Interim Report January - March 2001

Interim Report January - March 2001 · Sales increased 28 percent to 3,069 MSEK (2,394) · Operating income increased 18 percent to 491 MSEK (415) · Profit before tax was 445 MSEK (400) · EPS increased to 0.80 (0.59), an increase of 36 percent · EBITDA increased to 647 MSEK (536) · Total shares outstanding as of March 31, 2001 amounted to 362.9 million compared with 375.1 million as of December, 2000 Swedish Match sales increased by 28 percent, of which acquisitions accounted for 15 percentage points, in the first quarter versus the same period last year. The higher dollar rate has effected sales with 4 percentage points. Organic sales growth amounted to 9 percent. All product areas exhibited sales gains. Cigars, pipe tobacco, lighters, and snuff show the largest increases. Operating income grew by 18 percent to 491 MSEK, with gains primarily from cigars, matches, pipe tobacco, and lighters. Snuff margins have been impacted by increased costs due to product development and planned launches of new products during the year. Net financial expenses increased to -46 MSEK (-15) mainly due to the redemption program, repurchase of shares, and the acquisitions of General Cigar and pipe tobacco business in South Africa. Earnings per share during the first quarter increased to 0.80 SEK (0.59). An increased annual dividend is proposed, to 1.35 SEK per share (1.22). In addition a prolonging of the mandate to repurchase up to 10 percent of the total amount of outstanding shares is proposed. The share capital is proposed to be reduced through cancellation of 15 million repurchased shares. Summary of Consolidated Income Statement January - March MSEK 2001 2000 Sales 3,069 2,394 Operating income 491 415 Net income for the period 297 262 Sales by product area 12 months January - Change ended Full Change March year MSEK 2001 2000 % March 31, 2000 % 2001 Snuff 528 459 15 2,140 2,071 3 Chewing Tobacco 314 282 11 1,259 1,227 3 Cigars 750 405 85 3,035 2,690 13 Pipe Tobacco & 205 173 18 794 762 4 Accessories Matches 425 391 9 1,746 1,712 2 Lighters 220 175 26 765 720 6 Other operations 627 509 2,469 2,351 Total 3,069 2,394 28 12,208 11,533 6 Operating income by product area 12 months January - Change ended Full Change March year MSEK 2001 2000 % March 31, 2000 % 2001 Snuff 214 209 2 959 954 1 Chewing Tobacco 89 89 0 331 331 0 Cigars 101 52 94 396 347 14 Pipe Tobacco & 59 49 20 223 213 5 Accessories Matches 44 25 76 109 90 21 Lighters 25 16 56 83 74 12 Other operations (41) (25) (139) (123) Total 491 415 18 1,962 1,886 4 Smokeless Tobacco (Snuff and Chewing Tobacco) Snuff Swedish Match is the only global snuff manufacturer, and has leading positions in the Nordic Market and South Africa. In the United States the company has the largest share of the fast growing value price segment. Major brands include General, Catch and Ettan in Sweden, Timber Wolf in the US, and Taxi in South Africa. Sales in the first three months increased 15 percent, to 528 MSEK (459). Volume in the US increased almost 8 percent during the first quarter and the market share was approximately 8 percent. Volume in the Nordic market increased 4 percent. Operating income increased slightly versus the first quarter last year, to 214 MSEK (209), despite significant increases in product development costs and costs relating to upcoming product launches. In May the new premium snuff Sequoia will be launched in the US. After the end of the period the new brand, Click, has been launched in Bombay, India. Chewing Tobacco Chewing tobacco is sold primarily in the North American market. Major brands include Red Man and Southern Pride. Swedish Match is the leading producer of chewing tobacco in the US. Sales in the first three months amounted to 314 MSEK (282), an increase of 11 percent, mainly due to a stronger US dollar. Operating income in the first three months was 89 MSEK (89). The chewing tobacco market in the US has declined at an annual rate of approximately 4 percent over the past several years. Swedish Match share of market has improved since the same period last year and amounts to slightly more than 42 percent. Brown Tobacco (Cigars and Pipe Tobacco) Cigars Swedish Match is one of the world's largest manufacturers of cigars and cigarillos, and ranks number two in terms of sales value. Its largest markets are North America and Western Europe, where about 75 percent of the world cigar market exists. The company markets its broad portfolio of brands worldwide, with both premium and mass market cigars. Major brands include Macanudo, Garcia Y Vega, La Gloria Cubana, La Paz, Justus van Maurik, and Wings. Sales in the first three months amounted to 750 MSEK (405), an increase of 85 percent over the same period last year. The increase is primarily attributable to recent acquisitions in North America. The cigar market grew in both North America and Western Europe, with the strongest gains coming in the small cigar segment for mass market cigars in the US. Operating income for cigars grew by 94 percent to 101 MSEK (52) in the first quarter. Pipe Tobacco and Accessories Swedish Match is the third largest manufacturer of pipe tobacco in the world, and its products are marketed worldwide. Major brands include Borkum Riff, Boxer, and Half and Half. The main markets for pipe tobacco are in North America, North Europe and Western Europe. The company also has a significant presence in South Africa. Sales for the three-month period increased to 205 MSEK (173), mainly due to consolidation for two months of the recently