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Annual report
2021
A world without cigarettes
Since its listing in 1996, Swedish Match has created a dynamic and growing
business, through significant adjustments in our portfolio of products,
brands, and markets. Having long ago left the cigarette business, we now
can grow free from that legacy. We have continued to adapt and change,
always moving with societal trends, toward a vision of A world without
cigarettes. Our efforts in smokefree products and demonstrated growth
clearly show that this approach resonates with consumers who are seeking
attractive and less harmful alternatives to cigarettes. We endeavor to
deliver the highest quality in our products and services and work to actively
engage with our stakeholders. We are proud of our history, and consumers
trust in our brands. We build on our heritage and work to earn that trust
through our continuing drive to evolve and to innovate, to be a pioneer in the
marketplace with new products and services, and flexible in our approach –
in an effort to be our best in our time, and all times.
As society changes,
sodo we!
At the end of 2021, in addition to our core markets (the US and Scandinavia) nicotine pouches have
been introduced by Swedish Match in over 20 countries
1
, primarily under the ZYN brand.
1)
Nicotine pouches are oral products that contain nicotine, but no tobacco. There are certain markets, like Norway, that do not
allow nicotine pouches without tobacco. In those markets, nicotine pouches refer to products that contain small amounts of
tobacco.
Our world is growing
Having established the market leading
position within the rapidly expanding
nicotine pouch category in the US,
Swedish Match is investing for the future,
not only to support the growth for ZYN in
the US, but in other areas as well. Today’s
portfolio of nicotine pouches includes
a variety of brands, formats, strengths
and flavors with snus and nicotine pouch
products best adapted to consumers
wherever they may be. Portfolio
strength, product development as well
as operational and market investments
provide us with the scope to best cater to
consumer needs across geographies.
PORTFOLIO TRANSITION
From traditional tobacco
products to discrete
nicotine enjoyment
Adult consumers who enjoy nicotine are
looking for alternatives that not only
avoid the harmful effects of cigarettes,
but are also accessible, convenient,
and enjoyable. Our largest product
segment, Smokefree has been the key
driver in our efforts to promote positive
change. Local currency sales for
Smokefree have grown on a compound
annual basis by 20 percent over the
past two calendar years, with the
result being that in 2021 the Smokefree
product segment by itself registered
sales that were very close to sales for
the entire Group as recently as 2018.
ZYN US volumes grew by
52% versus 2020
ZYN nicotine pouch brand in the US
#1
2
Milestones in our transition
ZYN
THE #1 NICOTINE POUCH
BRAND IN THE US
Swedish Match is proud of its innovation work,
continually striving to provide consumers with
top quality products in line with consumer
trends, helping us to move ever closer to
our vision of A world without cigarettes. ZYN
is the most sold brand of nicotine pouches
in the US. In 2021, Swedish Match shipped
nearly 198 million cans of nicotine pouches
worldwide, primarily under the ZYN brand,
making Swedish Match the world’s largest
producer of nicotine pouches.
GOTHIATEK
®
QUALITY STANDARD FOR SNUS
Swedish Match’s quality standard for the Company’s snus products
is based on decades of research and development. Produced
according to this standard the high quality of our snus products is
ensured, with extremely low levels of undesired compounds, and
resulting in a dramatically reduced health risk versus smoking.
2014
2021
2016
1999
2000
DIVESTS CIGARETTE OPERATIONS
Swedish Match took the bold move to divest its cigarette business.
This reinforced our longstanding commitment to harm reduction, and
was an important step towards concentrating on growing categories,
in line with consumer trends. Swedish Match devoted resources and
product development into other areas, such as snus and other cigarette
alternatives.
ZYN
NICOTINE POUCHES GAINS A FOOTHOLD IN THE US
In 2016, when Swedish Match began expanding the availability of ZYN nicotine
pouches in the US, the brand was available in approximately 4,000 stores in
the western United States. By the end of 2021, ZYN was available in more than
120,000 stores nationwide, and the clear market leader for nicotine pouches in
the US – the world’s largest nicotine pouch market.
MRTP STATUS IN
THE US
Swedish Match became the first
tobacco company to be granted
Modified Risk Tobacco Product
(MRTP) designations by the FDA
for eight General snus products,
permitting Swedish Match to more
accurately communicate to adult
consumers the relative health
attributes of the General snus
products compared to cigarettes.
1973
THE POUCH
The first portion snus product, in
an easy to use pouch format, was
launched in Sweden.
2019
A WORLD WITHOUT
CIGARETTES
Swedish Match has a clear and
focused vision. By providing
products that are recognized as
safer alternatives to cigarettes,
we can contribute significantly
to improved public health.
2010
SCANDINAVIAN
TOBACCO GROUP (STG)
Creation of new STG (cigars,
pipe tobacco, fine cut tobacco)
and simultaneous divestment
of Swedish Match’s premium
cigar, European cigar, and pipe
tobacco businesses. Swedish
Match sold its stake in STG in
2017.
Swedish Match 2021 3
CONTENT
The Board of Directors Report and the formal audited part of this document comprises the following sections:
financial strategy on page 11, risk management on pages 31–33, share information and dividends on pages
71–72, financial overview and consolidated financial accounts and disclosures, including proposed distribution
of earnings on pages 75–126. Definitions are presented on pages 133–135.
Sustainability information is found on pages 34–67. The Corporate Governance report is found on pages
136–148. The sustainability and corporate governance reports have been reviewed by the auditors.
THE BOARD OF DIRECTORS REPORT
The sections which form part of the Board of
Directors Report are highlighted in light blue in the
table of contents above and on the respective page.
P. 514
The Group
6 This is Swedish Match
7 2021 in brief
8 CEO comment
10 Vision and strategy
10 Operational strategy
11 Financial strategy
11 Sustainability strategy
12 Organization
13 Core values
14 Introduction to the Board of Directors
Report
P. 1533
Our business
16 Market
18 Smokefree product segment
26 Cigars product segment
29 Lights product segment
31 Risk management
P. 73135
Financial reports
74 Content
75 Financial overview
79 Proposed distribution of earnings
80 Consolidated financial statements
116 Parent Company financial statements
127 Auditor’s report
130 Five year summary 2017–2021
132 Quarterly data 2020–2021
133 Definitions
P. 136150
Corporate Governance
137 Chairman’s comment
138 Governance report
144 Internal control over financial
reporting
145 Board of Directors
147 Group Management
149 Remuneration report
P. 3467
Sustainability
35 Highlights 2021
36 Our goals
38 Our contribution to the UN SDGs
41 Management approach
42 Materiality assessment
44 Our value chain
47 Code of Conduct
48 Our focus areas
48 Improve public health
51 Ensure ethical business practices
54 Reduce environmental impact
60 Human rights in our supply chain
65 Equal opportunity
P. 6872
Shareholder
information
69 Shareholder communication
71 The share
Swedish Match 2021 4
The Group
Sustainability
Shareholder
information
Financial
reports
Corporate
Governance
Our business
5
This is Swedish Match
segments are Smokefree, Cigars, and
Lights. With its vision of
A world without
cigarettes
, the Group is dedicated to the
improvement of public health by offering
attractive alternatives to cigarettes with
its smokefree products.
Production is located in seven countries with the majority of Group sales coming
from the US and Scandinavia .
Group sales for 2021 amounted to 18,489 MSEK and the average number of
employees was 7,523.
in Sweden with head oce in Stockholm , visiting address Sveavägen 44, postal
Nasdaq Stockholm (SWMA), ISIN Code: SE0015812219.
Products and brands
1)
Nicotine pouches are oral products that contain nicotine, but no tobacco. There are certain markets, like Norway, that do not allow nicotine pouches without tobacco. In those markets, nicotine
pouches refer to products that contain small amounts of tobacco.
SMOKEFREE
In the US, the Company is the biggest
participant in the nicotine pouch category with
its ZYN brand, as well as the largest producer
of chewing tobacco. The Company also holds
the third largest position in the moist snuff
category and has a long-standing presence
with its General snus.
In Scandinavia, Swedish Match enjoys the
market leading position for snus products, as
well as holding the number two position in the
Scandinavian market for nicotine pouches
1)
.
In Europe, Swedish Match has a presence
with its nicotine pouches in a number of
countries. The Company is also present with
its niche chewing tobacco products of chew
bags and tobacco bits, as well as with snus in
select countries.
Production of nicotine pouches takes place
in the US, Sweden, and Denmark. Production of snus occurs
in Sweden and Denmark, while moist snuff is produced in
the US. Pouch products with neither tobacco nor nicotine are
produced in Sweden. For chewing tobacco, production takes
place in the US and chew bags and tobacco bits are produced
in Denmark.
Read more on page 18
CIGARS
Swedish Match holds the number two position in the US
market for mass market cigars (excluding little cigars).
Swedish Match has strong positions within both the
natural leaf and HTL segment. Production of cigars
takes place in the US and the Dominican Republic.
Read more on page 26
LIGHTS
Swedish Match is the market leader for matches in many
markets throughout the world, with well-known local
brands. For lighters, the Group has strong market positions
in many countries. Production of matches takes place in
Sweden and Brazil. Lighters are produced in the Netherlands,
the Philippines and Brazil. In the Netherlands, the Fire-Up
business acquired during 2021 manufactures certain
productsfor lighting fireplaces, barbecues, and stoves.
Swedish Match also offers a portfolio of externally
sourcedcomplementary products (mainly for
theBrazilian market), which include for
example disposable razors, batteries
and light bulbs.
Read more on page 29
Share of sales 7%
Share of operating profit 4%
Share of sales 26%
Share of operating profit 23%
HIGHLIGHTS
SALES, MSEK
18,489
OPERATING LOCATIONS
11
AVERAGE NO OF EMPLOYEES
7,523
Share of sales 67%
Share of operating profit 74%
Swedish Match 2021 6
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
2021 in brief
Financials
• Record full year sales and operating profit with double-digit
growth in both revenues and earnings in local currencies across
all product segments.
• Impressive performance for the Smokefree product segment with
strong growth in both the US and Scandinavia. Growing demand
for natural leaf cigars drove the robust full year local currency
financial performance for the Cigars product segment. Strong
underlying performance for the Lights product segment.
• In local currencies, sales increased by 16 percent. Reported sales
increased by 11 percent to 18,489 MSEK (16,698).
• In local currencies, operating profit from product segments
1)
increased by 19 percent. Reported operating profit from product
segments increased by 14 percent to 8,136 MSEK (7,160).
• Operating profit amounted to 8,286 MSEK (6,991).
• Profit after tax amounted to 6,218 MSEK (4,888). Profit after tax of
the prior year included a charge of 286 MSEK following an adverse
ruling in a tax case.
• Earnings per share increased by 31 percent to 3.97 SEK (3.04).
Adjusted earnings per share increased by 19 percent to 3.82 SEK
(3.22).
2)
• The Board proposes to increase the dividend to 1.86 SEK per
share, to be paid in two installments; 0.93 SEK per share in
May2022 and 0.93 SEK per share in November 2022.
1)
Excludes Other operations and larger one-time items.
2)
A share split (10:1) was made in May 2021. Historical share data in this report has been restated in
accordance with IAS 33.
KEY DATA
MSEK 2021 2020 2019
Sales
18,489 16,698 14,739
Sales from product segments
18,145 16,332 14,363
Operating profit from product segments
8,136 7,160 5,812
Operating profit, excluding
larger one-time items
7,986 6,991 5,675
Operating profit
8,286 6,991 5,307
Operating margin from product segments, %
44.8 43.8 40.5
Operating margin, %
1)
43.2 41.9 38.5
EBITDA from product segments
8,690 7,684 6,296
EBITDA
8,601 7,580 6,222
Profit for the year
6,218 4,888 3,896
Earnings per share, basic and diluted, SEK
2)
3.97 3.04 2.32
Earnings per share, adjusted,
basic and diluted, SEK
2)3)
3.82 3.22 2.54
Dividend per share, SEK
2)
1.86
4)
1.50 1.25
1)
Excluding larger one-time items.
2)
A share slplit (1:10) was made in May 2021. Historical share data in this report has been restated
in accordance with IAS 33.
3)
Larger one-time items during 2021 amounted to 238 MSEK, during 2020 and 2019 to –286 MSEK
and –367 MSEK.
4)
Board proposal.
67%
26%
7%
74%
23%
4%
Smokefree
Cigars
Lights
BY PRODUCT SEGMENT
SALES
OPERATING PROFIT
Sustainability
• ZYN available in more than 20 countries.
• 100 percent of significant suppliers of direct
materials have committed to the principles of
Swedish Match Supplier Code of Conduct.
• European operation is 94 percent fossil free.
• Recycling of waste has increased by more than 30
percent.
• US Division has reduced waste to landfill by more
than 80 percent by shifting to incineration of waste
for power.
• 95 percent of our raw tobacco volumes included in
STP or in Swedish Match’s due diligence program.
• Continued strong Group-wide focus on ensuring
diversity among applicants and final candidates in
order to find best candidates.
KEY DATA 2021 2020 2019
Total emissions (CO
2
e)
1)
209,454 202,387 213,768
Total emissions per MSEK
sales
1)2)
11 12 15
Total waste
1)
29,408 26,990 26,164
Total waste per MSEK sales
1)2)
1.6 1.6 1.8
Percent of fossil free energy 45 47 44
1)
Metric tons.
2)
Net sales from product segments in constant currency terms.
Swedish Match 2021 7
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
As the world around us changes and society adjusts to new ways
of living and working, we at Swedish Match adapt in step with
societal trends by eectively managing our portfolio of brands
and products. We invest to develop and establish platforms for
future growth, while at the same time striving to deliver strong
nancial returns for our shareholders. Swedish Match has a vision
of A world without cigarettes, and we are committed to making
important contributions on our path towards that vision. When
cigarette smokers nd attractive and less harmful alternatives,
and choose to stop smoking altogether, they benet, and so does
society.
rough consumer insight, research and development, capital
investments, product quality assurance and improvements, and
with a continually evolving portfolio, we oer consumer choices
that meet changing demands. We have chosen to focus our eorts
on smokefree products, believing that these products can best
meet consumer expectations and needs of quality, satisfaction,
and harm reduction. Some of our brands and products are over
one hundred years in the making, and still going strong, like
General or Ettan snus, Oliver Twist tobacco bits, or our chewing
tobacco in the US which, at 135 years old, has taken on the brand
name, America’s Best Chew, in celebration of its agship position
for taste, quality and category leadership. Snus, and now nicotine
pouches, provide adult tobacco consumers with satisfying and
socially acceptable alternatives to cigarettes, and consumers have
increasingly turned to these varieties. Snus, for example, has
enabled an entire generation of adults to practically quit cigarettes
altogether. In Norway and in Sweden, the percentage of men
and women who smoke has dropped dramatically over the past
decade. Many have switched to snus, or, more recently, to nicotine
pouches. Today, well below 10 percent of the adult populations in
Sweden and Norway smoke cigarettes on a daily basis, among the
lowest incident rates in the world.
We strive to be a growing, protable company that makes
tangible and meaningful contributions through our sustainability
eorts. In 2021, not only did we deliver yet another year of
impressive growth, but we also took notable steps towards
Breaking new records,
while investing for the future
CEO COMMENT
“ Swedish Match has a vision of
A world
without cigarettes
, and we are committed to
making important contributions on our path
towards that vision. When cigarette smokers
find attractive and less harmful alternatives,
and choose to stop smoking altogether, they
benefit, and so does society.”
expanding our reach and portfolio of smokefree products
and engaging with the scientic community and regulators
in eorts to contribute to improved public health and a better
understanding of the benets of our smokefree products, like
nicotine pouches and snus. We not only work to improve public
health in line with our vision, but also to make concerted eorts
to reduce our environmental impacts and maintain strong and
sound governance and ethical standards. Our commitments
to taking a science-based target approach to greenhouse gases,
committing to the Paris Treaty on climate change, or our work
to ensure that we have a workplace where all feel that they have
opportunities to grow and develop, free from discrimination, in
an environment that celebrates diversity and gender balance, are
further examples of ways we have contributed and will continue
to contribute to positive change. We have taken several important
steps to improve not only our work within our sustainability
focus areas, but also in how we present and communicate our
sustainability approach, aspirations and results, much of which is
described in our sustainability report on pages 34–67.
Our sales performance in 2021 was outstanding, hitting a new
all-time high. In local currencies, sales increased by double digits
in each of our product segments, with the Smokefree product
segment leading the way. Our nicotine pouches made a signicant
contribution to that growth in the US as well as in Scandinavia
and Other markets. Nicotine pouches registered spectacular
volume growth of more than 50 percent in both the US and
Scandinavia. e total addressable market for nicotine pouches
includes cigarette smokers, but also draws from other oral tobacco
products, as well as from the growing pool of consumers who
currently use vape products but have found our nicotine pouches
to have greater appeal.
In the US, we continued to add to the number of shops where
ZYN can be found, and we broadened the distribution of our
assortment across the entire US market. We are seeking long-
term engagement with loyal consumers and customers and are
prepared to invest appropriately and adequately toward that
goal. is past year, we devoted signicant eorts toward loyalty
Swedish Match 2021 8
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
and engagement with both our customers and our consumers,
for example through our ZYN zone merchandising program
and ZYN.com consumer loyalty program. Despite aggressive
distribution expansion eorts and intense price competition
from our main competitors within US nicotine pouches, ZYN
stood out with its popularity and high-quality premium oering,
demonstrating market share resilience throughout most of 2021.
We also see signicant opportunities for nicotine pouches
outside of the US, where the variety of competitive oerings
and the regulatory frameworks are dynamic and diverse. In
Scandinavia, we are dedicating resources to strengthen our
position in nicotine pouches, and at the same time maintaining
leadership with our renowned snus portfolio which in 2021
continued to demonstrate growth. Our Scandinavian nicotine
pouch volume growth of 55 percent was impressive, but still
somewhat less than the growth rate for the nicotine pouch market.
Growing snus volumes reected continued strong consumer
demand for traditional tobacco smokefree varieties.
Outside the US and Scandinavia, we believe that nicotine
pouches are especially well positioned for meeting evolving
consumer demand for reduced risk products, and with planned
increased investment levels in current and new geographies we
see signicant opportunities for long-term growth.
Once again in 2021, as the COVID pandemic situation ebbed
and owed, and restrictions grew tighter or looser, we adapted,
helping to ensure that products were on shelves and that our
capacity plans and development work proceeded smoothly. In
Scandinavia, alternating on-sets and reliefs of travel restrictions
caused steep variations in consumers’ purchasing patterns
which caused logistical challenges, but for the full year, channel
and market mix eects yielded a net positive nancial impact
compared to 2020. Our Scandinavian smokefree business,
however, also delivered a solid earnings development on an
underlying basis, despite increased market related investments to
support growth opportunities within nicotine pouches.
For US chewing tobacco and for moist snu, volumes in
the prior year were unusually strong, bolstered by changes
in consumer patterns resulting from the COVID pandemic.
During the course of 2021 there were reversions to more normal
consumption patterns, most notably for chewing tobacco.
Despite volume declines for US chewing tobacco reecting
normal historical patterns, operating prot held up well as a
result of eective price management and operational eciencies.
For moist snu, our investments behind pouches and our
position in the value segment served us well, as volumes for our
Longhorn brand grew notably faster than the moist snu category
development. Improved pricing further contributed to the solid
nancial performance of our US moist snu business.
Our lights businesses delivered another year of sales growth for
both matches and lighters, with sales in local currencies excluding
acquisitions increasing by 16 percent. Operating prot grew
at an even faster rate, aided by certain asset sales, cost control,
and strong price mix impacts. Our match and lighter portfolios
include products for many purposes, such as utility lighters, or
wood-based re lighting products that typically sell at attractive
prices, provide good protability, and are exposed to growing
consumption patterns. is year we further strengthened our
range and assortment of value-added lights products through the
acquisition of Fire-Up, with its high-quality range of sustainable
re-lighting products.
For cigars, our shipment volumes for the year grew to another
record of over 1.9 billion sticks, as we achieved a strong rebound
in shipments of natural leaf varieties which were impacted by
COVID-related production constraints in the prior year. e
growth of natural leaf more than oset the year-on-year declines
for our homogenized tobacco leaf (HTL) assortment. In the prior
year, Swedish Match benetted from its dual factory footprint
when competition faced more severe supply and production
issues for HTL. In the second half of 2021, a constraint on raw
materials impacted Swedish Match more severely than some
of our competitors, resulting in lower levels of our HTL cigar
shipments than would have been the case without these supply
constraints. With the cigar portfolio focused on the attractive
and growing natural leaf segment, a strong segment market
share and a broad assortment of high-quality products, Swedish
Match’s cigar business is very well positioned for growth. e 2021
delivery of double-digit sales and earnings growth, despite several
supply chain related challenges, is a testament to the strength and
adaptability of the cigar business of Swedish Match.
In the month of September, we announced the intent to
separate our US Cigar business and started working towards a
spin-o to shareholders with a subsequent listing of the separated
business on a US national securities exchange. In March 2022,
we took the decision to suspend the preparations for a spin-o
until further notice. While the strategic intent remains to separate
the US cigar business from the rest of the Group, a step that we
believe would further enhance the prospects for Swedish Match’s
smokefree business, as well as for our cigar business, the decision
to suspend the spin-o preparations was prompted by increased
regulatory uncertainties and considered to be in the best interest
of shareholders.
e success that we experienced over this past year reects the
dedication, commitment, and creative engagement with and by
all our stakeholders, with insights from consumers, reections
and conversations with our shareholders, discussions with our
customers and suppliers, and most importantly passion and
resolve on the part of our employees. We see change, we adapt and
create change, and with that we create opportunities for growth,
for our employees, our shareholders, and our impactful and
purposeful progress toward a vision of A world without cigarettes.
Stockholm, March, 2022
Lars Dahlgren
President and CEO
Swedish Match 2021 9
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Operational strategy
Smokefree businesses
To achieve our vision, we leverage our unique smokefree
platforms with a focus on product development, quality and
consumer satisfaction based on thorough consumer insights.
