Financial strategy
Swedish Match’s operations are characterized by strong cash flows and a relatively limited need for capacity-enhancement expenditure.
The financial strategy is based on the basic principles of not utilizing more capital than necessary, and continually optimizing the balance sheet, with due consideration of flexibility and stability requirements.
The overall capital structure and dividend policy were analyzed and revised as part of the annual strategic review. As a result, the previous dividend policy – entailing a dividend in the range of 30 to 50 percent of annual earnings – has been amended so that the dividend should now be in the range of 40 to 60 percent of earnings per share, adjusted for major non-recurring items.
Moreover, in view of the stability of the company’s operations, it has been deemed possible to raise the net debt level. Consequently, the financial policy has been revised and we have set a net debt level which we believe to be optimal for shareholders, namely, that we shall strive to maintain a net debt that does not exceed three times annual EBITA.
Since the listing of the Company, we have consistently transferred capital to our shareholders. By means of share redemptions and buybacks from 1998 to the end of 2007, we reduced the number of shares outstanding from 463.6 million to 255.9 million, or by 45 percent. This was completed alongside substantial acquisitions. Our financial strategy has made a major contribution to our ability to increase earnings per share over a period of many years. In 2007, Swedish Match was able to transfer considerable amounts to shareholders via share buybacks.