(Source: Business Wire)
Swedish Match (STO:SWMA):
Sales for the third quarter increased by 10 percent to 3,606 MSEK
(3,274)1)
In local currencies, sales for the third quarter increased by 3
percent1)
Operating profit for the third quarter increased by 8 percent to
874 MSEK (808)1) 2)
In local currencies, operating profit for the third quarter
increased by 3 percent1) 2)
EPS (basic) for the third quarter amounted to 2.53 SEK (2.47)1)
2)
EPS (basic) for the third quarter, including discontinued
operations and one time gains, amounted to 5.38 SEK (2.67)
1) Amounts exclude Swedish Match South African
operations, which are separately reported as discontinued operations
2) Excludes the gain on the sale of Swedish Match
South African operations but includes restructuring charges of 45 MSEK
related to US mass market cigar production
CEO Lars Dahlgren comments:
In the third quarter we delivered continued strong sales and operating
performance, led by snus and snuff which achieved their best ever
performance in operating profit. Compared with the same period last year
sales and operating profit increased for all product lines except for
lights. Snus volumes continued to grow in the Scandinavian market as a
result of strong performance in Sweden. In the US we continued to gain
market share for snuff, and volumes grew by 13 percent. After a weak
start to the year, it is positive to note that European cigar volumes
and sales grew year on year in the third quarter. Our US machine made
cigar business is performing well, but the result was impacted by a
restructuring charge of 45 MSEK relating to changes in the production
set-up. The sale of our South African operations was completed in
September, with a tax exempt capital gain of 628 MSEK.
On July 2, 2009, Swedish Match AB announced the agreement to sell its
South African operations, Swedish Match South Africa (Proprietary)
Limited, and the transaction was subsequently closed in September.
Following this announcement, Swedish Match's South African operations
are reported as discontinued operations. Furthermore, the segments have
been reclassified with the remainder of the former pipe tobacco and
accessories segment now being reported in Other Operations. Financial
commentary and tables do not include the discontinued operations unless
explicitly stated.
Summary of consolidated income statement
July - September January - September Full year
MSEK 2009 2008 2009 2008 2008
Sales 3,606 3,274 10,659 9,131 12,611
Operating profit excl. larger one-time items 874 808 2,568 1,994 2,801
Operating profit 874 808 2,568 1,994 2,874
Profit before income tax 757 693 2,235 1,649 2,433
Profit from continuing operations 615 621 1,766 1,404 2,091
Profit from discontinued operations, net after tax 705 50 785 129 170
Profit for the period 1,319 671 2,551 1,534 2,261
Earnings per share, basic (SEK) 2.53 2.47 7.15 5.55 8.30
Earnings per share incl. discontinued operations, basic (SEK) 5.38 2.67 10.33 6.07 8.98
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Sales and results for the third quarter
Sales for the third quarter of 2009 increased by 10 percent to 3,606
MSEK (3,274) compared to the third quarter of 2008. Currency translation
has affected the sales comparison positively by 225 MSEK. In local
currencies, sales increased by 3 percent.
Sales of Scandinavian (pasteurized) snus and US (fermented) snuff in the
third quarter increased by 13 percent to 1,093 MSEK (964) and operating
profit increased by 11 percent to 534 MSEK (479). Scandinavian snus
sales were up 9 percent compared to the third quarter of the prior year
while volumes measured in number of cans increased by 2 percent.
In the US, sales of snuff in local currency increased by 12 percent, and
operating profit also increased. US volumes were up 13 percent in the
third quarter.
The operating margin for the snus and snuff product group was 48.8
percent (49.7).
For cigars, sales increased by 14 percent during the third quarter to
1,065 MSEK (933). Operating profit increased to 190 MSEK (187). While
sales of US mass market cigars increased, sales of US premium cigars
declined in dollar terms. In Europe, sales increased in local
currencies, in line with higher volumes. In the third quarter, a
restructuring charge of 45 MSEK was recorded for the partial relocation
of production of machine made cigars from the US to the Dominican
Republic. Operating margin for cigars was 17.9 percent (20.0). Excluding
the restructuring charge, the operating margin was 22.1 percent.
Group operating profit including the restructuring charge related to
cigars for the third quarter increased by 8 percent to 874 MSEK (808).
Currency translation has affected the operating profit comparison
positively by 45 MSEK. In local currencies, operating profit increased
by 3 percent.
Operating margin for the third quarter amounted to 24.2 percent.
Excluding the cigar restructuring charge of 45 MSEK, the operating
margin amounted to 25.5 percent compared to 24.7 percent for the third
quarter of 2008, a result of continued growth in the snus and snuff
businesses.