• In the US, we focus on faster growing categories and segments
such as nicotine pouches and moist snu pouches.
• In Scandinavia, we lead the development of the smokefree
category through product innovation and by complementing
our traditional products, brands and sales channels to meet
changing consumer demands.
• Outside the US and Scandinavia, we will continue to expand
our presence with innovative smokefree products.
• In our chewing tobacco businesses, we will protect protability
in the US by mitigating the impact of volume declines through
cost focus and price leadership. Outside the US, we will
continue to selectively exploit growth opportunities.
Other businesses
To support our vision and to maximize long term value, we
leverage our strong market positions and brands by capitalizing
on synergies and operational eciencies.
• In our cigar business, we focus on faster growing segments
with an objective to maximize long term protability and cash
generation.
• In our lights businesses, we continue to focus on operational
excellence while selectively investing in protable growth
markets and product segments.
Vision
A world without cigarettes
We create shareholder value by offering adult consumers enjoyable nicotine-containing products of
superior quality in a responsible way. By providing products that are recognized as safer alternatives to
cigarettes, we can contribute significantly to improved public health.
Swedish Match 2021 10
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Swedish Match’s operations are characterized by strong cash flows. The financial strategy is centered
on capital efficiency with a focus on financial flexibility and stability requirements.
Net debt
e Board of Directors has determined that the Group will strive
to maintain a net debt that does not exceed 3 times EBITA. e
actual level of net debt will be assessed against:
• anticipated future protability and cash ow
• investment and expansion plans
• acquisition opportunities
• development of interest rates and credit markets
e Board of Directors’ long-term goal is to optimize the capital
structure of the Group which in the current environment entails
maintaining a Standard & Poor’s BBB and a Moody’s Baa2 long-
term rating.
Shareholder distribution
Swedish Match has the ambition to continuously grow dividend
per share with a payout ratio normally within the range of 40–60
percent of the earnings per share, subject to adjustments for larger
one-time items. Excess funds shall be returned to shareholders
through dividends and share repurchases.
Financial strategy
TRANSFER OF CAPITAL TO SWEDISH MATCH’S SHAREHOLDERS
0
2,000
4,000
6,000
8,000
20212020201920182017
MSEK
Our vision of
A world without cigarettes
is central to our sustainability strategy and how we contribute
to making the world a better place. For best impact and transparency, our sustainability strategy is
founded on two basic principles – focus and organizational ownership.
rough our strategy, we emphasize ve focus areas – Improve
public health, Ensure ethical business practices, Reduce
environmental impact, Human rights in our supply chain,
and Equal opportunity – areas where we believe we have the
ability to directly or indirectly inuence meaningful outcomes
or where adverse developments could have a negative impact
on our businesses. Swedish Match has set a series of tangible
commitments and goals for each of the focus areas. Upholding
these commitments will enable Swedish Match to contribute to
9 out of the 17 Sustainable Development Goals (SDG) dened
by the United Nations in 2015. rough our general business
contribution and societal engagement, we also contribute to 7 of
the remaining 8 SDGs.
Our Code of Conduct forms a foundation for our sustainability
approach and eorts throughout the Group. It represents the
commitment of Swedish Match and all our employees to conduct
business activities in a responsible manner, demonstrating
integrity and respect to our stakeholders and society as a whole.
This section is part of the Board of Directors Report.
Sustainability strategy
Focus areas
Ordinary dividend Repurchase of own shares Special dividend
Improve
public health
Ensure
ethical business
practices
Reduce
environmental
impact
Human rights
in our supply chain
Equal
opportunity
Swedish Match 2021 11
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
How we operate
US Division
e US Division, with its head oce in Richmond, Virginia,
manufactures and markets smokefree products such as nicotine
pouches, moist snu and chewing tobacco – as well as snus,
which is manufactured and supplied by the Europe Division. e
division also markets cigars, with production in both the US and
the Dominican Republic.
Europe Division
e Europe Division, with its head oce in Stockholm, Sweden,
manufactures and markets snus, nicotine pouches, and other
smokefree products destined to Scandinavia and Other markets.
Production of its smokefree products takes place in Sweden and
Denmark.
Lights Division
Lights Division manufactures and markets matches, lighters and
other re-related products for markets worldwide. e division
also sells complementary products sourced from third party
manufacturers. Manufacturing locations include Brazil, the
Netherlands, the Philippines and Sweden.
Corporate functions
Corporate functions provides services and support to the
Parent Company, Swedish Match’s divisions, and SMD Logistics
(a separate wholly owned distribution company, serving the
Scandinavian market, which is also part of Corporate functions).
PRESIDENT & CEO
US
DIVISION
LIGHTS
DIVISION
EUROPE
DIVISION
CORPORATE
FUNCTIONS
The organization comprises three
divisions as well as Corporate
functions. The average number of
employees in the Group was 7,523
in 2021. Swedish Match operates in
eleven countries and our products
are sold across the globe.
OPERATING LOCATIONS
Norway
• Commercial operations
• 49 employees
Sweden
• Corporate head office
• Europe Division head office
• Lights Division head office
• Production of smokefree
products and matches
• SMD Logistics (distribution)
• R&D
• Commercial operations
• 1,352 employees
Denmark
• Production of smokefree
products
• Commercial operations
• 121 employees
Turkey
• Commercial operations
• 14 employees
Belgium
• EU representation office
• 2 employees
Netherlands
• Production of lighters
and other fire-related
products
• Commercial operations
• 109 employees
Switzerland
• Treasury office
• Commercial operations
• 12 employees
US
• US Division head office
• Production of
smokefree products
and cigars
• R&D
• Commercial operations
• 1,300 employees
Dominican Republic
• Production of cigars
• 3,823 employees
Brazil
• Production of matches
and lighters
• Commercial operations
• 476 employees
Philippines
• Production of lighters
• Commercial operations
• 265 employees
The number of employees refers to the average number of employees in specified country during 2021.
Swedish Match 2021 12
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Living our core values
Swedish Match promotes a culture in which our employees are actively engaged, demonstrating the
Company’s core values of passion, ownership, innovation and quality.
Passion, Ownership, Innovation, Quality
Swedish Match’s core values are central to the Company’s business ethics and, as such, they are demonstrated in all
relations with stakeholders and are a natural part of the way the Company conducts business.
Passion
• We are proud and engaged ambassadors for our
products and our company
• We are devoted to our consumers and always want
to exceed their expectations
• We have a passion to win, will walk the extra mile,
and help one another succeed
Ownership
• We take full ownership of our tasks ensuring that all
links in the chain, from start to finish, can deliver;
we never allow anything to fall between the cracks
• We evaluate our performance and always strive for
improved results the next time around
• We work quickly and cost-efficiently, recognizing
that the market and competitors never stand still
Innovation
• We continuously search for better solutions and
encourage new ideas
• We nurture and develop ideas, carefully selecting
those that we will invest time and effort behind to
implement
• The ideas that we choose to implement are pursued
100 percent
Quality
• We strive for uncompromised quality in everything
we do, our end goal is to have the most satisfied
consumers
• We help one another develop through direct and
constructive feedback
• We behave responsibly towards customers,
consumers, and the environment
Swedish Match 2021 13
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Introduction to the Board of Directors Report
The Board of Directors Report comprises descriptions of Swedish Match strategic priorities, financial
performance and risk management. The report also includes the Board’s proposal for remuneration
and dividend and information concerning the appointment of Board members, notice of Annual General
Meeting and Swedish Match financial position. The Board of Directors Report is integrated into the
annual report.
Strategic priorities
Swedish Match strives to create value for its shareholders and
other stakeholders as a fast moving consumer goods company
which delivers both strong cash ows and opportunities for
growth. Driven by the vision of A world without cigarettes,
Swedish Match oers consumers enjoyable and high quality
nicotine-containing products, in a responsible way. By providing
products that are recognized as safer alternatives to cigarettes,
we also believe that our business can contribute signicantly to
improved public health.
Read more on pages 10–11.
To continue to deliver attractive returns to our shareholders, our
main strategic priorities are:
• Oer high quality products and build strong brands
• Develope new and improved products to meet consumer needs
• Support protability through ecient manufacturing with cost
control
• Maintain strong cash ows from operations and clear priorities
for the use of cash for growth opportunities
• Comply with laws and regulations
• Invest in our employees to ensure a strong and dynamic
competence base to meet or exceed both short-term and long-
term challenges
Financial strategy, shareholder returns and financial
performance
Breaking new records, while investing for the future
As the world around us changes and society adjusts to new ways
of living and working, we at Swedish Match adapt in step with
societal trends by eectively managing our portfolio of brands
and products. We invest to develop and establish platforms for
future growth, while at the same time striving to deliver strong
nancial returns for our shareholders.
Read more under the following sections Financial strategy on page 11,
The share on pages 71–72 and Financial overview on pages 75–78.
Proposed distribution of earnings
See page 79.
Managing risks
A part of conducting business
Swedish Match strives to ensure that the risks taken are deliberate.
It is important for us to understand the risks to which our business
is exposed and make informed decisions. Risks need to be managed
eciently in order for the Group to be competitive, to operate safely,
and to maintain nancial stability and growth. Important risks to
address arise in the areas of competition, production, regulation, IT
security, and nance among other areas.
Read more on pages 31–33.
Guidelines for executive remuneration
See Financial overview page 75 and Note 5 Personnel pages 94–97.
This page is part of the Board of Directors Report.
e Board of Directors Report has undergone audit procedures as described in the auditor’s report on pages 127–129.
Swedish Match has decided, in accordance with the Swedish Annual Accounts Act chapter 6, §11 and §8, to produce a separate
Sustainability Report and a separate Corporate Governance Report instead of including these reports in the Board of Directors Report.
e Sustainability Report is presented on pages 34–67 and the Corporate Governance Report is presented on pages 136–148 in this
publication. e Corporate Governance Report includes information on internal control over nancial reporting, see further on page 144.
e Sustainability Report and the Corporate Governance Report are also available on the Company’s website www.swedishmatch.com.
e Sustainability and Corporate Governance reports have been reviewed by the auditors.
Swedish Match 2021 14
CEO comment Vision and strategy Core valuesThis is Swedish Match 2021 in brief Introduction to BoD reportOrganization
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
The Group
Sustainability
Shareholder
information
Financial
reports
Corporate
Governance
Our business
73
Content
Financial overview ....................................................... 75
Proposed distribution of earnings ...................................... 79
Consolidated financial statements
Consolidated income statement ........................................ 80
Consolidated statement of comprehensive income ................... 80
Consolidated balance sheet ............................................. 81
Consolidated statement of changes in equity .......................... 82
Consolidated cash flow statement ...................................... 83
Notes for the Group ....................................................... 84
Note 1 Accounting principles ..................................... 84
Note 2 Critical estimates and judgements ...................... 91
Note 3 Segment information ...................................... 92
Note 4 Other operating income and expenses .................. 93
Note 5 Personnel ................................................... 94
Note 6 Audit fees ................................................... 97
Note 7 Operating expenses classified by nature ................ 97
Note 8 Net finance cost ............................................ 97
Note 9 Income tax .................................................. 98
Note 10 Earnings per share ........................................ 99
Note 11 Intangible assets ........................................... 99
Note 12 Property, plant and equipment ......................... 101
Note 13 Biological assets ......................................... 101
Note 14 Leases .................................................... 102
Note 15 Investments in associated companies ................. 103
Note 16 Other non-current receivables and
other current receivables ............................... 103
Note 17 Inventories ................................................ 103
Note 18 Trade receivables ........................................ 104
Note 19 Cash and cash equivalents .............................. 104
Note 20 Assets held for sale ...................................... 104
Note 21 Equity ...................................................... 104
Note 22 Interest bearing liabilities ............................... 105
Note 23 Post-employment benefits ............................. 105
Note 24 Provisions ................................................. 109
Note 25 Other liabilities ........................................... 109
Note 26 Accrued expenses and deferred income .............. 109
Note 27 Financial instruments and financial risks ............. 110
Note 28 Pledged assets ........................................... 113
Note 29 Commitments and contingent liabilities and assets . 113
Note 30 Group companies ........................................ 114
Note 31 Supplementary information to cash flow statement . 115
Note 32 Related parties ........................................... 115
Note 33 Information about the Parent Company ............... 115
Note 34 Subsequent events ....................................... 115
Parent Company financial statements
Parent Company income statement ................................... 116
Parent Company statement of comprehensive income ............. 116
Parent Company balance sheet ........................................ 117
Statement of changes in Parent Company equity .................... 118
Cash flow statement for the Parent Company ........................ 119
Notes for the Parent Company ......................................... 120
Note 1 Sales ....................................................... 120
Note 2 Audit fees .................................................. 120
Note 3 Other operating income and expense ................... 120
Note 4 Financial items ............................................ 120
Note 5 Appropriations ............................................ 120
Note 6 Income tax ................................................. 120
Note 7 Tangible assets ............................................ 121
Note 8 Group companies ......................................... 121
Note 9 Other non-current receivables .......................... 122
Note 10 Other receivables ......................................... 122
Note 11 Prepaid expenses and accrued income ................. 122
Note 12 Equity ....................................................... 122
Note 13 Untaxed reserves ......................................... 122
Note 14 Other provisions ........................................... 123
Note 15 Bond loans ................................................. 123
Note 16 Other liabilities ............................................ 123
Note 17 Accrued expenses and deferred income ............... 123
Note 18 Carrying value and fair value of financial instruments 124
Note 19 Derivatives under netting agreements ................. 125
Note 20 Operating lease agreements ............................ 125
Note 21 Pledged assets and contingent liabilities .............. 125
Note 22 Distribution of earnings .................................. 125
Note 23 Related parties ............................................ 125
Note 24 Supplementary information to cash flow statement .. 126
Note 25 Post-employment benefits .............................. 126
Note 26 Subsequent events ........................................ 126
Auditor’s report .......................................................... 127
Swedish Match 2021 74
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
This page is part of the Board of Directors Report.
Swedish Match develops, manufactures, and sells quality products
with market leading brands. e Group’s product segments for
2021 were Smokefree, Cigars and Lights.
Swedish Match’s performance in 2021 showed strong growth,
with record sales and operating prot with double-digit growth in
both revenues and earnings in local currencies across all product
segments. Both Group sales and sales from product segments
increased by 11 percent to 18,489 MSEK (16,698) and 18,145
MSEK (16,332) respectively. Currency translation aected the
sales comparison negatively by 885 MSEK. In local currencies,
sales from product segments increased by 17 percent with all
three product segments contributing with double-digit growth.
e largest contributor to the sales increase was the Smokefree
product segment, with especially strong growth in the US along
with higher sales in both Scandinavia and Other markets.
Operating prot from product segments amounted to 8,136
MSEK (7,160). In local currencies, operating prot from product
segments increased by 19 percent. As for sales, all three product
segments contributed with double-digit growth in operating
prot in local currencies.
Group operating prot, including larger one-time items,
amounted to 8,286 MSEK (6,991) and included a settlement
income of 300 MSEK relating to a previously ongoing arbitration.
Currency translation aected the comparison of the operating
prot negatively by 376 MSEK.
e Group’s prot for the period amounted to 6,218 MSEK
(4,888) and included the above-mentioned settlement income
whereas in 2020 a one-time tax charge of 286 MSEK, including
interest expense, was included.
Operating margin from product segments for the year, was 44.8
percent (43.8). Operating margin excluding larger one-time items
for the Group was 43.2 percent (41.9).
Sales and operating profit from product segments
Sales for the Smokefree product segment increased by 14 percent
to 12,120 MSEK (10,651). In local currencies, sales and operating
prot increased by 18 percent and 21 percent, respectively. Sales
and operating prot grew both as reported and in local currencies
for Smokefree in Scandinavia and the US as well as in Other
markets.
In Scandinavia, sales and operating prot in local currencies
increased by 11 and 13 percent respectively, benetting from
strong underlying category growth, timing eects on shipments,
as well as favorable price/mix that resulted from price changes,
product mix eects and channel shis.
SALES AND OPERATING PROFIT BY PRODUCT SEGMENT
Sales Operating profit
MSEK 2021 2020 2021 2020
Smokefree 12,120 10,651 5,998 5,142
Cigars 4,688 4,533 1,841 1,796
Lights 1,338 1,149 297 222
Sales and operating profit
from product segments 18,145 16,332 8,136 7,160
Other operations 344 366 –150 –169
Settlement income – – 300 –
Total 18,489 16,698 8,286 6,991
SUMMARY OF CONSOLIDATED INCOME STATEMENT
MSEK 2021 2020
Sales 18,489 16,698
Operating profit 8,286 6,991
Net finance cost –345 –347
Income tax expense –1,723 –1,756
Profit for the year 6,218 4,888
Attributable to:
Equity holders of the Parent 6,217 4,888
Non-controlling interest 1 1
Profit for the year 6,218 4,888
Earnings per share, basic and diluted, (SEK)
1)
3.97 3.04
1)
In May 2021, a share split (10:1) was made. Historical share data has been restated.
“ Swedish Match’s performance in 2021
showed strong growth, with record
sales and operating profit with double-
digit growth in both revenues and
earnings in local currencies across all
product segments.”
Anders Larsson
CFO
Financial overview
(Note: Comments below refer to the comparison between full year 2021 vs. full year 2020).
Swedish Match 2021 75
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
This page is part of the Board of Directors Report.
In the US, the impressive growth for ZYN nicotine pouches was
the key contributor to the increased sales and operating prot
growth in local currency of 24 and 28 percent, respectively.
Other markets also contributed to the sales growth, with growth
for nicotine pouches and snus more than osetting lower sales of
chewing tobacco, principally relating to halted shipments to the
German market following adverse regulatory changes in 2020.
For Cigars, total sales for the year amounted to 4,688 MSEK
(4,533). e Cigars product segment derives its sales and prot
almost exclusively from the US operations. In local currency,
sales for the Cigar product segment increased by 11 percent with
balanced contributions of higher volumes and improved pricing.
While progress was achieved in addressing capacity limitations
for natural leaf varieties, the restrictions of certain input materials
adversely aected shipments of HTL volumes primarily as a
consequence of production planning prioritization of the more
attractive natural leaf segment. Despite a higher production cost
per cigar, operating prot grew in line with sales.
For Lights, total sales for the year amounted to 1,338 MSEK
(1,149). Both reported sales as well as sales excluding currency
translation eects and the impact from the Fire-Up acquisition,
increased by 16 percent with solid performance for both lighters
and matches. Operating prot increased by 34 percent to 297
MSEK (222). Operating prot in the current year benetted from
income relating to land sales and the resolution of indirect tax
disputes amounting to about 70 MSEK in total, while the prior
year period included income of a similar nature of 31 MSEK.
Excluding these items and the negative eects from currency
translation, operating prot increased by more than 30 percent on
the back of a strong performance for lighters.
Effects from COVID-19
While longer-term eects from the pandemic are uncertain, the
negative commercial, operational and nancial consequences to
Swedish Match have thus far been limited. Just as in the previous
year, the Scandinavian smokefree business has likely benetted
nancially from favorable channel mix eects 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, while it is challenging to identify and quantify
any such potential eects, 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 diculties in sourcing certain
input materials. ese 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.
Swedish Match is closely monitoring the current situation
including governmental guidelines and advice from public health
authorities in every country where we operate. We continue
to proactively take the steps that we believe are appropriate to
mitigate potential impacts to our employees, our customers and
our business, as well as to society.
Significant events during the year
Tax audits in Sweden
During 2017, the Swedish Tax Agency performed tax audits in
a number of Swedish Match’s Swedish group companies. Aer
completing the audits, the Swedish Tax Agency decided to deny
certain cost deductions in two cases. Both cases were appealed
by Swedish Match but the cases were ruled in favor of the Tax
Agency by the County Administrative Court in Stockholm in May
2019 and January 2020 respectively. Swedish Match subsequently
appealed to the Administrative Court of Appeals in both cases. In
August 2020 one of the cases was ruled in favor of the Tax Agency
by the Administrative Court of Appeals and the tax charges of in
total 270 MSEK and related interest costs of 16 MSEK have been
paid and debited in the 2020 accounts. Swedish Match applied
for leave to appeal and the leave was granted in June 2021 by
the Supreme Administrative Court. In the other case, the Court
of Appeal in December 2021 ruled in Swedish Match’s favor,
resulting in a positive net tax impact of 50 MSEK.
Larger one-time items
During the rst quarter of 2021 a settlement income of 300 MSEK
was recognized relating to a previously ongoing arbitration.
During the third quarter of 2020 a tax charge of 270 MSEK and
related interest costs of 16 MSEK was recognized relating to the
above-mentioned adverse ruling.
Taxes
Income tax expense for 2021 amounted to 1,723 MSEK (1,756),
corresponding to a corporate tax rate of 21.7 percent (26.4). e
higher tax rate for the Group for 2020 was primarily a result of an
additional income tax expense of 270 MSEK relating to the above-
mentioned tax case. In 2021, a favorable ruling in another tax
case in Sweden reduced the income tax expense by 50 MSEK for
the Group. When adjusted for income in associated companies
SUMMARY OF CONSOLIDATED BALANCE SHEET
MSEK 2021 2020
Non-current assets 9,123 7,765
Other current assets
1)
4,908 3,979
Cash and cash equivalents 2,121 3,411
Total assets 16,152 15,155
Equity –6,669 –7,798
Non-current financial liabilities and provisions 3,784 3,680
Non-current loans 14,197 13,514
Current liabilities and provisions 3,850 3,909
Current loans 990 1,850
Total equity and liabilities 16,152 15,155
1)
Includes assets held for sale in 2020 of 28 MSEK.
SUMMARY OF CONSOLIDATED CASH FLOW STATEMENT
MSEK 2021 2020
Net cash generated from operating activities 6,336 5,607
Net cash used in investing activities –1,156 –1,173
Net cash transferred to shareholders –6,171 –5,119
Net cash used in/from other financing activities –441 2,001
Net decrease/increase in cash and cash equivalents –1,431 1,315
Cash and cash equivalents at beginning of the year 3,411 2,370
Effects of exchanges rate fluctuations on cash and cash
equivalents 141 –274
Cash and cash equivalents at end of year 2,121 3,411
Swedish Match 2021 76
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
This page is part of the Board of Directors Report.
the underlying tax rate excluding items of temporary nature, was
23.0percent (23.1).
