Outlook and risk factors
Full Year 2021 Outlook
Swedish Match expects that the trend of increased interest from consumers, industry participants and regulators in less harmful alternatives to cigarettes will continue. Our ambition is to create value for both shareholders and society by providing products that are recognized as safer alternatives to cigarettes.
For the full year of 2021, Swedish Match expects continued market growth for smokefree products, most notably driven by rapid growth of nicotine pouches. Swedish Match expects that the attractive prospects of the nicotine pouch category will further elevate competitive activity.
For 2021, Swedish Match expects increased investments in marketing, distribution and sales efforts in both existing and new markets to actively participate in growth opportunities. Continued capital investments by Swedish Match to further expand nicotine pouch production capacity are expected to result in capital expenditures in 2021 above the 2020 level.
While Swedish Match expects that the COVID-19 pandemic will remain a serious public health issue for the remaining part of 2021, Swedish Match expects its business to remain largely resilient to material negative COVID-19 related effects.
The effective underlying corporate tax rate in 2021, excluding associated companies, is expected to be around 23 percent.
The Company remains committed to returning cash not needed in operations to shareholders.
Effects from the coronavirus (COVID-19)
While longer-term effects from the pandemic are uncertain, the negative commercial, operational and financial consequences to Swedish Match have thus far been limited. Just as in the previous year, for the nine-month period ending September 30, 2021, the Scandinavian smokefree business has likely benefitted financially from favorable channel mix effects that have been brought on by COVID-19 restrictions related to travel. For Cigars, since the on-set of the pandemic, consumer demand is likely to have been elevated as a consequence of changed consumption patterns. However, it is challenging to identify and quantify any such potential effects and Swedish Match has faced production constraints in its cigar operations, partly as a consequence of the COVID-19 situation, which has led to an inability to fully meet demand. Swedish Match, like many other companies, has experienced higher costs and some difficulties in sourcing certain input materials. These challenges in relation to input materials may have been caused, at least to some extent, by direct or indirect consequences of the pandemic.
No material governmental subsidies or concessions related to COVID-19 have been sought or received by Swedish Match during the first nine months of 2021.
Swedish Match is closely monitoring the current situation including governmental guidelines and advice from public health authorities in every country where we operate. We are proactively taking the steps that we believe are appropriate to mitigate potential impacts to our employees, our customers and our business, as well as to society.
Risk factors
Swedish Match faces intense competition in all of its markets and for each of its products and such competition may increase in the future. To remain successful, the Group must develop products and brands that resonate with changing consumer trends, and price and promote its brands competitively. Restrictions on advertising and promotion may, however, make it more difficult to counteract any loss of consumer loyalty. Competitors may develop and promote new products which could be successful, and could thereby have an adverse effect on Swedish Match results of operations.
Swedish Match has substantial sales in the US, with products sourced from local US production facilities and imports from Swedish Match’s production facilities in the Dominican Republic and in Sweden. Swedish Match also has operations in Brazil, Denmark, Norway, the Philippines and EMU member countries. Consequently, changes in import duties as well as in exchange rates of the euro, Norwegian krone, Danish krone, Brazilian real, the Dominican peso and in particular the US dollar may adversely affect the Group’s results of operations, cash flow, financial condition or relative price competitiveness in the future. Such effects may occur both in local currencies and when such local currencies are translated into Swedish currency for purposes of financial reporting.
Regulatory developments and fiscal changes related to tobacco and other nicotine products, corporate income and other taxes, as well as to the marketing, sale and consumption of tobacco products and other products containing nicotine in the countries where the Group is operating may have an adverse effect on Swedish Match financial results.
For a further description of risk factors affecting Swedish Match, see the Effects from COVID-19 above as well as the Risk and risk management section in the Report of the Board of Directors in the Swedish Match annual report for 2020.
Source: Swedish Match Interim Report Report January - September 2021.