acquired South African business acquired from British American Tobacco. Operating income increased to 59 MSEK (49). Lights (Matches and Lighters) Matches Swedish Match has the number one worldwide share position. Brands are mostly local, and very strong in their home countries. Major brands include Swan, Three Stars, and Redheads. Sales for the first three months grew 9 percent versus same period last year, to 425 MSEK (391). Operating income grew by 76 percent to 44 MSEK (25). Operating margin increased to 10.4 percent (6.4) due to improved margins on certain markets and positive effects due to ongoing restructuring program. Lighters Swedish Match is the third largest lighter manufacturer in the world, and its main brand is Cricket. Sales in the first three months grew 26 percent, to 220 MSEK (175). Operating income grew by 56 percent, to 25 MSEK (16) and operating margin was 11.4 percent. Other Operations Other operations include, among other things, the distribution of tobacco products on the Swedish market, sales of advertising products, as well as corporate overheads and expenses for business development. Expenses for business development have increased versus same period last year. For the first quarter, net expenses grew to -41 MSEK (-25). Net financial expense Net financial expense in the first quarter amounted to -46 MSEK (-15). Net interest expense amounted to -67 MSEK (-10). Other financial items, net, amounted to 21 MSEK (-5). Taxes Taxes for the first quarter were 143 MSEK (139) corresponding to a 32% tax rate. Acquisitions In January a small advertising product company in Belgium was acquired. On February 1st the final agreement with British American Tobacco concerning acquisition of its pipe tobacco business in South Africa was concluded. The acquisition includes production facilities, stock and brands. The annual sales amounts to approximately 200 MSEK. A final agreement has also been concluded with the previous owner of Leonard Dingler in South Africa regarding the earn-out on the purchase price. Investments The Group's direct investments in tangible fixed assets amounted to 132 MSEK (53). Total depreciation and amortization amounted to 156 MSEK (121), of which depreciation on tangible assets amounted to 76 MSEK (65) and amortization of intangibles amounted to 80 MSEK (56). Financing and liquidity At the end of the period, the Group had a net debt of 3,859 MSEK, as compared with 2,739 MSEK at December 31, 2000. Cash and bank balances, including short term investments, amounted to 1,933 MSEK at the end of the period, compared with 2,960 MSEK at the beginning of the year. The liquid funds are primarily invested in short- term marketable interest-bearing securities. Tobacco tax During the past 12 months, total tobacco tax and value-added tax on tobacco tax paid by Swedish Match in Sweden amounted to 9,739 MSEK (9,075). Average number of Group employees The average number of employees in the Group during the 12 month period ending March 31 was 14,480, compared with 13,672 for the full year 2000. Redemption of shares and share repurchase program After the reduction of share capital due to cancellation of 17,350,210 shares, according to the resolution by the Extra Meeting of Shareholders in October 2000, was registered in March 2001, the company's share capital amounts to 927.8 MSEK. The share capital is spread over 386,596,181 shares with a par value of 2.40 SEK. Through repurchase Swedish Match holds 23,674,377 in its treasury which means the number of outstanding shares amounts to 362,921,804. At the General Meeting of Shareholders on April 24th 2001 the Board of Directors suggests reduction of share capital with 36 MSEK through cancellation of 15,000,000 shares with transfer to unrestricted reserve. The Board of Directors also proposes renewed authorization to acquire a maximum of 10 percent of all shares in the company. After reduction of share capital and if the mandate to repurchase will be fully utilized the number of outstanding shares in the company will be, net after repurchase, 334.4 million shares. Accountings principles This interim report has been prepared in accordance with the recommendation RR 20 Interim Reports from the Swedish Financial Accounting Standards Council. Starting with this interim report Swedish Match applies the Swedish Financial Accounting Standards Council's new recommendation RR 9 Income taxes. The financial data for 2000 has been restated according to the new principles. Additional information This report has not been reviewed by the Company's auditors. The interim report for the first six months of 2001 will be released July 24, 2001. Stockholm, April 24, 2001 Lennart Sundén President and Chief Executive Officer ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/24/20010424BIT00890/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/24/20010424BIT00890/bit0002.pdf The full report

About Us

Swedish Match develops, manufactures, and sells quality products with market-leading brands. Swedish Match’s product areas are Snus and moist snuff, Other tobacco products (cigars and chewing tobacco), Lights (matches, lighters, and complementary products), and Other operations. Production is located in six countries, with sales concentrated in Scandinavia and the US. The Swedish Match share is listed on Nasdaq Stockholm (SWMA). Swedish Match’s vision is a world without cigarettes. Some of its well-known brands include: General, Longhorn, White Owl, Red Man, Fiat Lux, and Cricket.

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