Earnings per share
In May 2021, the number of shares and votes in Swedish Match
AB (publ) increased as a result of the share split (ratio 10:1) that
was resolved by Swedish Match AB´s Annual General Meeting
on April 13, 2021, through which each existing share was divided
into ten shares. Accordingly, share data for 2020 has been restated.
EPS for the full year amounted to 3.97 SEK (3.04). Adjusted EPS
increased by 19 percent to 3.82 SEK (3.22) for the full year.
Liquid funds
Cash and cash equivalents amounted to 2,121 MSEK at the end
of the period, compared to 3,411 MSEK at December 31, 2020.
As of December 31, 2021, Swedish Match had 1,500 MSEK in an
unutilized revolving credit facility (RCF).
Cash flow and financing
Cash ow from operating activities for the full year 2021
amounted to 6,336 MSEK (5,607). e improved cash ow
was driven by the stronger EBITDA development, the above-
mentioned settlement income of 300 MSEK and lower tax
payments, partly oset by negative changes in cash ow from
working capital, mainly due to timing eects.
Investments in property, plant and equipment increased
to 1,172 MSEK (1,126) principally benetting the Smokefree
product segment. Cash ow used in investing activities reects
the acquisition of Fire-Up, a small European manufacturer of
sustainable relighters and related products.
e Group’s net nance cost amounted to 345 MSEK (347).
Excluding interest costs of 16 MSEK relating to the adverse
tax ruling in Sweden in the prior year period, net nance cost
increased by 15 MSEK reecting lower nancial returns on
surplus cash and higher interest costs.
During 2021, new bond loans of 1,813 MSEK were issued,
repayments of maturing bond loans amounted to 1,553 MSEK,
and early repayment of short-term bond loans amounted to 716
MSEK. As of December 31, 2021, Swedish Match had 14,851
MSEK of interest-bearing debt excluding retirement benet
obligations but including lease liabilities of 403 MSEK. e
Group’s interest-bearing debt at December 31, 2020 amounted
to 15,523 MSEK. For further detail on the maturity prole of the
debt portfolio, please see the Company’s website. Net retirement
benet obligations decreased to 1,305 MSEK (1,411) as of
December 31, 2021 due to positive remeasurements eects from
higher discount rates and higher return on plan assets.
e net debt as of December 31, 2021 amounted to 14,035
MSEK compared to 13,523 MSEK at December 31, 2020.
During the year, Swedish Match paid dividends of 2,369 MSEK
to its shareholders and repurchased 52.8 million shares for 3,802
MSEK.
Swedish Match AB (publ)
Swedish Match AB (publ) is the Parent Company of the
Swedish Match Group. e main sources of income for the
Parent Company are dividends and Group contributions from
subsidiaries.
Revenue from the Parent Company for the full year of 2021
amounted to 32 MSEK (27). Prot before income tax amounted to
4,905 MSEK (5,347) and net prot for the year amounted to 4,543
MSEK (5,033). e lower prot before income tax compared to
previous year was primarily related to participation in Group
companies.
Net Group contributions of 2,646 MSEK (2,392) were received
during 2021. During the year, the Parent Company also received
dividends of 3,436 MSEK (4,185). An impairment loss on shares
in a subsidiary amounting to 299 MSEK was recognized during
the year corresponding to a dividend received of the same
amount.
Part of the Group’s treasury operations are within the
operations of the Parent Company, including the major part of the
Group’s external borrowings. Substantially all of these loans have
been hedged to xed interest rates.
Repayment of bond loans during the year amounted to 2,270
MSEK and new bond loans of 1,813 MSEK were issued.
During the second quarter of 2021 it was resolved to split each
of the Company’s shares into ten shares (ratio 10:1). All references
to shares and earnings per share in this document have been
restated to reect this split. During the year, the Parent Company
made share repurchases of 52.8 million (48.2) shares for 3,802
MSEK (3,099).
A dividend of 2,369 MSEK (2,020) has been paid during the
period.
Events after the reporting period
Updated plans for separation of the US cigar business
On September 14, 2021, Swedish Match announced its intention
to separate its cigar business via a spin-o to shareholders and
a subsequent listing on a US national securities exchange. e
separation was initially expected to be completed in the second
half of 2022, at the earliest. While the Board of Swedish Match
still has the strategic intent to separate the cigar business, and
views this as a move that would further enhance the prospects for
Swedish Match’s US smokefree business, as well as for its US cigar
business, the Board decided on March 14, 2022 to suspend the
preparations for the contemplated spin-o until further notice.
e Board decision was prompted by information received
from US Food and Drug Administration (FDA) that substantial
equivalence (SE) designations had been denied for SE applications
corresponding to about 3 percent of Swedish Match’s 2021 cigar
volume. It cannot be ruled out that additional SE applications for
the cigar assortment will be denied in the rst instance as FDA
continues to work through remaining applications. Swedish
Match plans to appeal the non-SE designations by the FDA by
requesting a supervisory review and Swedish Match remains
condent that it will be given the opportunity to provide the FDA
with sucient data in order to demonstrate that the cigars in
question are substantially equivalent to their predicate products
insofar that the changes that have taken place do not raise
questions of public health.
Swedish Match 2021 77
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
This page is part of the Board of Directors Report.
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 signicant 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
willremain intense.
In the US, in Scandinavia, as well as in Other markets, Swedish
Match plans to further increase investments during 2022 to
capitalize on the growth opportunities, especially for nicotine
pouches. Within Other markets, Swedish Match notes signicant
opportunities in existing as well as in certain new markets.
Capital expenditures are expected to be of a similar magnitude
as in 2021. e eective underlying corporate tax rate in 2022,
excluding associated companies, is expected to be around 23
percent.
e Company remains committed to returning cash not needed
in operations to shareholders.
Organization
e Swedish Match head oce, where the CEO and Group sta
functions are based, is located in Stockholm in Sweden. e
Group operates in eleven countries, with production units in
seven countries and the majority of Group sales coming from
the US and Scandinavia. e organizational structure is divided
among the divisions Europe Division, US Division and Lights
Division as well as Corporate functions. e vast majority of
the Group’s employees are in the Dominican Republic, Sweden,
and the US followed by Brazil and the Philippines. e Group’s
product segments are Smokefree, Cigars, and Lights.
In Scandinavia, Swedish Match enjoys the market leading
position for its snus products, as well as holding the number two
position in the Scandinavian market for its nicotine pouches.
In Europe, Swedish Match has a presence with its nicotine
pouches in a number of countries. e Group is also present with
its niche chewing tobacco products of chew bags and tobacco
bits, as well as with snus in select countries. Production of
nicotine pouches takes place in the US, Sweden, and Denmark.
Production of snus occurs in Sweden and Denmark, while moist
snu is produced in the US. Pouch products with neither tobacco
nor nicotine are produced in Sweden. For chewing tobacco,
production takes place in the US and chew bags and tobacco bits
are produced in Denmark.
In the US, the Group is the biggest participant in the nicotine
pouch category with its ZYN brand, as well as the largest producer
of chewing tobacco. e Group also holds the third largest
position in the moist snu category and has a long-standing
presence with its General snus. Swedish Match holds the number
two position in the US market for mass market cigars (excluding
little cigars). Swedish Match has strong positions within both the
natural leaf and HTL segment. Production of cigars takes place in
the US and the Dominican Republic.
Swedish Match is the market leader for matches in many markets
throughout the world, with well-known local brands. For lighters,
the Group has strong market positions in many countries.
Production of matches takes place in Sweden and Brazil. Lighters
are produced in the Netherlands, the Philippines and Brazil. In
the Netherlands, the Fire-Up business acquired during 2021
manufactures certain products for lighting replaces, barbecues,
and stoves. Swedish Match also oers a portfolio of externally
sourced complementary products (mainly for the Brazilian
market), which include for example disposable razors, batteries
and light bulbs.
Alternative Performance Measures
Swedish Match frequently presents measures of nancial
performance which complement measures that are dened or
specied in the applicable nancial reporting framework. e
bases for presenting such measures, referred to as Alternative
Performance Measures (APM’s) are that they are used by
management to evaluate the nancial performance and believed
to give analysts and other stakeholders valuable information.
Alisting of APM’s, including the APM’s denitions, is presented
on page 133 and is also available on the Company’s website.
Change in control clauses
Swedish Match AB and certain subsidiaries in the Group are
party to agreements that include change of control clauses. Bonds
issued under Swedish Match’s 2,000 MEUR Global Medium Term
Note Program and the 1,500 MSEK Revolving Credit Facility
have clauses that can force the Company to pay back loans in a
change of control situation. Some agreements with third parties in
the Scandinavian tobacco distribution function can be cancelled
should there be a change of control of Swedish Match.
e President and three other members of the Group
Management Team are entitled to terminate their employment if
a major change for the Company should occur that signicantly
restricts their position. In such an event, these executives have
the right to a notice period of six months and severance pay for
18 months. In addition, some executives in the US operations
have change in control clauses which may be triggered by certain
events.
Guidelines for executive remuneration
e forward-looking guidelines applicable for the remuneration
to the President and other members of the Group Management
Team (GMT) are the same as adopted on the Annual General
Meeting April 2, 2020. For more information see Note 5 Personnel,
pages 94–97.
Swedish Match 2021 78
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
This page is part of the Board of Directors Report.
Proposed distribution of earnings
As shown in the balance sheet of the parent company the following funds are available for appropriation by the Annual General Meeting:
Retained earnings including Hedge reserve SEK 5,347,920,938
Profit for the year SEK 4,542,895,317
Total SEK 9,890,816,255
e Board of Directors propose that these earnings be appropriated as follows:
To the shareholders, a dividend of 1.86 SEK per share based on 1,531,235,190 shares outstanding at the end of 2021 SEK 2,848,097,453
Retained earnings to be carried forward SEK 7,042,718,802
Total SEK 9,890,816,255
e proposed dividend is proposed to be paid in two installments, with SEK 0.93 per share in May, 2022 and SEK 0.93 per share in November, 2022.
e income statements and balance sheets will be presented to the Annual General Meeting on April 27, 2022 for adoption.
e Board of Directors and the President declare that the annual report was prepared in accordance with generally accepted accounting principles in
Sweden and that the consolidated accounts have been prepared in accordance with accounting standards referred to in Regulation (EG) No 1606/2002
of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards. eannual report and the
consolidated accounts give a true and fair view of the position and earnings of the Parent Company and the Group.
e Board of Directors report for the Parent Company and the Group gives a true and fair view of the operations, position and earnings and describes
signicant risks and uncertainties facing the Parent Company and companies included in the Group.
Stockholm, March 24, 2022
Conny Karlsson Charles A. Blixt Andrew Cripps Patrik Engelbrektsson
Chairman of the Board Board member Deputy Chairman Board member
Jacqueline Hoogerbrugge Alexander Lacik Pauline Lindwall Pär-Ola Olausson
Board member Board member Board member Board member
Dragan Popovic Wenche Rolfsen Joakim Westh Lars Dahlgren
Board member Board member Board member President and CEO
Our auditor’s report was submitted on March 24, 2022
Deloitte AB
Peter Ekberg
Authorized Public Accountant
Swedish Match 2021 79
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Consolidated income statement
Consolidated statement of comprehensive income
MSEK Note 2021 2020
Sales 3 18,489 16,698
Cost of goods sold –6,249 –5,751
Gross profit 12,240 10,947
Selling expenses –3,236 –2,866
Administrative expenses –1,075 –1,116
Other operating income and expenses 4 44 14
Share of profit in associated companies 15 13 13
Settlement income 300 –
Operating profit 3, 5, 6, 7, 14, 23 8,286 6,991
Finance income 36 49
Finance costs –381 –396
Net finance cost 8 –345 –347
Profit before income tax 7,941 6,644
Income tax expense 9 –1,723 –1,756
Profit for the year 6,218 4,888
Attributable to:
Equity holders of the Parent 6,217 4,888
Non-controlling interests 1 1
Profit for the year 6,218 4,888
Earnings per share, basic and diluted, SEK
1)
10 3.97 3.04
1)
In May 2021, a share split (10:1) was made. Historical share data in this report has been restated in accordance with IAS 33.
MSEK Note 2021 2020
Profit for the year 6,218 4,888
Other comprehensive income that may be reclassified to the income statement
Translation differences related to foreign operations 21 740 –1,120
Translation differences included in profit and loss 21 0 –
Effective portion of changes in fair value of cash flow hedges 21 82 –51
Income tax relating to reclassifiable components of other comprehensive income 9 –17 11
Subtotal, net of tax 805 –1,160
Other comprehensive income that will not be reclassified to the income statement
Actuarial gains and losses attributable to pensions, incl. payroll tax 23 369 –132
Income tax relating to non-reclassifiable components of other comprehensive income 9 –91 33
Subtotal, net of tax 278 –99
Other comprehensive income, net of tax 1,083 –1,260
Total comprehensive income for the year 7,300 3,629
Attributable to:
Equity holders of the Parent 7,299 3,628
Non-controlling interests 1 0
Total comprehensive income for the year 7,300 3,629
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Swedish Match 2021 80
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
Consolidated balance sheet
MSEK Note December 31, 2021 December 31, 2020
Assets
Intangible assets 11 2,281 2,237
Property, plant and equipment 12 4,518 3,589
Biological assets 13 38 44
Right-of-use assets 14 388 278
Investments in associated companies 15 41 42
Other non-current receivables 16 1,337 935
Deferred income tax assets 9 520 640
Total non-current assets 9,123 7,765
Inventories 17 2,267 1,824
Trade receivables 18 1,843 1,577
Prepaid expenses and accrued income 155 117
Income tax receivables 167 119
Other current receivables 16 476 315
Cash and cash equivalents 19 2,121 3,411
Total current assets 7,029 7,362
Assets held for sale 20 – 28
TOTAL ASSETS 16,152 15,155
Equity 21
Share capital 390 390
Reserves 573 –232
Retained earnings including profit for the year –7,648 –7,972
Equity attributable to equity holders of the Parent –6,686 –7,814
Non-controlling interests 17 16
TOTAL EQUITY –6,669 –7,798
Liabilities
Non-current loans and borrowings 22, 27 14,197 13,514
Other non-current liabilities 25 169 258
Non-current lease liabilities 14, 22 307 208
Provision for pensions and similar obligations 23 1,445 1,503
Non-current provisions 24 466 443
Deferred income tax liabilities 9 1,397 1,268
Total non-current liabilities 17,981 17,194
Current loans and borrowings 22, 27 990 1,850
Trade payables 464 409
Income tax liabilities 88 149
Other current liabilities 25 1,603 1,875
Current lease liabilities 14, 22 96 77
Accrued expenses and deferred income 26 1,063 1,018
Current provisions 24 535 381
Total current liabilities 4,840 5,759
TOTAL LIABILITIES 22,821 22,953
TOTAL EQUITY AND LIABILITIES 16,152 15,155
For information on the Group’s pledged assets and contingent liabilities, see Note 28 Pledged assets and Note 29 Commitments and contingent liabilities and assets.
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Swedish Match 2021 81
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
Consolidated statement of changes in equity
2020
MSEK
Equity attributable to equity holders of the Parent
Note
Share
capital Reserves
Accumulated
deficit Total
Non-controlling
interest Total equity
Equity at beginning of year 21 390 928 –7,641 –6,324 16 –6,308
Profit for the year – – 4,888 4,888 1 4,888
Other comprehensive income, net of tax
1)
– –1,160 –99 –1,259 0 –1,260
Total comprehensive income for the year – –1,160 4,788 3,628 0 3,629
Dividend – – –2,020 –2,020 0 –2,020
Repurchase of own shares – – –3,099 –3,099 – –3,099
Cancellation of shares –18 – 18 – – –
Bonus issue 18 – –18 – – –
Equity at end of year 390 –232 –7,972 –7,814 16 –7,798
2021
MSEK
Equity attributable to equity holders of the Parent
Note
Share
capital Reserves
Accumulated
deficit Total
Non-controlling
interest Total equity
Equity at beginning of year 21 390 –232 –7,972 –7,814 16 –7,798
Profit for the year – – 6,217 6,217 1 6,218
Other comprehensive income, net of tax
1)
Total comprehensive income for the year – 805 6,495 7,299 0 7,300
Dividend – – –2,369 –2,369 0 –2,369
Repurchase of own shares – – –3,802 –3,802 – –3,802
Cancellation of shares –10 – 10 – – –
Bonus issue 10 – -10 – – –
Equity at end of year 390 573 –7,648 –6,686 17 –6,669
1)
Other comprehensive income included in accumulated deficit consists of actuarial gains and losses attributable to the Group’s defined pension plans, net after payroll and income taxes.
For further information on objectives, policies and processes for managing capital see Note 21 Equity.
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Swedish Match 2021 82
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
Consolidated cash flow statement
MSEK Note 2021 2020
Operating activities 31
Profit before income tax 7,941 6,644
Share of net profit in associated companies – 13 –13
Dividend received from associated companies 13 10
Depreciations, amortizations and write-downs 615 588
Adjustments for other non-cash items – 42 72
Income tax paid –1,682 –2,006
Cash flow from operating activities before changes in working capital 6,833 5,296
Changes in working capital
Increase (–)/ Decrease (+) in inventories – 299 –182
Increase (–)/ Decrease (+) in operating receivables – 276 71
Increase (+)/ Decrease (–) in operating liabilities 78 422
Net cash generated from operating activities 6,336 5,607
Investing activities
Purchase of property, plant and equipment 12, 13 –1,172 –1,126
Proceeds from sale of property, plant and equipment 60 39
Purchase of intangible assets 11 – 8 –63
Acquisition of subsidiaries – 39 –32
Repayment of financial receivables from associated companies 15 11 9
Changes in financial receivables, etc. – 7 –0
Net cash used in investing activities –1,156 –1,173
Financing activities
Proceeds from non-current borrowing 1,813 3,702
Repayment of borrowings –2,270 –1,300
Dividend paid to equity holders of the Parent –2,369 –2,020
Repurchase of own shares –3,802 –3,099
Lease payments – 89 –81
Realized exchange gain/losses on financial instruments 98 –320
Other 7 0
Net cash used in financing activities –6,612 –3,118
Net decrease/increase in cash and cash equivalents –1,431 1,315
Cash and cash equivalents at the beginning of the year 3,411 2,370
Effect of exchange rate fluctuations on cash and cash equivalents 141 –274
Cash and cash equivalent at end of year 2,121 3,411
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Swedish Match 2021 83
Auditor’s reportContent
Five year summary
Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
Notes for the Group
1
Accounting principles
All amounts referred to in the notes of the Group financial statements are in
millions of Swedish kronor (MSEK) unless otherwise stated. The amounts
within brackets refer to the preceding year, 2020.
Compliance with standards and legislation
The consolidated financial statements have been prepared in accordance
with the International Financial Reporting Standards (IFRS) and
interpretations issued by the IFRS Interpretations Committee, approved
by the European Commission for application within the EU. In addition,
RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish
Financial Reporting Board, has been applied. The Parent Company applies
the same accounting principles as the Group, except in those instances
described below in the section Parent Company accounting principles. The
annual report and the consolidated financial statements were authorized for
issue by the Board of Directors and the Group’s CEO on March 25, 2022.
Basis for the preparation of the financial reports
for the Parent Company and the Group
The financial reports are presented in Swedish kronor (SEK), which is the
functional currency of the Parent Company. Unless otherwise stated, all
amounts are rounded to the nearest million. Figures in the reports are based
on a consolidation system in SEK thousands. By rounding the numbers
in tables, totals may not always equal the sum of the included rounded
numbers. Assets and liabilities are reported at their historical acquisition
value, except for certain financial assets and liabilities and biological assets
that are reported at fair value recognized directly in profit and loss. Financial
assets and liabilities reported at fair value comprise derivative instruments
classified as financial assets reported at fair value through profit and
loss or other comprehensive income at hedge accounting. Provisions for
post-employment benefits, are reported at fair values based on actuarial
valuations, with remeasurement effects recognized in other comprehensive
income. Provisions for post-employment benefits are recognized on the
balance sheet as a net of any attributable plan assets, which are measured
at fair value at each period end. Lease liabilities and the related right of use
assets are measured at the present value of future lease payments.
Use of the assessments in the financial reports
Preparing financial reports in accordance with IFRS requires that
management make assessments and assumptions that affect the
accounting principles and reported amounts for assets, liabilities, revenues,
and costs. The assessments and assumptions are based on historical
experience and other factors that may be considered relevant under
the prevailing conditions. The actual outcome may deviate from these
assessments and assumptions. Assessments and assumptions are reviewed
on a regular basis with changes in assessments recognized in the applicable
period. Assessments made by management on the application of IFRS that
have a significant impact on financial reports, and estimations made that
could entail material adjustments in subsequent years’ financial reports, are
further described in Note 2 Critical estimates and judgements.
Accounting principles applied
The below described accounting principles have been applied consistently
in all periods that are presented in the Group’s financial statements. Any
exceptions to the accounting principles outlined below are clearly described
in the relevant disclosure to the financial statements.
New standards, amendments and interpretations
Swedish Match has adopted Phase 1 and Phase 2 of Interest Rate
Benchmark Reform (Amendments to IFRS 9, IAS 39, and IFRS 7), which
allows for hedge accounting to continue for affected hedges during the
period of uncertainty before the effects of the amendment of the interest
rate benchmark reform become clear. The Group early adopted these
amendments of IFRS 9 from 2019. The financial reports for 2021 have not
been impacted by the amendment to IFRS 9. For further details, see Note 27
Financial Instruments.
No other amendments or interpretations applicable for the Group’s
financial reporting for 2021 have had any material effect on the Group’s
financial result or position.
New IFRSs and interpretations which have not yet been applied
There are no changes in IFRS standards, amendments and interpretations
of existing standards applicable as of January 1, 2022, that are deemed as
having a significant effect on the Group’s financial result or position.
