Lights
Matches and lighters showing increased profitability
Swedish Match produces and markets lighters, matches and match related products. The Group has strong local match brands in many markets, while for lighters, Cricket is the primary brand.
Consumption is declining in most developed countries. During 2006, Swedish Match achieved a substantially improved operating result on lower sales after a number of divestitures and restructuring measures in 2005.
Swedish Match has a broad portfolio of leading brands, and manufactures and markets Cricket, one of the world’s best-known brands of disposable lighters.
Sales and earnings
Sales for the year declined by 22 percent to 1,503 MSEK (1,936), due to divestments. Excluding divested businesses, sales for the year increased by 1 percent. Operating profit increased to 247 MSEK (58) resulting from cost savings and improved productivity following divestments and restructurings in 2005 and 2006. The operating margin rose to 16.4 percent (3.0).
Market
Consumption of matches in the world market continues to decline in most industrialized countries, particularly in Europe, where Swedish Match has a strong presence. Swedish Match sells matches in many international markets, mainly in Europe and Latin America and parts of Asia. Matches are produced in Sweden and Brazil.
Worldwide, lighter sales are generally stable, although sales are declining in Europe and the US. Major competitors include Bic and Tokai, and a number of other manufacturers, based mainly in China and other parts of Asia. Swedish Match manufactures its lighters in Assen in the Netherlands, Manila in the Philippines, and Manaus in Brazil. The main markets for Swedish Match are Russia, the EU and parts of Asia.
Europe
Swedish Match estimates that consumption of matches continued to decline during 2006, while the market grew for specialty matches. Imported matches from low-cost countries continued to take market shares in some countries. Matches are sold in Europe mainly through supermarkets, tobacconist stores and gasoline stations.
For lighters, Swedish Match maintains a strong market position in Russia, where Cricket is the leading brand. The Group also has solid positions in the Nordic countries, the UK and France. Retail sales of Swedish Match brands in the European market have been relatively stable during 2006. Cricket brand lighters are marketed using the key selling points of quality and design. They are sold mostly in stores that sell tobacco products, and can in some countries also be found in outlets where tobacco is not available, such as grocery stores.
Latin America
Swedish Match has a significant presence in Latin America, and the largest match market in this region for the Company is Brazil, where the Group has a leading position with the Fiat Lux brand. In terms of volume, the Brazilian market is about the same size as the total European market and, as in Europe, consumption is declining.
| Production units |
| Brazil, Bulgaria, Philippines, Netherlands and Sweden. |
| Main brands |
| Solstickan, Swan, Three Stars, England’s Glory, Redheads, Fiat Lux, Cricket and Poppell. |
| Key data, MSEK |
2006 |
2005 |
2004 |
| Sales |
1,503 |
1,936 |
1,960 |
| Operating profit |
247 |
58 |
1 |
| Operating margin, % |
16 |
3 |
0 |
| Investments in property, |
|
|
|
| plant and equipment |
38 |
47 |
53 |
| Average operating |
|
|
|
| capital |
1,148 |
963 |
1,324 |
| Average number of |
|
|
|
| employees |
1,565 |
3,770 |
5,206 |
Other markets
Swedish Match sells matches in a number of markets outside Europe and Latin America, but the value of these sales are relatively low. Swedish Match is the market leader for match products in Australia, with the country’s best-known brand – Redheads. Swedish Match also has lighter sales in a number of Asian markets.
Outlook
Swedish Match has consolidated its position in the match industry through a thorough rationalization program over the past two years. With these structural changes implemented, the product area is able to generate a good cash flow and profitability. The Company will strive to defend and strengthen its positions in key markets, in the coming years. Swedish Match will continue to focus on marketing its Cricket brand disposable lighters and utility lighter products.
Consolidated Income Statement
