Record sales of cheaper cigars in the United States helped tobacco group Swedish Match (SWMA.ST) beat second-quarter earnings expectations on Wednesday, and it forecast strong growth for that product.
The company, which has benefited from demand for smokeless products as cigarette sales have fallen due to health fears, also said sales of its key snus and snuff products improved in key Scandinavian markets Norway and Sweden, but fell in the U.S.
Chewing tobacco sales also fell. The group’s shares were up 2 percent by 0830 GMT.
The company, whose major sales areas are Norway and Sweden as well as the United States and which has BAT (BATS.L), Altria (MO.N) and Reynolds American (RAI.N) as key competitors, reported pretax profit of 816 million crowns ($111 million) in the quarter.
This beat the average forecast of 794 million crowns in a Reuters poll and 791 million crowns in the year-ago period.
It said its underlying operating profit of 911 million crowns, up from 899 million, was at a record level.
“Our U.S. mass market cigar business continues to perform very well, as sales and volumes rose to record levels,” the group said.
“Our ambition for the second half of the year is to grow volumes even more than the 19 percent of the first half compared with the year before,” chief executive Lars Dahlgren told Reuters in an interview.
Overall, cigar sales rose only 2 percent in the quarter year-on-year due to flat sales of premium brands.
“Our U.S. mass-market cigar business is expected to deliver sales and earnings well above prior year in the second half of 2010,” the group added.
The group said it expected the snus market in Scandinavia and the snuff market in the U.S. to continue to grow versus the prior year in the second half of 2010. “When it comes to the Scandinavian markets we stand by the forecast we gave earlier, that the market will grow about 3 percent for the whole region,” Dahlgren said.
“Our forecast there (in the U.S. ) is about 6 percent.”
Analysts were generally upbeat.
“It was an impressively strong report. The thing that sticks out is most of all is the cigar margin, which they explain with good sales of machine-made cigars in the United States,” said an analyst who declined to be named.
Artcile from: reuters.com