Consolidation principles Note 15, 30 and 31
The consolidated accounts are prepared in accordance with the Group’s
accounting principles and include the accounts of the Parent Company and
all subsidiaries and associated companies in accordance with the definitions
below.
Subsidiaries
Swedish Match Group has a number of subsidiaries in various countries for
the production and sale of Swedish Match products. A subsidiary is defined
as an entity that is controlled by the Swedish Match Group. There are no
subsidiaries where Swedish Match Group has any significant restriction to
access or use of assets from its subsidiaries. Furthermore, Swedish Match
does not hold any unconsolidated entities.
Consolidated financial statements in this report include all subsidiaries
which Swedish Match Group controls. Acquired companies are included
in the consolidated accounts from the date of acquisition and divested
companies are included in the consolidated accounts until the date of
divestment. All acquisitions of subsidiaries are reported in accordance with
the acquisition method where assets and liabilities in companies acquired
during the year are included in the consolidated financial statements at fair
value from the date of acquisition. Transaction costs relating to acquisition
of subsidiaries are not included in the value of the acquired assets. All
acquisition-related costs are expensed in the period when incurred.
Contingent considerations are recognized in the balance sheet at fair value
at the date of the acquisition, with any contingent payment classified as debt
subsequently remeasured through the income statement.
Non-controlling interest
Non-controlling interest can be reported as the non-controlling interests’
share of proportional net assets or alternatively at fair value, which means
that non-controlling interests have a share in any acquisition goodwill.
Reporting method can be chosen differently for each acquisition.
Swedish Match Group has two subsidiaries with non-controlling interests,
a Swedish subsidiary in which Swedish Match owns 95 percent and an
immaterial non-controlling interest in a foreign subsidiary.
Associated companies
Associated companies are companies in which the Group exercises a
significant influence but does not control the company. This normally
means that the Group holds 20-50 percent of total voting rights. Holdings
in associated companies are reported in accordance with the equity
method and are initially measured at cost. The acquisition cost amounts
to the purchase price and the valuation of acquired assets and liabilities is
performed as for subsidiaries. The carrying amount for associates includes
any goodwill, transaction costs and other group adjustments.
The Group’s share of associates post-acquisition is recognized on one
line in the consolidated income statement, after tax profits or after tax
losses, and its share of post-acquisition movements in other comprehensive
income, net of tax in the associates is recognized to the respective item in
the Group’s statement of other comprehensive income. The cumulative
post-acquisition movements are adjusted against the carrying value of the
investment.
If the Group’s share of reported losses in an associated company would
exceed the carrying value of the shares for the Group, the value of the shares
will be reduced to zero (unless the Group has provided guarantees to cover
losses incurred in the associated company). The equity method is applied up
until the date when the significant influence ceases.
Disposal of subsidiaries and shares in associated companies
Results from disposal of subsidiaries when the control is lost are recognized
in the income statement. Any remaining interests in divested entities are
remeasured to fair value, with the gain or loss recognized in the income
statement.
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If the ownership in an associate is reduced but significant influence is
retained, only a proportionate share of the amounts previously recognized
in other comprehensive income are reclassified to profit or loss where
appropriate. Results from disposal of an associate when the control is lost
are recognized in the income statement. Any remaining interests in divested
associates are remeasured to fair value, with the gain or loss recognized in
the income statement to the extent disposed externally.
Assets and liabilities held for sale Note 20
Non-current assets or a group of assets and liabilities (a disposal group) that
management intends to sell to a third party are reclassified and reported
separately in the consolidated balance sheet as assets and liabilities held
for sale. A reclassification is made when the sale is highly probable and is
expected to be sold within 12 months and that the asset (or the disposal
group) is available for immediate sale in its current condition. To be
classified as an asset or a disposal group held for sale, management must
have decided that the asset or the disposal group is to be sold and there is an
active program to locate buyers. Assets that are reclassified as held for sale
are measured at the lower of carrying value and fair value less costs to sell.
If the fair value, net of deduction for selling expenses, is expected to be less
than the carrying value, an impairment loss for the asset is recognized in the
income statement at the time of reclassification.
Discontinued operations
Divested operations, or operations classified as held for sale, are reported as
discontinued operations if they represent a separate major line of business
or geographical area of operations with operations and cash flow that can be
clearly distinguished, operationally and for reporting purposes, from the rest
of the Group. Classification as a discontinued operation takes place upon
disposal or at an earlier date when operation meets the criterions for being
classified as a held for sale. The post-tax profit or loss from discontinued
operations and the gain or loss from the sale is presented in a single amount
in the income statement as of the transaction date or as of the date when
the criterions are meet for being classified as held for sale. When a business
operation is discontinued or classified as held for sale and reported as such
prior period income statements are restated. Prior period balance sheets
are not restated.
Foreign currencies Note 4 and 8
Transactions in foreign currencies
Transactions in foreign currencies are translated into the functional
currency according to the exchange rates applicable on the transaction date.
Monetary assets and liabilities in foreign currencies are translated to the
functional currency at the exchange rate applicable on the reporting date.
Non-monetary assets and liabilities reported at their historical acquisition
values are translated at the exchange rate in effect at the transaction
date. Non-monetary assets and liabilities reported at their fair value are
converted to the functional currency at the applicable rate at the time of the
valuation. Exchange rate differences are then reported in the same manner
as other changes in value relating to the asset or liability. Exchange rate
differences arising from translation are reported in the income statement,
with exchange differences on non-monetary assets and liabilities reported
as operating income and expenses and exchange differences on monetary
assets and liabilities are reported in the net finance.
Financial reports of foreign operations
Assets and liabilities in foreign operations, including goodwill and other
Group surplus and deficit values, are translated into SEK at the exchange
rate on the reporting date. Revenues and expenses from foreign operations
are translated to SEK at an average exchange rate for the year. Translation
differences arising from currency translation of foreign operations are
reported as a translation reserve in equity through other comprehensive
income. The cumulative translation difference relating to a specific subsidiary
is recycled through the income statement when the subsidiary is divested.
The Group’s most significant currencies are shown in the table below:
Average exchange rate
January–December
Exchange rate on
December 31
Country Currency 2021 2020 2021 2020
USA USD 8.58 9.20 9.04 8.19
Euro zone EUR 10.15 10.49 10.23 10.04
Denmark DKK 1.36 1.41 1.38 1.35
Brazil BRL 1.59 1.81 1.59 1.57
Norway NOK 1.00 0.98 1.03 0.95
Reporting by segment Note 3
The Group’s reportable segments are based on the internal reporting
structure. Swedish Match’s chief operating decision maker is the Group’s
President and CEO, who monitors and makes decisions about operating
matters based on product segments. The Group’s reportable segments
in 2021 were three product segments: Smokefree, Cigars and Lights. The
reportable segments represent all Swedish Match products which are
produced and sold by the Group’s business units. Reportable segments have
been aggregated when there are similarities in the segments’ economic
characteristics, such as gross profit margins, level of capital investments
and impact from variations in the business cycle. Also, similarities in the
type of product, manufacturing process, customers, distribution process and
regulatory environment have been considered to determine the appropriate
aggregation of reportable segments. There are no internal sales between
reportable segments and the Group’s financial costs as well as taxes are not
allocated to reportable segments. Operating assets and liabilities are not
monitored on a segment basis.
Other operations consist of corporate functions and the Swedish
distribution function. Corporate functions include, among others, regulatory
affairs, legal and financial services. The distribution function provides
services to Swedish Match in Sweden and Norway as well as to other
manufacturers within the Swedish distribution network. The revenues from
Other operations are attributable to the distribution service for the delivery
of third-party tobacco products on the Swedish market. The revenues from
sales of Swedish Match’s products on the Swedish and the Norwegian
markets are reported as part of the product segment Smokefree. Revenue
in Other operations are not seen as an important performance indicator
and are not considered for resource allocation within the Group. The result
from Other operations consists of the consolidated result for the corporate
functions, of which the distribution function is making a profit from the
immaterial distribution fee and the other functions are normally making
losses.
Revenue Note 2 and 3
Revenue for Swedish Match refers to sale of goods manufactured, sale
of third-party products where Swedish Match is acting as a principal and
income from distribution service for delivery of third-party products where
Swedish Match is acting as an agent. The sales of goods or services are
recognized based on the amount expected to be received relating to the sales
transactions and when the transfer of control of the goods or services has
passed to the customers.
The expected consideration recognized reflects estimates of potential
outcome of variable considerations as well as expected reimbursements
for product returns. Refund liabilities for returned goods and variable
considerations are recognized on the balance sheet as operating provisions.
The main revenue streams for the Group’s reportable segments arise from
sale of goods manufactured by the Group. Within Lights, a minority part of
the revenue also come from the sale of third-party products. Revenue within
Other operations are mainly derived from income of logistics services for
delivery of third-party products to retail customers. For further information
on the assessment of the classification of principal or agent refer to Note 2
Critical estimates and judgements.
Revenue for the sale of goods and logistics services are recognized at the
point when the control of the promised good or service is transferred to the
customer at the expected consideration to be received for such delivery. The
Group has no material unconditional rights to receive considerations and no
material payments are received in advance. Based on this no contract assets
have been recognized in the Group balance sheet.
NOTE 1 Continued
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Swedish Match 2021 85
The timing of transfer of control of the goods or services to the customer is
determined for each revenue transaction. Indications of transfer of control
are being considered when Swedish Match has a present right to payment
or when the customer has legal title, a physical possession, the significant
risks and rewards of ownership or has accepted the asset. If control is
retained and the promised obligations are not satisfied, revenue is not
recognized.
A majority part of Swedish Match customers are retailers and distributers.
Within Smokefree and Cigars, customer credit terms are on average 10 days.
Within Lights, customer credit terms are on average 70 days, with credit
terms to customer could be in the range of pre-payment up to 90 days.
Uncollected amounts billed to customers at period end are recognized
as trade receivable in the Group’s balance sheet. The risk for impairment
losses on trade receivable are relatively low. Allowances for impairment
losses on accounts receivable are assessed in accordance with IFRS 9, for
more information refer to below section Impairment of financial assets.
Any incremental costs for obtaining a customer contract and/or costs to
fulfil a customer contract are capitalized as assets if such costs meet the
criteria for capitalization in IFRS 15. Currently, the Group does not have any
significant incremental costs for obtaining or fulfilling a customer contract
to be recognized on the balance sheet.
For further information on the Group’s sales for reportable segments and
disaggregation of revenue streams, see Note 3 Segment information.
Intangible assets Note 2 and 11
Goodwill
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the acquirer’s previously held equity interest in the acquiree
(if any) over the net of the acquisition-date amounts of the identifiable
assets acquired and the liabilities assumed. Goodwill that has arisen
from the acquisition of associated companies is included in the carrying
amount for participations in associated companies. Goodwill is valued at
acquisition value less any accumulated impairments. Goodwill is allocated
to cash-generating units and is tested annually, or upon indication, for
impairment.
Trademarks and other intangible assets
Trademarks and other intangible assets acquired by the Group are reported
at acquisition value less accumulated amortization and impairments.
Acquired trademarks defined with indefinite useful life have been assessed
having no foreseeable limit to the period over which the asset is expected to
generate net cash inflows for the Group. Trademarks with indefinite useful
life refer to well-established trademarks within their respective areas, which
the Group intends to retain and further develop. Indefinite-lived intangible
assets are not amortized but instead tested for impairment annually or
when there is an indication of impairment. In case there are borrowing costs
that are directly attributable to the acquisition, construction or production
of intangible assets that take substantial time to complete, such costs are
included in the acquisition value.
Research costs for obtaining new technical expertise are expensed
when incurred. Development costs in the case of which the research or
other knowledge are applied in order to achieve new or improved products
or processes are reported as other intangible asset in the balance sheet,
provided the product or process is technically and commercially usable.
Other costs are recognized in the income statement as they arise. Other
intangible assets primarily include software, licenses, etc.
Amortization
Amortization is recognized in the income statement straight-line over the
estimated economic useful life of the intangible assets, unless the useful
life is indefinite. Assessment of an intangible asset’s residual value and
useful life is performed at least annually. Goodwill and trademarks with
indefinite useful life are tested for impairment annually or if indications
arise of a decline in the value of the asset. Amortizable intangible assets are
amortized from the date that they are available for use. The estimated useful
life periods are individually assessed but normally in the range as indicated
below:
• trademarks and patents 10–20 years
• other intangible assets and capitalized development expenditures 5–7 years
Property, plant and equipment Note 12
Property, plant and equipment are reported in the Group at their acquisition
value, less accumulated depreciation and impairments, if applicable. The
acquisition value includes the purchase price and costs directly attributable
to the asset in order to transport it to its place of use in the appropriate
condition for being used in accordance with the purpose of the acquisition.
Borrowing costs directly attributable to acquisition, construction or
production of an asset that takes a substantial time to complete are included
in the acquisition value.
Depreciation
Depreciation is applied straight-line over the asset’s estimated economic
useful life. Land and construction in progress are not depreciated. Larger
machineries and buildings are depreciated based on the economical useful
life of significant components. The depreciation time for larger fixed assets
and buildings could therefore differ due to different expected economic life
of the asset’s different components. The estimated useful life periods are
normally:
• buildings, owner-occupied properties 12–50 years (applied on the
acquisition cost of the assets allocated to applicable components)
• machinery and other technical equipment 5–12 years
• equipment, tools and fixtures 5–10 years
Assessment of a tangible asset’s residual value and useful life is performed
at least annually.
Impairment Note 2 and 11
The carrying amounts for the Group’s intangible and tangible assets,
including right of use assets and investments in associated companies
are tested at least annually to evaluate whether there is an indication of an
impairment. Should such an indication exist, the asset’s recoverable amount
is assessed. An impairment charge is recognized in the income statement
when the carrying amount exceeds the calculated recoverable amount.
For goodwill and other intangible assets with an indefinite useful life and
intangible assets that are not yet ready for use, their recoverable amount
is calculated at least annually, or when an impairment is indicated. The
recoverable amounts, defined as the higher of value in use and fair value
less cost of disposal, are normally determined on the basis of value in use,
applying discounted cash flow calculations. An impairment charge against
the income statement is made when the carrying amount exceeds the
recoverable amount. For the purpose of impairment testing, goodwill and
trademarks with indefinite life are allocated to the lowest level of groups of
cash generating units based on product groups and geographical markets,
at which it is monitored by management.
Biological assets Note 13
The Group has forest plantations to secure its raw material needs for
match manufacturing. Biological assets in the Group’s balance sheet are
measured at fair value less estimated selling expenses. The biological
assets are regularly measured to fair value based on estimated market
values. Estimated selling expenses includes all costs that would be incurred
in relation to disposal of the biological assets, with the exception of cost for
providing the biological asset to market.
Leases Note 2 and 14
Real estate leases, such as rental of office and factory premises, warehouses
and storages, represent the major part of the total value of leases within the
Group. The duration of real estate leases is typically 3–5 years, excluding
assessments of the likelihood of utilizing extension and termination options.
The Group also hold lease contracts for machinery, equipment and vehicles.
The lease liabilities are measured at the present value of future
non-cancelable lease payments, including other expected future payments
relating to the lease if such are deemed reasonably certain (for example
expected payments for optional periods relating to lease term extension
options, purchase options etc.). The present value of the future lease
payments is discounted using the interest rate observed in the period
when the lease contract commences or is modified. In most cases, the
measurement of the right-of-use assets equal the lease liabilities. Any
additional costs directly attributable to get the access to the asset are
also included in the measurement of the right of use assets as well as any
replacement costs to remove or restore the asset after the lease term as
required by the contract.
Non-lease component payments and variable lease payments, that do
not depend on an index or rate attributable to the fixed lease payment, are
not included in the measurement of the lease liabilities and are expensed
directly when incurred.
NOTE 1 Continued
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A lease contract is initially recognized on the balance sheet at the date when
the underlying asset is available for use, i.e. at the commencement date. The
depreciation of the right-of-use asset is usually on a straight-line basis over
the lease term.
In subsequent periods, if the lease payments or the lease term changes
for an existing contract, the lease liability will be revalued to reflect the
changes in the future lease payments. The right-of-use asset will be
adjusted for any remeasurement effects of the lease liability in the same
period. Assessment of key parameters of lease contracts that could have an
impact to the reported amounts are performed regularly.
Exemptions
In the accounting for right-of-use assets and lease liabilities, Swedish Match
apply the practical expedients for short-term leases (contracts with a lease
term of 12 months or less) and leases for which the underlying asset is of
low value. The Group’s lease contracts of low value are mainly leasing of
office equipment, water dispensers, coffee machines and IT equipment for
individual use. Such lease contracts are not included in the Group’s lease
liabilities and related right-of-use assets and are reported with the lease
payments expensed in the income statement when incurred. In addition,
leases of intangible assets, such as software, licenses, etc., are also
excluded.
The practical relief for rent concession relating to the outbreak of
COVID-19 pandemic has not been applied as Swedish Match has not received
any significant COVID-19 related rent reductions during 2021.
Discount rate
The key parameters for determining the discount rates are the type
of the underlying asset of the lease contract, the lease term and the
economic environment where the asset will operate. The Group’s policy for
determining the discount rates is based on the incremental borrowing rate
for lease contracts. The incremental borrowing rate is the rate of interest
that Swedish Match would have to pay to obtain an asset of similar value to
the right-of-use asset, adjusted for a risk premium relating to the economic
environment where the asset operates at the given time in relation to the
lease term of the contract.
Inventory Note 17
Inventories are recognized at the lower of cost and net realizable value
on the balance sheet date. Cost is calculated using the first-in, first-out
(FIFO), or weighted average cost formula. The cost of finished goods and
work in progress includes raw material, direct labor, other direct expenses
and production-related overheads, based on a normal production level.
Expenses arising from the transport of items to their present location
and condition are included in the acquisition value of inventories. Interest
expenses are not included in the measurement of inventories.
The acquisition value for cut timber in inventory is determined in
accordance with the accounting principles for biological assets and is
reported at the fair value with deductions for estimated selling expenses at
the time of the trees were harvested.
Employee benefits Note 5 and 26
Short term employee benefits
Short term employee benefits are recognized as expenses in the income
statement when the services are received. Costs for the profit-sharing
program and incentive plans (variable salary) are recognized on a pro-rata
basis during the financial year when the compensation is earned based
on an estimated outcome. In connection with the annual accounts, a final
calculation of the year’s cost is performed based on the actual outcome
for the year. Any adjustments of previously reported costs for incentive
programs are also recognized in the period when there is a change in the
estimated outcome for each program.
Long term employee benefits
A long term incentive program is introduced by the Board of Directors
to certain executives, where the executives may, after a three-year
performance period, receive a cash bonus based on the established
performance targets for the performance period. Costs for the long term
incentive plan are expensed during the service year including social security
fees applicable for each country where the executives work. Costs for the
incentive plan are reported as personnel costs with corresponding amount
reported as a long term deferred compensation provision on the balance
sheet. The accrual is subject to review based on actual performance during
the performance period with any changes in the estimate taken through the
income statement.
Termination benefits
The Group recognizes termination benefits when there is an event that gives
rise to an obligation to an employee when employment is terminated by the
Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognizes
termination benefits at the earlier of the following dates: (a) when the group
can no longer withdraw the offer of those benefits; and (b) when the entity
recognizes costs for a restructuring that involves the payment of termination
benefits. In the case of an offer made to encourage voluntary redundancy,
the termination benefits are measured based on the number of employees
expected to accept the offer.
Post-employment benefits Note 2 and 23
Within the Group there are a number of defined contribution and defined
benefit pension plans, some of them with plan assets in special foundations
or similar institutions. The pension plans are financed by payments from
the Group company concerned and its employees. Independent actuaries
compute the size of the commitments attached to each plan and reevaluate
the pension plan assumptions each year.
Pension fees for defined contribution plans are reported as an expense in
the income statement as incurred. Pension costs for defined benefit plans
are calculated according to the Projected Unit Credit Method in a manner
that distributes the cost over the employee’s remaining active working
life. These costs are valued at the present value of the expected future
disbursements using a discount rate that corresponds to the interest rate
on high quality corporate bonds or government bonds with a remaining
maturity that approximates the particular commitments. Service cost, past
service cost and any administration costs relating to post-employment
defined benefit plans are classified as operating cost. A finance component
calculated based on the discount rate on the net liability or net asset is
recognized in the net finance cost. The finance component is recognized as
interest expense or interest income net by plan.
For the US defined benefit plans Swedish Match determine the obligation
effective discount rate based on the single equivalent rate such that the
present value of the plan’s obligation cash flows using the single rate equals
the present value of those cash flows using the corresponding spot rate
along the yield curve for high quality corporate bonds.
The effective rates for interest on the defined benefit obligation and
service cost are the single equivalent rates that result in the same value
when applied to the defined benefit obligation and service cost, respectively.
For the larger US post-employment defined benefit plans the same
process is applied to the plan’s service cost cash flows to determine the
effective discount rate associated with the service cost.
For the other plans, Swedish Match applies the single weighted average
discount rate based on the yield curve for high quality corporate bonds used
to measure the obligation and pension expense.
In the Swedish Match consolidated balance sheet, the pension
commitments for funded plans are reported net after deductions for the fair
value of plan assets. Funded plans with net assets, that is, assets in excess of
obligations, are reported as non-current receivables. When the calculation
leads to a net asset and there is no minimum funding requirement, the
carrying value of the net asset is limited to the lower of the surplus in the
plan and the present value of future service cost to be borne by the Company.
Calculating the discounted value of defined benefit obligations and the
fair value of plan assets can give rise to remeasurement gains and losses.
These arise when actual outcome deviates from projected outcome or when
assumptions made earlier are changed. Measurement differences that arise
from the revaluation of the post-employment benefit plans are recognized in
other comprehensive income as actuarial gains and losses in the period as
they occur.
When there is a difference between how pension costs are determined
for a legal entity and the Group, a provision or claim relating to a special
employer’s salary tax based on this difference is recorded. The provision or
claim for special employer’s salary tax is included in the net present value
of the net obligation or net asset. Special employer’s salary tax refers to
pension plans in Sweden.
