Reduced cigarette prices

The Swedish Parliament has decided that the tax on cigarettes will be reduced on August 1, 1998. Since both Swedish Match and the retailers are reducing their margins at the same time, the price reduction to the customer will be substantial. The price on a package of Blend Original, for example, will be reduced from SEK 44.50 to SEK 34.50, down 22%. "The reduction is a step in the right direction. We are now beginning to approach the price levels in other EU countries. During 1997, the excise tax on tobacco in Sweden rose more than 60% in eight months, giving Sweden the highest cigarette prices within EU. This resulted in a dramatic increase primarily in cross-border commerce and smuggling, which hurt the established retail trade, says Bo Aulin, Senior Vice President, Corporate Affairs, Swedish Match. Sharp price cuts The price of Blend Kings, John Silver and Camel will be cut on August 1 from SEK 45.00 to SEK 35.50. Blend Original is being cut from SEK 44.50 to SEK 34.50 and Right is being reduced the most, from SEK 43.00 to SEK 33.00. Swedish Match and the retailers are also cutting margins on August 1. Combined with control efforts by the authorities, this is expected to have the effect that Swedish Match has good possibilities of recovering volume lost to the illegal market. "After the price cuts, we are nearing the price in Denmark and Finland, which also should reduce the cross-border trade", says Bo Aulin. "During 1997, legal cigarette sales fell by 27%. The Customs Authority´s confiscation of smuggled cigarettes rose by 137% in the same year. This indicates that consumption did not decline in an amount corresponding to fall in legal sales, concludes Bo Aulin. For futher information, contact: Boel Sundvall, Vice President Office: +46 8 658 01 73 Corporate Affairs, Investor Relations Mobile:+46 70 651 39 09 Residence: +46 8 25 87 12