Basic earnings per share from continued operations for the third quarter
amounted to 2.53 SEK (2.47). Basic earnings per share including
discontinued operations amounted to 5.38 SEK (2.67). The gain on the
sale of the South African operations contributed 2.54 SEK to earnings
per share.
Sales and results for the first nine months
Sales for the first nine months increased by 17 percent to 10,659 MSEK
(9,131). In local currencies, sales increased by 5 percent. Operating
profit was 2,568 MSEK (1,994). Currency translation has affected the
operating profit comparison positively by 269 MSEK.
Group operating margin during the first nine months was 24.1 percent
(21.8).
The reported tax rate for the Group for the first nine months was 21
percent (15).
EPS (basic) for the first nine months was 7.15 SEK (5.55), while diluted
EPS was 7.15 SEK (5.54). EPS (basic) for the first nine months including
discontinued operations was 10.33 SEK (6.07), while diluted EPS was
10.32 SEK (6.06).
Sales by product area
July - September Chg January - September Chg Full year
MSEK 2009 2008 % 2009 2008 % 2008
Snus and snuff 1,093 964 13 3,149 2,690 17 3,725
Cigars 1,065 933 14 3,369 2,592 30 3,644
Chewing tobacco 280 237 18 878 674 30 934
Lights 388 401 -3 1,152 1,117 3 1,525
Other Operations 781 740 6 2,111 2,057 3 2,783
Total 3,606 3,274 10 10,659 9,131 17 12,611
-------------------------------------------------------------------------------
Operating profit by product area
July - September Chg January - September Chg Full year
MSEK 2009 2008 % 2009 2008 % 2008
Snus and snuff 534 479 11 1,394 1,195 17 1,658
Cigars 190 187 2 757 481 57 686
Chewing tobacco 107 87 23 335 233 43 329
Lights 62 85 -28 187 204 -8 275
Other Operations -19 -30 -104 -119 -146
Subtotal 874 808 8 2,568 1,994 29 2,801
Larger one-time items
Gain on sale of subsidiary and related assets* - - - - 73
Total 874 808 8 2,568 1,994 29 2,874
-------------------------------------------------------------------------------
* The capital gain is attributable to the product area Other Operations
Total sales and operating profit of the Group's reportable segments
reconcile to the Group's total sales and operating profit for the
periods. In order to arrive at the profit before tax of 757 MSEK (693)
for the third quarter and 2,235 MSEK (1,649) for the first nine months,
the net finance costs of 117 MSEK (115) and 333 MSEK (345) respectively
need to be deducted.
Operating margin by product area*
July - September January - September Full year
Percent 2009 2008 2009 2008 2008
Snus and snuff 48.8 49.7 44.3 44.4 44.5
Cigars 17.9 20.0 22.5 18.5 18.8
Chewing tobacco 38.4 36.9 38.1 34.6 35.2
Lights 15.9 21.2 16.2 18.2 18.0
Group 24.2 24.7 24.1 21.8 22.2
-------------------------------------------------------------------------------
* Excluding larger one-time items
EBITDA by product area
July - September Chg January - September Chg Full year
MSEK 2009 2008 % 2009 2008 % 2008
Snus and snuff 573 516 11 1,507 1,306 15 1,805
Cigars 277 235 18 954 626 52 889
Chewing tobacco 113 92 22 352 249 41 346
Lights 73 95 -23 220 234 -6 316
Other Operations -16 -27 -95 -110 -134
Group 1,019 911 12 2,938 2,305 27 3,222
-------------------------------------------------------------------------------
EBITDA margin by product area
July - September January - September Full year
Percent 2009 2008 2009 2008 2008
Snus and snuff 52.4 53.6 47.9 48.5 48.4
Cigars 26.0 25.2 28.3 24.1 24.4
Chewing tobacco 40.3 39.1 40.1 36.9 37.1
Lights 18.8 23.7 19.1 20.9 20.7
Group 28.3 27.8 27.6 25.2 25.5
-------------------------------------------------------------------------------
Snus/Moist snuff
Sweden is the world's largest snus 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 smaller than the Swedish
market but has in recent years experienced strong volume growth. The US
is the world's largest moist snuff market measured in number of cans and
is approximately six times larger than the Swedish snus 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, and Red Man,
Timber Wolf and Longhorn in the US.
During the third quarter, sales increased by 13 percent compared to the
same quarter of the previous year, to 1,093 MSEK (964), and operating
profit increased by 11 percent to 534 MSEK (479). Sales and operating
profit improved in Scandinavia as well as in the US. The operating
margin for the total product group was 48.8 percent (49.7).