In Sweden, the Group has post-employment defined benefit obligations for
salaried personnel which are insured by Alecta. Alecta is the largest Swedish
NOTE 1 Continued
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life insurance company and safeguards the majority of the private sector’s
defined benefit pension plans, i.e., the ITP-plan. Alecta is not able to provide
specific information for each customer’s obligations and fair value of related
assets which is necessary information for Swedish Match in order to account
for the obligations in accordance with the rules for defined benefit plans.
Therefore, all obligations relating to the Swedish ITP-plan are accounted
for as defined contribution plans in accordance with the rules for multi-
employer plans.
Provisions Note 24
A provision is reported in the balance sheet when the Group has an existing
legal or informal obligation as a result of an event that has occurred, it is
probable that expenditure will be required to settle the obligation and when a
reliable estimate of the amount can be made.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the end of the
reporting period, considering the risks and uncertainties surrounding the
obligation. When a provision is measured using cash flows estimated to
settle the present obligation, the carrying amount is the present value of
those cash flows (where the effect of the time value of money is material).
Financial income and expenses Note 8
Financial income and expenses consist of interest income on bank balances,
receivables, interest-bearing securities and dividend income, interest
expense on loans, leases, benefit obligations, exchange rate differences,
unrealized and realized gains on financial investments and derivative
instruments used in financial activities. Exchange rate differences arising
from operating assets and liabilities are reported in operating profit.
The effective interest method is used when calculating the amortized cost
of the financial asset or the financial liability and when allocating the interest
income or interest expense over the relevant period. The effective interest
rate is the rate that discounts estimated future cash flows. Interest income
or expense include accrued amounts of transaction costs and, if applicable,
discounts, premiums and other differences between the original value of the
receivable or liability and the amount received or paid at maturity.
Financial instruments Note 16, 18, 19, 22, 25 and 27
Financial instruments reported in the balance sheet include, on the asset
side, cash and cash equivalents, trade receivables, shares and other equity
instruments, loans receivable, and derivatives. Financial instruments on the
liabilities and equity side are trade payables, lease liabilities, issued liability
and equity instruments, loans and derivatives.
Financial assets and liabilities are offset only when there is a legally
enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability
simultaneously.
A financial asset (or a part of a financial asset) is derecognized from the
balance sheet when the risk and the right to receive cash flow from the
instrument has ceased or been transferred to another party. A financial
liability (or a part of a financial liability) is derecognized from the balance
sheet when the obligation is settled or discharged. Financial assets and
liabilities are recognized and derecognized applying settlement date
accounting.
Financial instruments are reported initially at their acquisition value,
corresponding to the instruments fair value, except for trade receivables,
which are initially measured at their transaction price. Subsequent reporting
depends on how they are held and classified in accordance with the criteria
below.
Financial assets
Financial assets which are debt instruments, are classified depending
on the business model for managing the financial assets and the asset’s
contractual terms of the cash flows.
Financial assets are classified at the initial recognition, and subsequently
measured, at either amortized cost or fair value. The classification of
financial assets depends on the business model for managing the financial
assets and whether the contractual terms of the cash flows are solely
payments of principal and interest. The business model determines whether
cash flows will result from collecting contractual cash flows, selling the
financial asset, or both. There are two business models into which the Group
classifies its financial assets.
• Financial assets measured at amortized cost
• Financial assets measured at fair value through profit and loss (FVTPL)
Financial assets measured at amortized cost
Financial assets that are held for collection of contractual cash flows
which represent solely payments of principal and interest are measured
at amortized cost. Included in this category are cash and cash equivalents,
along with loan receivables and trade receivables. Interest income from
these assets are reported in the income statement using the effective
interest rate method.
Cash and cash equivalents consist of cash and immediately available
balances with banks and similar institutions, as well as short-term liquid
investments with a maturity of less than three months from acquisition,
which are exposed to only an insignificant risk of value fluctuations.
Trade receivables have an anticipated short duration and are reported
at the amount expected to be received after deductions for expected credit
losses.
Financial assets measured at fair value through profit and loss (FVTPL)
Financial assets in this category do not meet the criteria for amortized cost
or fair value through other comprehensive income and are measured at
fair value through profit and loss. The financial assets in this category are
held for trading and reported as other current receivables, measured at fair
value. They include the Group’s currency derivatives that are not used for
hedge accounting.
Impairment of financial assets
The Group recognizes a loss for expected credit losses for financial assets
that are measured at amortized cost. Currently, financial assets measured
at amortized cost refer mainly to accounts receivables and cash and cash
equivalents. Changes in expected credit losses are recognized in profit and
loss as of the initial recognition at each balance sheet date.
Swedish Match applies the simplified approach to measure expected
credit losses, which means that expected credit losses are measured on
the remaining lifetime of the financial asset. Historical information is used
to assess expected credit losses. In addition, current and forward-looking
information available is also considered to reflect current and future
conditions, including discounting factor for time if relevant. Customers’
credit risks are regularly assessed, and accounts receivables are written off
when it is deemed that the customer has no ability to pay the outstanding
invoice.
Cash and cash equivalents are covered in the general approach for credit
risk allowances, which means that if there have been significant changes in
the credit risk since initial recognition, the expected credit loss is measured
on the assets’ lifetime expected credit loss. The general approach is based
on the rating of the counterparty, and due to high ratings of the Group’s
main counterparties, and short duration of the assets, the total amount
of credit risk is immaterial. For cash and cash equivalents, low credit risk
simplification is applied. In addition, receivables on Group companies and
associated companies as well as other receivables and accrued income are
covered by the general approach.
Financial liabilities
The Group classifies financial liabilities, at initial recognition, into two
categories:
• Other financial liabilities measured at amortized cost
• Financial liabilities measured at fair value through profit and loss (FVTPL)
Other financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost include trade payables,
lease liabilities, loans and borrowings, and accrued interest, which are not
held for trading. These liabilities are classified as other financial liabilities,
which means that they are initially reported at the amount received after
deductions for transaction costs. After the date of acquisition, loans are
measured at amortized cost in accordance with the effective interest rate
method. The financial liability is derecognized when the obligation under
theliability is discharged or expires.
Financial liabilities measured at fair value through profit and loss (FVTPL)
Financial liabilities in this category are reported as current financial
liabilities, measured at fair value. These financial liabilities are held for
trading and include the Group’s currency derivatives that are not used
for hedge accounting. Changes in fair value of the financial liabilities are
recognized in the income statement as profit or loss. Financial liabilities
relating to contingent considerations on acquisitions, for which IFRS 3 is
applied, are measured at fair value with any changes recognized in profit
andloss.
NOTE 1 Continued
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NOTE 1 Continued
Derivatives and hedge accounting
The Group uses derivative financial instruments, such as interest rate
swaps and forward currency contracts to cover the exposure of interest
rate and foreign exchange risks. These derivatives are initially recognized
at fair value on the date of inception of the contract and are subsequently
remeasured to their fair value at each reporting date. Transaction costs for
derivative instruments at fair value are reported in the income statement
at initial recognition. Derivatives are carried as financial receivables when
the fair value is positive and financial liabilities when the fair value is
negative. The components consist of the derivatives’ fair value according to
market conditions and the exchange rate differences between inception and
reporting date. The derivatives used are mainly cross currency interest rate
swaps (a combination of interest and currency swap) to hedge funding in
foreign currencies to SEK. These derivatives have a fully matched cash flow
to the underlying issued bonds.
Derivatives used for hedge accounting
Swedish Match applies hedge accounting in which derivatives were entered
into in order to manage interest rate risk. Changes in fair value affecting
derivative instruments are reported as fair value in the income statement
depending on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged.
When hedge accounting is applied, hedges are classified into:
• Cash flow hedges when hedging the exposure to variability in cash flows
that is attributable to a particular risk associated with a recognized asset
or liability.
• Fair value hedges when hedging the exposure to changes in the fair value
of a recognized asset or liability or an unrecognized firm commitment.
At the inception of a hedge relationship, the Group determines the economic
relationship to which it wishes to apply hedge accounting by identifying the
critical terms, such as nominal amount, currency, settlement and maturity
dates, and interest and repayment dates. The Group also documents its
risk-management objectives and strategy for undertaking the hedge
transactions. The documentation includes identification of the hedged item,
the hedging instrument, the nature of the risk being hedged and how the
Group assesses the prospective effectiveness of changes in the hedged
instrument’s fair value in offsetting the exposure to changes in the hedged
item’s fair value or cash flows attributable to the hedged risk. The hedges
are matched in all critical terms, are expected to be highly effective, and are
assessed on an ongoing basis based on requirements documented in IFRS
9. Any ineffectiveness is measured by the hypothetical derivatives method
if the critical terms would be different. The hypothetical derivative method
is a model that estimates the effectiveness of a cash flow hedge relation
which means that the risks of the hedged item (the loans) are mirrored in
a hypothetical instrument which is only used to be compared to the actual
derivative. The method is a way to quantify the part of the fair value of the
actual instrument that is effective in the hedge. The method results in
two amounts disclosed, one to quantify the effectiveness and one that is
accounted for as ineffectiveness. The latter is nil in a theoretical perfect
hedge.
Sources of ineffectiveness could be the impact of credit risk on the fair
value of the derivatives or differences in valuation input. The Group assesses
that existing hedging relationships all qualify as continuing hedging
relationships and continue to be effective. The full fair value of a hedging
derivative is classified as non-current receivable or liability when the
remaining hedged item is more than 12 months and as current receivable or
liability if the maturity is equal to or shorter than 12 months.
Cash flow hedges
The Group uses derivatives in order to convert its debt payments in foreign
currency or floating rate debt in SEK into fixed interest payments in SEK,
by which hedge accounting according to the cash flow hedge technique is
applied. The hedging relationship consists of eligible hedging instruments
and items, with the principle that the critical terms and the economic
relationship of the hedged item and the hedging instrument are identical
and match with a hedge ratio of 100 percent, meaning that they are effective
and no rebalancing is expected to occur. Fair value changes arising from
the revaluation of derivatives that are part of a cash flow hedge relationship
and are considered to be effective according to the definition in IFRS 9,
are measured at fair value in other comprehensive income (FVOCI) and
are accumulated in the cash flow hedge reserve within equity, and any
ineffective portion is recognized directly in the statement of profit and loss.
Reclassification from the hedge reserve through other comprehensive
income into the income statement is made either when the hedged item
affects the income statement or when the hedged item has ceased to exist,
for instance when issued debt is repurchased.
Fair value hedges
In cases where fixed interest rate obligations are converted into floating
interest rate obligations, hedge accounting according to the fair value
hedge technique is applied. The fair value changes arising from revaluation
of derivatives are measured at fair value through profit and loss, and the
related value change from the hedged item is similarly recognized in profit
and loss thus offsetting the effective portion in the hedge relationship.
Swedish Match had no fair value hedges at December 31, 2021.
Derivatives in foreign currency not used for hedge accounting
To reduce the risk of exposure of assets or liabilities against exchange rate
risks, forwards are used to convert foreign currencies into SEK. Forwards
are also used for certain binding contracts. For those derivatives to which
hedge accounting cannot be applied, changes in fair value are measured at
fair value through profit and loss and reported in net finance cost. Changes in
value relating to operations-related receivables and liabilities are reported
in operating profit.
Income taxes Note 9
Income taxes, consisting of current tax and deferred tax, are reported in the
income statement except when the underlying transactions are reported
in other comprehensive income, in which case the related tax effect is also
reported in other comprehensive income.
Current tax is tax that shall be paid or is received for the current year, with
application of tax rates that are enacted on the reporting date. Adjustments
of current tax attributable to earlier periods are also reported as current tax.
Deferred tax is calculated using the balance sheet method, using
temporary differences between reported and taxable values of assets and
liabilities as the starting point. The following temporary differences are not
taken into account: temporary differences from first reporting of goodwill,
first reporting of assets and liabilities that are not the result of business
combinations and which, at the time of the transaction, do not affect either
the reported or the taxable earnings, or temporary differences attributable
to shares in subsidiaries and associated companies that are not expected
to be reversed in the foreseeable future. Valuation of deferred tax is based
on how the carrying amounts for assets or liabilities are expected to be
realized or regulated. Deferred tax is calculated by applying tax rates or tax
regulations that are enacted or substantively enacted on the reporting date.
Deferred tax assets related to deductible temporary differences and tax loss
carryforwards are only reported to the extent that it is likely that they will be
utilized.
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NOTE 1 Continued
Share capital Note 21
Repurchases of own shares are reported as a reduction directly in equity.
Proceeds from disposal of own shares are reported as an increase directly
in equity. Any transaction costs attributable to purchases or disposal of own
shares is reported directly in equity.
Earnings per share Note 10
The computation of earnings per share is based on net profit for the year
attributable to the shareholders of the Parent Company and on the weighted
number of shares outstanding during the year. There are no potential
dilution effects of shares at December 31, 2021.
Contingent liabilities Note 29
A contingent liability is reported when there is a potential commitment from
previous events and whose occurrence is confirmed only by one or more
uncertain future events or when there is a commitment that is not reported,
as a liability or provision, because it is unlikely that an outflow of resources
will be required.
Parent Company accounting principles
The annual report of the Parent Company has been prepared in accordance
with the Annual Accounts Act (1995:1554) and RFR 2 Accounting for Legal
Entities issued by the Swedish Financial Reporting Board. RFR 2 states that
in the annual report for the legal entity, the Parent Company shall apply all
IFRS standards and statements approved by the EU as far as this is possible
within the framework of the Annual Accounts Act and with respect to the
connection between accounting and taxation.
There are no new or changed accounting principles to be adopted for
the Parent Company as of January 1, 2021. Differences in the accounting
principles between the Parent Company and the Group are described below.
Subsidiaries and associated companies
Shares in subsidiaries and associated companies are valued at cost. This
means that transaction costs relating to acquisitions are included in the
acquisition value. The Parent Company held no investments in associated
companies at December 31, 2021.
Post-employment benefits
The Parent Company applies different principles for computing defined
benefit plans than those specified in IAS 19. The Parent Company follows
the provisions of the Pension Security Act and the regulations of the
Swedish Financial Supervisory Authority, since that is a prerequisite for tax
deductibility. For the foreign pension plan local regulations are used when
calculating the benefit.
Key differences compared to Group principles are how the discount rate
is determined, that computation of the defined benefit obligations occurs
according to current salary levels without assumptions regarding future
wage increases, and that all actuarial gains and losses are reported in the
income statement as they are incurred. Another difference is that no asset
is recognized if the plan assets, valued at market value, exceed the defined
benefit obligations. However, if the value of the plan assets is less than the
defined benefit obligations, a provision is recognized.
Taxes
In the Parent Company, untaxed reserves are reported including deferred tax
liabilities.
Group and shareholder contributions
Shareholder contributions are transferred directly to the recipient’s equity
and are capitalized in shares and participations by the contributor, to the
extent that an impairment loss is not required. Group contributions, received
and granted, are reported in the income statement as appropriations.
Leases
In the Parent Company all leases of fixed assets and rental of premises are
reported as operating leases. Lease charges are expensed straight-line over
the lease period.
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2
Critical estimates and judgements
The preparation of the financial statements in accordance with IFRS requires
management to make assessments, estimates and assumptions that affect
the application of accounting principles and the amounts recognized as
assets, liabilities, income and expenses. The actual outcome could differ
from these estimates. Assessments and assumptions are reviewed on a
regular basis with changes in assessments recognized in the applicable
period. Below are the most important estimates and assumptions made by
management:
Classification as principal or agent Note 3
The most significant impact on the Group’s revenue recognition is the
assessment of control indicators for the sale transactions to determine
whether Swedish Match is acting as a principal or as an agent. Such
judgements impact the amount of reported revenue and operating expenses,
but do not impact net income or cash flows.
Revenue relating to sales transactions where Swedish Match is acting as a
principal are recognized as gross revenue with the related cost of the goods
sold as operating costs. If the Group sells goods or services as an agent
sales and payments to suppliers are recorded in revenue on a net basis,
representing the margin/commission earned.
Given the control indicators, Swedish Match has assessed that for the sale
of goods from the Group’s reportable segments, Swedish Match is acting
as a principal with the revenue and the operating costs recognized as gross
amounts (net after allowances for estimates of potential outcome of variable
considerations as well as expected reimbursements for product returns).
Furthermore, it has been assessed that sale of goods in the Swedish
distribution function relating to the delivery of third party tobacco products
should be reported as if it acts as an agent. For most of Swedish Match
transactions for the delivery of third party tobacco products in Sweden,
Swedish Match does not have exposure to significant risks and rewards
associated with the third party products from delivery to the Swedish
distribution function’s warehouse until delivery to retail. Swedish Match’s
distribution function does not provide any marketing nor any sales activities
related to such products. Consequently, the distribution function recognizes
revenues equaling the net commission earned, i.e., the distribution fee
for the delivery service of third party tobacco products. Accordingly,
inventory relating to the third party tobacco products for which the Swedish
distribution function is acting as an agent, and has limited control over such
inventory, is not recognized in Swedish Match’s balance sheet.
Intangible assets Note 11
Intangible assets within Swedish Match essentially consists of goodwill and
trademarks. Assessments are made on an ongoing basis to ensure that the
book value of goodwill and trademarks does not exceed their recoverable
amount.
Intangible assets with indefinite useful lives are not amortized, but
instead tested for impairment at least annually or when circumstances
indicate that the value of the intangible assets is impaired. Impairment tests
include significant judgements made by management, such as assumption
of projected future cash flows used in the valuation of the assets. Also,
climate related matters have been considered but assessed to have no
significant impact. Future events could cause management to conclude that
impairment indicators exist and that an intangible asset should be impaired.
An impairment loss could have a material impact on the financial condition
and result of operations. During 2021 no impairment loss on intangible
assets has been recognized.
The Group’s intangible assets as of December 31, 2021 amounted to 2,281
MSEK, amortizations amounted to
–75 MSEK. The amount for goodwill,
which has been included in intangible assets, amounted to 1,301 MSEK.
Post employment defined benefits Note 23
Costs and liabilities attributable to post-employment defined benefit plans
are recognized in the Group’s financial statements based on actuarial
calculations. Actuarial calculations are based on assumptions on the
discount rate, future mortality, rate of compensation increases etc., often for
a long time period. The actual outcome could differ from the assumptions
made which can lead to an adjustment to the amount recognized in the
balance sheet. The benefit obligations of the Group’s defined benefit pension
plans and post-employment medical benefit plans as of December 31, 2021
were estimated to exceed the fair value of plan assets by 1,305 MSEK.
Lease contracts Note 14
Most of the Group’s lease contracts are recognized as right-of-use assets
and lease liabilities on the consolidated balance sheet and are affected
by management’s judgement and estimates of certain variables that
have a direct impact on the reported balances. The most significant is
the assumption on the discount rates applied in the measurement of
the lease liabilities and the corresponding right-of-use assets. Other
judgements that may have a significant impact on the reported balances
are assessments of the likelihood of using or not using extension and
termination options in lease contracts. In assessing whether an extension
or a termination option is reasonably certain to be exercised or not, all
relevant facts and circumstances that create an economic incentive are
considered. For example the leased assets relevance to the operation, cost
of substitute the leased asset, the availability of similar assets, investments
or customizations to the leased assets, economic incentives regarding the
contract terms, etc. During 2021, revaluation of lease contracts has been
made to an amount of 18 MSEK, mainly attributable to reassessment for
utilization of extension options for rental agreements of stores.
As per December 31, 2021, the Group’s lease liabilities amounted to
403MSEK and corresponding balance for the right-of-use assets amounted
to 388 MSEK.
Legal disputes Note 29
Swedish Match is involved in a number of legal proceedings. Although
the Group is convinced that it has a strong position in these disputes, an
unfavorable outcome cannot be ruled out, and this could have an adverse
effect on the Group’s earnings.
Assets held for sale and Discontinued operations Note 20
On September 14, 2021, Swedish Match announced its intention to separate
its cigar business via a spin-off to shareholders and a subsequent listing on
a US national securities exchange. The separation was initially expected to
be completed in the second half of 2022, at the earliest. While the Board of
Swedish Match still has the strategic intent to separate the cigar business
it was on March 14, 2022 decided by the Board to suspend the preparations
for the contemplated spin-off until further notice. The intension and the
work to prepare for listing requirements and operational readiness of the
cigar business has continuously given rise to judgement by management
primarily related to the timing of when to present the business as held for
sale and discontinued operations. Conditions evaluated include Swedish
Match commitment to the distribution, whether the distribution is highly
probable and available for immediate distribution in its current form. As per
December 31, 2021 management made the assessment that conditions to
present the cigar business as discontinued operations were not met.
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3
Segment information
Swedish Match’s product segments are based on the internal reporting
structure. Swedish Match’s chief operating decision maker is the Group’s
President and CEO, who monitors and makes decisions about operating
matters based on product segments. The Group’s product segments as
per December 31, 2021 were Smokefree, Cigars and Lights. The reportable
segments represent all Swedish Match products that are produced and sold
by the Group’s business units.
Smokefree represent smokeless tobacco products and nicotine pouches
as well as pouch products with neither tobacco nor nicotine. Smokefree
products are primarily sold in US, Sweden, Norway, Denmark as well as in
other markets, mostly in Europe. Production takes place in US, Sweden and
Denmark. Nicotine pouches is a strong growing category and the products
are sold in US, Sweden, Norway, Denmark as well as in other markets,
mostly in Europe. In the US, the Group has a leading position in the nicotine
pouch category and is the third largest player in the moist snuff category,
and is also present with snus. The US is the world’s largest moist snuff
market measured in number of cans. In Sweden and Norway, Swedish Match
has a leading position for snus and is also present with nicotine pouches.
Sweden is the world’s largest snus market measured in number of cans.
