News; May 11, 2007 CET

Record earnings pleased shareholders

The arrival of spring in Stockholm, with masses of wood anemones, scillas and spring bulbs blooming in the park outside the Stockholm International Fairs facility, must have been matched by the spring feelings of the 435 shareholders represented in the meeting venue itself.

Shareholders in Swedish Match could look back on a very strong 2006, with the best operating income ever for the company. Among other reasons shareholders had for celebrating, the dividend was raised to 2.50 SEK and the share price showed a 37-percent increase during 2006.

"Since its stock market introduction, Swedish Match, together with such companies as Nokia, has had the best share performance among the major listed companies," noted CEO Sven Hindrikes.

The favorable result is attributable not only to intensive work during the past year, but also to the extensive rationalization program that has been under way for several years and whose effects were fully realized in the results for 2006.

Searching for acquisition targets

Sven Hindrikes promised an even more aggressive acquisition strategy in the future for the cigars product area, as well as further investments in the snuff operations, particularly in North America and Scandinavia.

"There is an enormous snuff market to be penetrated in the US," said Sven Hindrikes.

Gunnar Ek, representing the Swedish Association of Share Investors, wondered whether Swedish Match would be retaining its present structure or was contemplating complete withdrawal from match operations.

"We have no plans to sell off more of the match operations," replied Hindrikes. "Both the plants that remain, in Sweden and Brazil, have favorable capacity utilization and profitability. The present structure will be retained, and it will be within this structure that we search for opportunities to grow. But in regard to snuff, it should be borne in mind that there are in fact no companies for sale. Within cigars, we are constantly seeking acquisitions."

Taking leave after 28 years

A special aspect of this year's meeting was that it marked the end of a long era with Bernt Magnusson as Chairman of the Board. After 28 years in the company, 14 years on the Board - 12 of them as Chairman - Bernt Magnusson has decided to move on to new tasks, and when he reported on the work of the Board during the past year, it was also a form of summation of the view of Board work that had characterized his time as Chairman.

"Judging from the public debate, it would be easy to believe that remuneration issues were the highest priority on the agenda, but this was not the case," said Bernt Magnusson. "Strategy issues have been by far the most important topics at our meetings. They are always a key item at all meetings, and we also devote an entire meeting each year exclusively to strategy."

With the exception of snuff and cigars, all of Swedish Match's products are sold in declining markets, according to Bernt Magnusson.

"This means that much inventiveness is required to nevertheless achieve growth in profits," he continued. "We are constantly weighing alternatives to offset declining volumes. We have chosen to maintain a strict focus on our main product areas, to look continuously for complementary acquisitions, and not to diversify too much. Swedish Match's history includes some unsuccessful diversification attempts that have been costly for the owners."

Finally, Sven Hindrikes thanked Bernt Magnusson for his efforts on behalf of the company.

"Bernt has really been in for the long haul, with experience of Swedish Match dating back to 1979. He deserves a huge vote of thanks for his efforts and is going to be missed here."

New Board members

Conny Karlsson, who has been a Board member since 2006, was elected as Swedish Match's new Chairman of the Board.

"Conny is highly competent in the marketing of consumer goods. We hope this will contribute to the company’s continued growth," said Mads Eg Gensmann, Chairman of the Nominating Committee.

The two new Board members elected were Charles A, Blixt, with solid experience of the US tobacco industry, and John P. Bridendall, who has extensive experience of fast-moving consumer goods with strong brands.