Outlook and risk factors
Full year 2022 Outlook
With its vision of A world without cigarettes, Swedish Match’s core business is to provide consumers with enjoyable alternatives that are both satisfying and dramatically safer than smoking. Swedish Match expects continued significant growth in consumer demand for safer alternatives to cigarettes. Swedish Match further expects that nicotine pouches as a category will continue to evolve as the number one choice among even more consumers seeking satisfactory experiences in the reduced risk product landscape. With the highly attractive prospects of the nicotine pouch category, Swedish Match anticipates that competitive activity will remain intense.
In the US, in Scandinavia, as well as in Other markets, Swedish Match will continue to invest behind growth opportunities, especially for nicotine pouches. Within Other markets, Swedish Match notes significant opportunities in existing as well as in certain new markets.
Capital expenditures are expected to be of a similar magnitude as in 2021. The strong growth in earnings derived from the US has resulted in an upward pressure on the corporate income tax rate. The effective underlying corporate tax rate in 2022, excluding associated companies, is now expected to be close to 24 percent.
The Company remains committed to returning cash not needed in operations to shareholders, but given the current public offer on the Company, share repurchases have been suspended.
Source: Swedish Match Half Year Report January–June 2022.
Risk factors
Swedish Match operates in highly competitive markets, which require an agile organization in a continually changing environment. In the event that Swedish Match cannot provide a better offering to the consumer than competitors, there is an increased risk to both customer purchases and the ability to realize price changes.
Production facilities are exposed to risk of various harmful incidents such as fires and machinery breakdown, as well as potential natural disasters or global health crises such as pandemics and other catastrophic events, along with effects related to climate changes. Such incidents may affect both production facilities and employees. Production interruptions could cause quality or delivery problems.
A loss of a key supplier or a supplier’s non-compliance with regulations or unethical behavior could be harmful to the Group. Potential consequences are delivery or quality problems or difficulties in the interaction with other stakeholders including sales to consumers.
Swedish Match is exposed to a high degree of regulation from various authorities. Regulations could have a restricting impact on how the Group can operate its business and interact with its stakeholders or direct financial impact in the form or increased taxes or imposed fees. Regulations, many related to the Group’s involvement in the tobacco industry, concern among other issues, tobacco excise taxes, marketing, packaging, warning labels, ingredients, reporting to authorities, product approvals, and introduction of new products. Many authorities have and continue to implement various forms of restrictions on sales and usage of tobacco and other nicotine containing products.
Social and geopolitical upheaval caused by wars, armed conflicts, or incidents causing massive migration pressures may have moderate to severe impacts on supply chains (sourcing and deliveries), production levels and resultant costs. Business relationships may be altered for an unforeseen period of time. As a result of the ongoing war in Ukraine, Swedish Match continuously follow up on risks and mitigating activities to reduce any negative impacts for the Group. Effects of the war are closely monitored, and any direct and indirect financial effects are evaluated. Commercial, operational, and financial consequences resulting from the ongoing war have thus far been limited for Swedish Match.
The dynamic financial market conditions are continuously changing with fluctuating currency exchange rates, interest rates and availability of funds. A weakening of certain major currencies, such as the USD versus the SEK, could cause lower financial results presented in SEK from the translation of foreign operations. The transaction exposure is relatively low as most production is located in the country where sales are conducted. Higher interest rates and credit spreads could have a negative impact on net finance expense.
Key business processes such as production management, invoicing, customer support and financial reporting rely on IT systems. Increasingly sophisticated and frequent cybercrimes could result in significant outages or application failures to our infrastructure, and cause reputational damage, considerable business disruption or adverse impact on business-critical data. The information assets within Swedish Match are of fundamental importance for our business. Proper handling of the assets is important for the trust of employees, customers, and partners. Swedish Match needs to ensure confidentiality, integrity, and availability of information most important to Swedish Match.
For a further description of risk factors and how Swedish Match works to mitigate risks, see the page Risk management.
Source: Swedish Match Half Year Report January–June 2022.