The Norwegian market for smokefree products has experienced strong
volume growth in recent years. In Sweden, some of the best known brands
include General, Göteborgs Rapé, Kaliber, Kronan, Ettan, Grov, ZYN, VOLT and
Swave and in Norway the best known brands are General, G.3, The Lab, Nick
& Johnny, G.4 and ZYN. In the US, ZYN, Longhorn and Timber Wolf as well as
General are the best known brands. The ZYN brand for nicotine pouches is
also sold in markets outside of the US and Scandinavia – primarily in Europe.
Swedish Match is the leading producer of chewing tobacco in the US where
the product is mainly sold in the southern states of the country. Swedish
Match’s best known brands for chewing tobacco in the US are America’s
Best Chew (formerly Red Man), and Big Duke. Chew bags and tobacco bits
are manufactured in Denmark and sold in certain European markets. The
Group’s brands for chewing tobacco in Europe include Thunder, Göteborgs
Rapé and Oliver Twist.
Cigars are manufactured in the US and the Dominican Republic, and are
almost exclusively sold in the US. Swedish Match is a major player in the US
mass market cigar market, with such well known brands as Garcia y Vega,
Game by Garcia y Vega, 1882, White Owl, and Jackpot.
Lights include manufacturing and distribution of matches and lighters
as well as distribution of complementary products. Swedish Match is the
market leader in a number of markets for matches. The match brands are
mostly local, with leading positions in their home countries. Larger brands
include Solstickan, Nitedals, Fiat Lux and Redheads. The Group’s main
brand for disposable lighters is Cricket. Swedish Match’s largest markets
for lighters are in Asia and Europe as well as in North America and Brazil.
Complementary products include externally sourced razors, batteries and
high efficiency light bulbs offered within the Brazilian market under the Fiat
Lux brand.
There are no internal sales between product segments and the Group’s
financial costs as well as taxes are not allocated to product segments.
Operating assets and liabilities are not monitored on a segment basis.
Segment reporting for internal purposes is prepared in accordance with
IFRS.
Other operations consist of corporate functions providing services to the
Swedish Match’s operating divisions and the Swedish distribution function.
Services provided include, among others, regulatory affairs, legal and
financial services. The distribution function provides services to Swedish
Match in Sweden and Norway as well as to other manufacturers within the
Swedish distribution network. The revenues from sales of Swedish Match’s
products on the Swedish and the Norwegian markets are reported as part
of the product segment Smokefree. The result from Other operations
consists of the consolidated result for the corporate functions, of which
the distribution function is making a profit from the distribution fee from
the distribution of third party tobacco products and the other functions are
normally making losses.
Smokefree Cigars Lights Total segments Other operations
Swedish Match
Group
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
External sales 12,120 10,651 4,688 4,533 1,338 1,149 18,145 16,332 344 366 18,489 16,698
Depreciation,amortization
and write-down
1)
–425 –397 –86 –87 –43 –39 –554 –523 –61 –65 –615 –588
Income from associated companies 4 4 1 – 1 1 6 5 6 8 13 13
Operating profit 5,998 5,142 1,841 1,796 297 222 8,136 7,160 –150 –169 7,986 6,991
Larger one-time items
Settlement income – – – – – – – – 300 – 300 –
Operating profit, including larger
one-time items 5,998 5,142 1,841 1,796 297 222 8,136 7,160 150 –169 8,286 6,991
Finance income 36 49
Finance costs –381 –396
Profit before income tax 7,941 6,644
1)
Write-down of tangible assets amounted to 3 MSEK (0) for Smokefree. There were no write-down of intangible assets in 2021 and 2020.
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NOTE 3 Continued
Smokefree Cigars Lights Total segments Other operations
Swedish Match
Group
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Restructuring costs and results from
sale of fixed assets
Restructuring costs – – – – –8 – –8 – –1 – –9 –
Gains/losses from sale of fixed assets –1 –0 –1 0 35 18 32 18 –0 1 32 19
Investments
Property, plant and equipment
1)
1,000 1,003 94 74 51 29 1,146 1,107 26 19 1,172 1,126
Intangible assets – 0 0 – 1 1 1 1 7 62 8 63
1)
Investments in property, plant and equipment for Lights operations include investments in biological assets.
Geographical information
The table below refers to sales to external customers and fixed assets based on the geographical area where the Group operates. Sales to external customers
during 2021 attributable to Sweden, which is the Group´s country of domicile, amounted to 3,688 MSEK (3 509). Fixed assets as of December 31, 2021 in
Sweden amounted to 2,641 MSEK (2,547). Sweden is included in Scandinavia in the table below.
External sales and fixed assets are distributed per significant geographical areas as follows:
Sales to external customers Fixed assets
1)
2021 2020 2021 2020
MSEK Percent MSEK Percent MSEK Percent MSEK Percent
The US 11,633 63 10,451 63 3,216 42 2,345 36
Scandinavia 5,607 30 5,092 30 3,709 48 3,537 55
Other markets 1,249 7 1,155 7 800 10 605 9
Total 18,489 100 16,698 100 7,725 100 6,487 100
1)
Non-current assets other than financial instruments, deferred tax assets and pension assets.
Information about major customers
Swedish Match generates its sales from a diverse customer portfolio and
thereliance on individual customers is therefore limited.
Sales from the Group’s largest single external customer constituted
12percent (11) of the Group’s total sales, and referred to to sales from the
product segments Smokefree and Cigars.
Revenue from contracts with customers
The main revenue streams for the Swedish Match Group arise from sale
of goods manufactured by the Group. Within Lights, a minority part of the
revenue also refers to the distribution of third party products. Revenue
within Other operations mainly refers to income from logistics services for
delivery of third party products to retail customers. Revenue for the sale of
goods and logistics services are recognized at the point in time when the
control of the promised good or service is transferred to the customer at
the expected consideration to be received for such delivery. The expected
consideration recognized reflects estimates of potential outcome of variable
considerations as well as expected reimbursements for product returns.
Refund liabilities relating to these obligations are recognized as operating
provisions in the Group balance sheet. The majority of Swedish Match’s
customers are retailers and distributors.
Disaggregation of revenue
Smokefree Cigars Lights Total segments Other operations
Swedish Match
Group
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Primary geographical markets
The US 6,754 5,818 4,688 4,533 191 100 11,633 10,451 – – 11,633 10,451
Scandinavia 5,203 4,675 – – 61 51 5,264 4,726 344 366 5,607 5,092
Other markets 163 158 – – 1,085 997 1,249 1,155 – – 1,249 1,155
Total sales 12,120 10,651 4,688 4,533 1,338 1,149 18,145 16,332 344 366 18,489 16,698
4
Other operating income and expenses
Other operating income and expenses are specified below:
2021 2020
Foreign exchanges gains 72 69
Foreign exchanges losses –66 –76
Result from sale of fixed assets 32 19
Other 6 3
Total 44 14
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Swedish Match 2021 93
5
Personnel
The average number of employees, including temporary employees,
inthe Parent Company during 2021 was 54, and in the Group 7,523.
Thecorresponding numbers in 2020 were 56 and 6,733, respectively.
Theincrease in the average number of employees primarily relates to
the expansion of cigar production in the Dominican Republic and the
ZYNproduction in the US.
Average number of employees by gender and country:
2021 2020
Average
number of
employees
(of whom
men, %)
Average
number of
employees
(of whom
men, %)
Parent Company
Sweden 52 52 54 50
Belgium 2 50 2 50
Subsidiaries
Brazil 476 72 475 72
Denmark 121 68 110 65
Dominican Republic 3,823 54 3,236 53
Netherlands 109 87 95 94
Norway 49 65 46 68
Philippines 265 56 190 73
Sweden 1,300 58 1,323 61
Switzerland 12 75 8 75
Turkey 14 79 14 76
United States 1,300 69 1,182 70
Total 7,523 59 6,733 60
Board members, Presidents and management by gender
1)
:
2021 2020
At end of
period
(of whom
men, %)
At end of
period
(of whom
men, %)
Parent Company
Board members elected by
the AGM 8 63 8 63
Board members, employee
representatives 3 100 3 100
Board members 11 73 11 73
President and other
management
2)
7 86 8 88
Group
Board members 119 73 118 73
President and other
management
2)
56 79 48 77
1)
Deputy Board members are not included in the table. Presidents who are part of the Board are
included in both categories; Board members and President and other management.
2)
During first seven months of 2020 one member of the Group Management Team was partly
employed by the Parent Company and partly employed by a US subsidiary.
Wages, salaries, other remunerations and social costs are summarized below:
2021 2020
Wages, salaries and
other remunerations
2)
Social costs
of which,
pension costs
1)
Wages, salaries and
other remunerations
2)
Social costs
of which,
pension costs
1)
Parent Company 107 59 19 98 52 17
Subsidiaries 1,985 795 286 1,982 781 278
Total 2,092 854 305 2,081 833 295
1)
Defined as service cost for defined benefit pension plans and contributions for defined contribution pension plans (excluding special employer contributions).
2)
Remuneration related to the Group Management Team member that was partly employed by the Parent Company and partly by a US subsidiary during 2020, has been reported by the US subsidiary and
invoiced to the Parent Company as consultancy services.
The pension costs for the Parent Company included 6 MSEK (5) attributable
to the President and other management consisting on average of four
persons during 2021 and 2020.
The pension costs for the subsidiaries included 15 MSEK (15) attributable
to Presidents and other management consisting on average of 26 persons
in 2021 (24 persons in 2020). The defined benefit obligations related to
Presidents and other management as of December 31, 2021 amounted to
142 MSEK (181).
During 2021, government grants for compensation of employee sick leave
expenses have been received to an immaterial amount attributable to the
COVID-19 pandemic.
Wages, salaries and other remunerations split by Board members, President and other management and other employees, are summarized below:
2021 2020
Board, President and
other management
1)
of which,
variable salaries Other employees
Board, President and
other management
1)
of which,
variable salaries Other employees
Parent Company
Total in Parent Company 50 20 57 46 20 52
Subsidiaries
Total in subsidiaries 97 39 1,889 108 48 1,874
Total 146 59 1,946 154 67 1,927
1)
The Board, President and other management employed by the Parent Company consisted on average of 15 persons (15). Presidents and other management employed by the subsidiaries consisted
on average of 26 persons (24), whereof three persons were members of the Group Management Team. For further information about remunerations to Group Management Team members see table
“Remuneration and other benefits to Group Management Team”.
During 2021, 73 MSEK (71) was charged to the income statement, relating to a profit-sharing foundation on behalf of Group personnel in Sweden.
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NOTE 5 Continued
Remuneration to Swedish Match AB’s Board of Directors
The Annual General Meeting on April 13, 2021 decided, for the period up
to and including April 27, 2022 when the next Annual General Meeting is
held that the Chairman of the Board shall receive a fee of 2,252,000 SEK,
the deputy Chairman shall receive 1,040,000 SEK, that other members
of the Board elected by the General Meeting shall each receive a fee of
900,000 SEK. As Remuneration for committee work the Chairman of the
Remuneration Committee shall receive 291,000 SEK and the other members
of committee shall each receive 146,000 SEK and the Chairman of the
Audit Committee shall receive 364,000 SEK and the other members of the
committee shall each receive 156,000 SEK. Members of the Board employed
by the Group shall not receive any Directors’ fees.
There are no variable salaries or other benefits paid to the Board
members for Board work during 2021. In 2021 a study fee in the amount
of 61,281 SEK was paid to each of the three employee representatives on
the Board, and in the amount of 45,868 SEK to each of the three deputy
members. The study fees were paid by each employee representative´s
respective company. The fees to Board members elected by the Annual
General Meeting for Board work during 2021 and 2020 are shown in the
tables below:
Fees to Board members
2021
TSEK
Board
fee
Remuneration
Committee
Audit
Committee
Total remuneration
for Board work
Conny Karlsson
Board chairman 2,252 291 – 2,543
Andrew Cripps
Deputy chairman 1,040 – 156 1,196
Charles Blixt
Board member 900 146 – 1,046
Jacqueline
Hoogerbrugge
Board member 900 146 – 1,046
Pauline Lindwall
Board member 900 – – 900
Wenche Rolfsen
Board member 900 – 156 1,056
Joakim Westh
Board member 900 – 364 1,264
Alexander Lacik
Board member 900 – – 900
Total 8,692 583 676 9,951
2020
TSEK
Board
fee
Remuneration
Committee
Audit
Committee
Total remuneration
for Board work
Conny Karlsson
Board chairman 2,165 280 – 2,445
Andrew Cripps
Deputy chairman 1,000 – 150 1,150
Charles Blixt
Board member 865 140 – 1,005
Jacqueline
Hoogerbrugge
Board member 865 140 – 1,005
Pauline Lindwall
Board member 865 – – 865
Wenche Rolfsen
Board member 865 – 150 1,015
Joakim Westh
Board member 865 – 350 1,215
Alexander Lacik
Board member 865 – – 865
Total 8,355 560 650 9,565
Remuneration and other benefits to Group Management Team
The Annual General Meeting on April 2, 2020 adopted the following guidelines
for executive remuneration. The guidelines govern the remuneration of
the President and other members of the Group Management Team (GMT).
The guidelines are applicable to remuneration agreed, and amendments to
remuneration already agreed, after adoption of the guidelines by the Annual
General Meeting 2020. These guidelines do not apply to any remuneration
decided or approved by the General Meeting.
The guidelines’ promotion of the Company’s business
strategy, long-term interests and sustainability
For information regarding the Company’s business strategy, see
https://www.swedishmatch.com/Our-company/Vision-and-strategy/.
A prerequisite for the successful implementation of the Company’s
business strategy and safeguarding of its long-term interests, including
its sustainability, is that the Company can recruit and retain qualified
personnel. To this end, it is necessary that the Company offers competitive
remuneration. The remuneration structures shall encourage employees
to do their utmost to safeguard shareholders’ interests and thereby the
Company’s sustainability and long-term value creation.
The types of remuneration to GMT
The total remuneration to the GMT consists of fixed cash salary, variable
cash remuneration, pension benefits, other benefits and terms related
to termination of employment. Additionally, the General Meeting may –
irrespective of these guidelines – resolve on, among other things, share-
related or share price-related remuneration.
Remuneration under employments subject to other rules than Swedish
may be duly adjusted to comply with mandatory rules or established local
practice, taking into account, to the extent and reasonably possible, the
overall purpose of these guidelines.
1. Fixed salary
The fixed salary for the GMT shall be in cash, correspond with market
practice and be based on each individual’s competence, country of residence,
area of responsibility and performance.
2. Variable salary
GMT may be entitled to a variable salary in addition to the fixed salary. The
variable salary shall be capped in relation to the fixed salary and reflect the
market practice in the country of residence of the member of the GMT.
The variable salary may include both a short-term (annual) cash incentive
program (2a below), a long-term cash incentive program with a performance
period which shall not be shorter than three years (2b below), and profit
sharing (2c below). To correspond with local market practice and to be able
to attract and retain members of the GMT resident outside of Sweden, such
members may participate in an additional incentive program (2d below).
The variable cash salary shall be linked to specified performance
criteria. Performance criteria, their weight, thresholds and targets will be
established at the beginning of each respective program.
The performance criteria will be established by the Board of Directors in
relation to the President and by the Renumeration Committee in relation
to all other members of GMT. The criteria shall be designed to contribute
to the Company’s business strategy and long-term interests, including
its sustainability. A majority of the criteria shall be linked to clear and
measurable financial performance measures (e.g. operating profit and net
sales). There may also be non-financial criteria (e.g. operational criteria or
criteria linked to sustainability).
To which extent the criteria for awarding variable cash remuneration
has been satisfied shall be determined when the measurement period has
ended. The Remuneration Committee is responsible for the evaluation of
variable remuneration to be awarded the President as well as the other
members of the GMT. For financial performance criteria, the evaluation shall
be based on financial information made public by the Company.
By the end of a program, either the Board of Directors or the
Remuneration Committee will have the right to adjust the outcome in case
conditions have changed during the performance period. However, such
potential adjustment(s) must have the primary purpose of strengthening the
link between remuneration and the value creation for the shareholders, and
to ensure that the level of remuneration is a fair reflection of the Company’s
and the individual’s performance during the performance period for each
individual program.
The Board of Directors shall have the possibility, subject to the
restrictions that may apply under law, to in whole or in part reclaim variable
remuneration paid on incorrect grounds (claw-back).
a. Short-term incentive program: The Board of Directors and the
Remuneration Committee can annually resolve to implement an annual
incentive program (STI). The maximum variable salary of such short-term
incentive shall be 70 percent of the base salary.
To strengthen the connection to the shareholders’ interest and the
Company’s long-term value creation, members of GMT may in the
beginning of the program commit to purchase Company shares for at least
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NOTE 5 Continued
50 percent of the received cash award net of income tax and to retain such
shares for a period of not less than three years. A 20 percentage points
reduction in maximum variable salary shall apply to any GMT member who
does not commit to such purchase and retention of shares.
b. Long-term incentive program: The Board of Directors and the
Remuneration Committee can annually resolve to implement a long-term
cash incentive program (LTI) where the maximum variable salary shall be
45 percent of the base salary. The LTI-program, with a performance period
which shall not be shorter than three years, includes an obligation to
purchase Company shares for the full cash award net of income tax and to
retain such shares for a period of not less than two years.
c. Profit-Sharing System: In some countries employees, including members
of the GMT, can participate in profit-sharing systems. The Profit-Sharing
System is not connected to a position and shall compose a small part of the
remuneration for the member of GMT. The maximum award to members of
GMT resident in Sweden shall not exceed 5 percent of the base salary.
d. Additional incentive program: To correspond with local market practice,
GMT members resident outside Sweden may participate in an additional
incentive program capped over time at 50 percent of the base salary.
Performance criteria shall be set at the beginning of each program whilst
the thresholds and targets can be set at the beginning of the performance
period or yearly.
3. Pensions
Old age pension shall be designed to reflect the practices in the country
where a member of the GMT is resident.
The retirement age of a member of GMT shall normally be 65 years.
With regard to employments in Sweden, the GMT may have a defined
contribution plan applicable to the part of the salary which is not covered
by the ITP-plan. Such pension contributions shall amount to not more than
40 percent of the part of the base salary which is not covered by another
pension plan.
Pension for new members of the GMT shall preferably be covered by
defined contribution plans, which can amount to a maximum of 40 percent
of the salary which qualifies for pension. Variable cash remuneration shall
not qualify for pension benefits unless it is stated in mandatory rules or
collective bargaining agreements.
4. Other benefits
Other benefits may include a company car, disability and sickness benefits,
medical insurance and life insurance.
Other benefits to members of the GMT shall be payable in accordance
with local practice. The combined value of these benefits shall normally
constitute a limited value in relation to the total remuneration package and
shall correspond to market practice.
GMT members, who are expatriates to another country than their country
of origin, may receive additional remuneration and other benefits to the
extent reasonable in light of the special circumstances associated with
the expatriate arrangement, taking into account the overall purpose of
these guidelines. Such additional benefits will be payable under the same
conditions as for other employees during expatriate arrangement.
5. Termination of employment
The notice period may not exceed six months. Upon termination of
employment by the Company, severance pay amounting to a maximum of
18months fixed salary is paid. Notice of termination given by a GMT member
due to significant structural changes, or other events that in a determining
manner affect the content of work or the conditions for the position, is
equated with of notice of termination given by the Company. Fixed cash
salary during the period of notice and severance pay may together not
exceed an amount equivalent to the fixed cash salary for two years.
Additionally, remuneration may be paid for non-compete undertakings.
Such remuneration shall compensate for loss of income and shall only
be paid in so far as the previously employed executive is not entitled to
severance pay. The remuneration shall amount to not more than 60 percent
of the fixed cash salary at the time of termination of employment, unless
otherwise provided by mandatory collective bargaining agreements, and be
paid during the time the non-compete undertaking applies, however not for
more than nine months following termination of employment.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these guidelines
and when evaluating whether the guidelines and the limitations set out
herein are reasonable, the Remuneration Committee and the Board of
Directors have taken into account salary and employment conditions for
other employees in the Company. This typically include remuneration levels
and elements, including changes in remuneration levels, as well as other
employment conditions for employees in the Company that are not members
of the GMT. The Committee regularly consults with the HR function of the
Company in order to stay up to date with employee pay and conditions across
the broader employee population.
The decision-making process to determine,
review and implement the guidelines
The Board of Directors has established a Remuneration Committee. The
Committee’s tasks include preparing the Board of Directors’ decision to
propose guidelines for executive remuneration. The Board of Directors shall
prepare a proposal for new guidelines at least every fourth year and submit
it to the Annual General Meeting. The guidelines shall be in force until new
guidelines are adopted by the General Meeting. The Remuneration Committee
shall also monitor and evaluate programs for variable remuneration for the
GMT, the application of the guidelines for executive remuneration as well
as the current remuneration structures and compensation levels in the
Company. The President and other members of the GMT do not participate in
the Board of Directors’ deliberations or resolutions regarding remuneration-
related matters in so far as they are affected by such matters.
The Board of Directors’ right to derogate from the guidelines
The Board of Directors may temporarily resolve to derogate from the
guidelines, in whole or in part, if in a specific case there is special cause
for the derogation and a derogation is necessary to serve the Company’s
long-term interests, including its sustainability, or to ensure the Company’s
financial viability. As set out above, the Remuneration Committee’s tasks
include preparing the Board of Directors’ resolutions in remuneration-related
matters. This includes any resolutions to derogate from the guidelines.
Remuneration and other benefits to Group Management Team
TSEK Fixed salary Variable salary Other benefits Pension costs Total
Defined benefit
obligations
President 2021 7,666 9,103 159 2,813 19,742 –
2020 7,446 8,921 140 2,667 19,174 –
Other members of Group Management Team 2021 21,422 22,890 1,940 7,054 53,307 28,415
2020 24,671 30,363 2,021 7,765 64,820 61,456
Total 2021 29,088 31,993 2,099 9,868 73,048 28,415
2020 32,117 39,284 2,161 10,432 83,994 61,456
Comments to the table
• At the end of 2021, the Group Management Team consisted of seven
persons including the President. The President and three other members
of the Group Management Team were employed by the Parent Company
and three members were employed by a subsidiary.
