full year
·Operating profit for the fourth quarter amounted to 937 MSEK (1,062) and 3,090 MSEK (2,997) for the full year
·EPS (basic) for the fourth quarter amounted to 2.91 SEK (3.04) and 8.98 SEK (7.82) for the full year
The Board proposes an increased dividend to 4.10 SEK (3.50)
![]()
* In the fourth quarter 2008 there was a gain of 73 MSEK on the sale of a subsidiary in the UK and related assets. In the fourth quarter 2007 there was a gain of 267 MSEK on the sale of head office buildings in Stockholm.
CEO Lars Dahlgren comments:
The fourth quarter delivered a strong performance in both sales and operating profit. Scandinavian sales of snus continued to grow, despite the fact that the fourth quarter did not benefit from consumer and trade hoarding as was the case in 2007. In the US, we noted a marked improvement in both sales and operating profit for our snuff business with continuing growth of the Red Man brand. While the current economic and credit situation continued to put pressure on the premium cigar business, sales in USD were flat year on year in the fourth quarter as the demand for cigars sold over the Internet continued to increase. Chewing tobacco, Pipe Tobacco and Lights all finished the year on a strong note with year on year increases in operating profit in local currencies in the fourth quarter. We have a healthy cash balance and limited debt repayments through the end of 2009.
![]()
Sales and results for the fourth quarter
Sales for the fourth quarter of 2008 increased by 3 percent to 3,628 MSEK (3,527) compared to the fourth quarter of 2007. In local currencies, sales declined by 3 percent. Currency translation has affected the sales comparison positively by 204 MSEK.
Sales of snuff in the fourth quarter increased by 8 percent to 1,063 MSEK (981) and operating profit increased by 7 percent to 470 MSEK (441). Scandinavian snus sales were up 2 percent compared to the fourth quarter of the prior year while volumes measured in number of cans declined by 12 percent. Snus sales and can volume in the fourth quarter 2007 were positively impacted by hoarding in anticipation of tax and price increases in January 2008. Snuff sales in North America were up by 13 percent in local currency, as a result of both volume growth and a higher average price for the portfolio. During the fourth quarter there was a high level of marketing activity in Scandinavia, related to new product launches and product changes. Operating margin was 44.2 percent (45.0).
For cigars, sales increased by 14 percent during the fourth quarter to 1,056 MSEK (928). Operating profit increased to 206 MSEK (195). US cigar sales declined less than one percent in dollar terms, as Internet and mail order sales offset declines in other areas, primarily within premium cigars. In Europe, sales declined slightly. Operating profit declined in the US in local currency and increased versus prior year in Europe. Operating margin for cigars was 19.5 percent (21.0).
Group operating profit, excluding larger one time items*, for the fourth quarter increased by 9 percent to 864 MSEK (795). In local currencies, (and excluding larger one time items*) operating profit increased by 6 percent. Currency translation has affected the operating profit comparison positively by 24 MSEK.
Operating margin, excluding larger one time items*, for the fourth quarter amounted to 23.8 percent compared to 22.5 percent for the fourth quarter of 2007 driven by the strength of our smokefree businesses. Operating margin, including larger one time items, amounted to 25.8 percent (30.1).
Basic and diluted earnings per share for the fourth quarter amounted to 2.91 SEK (3.04).
Sales and results for the year
Sales for the year increased to 13,162 MSEK (12,551). In local currencies, sales increased by 6 percent. Operating profit, excluding larger one time items*, increased to 3,017 MSEK (2,730). In local currencies, operating profit excluding larger one time items* increased by 13 percent. Currency translation has affected the operating profit comparison negatively by 64 MSEK. Operating profit, including larger one time items, amounted to 3,090 MSEK (2,997).
Group operating margin, excluding larger one time items*, during the year was 22.9 percent (21.8).
The reported tax rate for the Group for the full year was 14.5 percent (22.8), positively impacted by the reversal of certain tax provisions.
EPS (basic) for the year was 8.98 SEK (7.82). Diluted EPS was 8.96 SEK (7.80).
