Record earnings per share
The results for the first six months of 2002 were largely in line with our expectations and we are more than satisfied. The continuous improvements in operating margins for snuff and cigars are particularly gratifying, since these are our largest product areas, says Sven Hindrikes. Other product groups reported positive margins for the past six months, except for pipe tobacco. In the case of pipe tobacco, the decline is particularly attributable to the situation in South Africa, with raised tobacco taxes and the low value of the currency. Matches and lighters continue their secure trend above the long-term target profit margin of 10 percent.
FOR AN INTERNATIONALLY ACTIVE group like Swedish Match, currency fluctuations are always a factor that affects earnings, which is also the case for this six-month period. The strengthening of the Swedish krona, particularly against the US dollar, resulted in a fall in sales during the period of 1 percentage point compared with the year-earlier period, according to Sven Hindrikes. Swedish Match continues to reinforce its position as the only global manufacturer of snuff. Sales in both of its leading markets - Northern Europe and the US - increased strongly in volume, thereby representing the largest contribution to organic growth during the period. In the US, which is the worlds largest single snuff market, the rate of volume increase was 10 percent, which means that the market share grew from 8.1 percent in 2001 to 9.3 percent in total. In Northern Europe, volumes increased by 6 percent. Sales for the entire product area grew by 18 percent.
OPERATING INCOME FOR SNUFF operations as a whole rose by 34 percent to 603 MSEK and the operating margin was 43.6 percent, compared with 38.4 percent during the year-earlier period. The positive result is the outcome of a combination of increased sales, price increases and somewhat reduced marketing costs, according to Sven Hindrikes. Swedish Match also increased its sales of chewing tobacco, which is mainly sold in the North American market, by 5 percent, although the market in general is declining in terms of volume by approximately 4 percent per year. Operating income rose by 12 percent to 211 MSEK on total sales of 711 MSEK.
Cigars, the Groups other large product area, noted largely unchanged sales compared with the year-earlier period. Sales during the first six months amounted to 1,649 MSEK (1,642). The sales increases in Europe offset a somewhat reduced sales volume in the US market.
However, both the operating income and the operating margin improved in a satisfactory manner during the period. Operating income grew by 20 percent to 271 MSEK, which resulted in an operating margin of 16.4 percent, compared with 13.7 percent for the first six months of 2001. The factors behind the improvement are mainly continued consolidation and efficiency enhancement of operations, which led to substantial cost savings.
MATCH OPERATIONS CONTINUE to be a source of satisfaction following the restructuring and efficiency program of the past year and operating income increased by 41 percent during the period to 124 MSEK. Sales grew by 6 percent to 881 MSEK and the operating margin improved to 14.1 percent. Sales of lighters, on the other hand, declined somewhat compared with to the preceding year, to 370 MSEK. The operating margin for operations amounted 11.6 percent.
In conclusion, this means that, during the past six months, there has been a considerable increase in the earnings per share, to a record level of 2.07 SEK, which is in line with the Group managements focus on increased shareholder value.
THE RESULTS FROM THE FIRST six months show that we are wellequipped to implement the goals we established for the year, which are consolidation of operations and improved operating margins, as well as investment in organic growth, says Sven Hindrikes.