• At the end of 2020, the Group Management Team consisted of eight
persons including the President. The President and three other members
of the Group Management Team were employed by the Parent Company
and four members were employed by a subsidiary.
• Variable salary refers to accruals charged to the consolidated income
statement during the year for short term and long term incentive programs.
• Other benefits refers to company cars, medical insurance, dental plan, life
insurance, club membership and other benefits.
• Reported pension costs correspond to service costs for defined benefit
pension plans and fees relating to defined contribution pension plans
(excluding payroll taxes).
• During 2021 and 2020 no earnings-related compensation (tantiem) has
been paid to the Group Management Team.
• During 2021 and 2020 no severance has been paid to the Group
Management Team.
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NOTE 5 Continued
Variable salary
In 2021, the Group Management Team (“GMT”) participated in short and long
term incentive programs (variable salary) described under the presentation
of the remuneration and other benefits to Group Management Team.
Performance targets for the short-term incentive are determined in the
beginning of each year. For 2021, the CEO and heads of corporate functions
of the GMT had the same criteria, Group operating profit (weight 75 percent)
and Net sales from product segments (weight 25 percent). The Division
Presidents had partly the same Group criteria as the CEO and partly criteria
linked to the division.
In the three year long incentive program that started in 2019 and ended
in 2021, the performance criteria for the CEO and other members of group
management were based on Group operating profit (weight 75 precent)
and net sales from product segments (weight 25 percent). For the criterion
Group operating profit the threshold for payout and target for maximum
payout were 14,520 MSEK and 16,809 MSEK respectively and for the criterion
net sales from product segments the corresponding numbers were 37,998
MSEK and 43,988 MSEK respectively. The Remuneration Committee
established the total weighted performance outcome for the long term
program to 100 percent.
In the long term program that started in 2021, the performance criteria
for the CEO and other members of the Group Management team is the
accumulated Group operating profit (weight 70 percent), the accumulated
Group net sales from product segments (weight 20 percent) and reduction
in greenhouse gas intensity (weight 10 procent) for the years 2021 to 2023.
There will be no pay-out in relation to these criteria unless there is an
improvement in relation to the comparable performance of the Group in
2020. The costs for the long term program are expensed during the fiscal
year when the compensation is earned based on an estimated outcome.
At year end, a final estimate of the year’s cost is calculated based on the
actual outcome. Adjustments of previously reported costs for the long term
programs are also reported when the estimated outcome is updated for each
program during the performance period. As the long term program extends
over three years the final result will be established at the end of the three
year performance period.
In addition to the programs noted above, GMT members residing in the
US also participated in a three-year local program. This local program
extends over three years, with a new program starting every second year.
Accordingly, this program can generate an outcome every second year. The
maximum outcome of this plan corresponds to a fixed annual salary every
second year.
In 2021, the eligible participants in the long term incentive program have
committed to purchase Swedish Match shares for the total compensation
received, net after tax, and to retain these shares for a period not less than
two years.
Pensions
President
The President’s retirement age is 62 and he is covered by the Swedish
standard retirement plan for white-collar employees (ITP plan) on salary
up to 30 times the income base amount. The President’s ITP plan shall be
fully funded at age 62. In addition, the Company pays a pension premium
amounting to 40 percent of fixed salary above 30 times the income base
amount to a defined contribution pension plan.
Other members of Group Management Team
For members of the Group Management Team who are residents in Sweden,
the retirement age is 62 or 65. Swedish GMT members that are born 1978 or
earlier are covered by the Swedish standard retirement plan for white-collar
employees (ITP2 plan) on salary up to 30 times the income base amount.
In addition, for some of the members, the Company also pays a pension
contribution amounting to a maximum of 35 percent of fixed salary above
30 times the income base amount. Swedish GMT members that are born
after 1978 are covered by the ITP1 plan, and are not eligible to any additional
pension contributions. Members of the GMT who are resident in the US, are
covered by a defined benefit pension plan with a normal retirement age of 65.
Other employment conditions
Severance pay etc.
For the Group Management Team including the President, a mutual notice
period of maximum of six months applies and a maximum severance
payment of 18 months’ fixed salary is payable if the Company terminates the
employment contract.
The President and three other members of the Group Management Team are
entitled to terminate their employment with the right to receive severance
pay in accordance with the above terms if a major organizational change
should occur that significantly restricts their position.
6
Audit fees
Expenses for auditor’s fees are included in the administrative expenses as
set out in the table below:
Audit fees 2021 2020
Deloitte
Audit services 8 8
Tax services 0 1
Other services 1 1
Total 9 9
7
Operating expenses classified by nature
Operating expenses
1)
2021 2020
Personnel expenses 2,946 2,913
Depreciation, amortization and write-downs 615 588
Direct material 3,292 2,833
Other operating expenses 3,662 3,385
Total 10,515 9,719
1)
Excluding larger one-time items.
Expenses for research and development are recognized in the income
statement as other operating expenses. During 2021 expenses for research
and development amounted to 241 MSEK (237).
8
Net finance cost
Financial income 2021 2020
Interest income relating to pension receivables 1 1
Interest income relating to financial assets measured at
amortized cost 14 20
Interest income relating to financial instruments
measured at fair value through profit and loss 21 28
Total 36 49
Financial expenses 2021 2020
Interest expense relating to pension liabilities –33 –43
Interest expense relating to other financial liabilities
measured at amortized cost –228 –222
Interest expense relating to financial instruments
measured at fair value in hedging relationships –90 –85
Interest expense relating to financial instruments
measured at fair value through profit and loss –1 0
Interest expense relating to lease liabilities –14 –12
Interest expense relating to tax charge due to adverse
ruling in a tax case – –16
Net foreign exchange losses –5 –8
Other financial expenses –9 –10
Total –381 –396
Net finance cost –345 –347
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9
Income tax
The major components of income tax expense/income for the years ended December 31, 2021 and 2020 are:
Income tax expense reported in the Income statement 2021 2020
Current tax:
Current tax on earnings for the year –1,590 –1,503
Adjustments in respect of prior years 16 –243
Total current tax –1,574 –1,746
Deferred tax:
Origination and reversal of temporary differences –159 –2
Adjustments in respect of prior years –6 –6
Impact of change in tax rate 16 –1
Total deferred tax –149 –10
Income tax expense –1,723 –1,756
Income tax reported outside of the Income statement 2021 2020
Current tax – –
Deferred tax –108 44
Total –108 44
This comprises:
Tax reported in other comprehensive income
Actuarial net gains/losses attributable to pensions –91 33
Revaluation of cash flow hedges net gain/loss –17 11
Total tax reported in other comprehensive income –108 44
Total tax reported outside of the income statement –108 44
The deductible and taxable temporary differences in the balance sheet for the years ended December 31, 2021 and 2020 are summarized below:
2021 2020
Deferred tax assets and deferred tax liabilities
Deferred
tax assets
Deferred
tax liabilities Net balance
Deferred
tax assets
Deferred
tax liabilities Net balance
Tax loss carry forwards – – – 100 – 100
Trade receivables – – – 1 – 1
Pensions and other post-employment benefits 361 2 359 371 –6 378
Employment benefits 112 – 112 107 – 107
Intangible assets – 294 –294 – 302 –302
Fixed assets –1 354 –355 1 286 –285
Right of use assets/lease liabilities 2 – 2 2 – 2
Tax allocation reserve – 642 –642 – 582 –582
Inventory 9 20 –12 5 23 –17
Unremitted earnings in foreign subsidiaries – 91 –91 – 87 –87
Financial assets –6 – –6 23 – 23
Other 43 –5 48 30 –6 36
Net deferred tax balances 520 1,397 –877 640 1,268 –628
The net of deferred tax liabilities and assets for the years ended December 31,
2021 and 2020 are summarized below:
Movement in deferred tax liabilities, net 2021 2020
Opening balance, net 628 634
Deferred tax expense/income in the income statement 149 10
Deferred tax in other comprehensive income 108 –44
Companies acquired externally 7 –
Translation differences –14 27
Closing balance, net 877 628
As of December 31, 2021 the Group’s non-recognized deductible temporary
differences are in total 3 MSEK (5). There are no unrecognized tax losses in
the Group at year end 2021.
A reconciliation between tax expense and the product of accounting profit
multiplied by Sweden’s statutory tax rate for the years ended December 31,
2021 and 2020 is as follows:
2021 2020
Reconciliation of effective tax rate % MSEK % MSEK
Profit before income tax 7,941 6,644
Swedish statutory tax rate 20.6 –1,636 21.4 –1,422
Effect of tax rates in foreign
jurisdictions
1)
2.1 –164 1.7 –111
Results from associated companies
reported net of tax 0.0 2 0.0 2
Income tax in respect of prior years
2)
–0.2 12 3.7 –243
Utilization of previously
unrecognized tax losses
3)
–0.6 50 – –
Income not subject to tax –0.4 31 –0.5 32
Expenses not deductible for tax
purposes 0.3 –22 0.2 –15
No benefit available for loss 0.0 –2 0.0 –1
Effect of enacted change of tax rate
4)
–0.3 21 0.0 3
Withholding tax in foreign
subsidiaries
5)
0.2 –18 0.1 –7
Tax allocation reserve in Sweden 0.1 –6 0.1 –7
Tax credit of machinery and
equipment in Sweden
6)
–0.1 6 – –
Other items –0.1 4 –0,2 12
Reported effective tax 21.7 –1,723 26.4 –1,756
1) The negative effect in “tax rates in foreign jurisdictions” in 2020 and 2021 is largely a result of
the increase in the contribution to earnings from the US business where the corporate tax rate
is higher than the Swedish tax rate.
2) The negative effect of “income tax in respect of prior years” in 2020 is mainly a result of the non
recurring income tax expense of 270 MSEK from a Swedish tax case.
3) The positive effect of “utilization of previously unrecognized tax losses” in 2021 is the result of a
favorable ruling in a tax case in Sweden.
4) The positive effect of “enacted change of tax rate” in 2021 is mainly a result of state tax rate and
apportionment methodology changes in the US.
5) The negative impact of “withholding tax in foreign subsidiaries” in 2021 is largely a result of
increased income in the Phillipines.
6) “Tax credit of machinery and equipment in Sweden” is a temporay legislation granting a credit
in 2022 of M/E purchased during 2021. The credit is recognized in 2021.
Sweden reduced the corporate tax rate from 21.4 percent to 20.6 percent as
of January 1, 2021.
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Swedish Match 2021 98
10
Earnings per share
Basic and diluted 2021 2020
Profit for the year attributable to equity holders of
the Parent, MSEK 6,217 4,888
Profit for the year attributable to equity holders of
the Parent, excl. larger one-time items, MSEK 5,979 5,174
Weighted average number of shares
outstanding, basic and diluted
1)
1,565,379,185 1,608,665,372
1)
In May 2021, a share split (10:1) was made. Historical share data in this report has been
restated in accordance with IAS 33.
Earnings per share, basic and diluted, SEK 2021 2020
Earnings per share 3.97 3.04
Adjusted earnings per share 3.82 3.22
The Company had no outstanding options and no dilution.
11
Intangible assets
Intangible assets at December 31 comprised the following:
Goodwill Trademarks
Other intangible
assets
1)
Total
2021 2020 2021 2020 2021 2020 2021 2020
Cost at beginning of year 1,620 1,714 1,611 1,676 516 462 3,747 3,852
Purchases/investments – – 0 – 7 63 8 63
Acquisitions 11 – 27 – – – 38 –
Sales/Disposals – – – – –2 –9 –3 –9
Reclassifications – – – – 0 1 0 1
Translation differences, etc. 66 –95 46 –65 0 –0 113 –160
Cost at end of year 1,697 1,620 1,684 1,611 522 516 3,903 3,747
Accumulated amortization and write-down at beginning
of year –388 –401 –855 –856 –266 –240 –1,510 –1,496
Amortization for the year – – –42 –42 –32 –35 –75 –77
Sales/Disposals – – – – 2 9 2 9
Translation differences, etc. –7 12 –33 43 –0 0 –39 55
Accumulated amortization and write-down at end of year –395 –388 –931 –855 –296 –266 –1,622 –1,510
Net carrying value at end of year 1,301 1,231 754 756 226 250 2,281 2,237
1)
Other intangible assets mainly consist of software, licenses and patent rights.
No borrowing costs have been capitalized during 2021 nor 2020 for intangible
assets.
The Group’s intangible assets are deemed to have definite useful lives,
except for goodwill and the trademark Jakobsson’s, which according to the
IFRS definition has an indefinite useful life. Jakobsson’s has been assessed
having indefinite useful life based on that the trademark is well established
in the market and has a loyal and growing consumer base within a unique
niche segment. Trademarks with indefinite useful lives are reviewed
annually and are included in the impairment testing. In the beginning of
2020, Swedish Match reassessed the estimated economical useful life of the
Thunder trademark. The updated assessment indicated that the Thunder
trademark’s economical useful life has changed from indefinite to a definite
economical useful life of 20 years.
Amortization have been charged to the income statement as stated below:
Amortization and
write-down
2021 2020
Cost of goods sold –2 –2
Selling expenses –19 –19
Administrative expenses –54 –56
Total –75 –77
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Impairment test
The Group’s goodwill and trademarks with indefinite useful life are tested
for impairment on an annual basis or whenever there is an indication of
impairment. Goodwill and trademarks with indefinite useful life are, for the
purpose of impairment testing, allocated to the lowest level of groups of
cash generating units (CGUs) based on product groups and geographical
markets, at which they are monitored within the Group. A group of CGUs
is not larger than an operating segment. Taking into account that an
assessment has been made that the cash flow attributable to trademarks
cannot be distinguished from other cash flows within each CGU, impairment
testing is performed for both goodwill and trademarks jointly.
The Group’s goodwill and trademarks with indefinite useful life relate to
the following CGUs: Other tobacco products operations in US, which includes
chewing tobacco and moist snuff in US, Cigar operations in US, Smokefree
operations in Europe, which includes all smokefree products sold in
Europe, and Lights operations. The carrying values of the assets relating to
respective CGU are compared to the recoverable amount for the CGU. In the
impairment testing, the carrying values of the assets relating to respective
CGU are compared to the recoverable amount for the CGU. If the carrying
value is higher, the difference will be charged to the income statement as an
impairment loss.
The recoverable amount for all CGUs has been determined based on
value in use calculations. The value in use of a CGU is calculated using a
valuation model based on discounted expected future cash flows (DCF).
The cash flows are explicitly forecasted for a period of five years. The cash
flows beyond the five year period are extrapolated using a terminal growth
rate. The cash flows used in the valuation model are projected considering
historical performance and forecasts, and are based on what management
believes are reasonable assumptions according to the best information
available. The forecasts are based on previous results, industry experience
and expectations for market trends and has been approved by management.
Forecasts are drawn up separately for each CGU and include assumptions
on sales growth, EBITDA margin, working capital and investment needs, and
the terminal growth rate of free cash flow. The forecasted cash flows are
discounted by a discount rate specifically determined for each CGU.
The discount rates are calculated by weighting cost of capital (WACC) for
each CGU. The calculation of cost of debt is based on local risk-free interest
rates, specific risk premium (if applicable), local tax rates and a Swedish
Match specific interest margin. Cost of equity is calculated using the Capital
Asset Pricing Model, applying average beta for the industry adjusted for
capital structure, local risk-free interest rates, specific risk premium (if
applicable) and an equity risk premium. As local interest rates are included
in the calculation of discount rates, the value in use calculations are
sensitive to changes in market conditions.
The result from the impairment testing in 2021 and 2020 of goodwill and
trademarks with indefinite useful life showed that the value in use exceeded
the carrying values for all CGUs. No reasonable possible change in any of the
key assumptions would result in an impairment.
NOTE 11 Continued
The table below presents the composition of the Group’s CGUs, terminal growth rate and WACC used in the impairment testing for 2021 and 2020 as well as
the carrying value of goodwill and trademarks with indefinite life as of December 31.
Goodwill and trademarks with indefinite life incash generating units
Cash generating units
Terminal
growth rate
2021, %
Post-tax
WACC
2021, %
Pre-tax
WACC
2021, %
Carrying
value
2021
Terminal
growth rate
2020, %
Post-tax
WACC
2020, %
Pre-tax
WACC
2020, %
Carrying
value
2020
Smokefree traditional tobacco products operations in US 0.2 6.4 8.7 156 0.0 5.7 8.2 167
Cigar operations in US 0.7 6.4 8.6 383 0.8 5.7 7.9 321
Smokefree operations in Europe
1)
1.5 5.7 6.9 733 1.5 5.2 6.2 725
Lights operations 0.8 7.9 10.2 181 0.9 8.8 11.4 170
Total 1,453 1,382
1)
Includes the trademark with indefinite useful life of 151 MSEK (151).
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12
Property, plant and equipment
Property, plant and equipment at December 31, comprised the following:
Buildings and land
1)
Plant and machinery
Equipment, tools and
fixtures
Construction in
progress
Total
2)
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Cost at beginning of year 1,603 1,561 4,854 4,977 933 954 797 389 8,187 7,882
Purchases/investments 16 54 87 76 157 97 904 892 1,165 1,120
Acquisitions – – 1 – 1 – – – 2 –
Sales/disposals –3 –6 –44 –95 –28 –97 – – –76 –198
Reclassifications 377 111 476 302 3 3 –859 –417 –3 –1
Translation differences, etc. 88 –118 284 –406 8 –24 53 –67 433 –615
Cost at end of year 2,080 1,603 5,657 4,854 1,074 933 896 797 9,707 8,187
Accumulated decpreciation and
write-down at beginning of year –667 –674 –3,319 –3,388 –611 –652 0 –1 –4,598 –4,714
Depreciation for the year –65 –54 –297 –290 –79 –76 0 – –441 –419
Write-down for the year 0 – –1 0 0 – –1 – –3 0
Sales/disposals 0 1 43 90 26 97 – – 69 188
Translation differences, etc. –37 58 –173 269 –6 20 0 0 –216 348
Accumulated decpreciation and
write-down at end of year –770 –667 –3,747 –3,319 –670 –611 –2 0 –5,189 –4,598
Net carrying value at end of year 1,311 936 1,910 1,534 404 323 894 796 4,518 3,589
1)
Buildings and land include land and land improvements at a book value of 131 MSEK (92).
2)
Total property, plant and equipment exclude forest plantation.
Construction in progress primarily relates to investments in production
facilities.
No borrowing costs have been capitalized during 2021 or 2020 for property,
plant or equipment.
Depreciation and write-downs for the year totaling 444 MSEK (420) was
charged to cost of goods sold in the income statement in an amount of 371
MSEK (343), to administrative expenses of 15 MSEK (19), and to selling
expenses of 58 MSEK (58).
At December 31, 2021, the Group has contractual commitments of 173
MSEK for firm orders, placed for acquisition of plant and machinery.
13
Biological assets
Biological assets at December 31 comprised the following:
Forest plantations 2021 2020
Carrying value at beginning of year 44 87
Purchases and new planting 8 7
Timber harvested and transferred to inventory –3 –4
Sales/disposals –0 –2
Reclassifications
1)
–11 –18
Translation differences, etc. 0 –25
Carrying value at end of year 38 44
1)
Reclassifications refers to assets that are reclassified to assets held for sale.
The Group’s reported biological assets comprise poplar and pine forests in
Brazil with a total area of 3,686 hectares at December 31, 2021. The age of
the trees varies from newly planted seedlings up to 50 years. The forests are
held to ensure the supply of wood used in the product segment Lights.
Timber felled during 2021 had an estimated value of 3.2 MSEK at the time of
harvesting, and made up 90,942 cubic meters of wood.
The forest plantations are regularly measured at fair value of the forest,
according to level 2 in the fair value hierarchy, based on estimated volumes
and prevailing market prices for timber, less estimated point-of-sale costs.
Volume estimates for each age category and type of wood are based on
measurements of the height and diameter of trees and the number of trees
per unit of area. The latest measurement of fair value of the forest did not
result in any changes of the reported value.
Replanting is required following harvesting of the Group’s pine forest.
Based on normal annual harvesting, this involves replanting approximately
150 hectares annually. During 2021, 161 hectares (113) pine forest were
replanted. At present, there is no corresponding requirement for poplar.
Forest plantations may be damaged by noxious insects, diseases and fire.
To reduce these risks, a program for damage and fire prevention is in place.
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14
Leases
The Group is lessee for a number of assets where real estate leases, such as
rental of office and factory premises, warehouses and storages, represent
the major part of the total value of leases. The Group’s leases also include
vehicles, IT equipment, machinery etc. With the exception of short-term
leases and leases of low-value, each lease is reflected on the balance sheet
as a right-of-use asset and a lease liability. Lease payments are generally
fixed, but a limited number of real estate leases are linked to periodic
changes in an index. Variable lease payments, which do not depend on an
index or a rate, are excluded from the initial measurement of the lease
liabilities and assets.
Swedish Match has not received any significant COVID-19 related rent
concessions during neither 2020 or 2021 that have resulted in any changes
tothe valuation and reporting of lease contracts.
Some leases contain options to extend the lease for one or more terms or
to terminate the lease. The likelihood of utilizing or not utilizing extension
and termination options are assessed for each lease contract, as applicable.
The amount of optional lease payment not included in the lease liabilities
at December 31, 2021 amounted to 144 MSEK (129). The average duration
of the Group’s leases was 1.4 years (1.9), including assessments of the
likelihood of utilizing extension and termination options.
Amounts recognized in the income statement are summarized below:
2021 2020
Depreciation right-of-use assets –97 –92
Variable lease payments not included in the lease
liabilities –23 –21
Expenses for short term leases –18 –15
Expenses for low value leases –4 –2
Interest expense on lease liabilities –15 –11
Result sale or cancellation of right-of-use assets 1 –0
Total –155 –140
Variable lease payments not included in the related lease liability are
expensed as incurred and mainly include usage payments on vehicles and
for office and factory premisis.