* In the fourth quarter 2008 there was a gain of 73 MSEK on the sale of a subsidiary in the UK and related assets. In the fourth quarter 2007 there was a gain of 267 MSEK on the sale of head office buildings in Stockholm.
![]()
![]()
![]()
![]()
![]()
Snuff/Snus
Sweden is the world's largest snuff market measured by per capita consumption. A substantially larger proportion of the male population uses the Swedish type of moist snuff called snus* compared to cigarettes. The Norwegian market is significantly smaller than the Swedish market but in recent years has experienced strong volume growth. The US is the world's largest snuff market measured in number of cans and is approximately six times larger than the Swedish market. In Sweden and Norway, Swedish Match has a leading position. In the US, the Group is well positioned as the third largest player. Some of the best known brands include General, Ettan, and Grov in Sweden, Timber Wolf and Longhorn in the US. In 2007, the Group launched a snuff line extension under its well known Red Man brand in the US market.
During the fourth quarter, sales increased by 8 percent compared to the same quarter of the previous year, to 1,063 MSEK (981), and operating profit increased by 7 percent, to 470 MSEK (441). Operating profit improved significantly in the US snuff business in local currency. In Scandinavia, where the fourth quarter of 2007 included trade and consumer hoarding in anticipation of the announced excise tax increase in January 2008, the operating profit was modestly lower.
Operating margin for the quarter improved versus prior year in the US, but was slightly down in Scandinavia. In the US, marketing spending per can for the Red Man brand was lower than in previous quarters, while in Scandinavia, higher marketing spending (primarily tied to product launch initiatives) and lower volumes reduced profitability somewhat. The operating margin for the total product group was 44.2 percent (45.0).
In Scandinavia, sales volumes measured in number of cans, were down by 12 percent during the fourth quarter compared to the previous year, with much of the decline due to hoarding effects in the prior year period. During the quarter, the Swedish Government published the budget for 2009, which confirmed that there would be no increase of excise taxes on snus in January 2009, following two successive years of major excise tax increases. In view of this, there was no extraordinary consumer or trade hoarding of the product in Sweden as was the case in the fourth quarter of both 2007 and 2006.
Sales revenues in Scandinavia grew by 2 percent in the fourth quarter, while operating profit declined by 2 percent due to mix effects and higher marketing spending. During the quarter, product launch and redesign initiatives included support behind Onico, a smokefree product that contains no tobacco, as well as Grov Svart, a new pouch product with a distinctive look and taste, as well as line extensions on the General brand with a bolder, stronger profile.
In the US, sales volumes during the fourth quarter were up by 5 percent compared to the same period in the previous year, with volume increases for the Red Man and Longhorn brands more than offsetting declines for the Timber Wolf brand. Last year's fourth quarter included substantial pipeline shipments of Red Man. In 2008, the Triumph brand of Swedish style snus has been launched in test markets in Ohio and Georgia as part of the joint venture with Lorillard.
Sales and operating profit in the US rose due to higher volumes and price/mix effects, as well as lower marketing spending as the fourth quarter of 2007 included launch spending behind the Red Man brand.
For the year, sales increased to 3,829 MSEK (3,289) and operating profit increased to 1,689 MSEK (1,366). Operating margin was 44.1 percent (41.5).
* Swedish snus is moist snuff which is produced using a special heat treated process, much like pasteurization, as opposed to other snuff products for which a fermentation process is used.
Cigars
Swedish Match is one of the world's largest producers of cigars and cigarillos. Swedish Match offers a full range of different cigars and brands. Well known brands include Macanudo, La Gloria Cubana, White Owl, Garcia y Vega, La Paz, Hajenius, Hollandia, Justus van Maurik, and Salsa. The US is the largest cigar market in the world. Swedish Match has a leading position in the premium segment and is well established in the segment for machine made cigars. After the US, the most important cigar markets are in Europe, where Swedish Match is well represented in most countries. The largest markets for Swedish Match in sales terms in Europe are France, Benelux, Finland and Spain.
During the fourth quarter, sales were 1,056 MSEK (928), and operating profit amounted to 206 MSEK (195). In local currencies, sales in the fourth quarter were down one percent from same period of the previous year, while operating profit declined by 7 percent. Operating margin was 19.5 percent (21.0).
