Interim Report January – March 2006

• First quarter net sales amounted to 2,951 MSEK (2,967)
• Excluding the effect of divested businesses, sales increased by 5%
• First quarter operating income amounted to 721 MSEK (538), up 34%
• First quarter net profit amounted to 487 MSEK (347), up 41%
• First quarter EPS amounted to 1.62 SEK (1.06), up 53%

Interim report highlights

First quarter’s sales in 2006 in comparison with the first quarter 2005 were positively affected by currency translation effects but was negatively affected by divestitures that took place in 2005. Operating income comparison was favourably affected by currency effects and also from restructuring charges during the first quarter previous year.

Swedish Match sales for the first quarter declined by 1 percent to 2,951 MSEK (2,967). In local currency, sales declined by 7%. Excluding divested businesses, sales in SEK increased by 5 percent with increases for all product areas except for Other operations.

For snuff, sales increased by 12 percent during the first quarter, to 785 MSEK (703) while operating income increased by 18 percent to 380 MSEK (324). This year’s operating income was positively impacted by recovery of excise taxes of 17 MSEK. Swedish Match volumes increased in both the Scandinavian and US markets. Operating margin amounted to 48.5 percent (46.0).

Sales of cigars increased by 3 percent in the first quarter and amounted to 759 MSEK (734), while operating income increased by 16 percent, to 158 MSEK (136). Compared to previous year, sales in local currency were weaker during the first quarter in Europe and for US machine made cigars, while sales for US premium cigars increased. Operating margin for cigars amounted to 20.8 percent (18.6).

Group operating income for the first three months reached 721 MSEK (538), an increase of 34 percent. In local currency, operating income increased by 25 percent.

Operating margin for the first quarter amounted to 24.4 percent (18.1), with much of the improvement resulting from sharply higher operating income results in the lights operations during the first quarter.

During the first quarter basic EPS amounted to 1.62 SEK, compared to 1.06 SEK last year. Diluted EPS amounted to 1.61 SEK (1.05).