Swedish Match’s snus and snuff volumes down, but cigar volumes up

| October 31, 2012

During the third quarter to the end of September, Swedish Match’s Scandinavian snus and snuff shipment volumes measured in number of cans were down by 0.7 per cent on those of the third quarter of 2011.

Competition from low priced products intensified inSwedenduring the third quarter, leading to an acceleration of SM’s market share erosion and contributing to a volume decline for full price products.

In theUS, moist snuff volumes were down by five per cent.

US mass market cigar volumes grew by 11 per cent, while US chewing tobacco volumes grew by two per cent, with higher contract manufacturing volumes following inventory reductions in the prior year more than offsetting a decline of nine per cent in SM’s own brands.

Overall, SM’s sales for the third quarter, at SEK3,208 million, were up by seven per cent.

Operating profit from product areas (excludes SM’s share of net profit from the Scandinavian Tobacco Group) increased by four per cent to SEK942 million, while operating profit (includes SM’s share of net profit from the Scandinavian Tobacco Group) increased by four per cent to SEK1,022 million.

Basic earnings per share increased by four per cent to SEK3.41.

CEO, Lars Dahlgren, said that SM had delivered sales and operating profit growth during the third quarter, led by solid growth in the company’sUSmass market cigar business and the continued strength of snus inNorway.

“In local currencies, operating profit increased by three per cent, with improvements for Scandinavian snus, US mass market cigars and lighters, partially offset by lower profits for chewing tobacco, matches and US moist snuff/snus,” he said.

“In the US, General snus is now available in more than 9,000 retail outlets and I am pleased with the trends and the progress. We will continue to invest behind the brand and expand distribution, and expect to be in more than 10,000 stores by the end of the year.

“Test market activities for snus through SMPM International continue inCanada, andSt. Petersburg,Russia, and we have now added Tel Aviv,Israel, as another test market.

“In Scandinavia, the snus business delivered a six per cent increase in sales, with volume growth inNorwayand travel retail largely offsetting volume declines inSweden.

“Recent market share and volume declines inSwedenare the result of aggressive pricing at the low end of the market taking share from premium brands. Despite this, profitability in the third quarter improved versus prior year.

“In theUSmoist snuff business, sales in local currency were down on lower volumes, and operating profit declined.

“Our USmass market cigar business continued its strong performance, helped by the launch of White Owl Black and Game by Garcia y Vega Black cigars. Shipment volumes increased by 11 per cent and sales grew by 14 per cent in local currency.

“Our lights businesses demonstrated mixed performance. While lighters continued to deliver solid results, match profits declined.

“We have revised our outlook in this report. Due to difficult comparisons in the fourth quarter of 2011, and a deterioration of the product mix in the Swedish snus market, it is likely that the operating profit from product areas for the fourth quarter of 2012 will be lower than in the fourth quarter of 2011.

“The profitability of the Swedish snus business in the beginning of 2013 will also be negatively impacted by the product mix and the absorption of the proposed excise tax increase for premium and mid priced brands.”

Category: Breaking News

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