In Scandinavia, sales volumes measured in number of cans, increased by 2
percent during the third quarter compared to the third quarter of the
previous year, as volume increases in Sweden more than offset declines
in Travel Retail and declines in deliveries to the distributor in
Norway. Sales revenues in Scandinavia grew by 9 percent in the third
quarter, while operating profit grew by 4 percent on higher marketing
and production costs. During the quarter there were a number of new
product and packaging updates, including product development and some
launch costs for Lab Series 01 and 02, an innovative and
unique product which continues its roll-out during the fourth quarter in
Norway. The new, General White Portion snus in an upgraded "star
formation" packaging which was launched in February, has been well
received in Sweden, supported by marketing activities in the second and
third quarters. At the end of June, consumer prices for Swedish snus
were increased by an average of 4 percent -- the first price increase in
the Swedish market since January, 2008.
In the US, sales increased by 12 percent during the third quarter. US
volumes measured in number of cans rose by 13 percent during the third
quarter and were up 10 percent for the year to date period, led by
strong growth for the Longhorn brand. During the third quarter,
the Company began shipping Longhorn pouches to retailers. Longhorn
offers consumers a lower priced alternative in the fast growing pouch
segment of the market. Swedish Match consumer volumes as measured by
Nielsen for the year to date period through October 3 increased by 7.1
percent compared to the same period of the previous year. Market growth
in the same period was 1.6 percent according to Nielsen. The strong
shipment volumes were a contributor to the sales and operating profit
growth in the US snuff business.
From April 1, excise taxes in the US increased by 91.5 cents per pound
(about 7 cents per can for most products). Swedish Match maintained
pricing until June 23, when prices increased by 7-10 cents per can. This
increase compensated for the tax increase, bringing net prices closer to
pre April 1 levels.
For the first nine months of the year, sales increased to 3,149 MSEK
(2,690) and operating profit increased to 1,394 MSEK (1,195). Operating
margin was 44.3 percent (44.4).
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, Willem
II, 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 third quarter, sales were 1,065 MSEK (933), and operating
profit amounted to 190 MSEK (187). Excluding restructuring charges,
operating profit was 235 MSEK. In local currencies, sales in the third
quarter were up 1 percent compared to the same period of the previous
year, while operating profit declined by 5 percent. Operating margin was
17.9 percent. Excluding restructuring charges, operating margin was 22.1
percent (20.0) and operating profit increased by 14 percent in local
currencies.
During the third quarter, US mass market cigar sales grew by 14 percent
in local currency, with volumes up by 8 percent compared to the same
period in the previous year.
US premium cigar sales, which includes Internet and mail order, were
down in local currency. US premium cigar volumes declined, to a degree
as a result of timing of deliveries, with increased volumes to mail
order and Internet retailers partially offsetting declines for
traditional retailers.
In the third quarter, a restructuring charge of 45 MSEK was recorded for
the partial relocation of production of machine made cigars from the US
to the Dominican Republic. Of this charge, 35 MSEK was a non-cash
write-down of property, plant and equipment. Excluding this
restructuring cost, spending returned to more normal levels in the
quarter, while in the second quarter costs were unusually low due to
temporary cost reductions.
Cigar sales in Europe grew as a result of higher volumes in a number of
markets, most notably in France, Portugal, and Spain.
For cigars in total, sales for the first nine months amounted to 3,369
MSEK (2,592), while operating profit was 757 MSEK (481). In local
currencies sales increased by 7 percent versus the previous year, while
operating profit increased by 30 percent. Excluding restructuring
charges, operating profit was 802 MSEK (481), and increased by 37
percent in local currencies.
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 third quarter, sales increased by 18 percent, to 280 MSEK
(237). In local currency, sales of chewing tobacco increased by 2
percent. Operating profit increased by 23 percent, to 107 MSEK (87). In
local currency, the operating profit increased by 6 percent. Operating
margin was 38.4 percent (36.9).
Sales for the first nine months amounted to 878 MSEK (674) while
operating profit amounted to 335 MSEK (233). In local currency, sales
for the first nine months were up 3 percent, while operating profit grew
by 13 percent. Operating margin was 38.1 percent (34.6).
During the second quarter, Swedish Match began producing chewing tobacco
as part of a production agreement with National Tobacco. Production was
fully up and running during the third quarter.
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 third quarter sales amounted to 388 MSEK (401). In local
currencies, sales declined by 9 percent. Operating profit amounted to 62
MSEK (85).