During the fourth quarter, US premium cigar sales in local currency were at the same level as in the previous year, which includes the acquired business of Cigars International (Internet and mail order) in both years. Excluding Cigars International, premium cigar sales in the US declined by 8 percent in local currency versus prior year as a result of lower volumes. Premium cigar volumes have been lower in 2008 as retailers have been managing inventory levels to reflect the current market. Premium cigar retailers have been faced with both a more difficult credit environment and reduced consumption. Sales of mass market cigars in the US declined by 2 percent in local currency. Volumes were negatively impacted by some destocking following the hoarding effects in the third quarter in anticipation of a September price increase. Cigar sales in Europe declined by 2 percent.
For cigars in total, sales for the year amounted to 3,657 MSEK (3,411), while operating profit was 689 MSEK (737). In local currencies sales increased by 8 percent versus the previous year, while operating profit declined by 2 percent. Operating margin was 18.8 percent (21.6). During the year, volumes and sales were negatively impacted from both smoking bans in France and the Netherlands as well as price/mix effects toward smaller and less expensive cigars in markets in both the US and Europe.
Chewing tobacco
Chewing tobacco is sold primarily on the North American market, mainly in the southern US. Swedish Match is the leading producer of chewing tobacco in the US. Well known brands include Red Man and Southern Pride. The chewing tobacco segment shows a declining trend.
During the fourth quarter, sales increased by 17 percent, to 260 MSEK (222). In local currency, sales of chewing tobacco declined by 4 percent, as volume declines more than offset the positive effect from earlier pricing activities. Operating profit increased by 27 percent, to 96 MSEK (75). In local currency, the operating profit increased by 5 percent. Operating margin was 36.8 percent (34.1).
Sales for the year amounted to 934 MSEK (956) while operating profit amounted to 329 MSEK (312). In local currency, sales for the year were up 1 percent, while operating profit grew by 5 percent. Operating margin was 35.2 percent (32.7).
Pipe tobacco and accessories
Swedish Match is one of the world's largest pipe tobacco companies. The Company has a significant presence in South Africa where Best Blend and Boxer are the most important brands. The Borkum Riff brand is sold across the globe. Accessories include the sales of papers and other smoking related items, primarily in the UK.
During the fourth quarter, sales declined by 3 percent to 217 MSEK (223) and the operating profit reached 57 MSEK (58). The sales and operating profit comparisons are affected by the depreciation of the South African Rand. In local currencies, sales increased by 8 percent, while operating profit increased by 17 percent. Operating margin was 26.3 percent (25.9).
In December, Swedish Match sold its Swedish Match UK Ltd. business to Republic Technologies International. The divested business includes mainly cigarette papers and filters and corresponds to some 1 percent of Swedish Match total Group sales. The divestments resulted in a capital gain of 73 MSEK reported separately as a larger one time item.
Sales for the year amounted to 817 MSEK (851), while operating profit amounted to 210 MSEK (201). Operating margin was 25.7 percent (23.6).
Lights
Swedish Match is the market leader in a number of markets for matches. The brands are mostly local, with leading positions in their home countries. Larger brands include Solstickan, Three Stars, Fiat Lux, and Redheads. The Group's main brand for disposable lighters is Cricket. Swedish Match's largest market for lighters is Russia.
During the fourth quarter sales amounted to 410 MSEK (405). In local currencies sales declined by 1 percent. Operating profit amounted to 71 MSEK (67). Operating margin was 17.4 percent (16.4).
Sales for the year amounted to 1,534 MSEK (1,473). In local currencies sales increased by 3 percent. Operating profit increased to 276 MSEK (252). Full year operating profit includes a gain of 18 MSEK from the sale of land. Operating margin was 18.0 percent (17.1).
Other operations
Other operations include the distribution of tobacco products on the Swedish market, as well as corporate overhead costs.
Sales in Other operations for the fourth quarter amounted to 621 MSEK (769). Operating profit for Other operations was a negative 36 MSEK (negative 41).
Sales for the year amounted to 2,390 MSEK (2,571). Operating profit for the full year was a negative 176 MSEK (negative 137). Enditem