The Group’s lease liabilities at December 31 comprised the following:
2021 2020
Current lease liabilities 96 77
Non-current lease liabilities 307 208
Total 403 285
The maturity structure for future lease expenses included in the lease
liabilities, with remaining terms of one year or more, is as follows:
Undiscounted future lease expenses
included in the lease liabilities 2021 2020
First year after period 109 86
Second year after period 94 77
Third year after period 48 60
Fourth year after period 42 25
Fifth year after period 41 23
Sixth year after period and beyond 132 64
Total 466 334
Total cash flow from leases, including interest component, variable lease
payments and payments for short-term and low value leases in 2021,
amounted to 145 MSEK (133).
Future variable lease payments not included in the measurement of
the lease liabilities, in relation to the fixed lease payments are expected
to remain at a similar level in all material aspects. The relative magnitude
of variable lease payments related to the fixed payments for 2021 was 21
percent (20).
At December 31, 2021 the Group had committed to leases amounting to
14MSEK (15) which had not commenced. The commitments refer to rental of
production facilities under construction in Dominican Republic with expected
access and completion 2022.
Leases at December 31, comprised the following:
Real estate Cars Other Total
Right-of-use assets 2021 2020 2021 2020 2021 2020 2021 2020
Carrying value at beginning of year 216 168 60 83 3 4 278 255
Additions
1)
143 50 30 28 3 2 176 80
Terminations –3 –2 –2 –4 – –1 –5 –6
Depreciation for the year –56 –49 –38 –40 –2 –2 –96 –92
Revaluations
2)
18 64 – – 0 – 18 64
Translation differences, etc. 13 –15 5 –8 0 0 18 –23
Carrying value at end of year 331 216 55 59 2 3 388 278
1)
Additions in 2021 mainly relate to new rental agreements of office premisess and stores.
2)
Revaluations in 2021 mainly relate to reassesments of extensions options of rental agreements of stores and 2020 relate to reassesments of office premisess.
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15
Investments in associated companies
Swedish Match investments in associated companies are a 32 percent
ownership interest in Malaysian Match Co. SDN. BHD. and a 49 percent
interest in OTP. Malaysian Match is a Malaysian sales distributor for
primarily matches and lighters in the Asia region. OTP is a tobacco
distribution company with subsidiaries in Slovenia and Croatia.
During December 2021, Swedish Match divested its shareholding of 25
percent in EB Road Cargo AB. During the year, Swedish Match received
dividends of 13 MSEK from EB Road Cargo.
The numbers in the tables below represent the change in carrying value:
Associates 2021 2020
Carrying value at beginning of year 42 42
Divestment of EB Road Cargo AB –2 –
Share of profit 13 13
Dividends received –13 –10
Translation differences, etc 1 –3
Carrying value at end of year 41 42
The tables below specify the summary financial position of the associated
companies and the corresponding carrying values. Operating results of
investments in associated companies have been recognized for a 12-month
period but with a time lag of one month, based on the investee’s internal
financial reporting. Adjustments resulting from annual audits of investee
results are thereby reflected in the subsequent reporting periods in Swedish
Match consolidated financial statements.
Associated companies
2021 2020
Sales 230 670
Operating profit 23 46
Net profit/loss (excluding other comprehensive income) 18 37
Total comprehensive income 18 37
Total current assets 161 249
Total fixed assets 15 110
Total current liabilities 86 172
Total non-current liabilities 7 81
Equity 83 106
Equity interest 33 34
Goodwill 8 8
Carrying value at end of year 41 42
Transactions with associated companies
In the normal course of business, Swedish Match conducts various
transactions with associated companies. Transactions are conducted at an
arms-length basis. At December 31, 2021, receivables from these companies
amounted to 16 MSEK (15). Total sales during the year to associated
companies amounted to 75 MSEK (82). Payables to and purchases from
associated companies amounted to immaterial amounts. In addition, as
per December 31, 2021, Swedish Match had a financial receivable on OTP
amounting of 36 MSEK (46).
16
Other non-current receivables and other current
receivables
Non-current receivables at December 31 comprised the following items:
Other non-current receivables 2021 2020
Non-current financial receivables 1,182 833
Net assets in pension plans 140 92
Other non-current receivables 15 10
Total 1,337 935
Non-current financial receivables included foreign exchange derivatives
used to hedge the bond loans denominated in foreign currencies amounting
to 700 MSEK (460). Most of the remaining value of the non-current financial
receivables consisted of life insurance policies in a non-Swedish subsidiary.
Other current receivables at December 31 comprised the following items:
Other current receivables 2021 2020
Current financial receivables 205 99
VAT receivables 31 22
Other current receivables 240 194
Total 476 315
The assessed impairment on the Group’s non-current and current
receivables is deemed immaterial.
17
Inventories
Inventories at December 31, net of allowances for obsolescence, comprised
the following items:
2021 2020
Inventories Current
Non-
current Total Current
Non-
current Total
Finished goods 701 – 701 527 – 527
Work in progress 96 – 96 94 – 94
Leaf tobacco 694 232 926 597 216 813
Other input materials
and consumables 544 – 544 390 – 390
Total 2,035 232 2,267 1,608 216 1,824
During 2021, 35 MSEK (18) of inventory write-downs, net of adjustments of
allowances for inventory obsolescence, have been expensed.
Other input materials and consumables included harvested trees which
are reported at fair value less estimated point-of-sale cost. Harvested trees
constituted an immaterial part of other input materials and consumables.
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18
Trade receivables
Trade receivables at December 31 comprised the following:
2021 2020
Trade receivables 1,854 1,588
Less provision for impairment of trade receivables –11 –11
Net trade receivables 1,843 1,577
Movements, due to the changes in expectations, on the group provision for
impairment of trade receivables are as follows:
Trade receivable provision 2021 2020
Carrying value at beginning of year –11 –14
Provision –3 –2
Recovery 1 2
Write-down 3 2
Translation differences, other deductions or additions, etc. 0 1
Carrying value at end of year –11 –11
As of December 2021, net trade receivables of 50 MSEK (74) were past due.
The aging of trade receivables is as follows:
Aging of trade receivables 2021 2020
Current 1,793 1,502
Overdue < 31 days 31 53
Overdue 31–60 days 6 10
Overdue > 60 days 13 11
Total 1,843 1,577
Swedish Match does not generally hold collateral against trade receivable.
The ten largest customers represent 43 percent (42) of total net sales.
Trade receivables are generally held in domestic currencies, which have an
insignificant impact on the foreign currency risk. The provision for account
receivables mainly pertain to doubtful customer account receivables that
have the potential risk for not being collected. As the time to maturity is
short and the credit risk is low the impairment for trade receivables is
assessed to be immaterial. Credit risks are regularly reviewed, and there
has been no indications of any significant changes, due to COVID-19, in
customers’ credit terms or to customers’ ability to pay outstanding invoices
when they fall due. For more information, see Note 27 Financial instruments
and financial risks.
19
Cash and cash equivalents
Cash and cash equivalents 2021 2020
Cash and bank 1,018 1,972
Other current investments 1,103 1,440
Total 2,121 3,411
Other current investments consist of short term deposits with banks and
other institutions.
20
Assets held for sale
At December 31, 2021 the Group had no assets classified as held for sale.
At December 31, 2020 the Group had assets held for sale amounting to 28
MSEK which referred to land and forestry assets in Brazil and tangible fixed
assets to an immaterial amount. There were no corresponding liabilities to
these assets.
21
Equity
Objectives, policies and processes for managing capital
The basis for determining dividends and repurchasing of own shares is the
equity of the Parent Company. Total equity in the Parent Company as per
December 31, 2021 amounted to 10,280 MSEK and distributable earnings
amounted to 9,891 MSEK. In addition, before any distribution of capital to
shareholders is determined, the financial position of the Group is carefully
analyzed. As part of this analysis, the Board of Directors of Swedish Match
has adopted certain financial guidelines and risk management procedures
to ensure that the Parent Company and the Group maintain adequate
liquidity to meet reasonably foreseeable requirements taking into account
the maturity profile of debt obligations. The dividend policy of the Company
is a pay-out ratio of 40 to 60 percent of the earnings per share, subject to
adjustments for larger one-time items. The Board has further determined
that the financial policy should be, for the Group, to strive to maintain a net
debt that does not exceed 3 times EBITA. The Board continually reviews
the financial position of the Company, and the actual level of net debt is
assessed against anticipated future profitability and cash flow, investment
and expansion plans, acquisition opportunities as well as the development of
interest rates and credit markets. Excess funds are returned to shareholders
through dividends and share repurchases.
Proposed dividend per share
The Board of Directors proposes to the Annual General Meeting an increased
dividend, amounting to 1.86 SEK per share (1.50), proposed to be paid in
two installments of 0.93 SEK per share in May 2022 and 0.93 SEK per share
in November 2022. The proposed dividend is in line with Swedish Match’s
ambition to continually grow dividend per share with a payout ratio normally
within 40-60 percent of earnings per share, subject to adjustment for larger
one-time items. The proposed dividend represents an increase of 24 percent
from the prior year’s dividend, and equals a payout ratio of 49 percent (47) of
the adjusted earnings per share for the year. The proposed dividend amounts
to 2,848 MSEK based on the 1.531 billion shares outstanding at the end of the
year. Dividend for 2020, paid in 2021, amounted to 2,369 MSEK.
Shareholder distributions and the share
The Annual General Meeting on April 13, 2021 renewed the mandate to
repurchase up to 10 percent of the shares of the Company. In addition,
a decision was made to cancel 42 million shares held in treasury, with
a simultaneous bonus issue, without issuing new shares, of an amount
equivalent to the amount represented by the cancelled shares of 10 MSEK.
The total number of outstanding shares of the Company, including treasury
shares, after the cancellations, is 1.580 billion shares.
In May 2021, the number of shares and votes in Swedish Match AB (publ)
increased as a result of the share split (ratio 10:1) that was resolved by
Swedish Match AB´s Annual General Meeting on April 13, 2021, through
which each existing share was divided into ten shares. The record date for
the share split was May 10, 2021. Following the share split , the total number
of shares in the company amounts to 1,580,000,000 shares (previously
158,000,000 shares). All references to shares and earnings per share in this
document have been restated to reflect this split.
During the year 52.8 million shares were repurchased for 3,802 MSEK at
an average price of 71.96 SEK. As at December 31, 2021 Swedish Match held
48.8 million shares in its treasury, corresponding to 3.09 percent of the total
number of shares. The number of shares outstanding, net as per December
31, 2021, amounted to 1.531 billion.
Number of shares held in treasury and cumulative repurchases of own
shares included in retained earnings are detailed below:
Number of shares
(thousands)
Cumulative effect on
equity (MSEK)
2021 2020 2021 2020
Balance at beginning of year 37,929 67,217 –37,528 –34,429
Repurchase of own shares
during the year 52,836 48,212 –3,802 –3,099
Allocated to retained earnings
by cancellation of treasury
shares –42,000 –77,500 10 18
Bonus issue – – –10 –18
Balance at end of year 48,765 37,929 –41,330 –37,528
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Since the buyback program started in June 2000 the total number of shares
repurchased amounts to 2,655 million and the total number of shares
cancelled amounts to 2,459 million shares. The total number of shares
sold as a result of option holders exercising options amounts to 146 million
shares. Total shares bought back since the buyback program started have
been repurchased at an average price of 15.95 SEK.
For information regarding number of registed shares in the Parent
Company and outstanding shares quota value, see Note 12 Equity to the
Parent Company financial statements.
Changes in reserves of cumulative other comprehensive
income and non-controlling interest
2020
Hedge
reserve
Translation
reserve
Non-
controlling
interest
Balance at beginning of year –66 995 1
Profit for the year relating to non-
controlling interest – – –1
Translation differences related to
foreign operations for the year – –1,120 0
Effective portion of changes in fair
value cash flow hedges –51 – –
Income tax relating to components
of other comprehensive income
1)
11 – –
Balance at end of year –107 –125 1
1)
For further details on tax components relating to the various other comprehensive income
items, see Note 9 Income tax.
2021
Hedge
reserve
Translation
reserve
Non-
controlling
interest
Balance at beginning of year –107 –125 1
Profit for the year relating to non-
controlling interest – – –1
Translation differences related to
foreign operations for the year – 740 0
Translation differences included in
profit and loss – 0 –
Effective portion of changes in fair
value cash flow hedges 82 – –
Income tax relating to components
of other comprehensive income
1)
–17 – –
Balance at end of year –42 615 –1
1)
For further details on tax components relating to the various other comprehensive income
items, see Note 9 Income tax.
Hedge reserve
The hedge reserve includes the accumulated effective portion of changes in
fair value of cashflow hedges attributable to interest rate hedges measures
at FVOCI.
Translation reserve
The translation reserve includes all exchange rate differences that arise in
translation of the financial reports of foreign operations that have prepared
their financial statements in a different currency from that which is used
to present the consolidated financial reports. The Parent Company and the
Group present their reports in Swedish krona (SEK).
22
Interest bearing liabilities
The Group’s interest bearing liabilities consist of bond loans and lease
liabilities. The maturity structure of the Group’s non-current interest-
bearing liabilities is as follows:
Year 2021 2020
2022 – 1,467
2023 2,316 2,224
2024 3,104 3,026
2025 3,122 2,539
2026 2,031 1,053
2027 and later 3,932 3,412
Total 14,504 13,722
The Group’s current interest-bearing liabilities at December 31 comprised
the following items:
Current interest-bearing liabilities 2021 2020
Current portion of non-current loans 989 1,849
Current lease liabilities 96 77
Bank overdraft facilities utilized 1 0
Total 1,086 1,927
See further information on interest-bearing liabilities in Note 27 Financial
instruments and financial risks.
23
Post-employment benefits
The Group has defined benefit pension plans in a number of subsidiaries,
through which the employees are entitled to post-employment benefits
based on their pensionable income and the number of service years.
Obligations related to post-employment employee benefits as of December
31 are reported in the balance sheet under the following balance sheet
items:
Post-employment defined benefits 2021 2020
Defined benefit plans, net liabilities 296 461
Post-employment medical benefits, net liabilities 1,137 1,032
Other long term employee benefits, net liabilities 12 10
Provision for pensions and similar obligations 1,445 1,503
Defined benefit plans, net assets –140 –92
Included in other non-current receivables –140 –92
Net post-employment liability 1,305 1,411
The net defined pension benefit liability decreased during the year, as a
result of net positive actuarial remeasurements, mainly due to higher
discount rates and higher return on plan assets. In addition, the Group’s net
pension benefit obligation was affected by negative currency translation
effects.
Overview of the Group’s post-employment defined benefit plans
Post-employment defined benefit plans in the US represents the majority of
the Group’s total defined benefit obligation.
In the US, Swedish Match provides two qualifying pension plans, a post
retirement medical plan, a supplemental pension plan covering certain
executives, and a long term disability plan. The qualifying pension plans
are funded, where benefit payments are made from a trustee-administered
fund. The other plans are generally unfunded, where Swedish Match pays
benefits as they come due, although the Group did establish two Voluntary
Employee Beneficiary Association (VEBA) trusts for certain of its obligations
under the US post retirement medical plan in 2017.
The largest qualified pension plan covers non-collectively bargained US
employees and was closed for new entrants beginning in 2008. The plan is a
final average pay pension plan, which provides benefits to members in the
form of a guaranteed level of pension payable for life. The level of benefits
provided depends on members’ length of service and their salary in the final
years pre retirement.
The second qualifying pension plan covers collectively bargained US
employees and is open for new entrants. The plan is a dollars times service
NOTE 21 Continued
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pension plan, which provides benefits to members in the form of a
guaranteed level of pension payable for life. The level of benefits provided
depends on members’ length of service and dollar multipliers specified by
the plan. Normal retirement age for the US qualifying pensions is 65 years
and beneficiaries do not receive inflationary increases. Plan assets are
held in trusts and there are pension plan fiduciaries as required under US
pension law. The fiduciaries, jointly with Swedish Match, are responsible for
the governance of the plans.
Plan assets are invested in accordance with the plans’ Statement of
Investment Guidelines. Investments are well diversified, such that the failure
of any single investment would not have a material impact on the overall
level of assets. The asset allocation strategy is to gradually move toward a
higher fixed income allocation, following an interest rate matching strategy
specifically referred to as a Liability Responsive Asset Allocation. As the
funded status improves, the allocation to liability-oriented long duration
bonds, or hedging assets, will increase, with a corresponding decrease to
return-seeking assets, including equities, real estate, and hedge funds.
The US post-retirement medical plan offers heavily subsidized health care
coverage for employees and their beneficiaries after retirement. For
noncollectively bargained employees, the plan was closed for new entrants
beginning in 2008. The plan is still open for collectively bargained new
entrants. In addition to retiree medical benefits, retiree life insurance
benefits are also provided under the plan.
Actuarial valuations are completed annually for the US plans, and
historically contributions have been made to satisfy minimum funding
requirements and any additional discretionary amounts to avoid benefit
restrictions, and to maintain a funded ratio of at least 80 percent under
USpension law.
In the UK, Swedish Match provides a funded pension plan for former
employees of Swedish Match UK Limited, providing benefits based on final
pay. Approximately 70 percent of the liabilities relate to retired members
already in receipt of pensions, and their dependents, with the remaining part
of the balance relating to members with deferred pensions. There are no
active members accruing further benefits, and no new members are able
tojoin.
The plan is set up as a separate legal entity, and a separate trustee
company, Swedish Match UK Pension Trustee Limited, responsible for its
governance. One third of the directors of the trustee company are nominated
by the membership and two thirds are nominated by the employer. The
strategic asset allocation is determined from time to time by the directors
of the trustee company, after consulting with Swedish Match, based on
professional advice and having regard to the level of risk.
In 2011, the trustee undertook a significant exercise to reduce risk by
purchasing a bulk annuity contract covering all of the liabilities for
pensions in payment at that time. The trustee is currently following a largely
growth based strategy for the remaining assets but is actively searching for
opportunities to de-risk further as and when the funding position allows.
The other pension plans, representing a minority part of the Group’s
total pension plans, are final salary pension plans that provide benefits to
members in the form of a guaranteed level of pension payable for life, or in
a lump-sum at the date for retirement. The majority of benefit payments
are from trustee administered funds. Also, there are a number of unfunded
plans where the Group meets the benefit payment obligation as it falls due.
Plan assets held in trusts are governed by local regulations and practices in
each country, as is the nature of relationship between Swedish Match and the
trustees (or equivalent) and their composition. Responsibility for governance
of the plans, including investment decisions and contribution schedules, lies
jointly with Swedish Match and the board of trustees. The board of trustees
is composed of representatives of Swedish Match and plan participants in
accordance with the plans’ regulations.
Actuarial valuations are completed annually for all material
post-employment benefit plans.
The table below specifies the net liability for defined benefit
post-employment obligations:
Defined benefit
pension plans
Post-employment
medical benefits
Post-employment defined
benefits 2021 2020 2021 2020
Present value of funded
obligations 3,750 3,600 1,183 1,103
Fair value of plan assets –3,857 –3,425 –46 –71
Surplus(-)/Deficit(+), net –107 175 1,137 1,032
Present value of unfunded
obligations 259 194 – –
Assets ceiling 4 – – –
Net liability(+) in the balance
sheet 156 369 – –
Amounts in the balance sheet
Liabilities 296 461 1,137 1,032
Assets –140 –92 – –
Net liability(+) in the balance
sheet 156 369 1,137 1,032
Actuarial assumptions
Provisions for the Group’s post-employment defined benefit plans are
reported based on actuarial valuations. The valuations are calculated based
on actuarial assumptions for determining the discounted net present value
of the obligations. Significant actuarial assumptions used are discount
rate, future salary growth rate, future pension growth rate, inflation, future
mortality expectancy and medical cost trend rate, as applicable.
The discount rate is set per country with reference to market yield on
high quality corporate bonds of appropriate duration or government bonds
for countries where a deep market of high quality corporate bonds is not
available.
For the US defined benefit plans Swedish Match determined the obligation
effective discount rate based on the single equivalent rate such as the
present value of the plan’s obligation cash flows using the single rate equals
the present value of those cash flows using the corresponding spot rate
along the yield curve.
The effective rates for interest on the defined benefit obligation and
service cost are the single equivalent rates that result in the same value
when applied to the defined benefit obligation and service cost, respectively.
For the larger US post-employment defined benefit plans the same
process is applied to the plan’s service cost cash flows to determine the
effective discount rate associated with the service cost.
For the other plans Swedish Match applies a single weighted average
discount rate based on the full eligible population to measure the obligations
and pension expense.
Assumptions regarding future mortality expectancy are based on advice
in accordance with published statistics and experience in each country.
The interest income on plan assets is based on the discount rate and is a
component of the return on plan assets. Changes in assumptions can give
rise to remeasurement differences, i.e. actuarial gains and losses, in the
valuation of the Group’s defined benefit obligations and the outcome from
the performance of plan assets. Actuarial gains and losses are recognized
to the full amount as they occur in accordance with the actuarial valuation
and reported in other comprehensive income for all plans except for the US
L-T Disability plan where actuarial gains and losses are recognized directly
in profit and loss, which constituted an immaterial amount as per December
31, 2021. The full recognition of actuarial gains and losses implies that the
Group’s net pension liability in the balance sheet includes all cumulative
actuarial gains and losses.
NOTE 23 Continued
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NOTE 23 Continued
Significant risks associated with the Group’s post-
employment defined benefit plans
Changes in market yields on corporate and government bonds would impact
the plan liabilities. A decrease in market yields will decrease the discount
rate assumption which increases plan liabilities for accounting purposes.
However, for funded plans, this will be partially offset by an increase in
the value of the trusts’ bond holdings. As Swedish Match moves along the
liabilitydriven investment glide path, this offset will increase and risk will be
further mitigated.
Some pension plan trusts hold equities, whose growth is expected to
outpace liabilities over the long term while providing volatility and risk in the
short term. Poor equity performance will decrease funded status and will
increase both accounting expense and required funding. As discussed above,
over time, Swedish Match intends to reduce the level of equity investment
risk by investing more in fixed income assets to better match the liabilities
per the liability driven investment glide path set forth in the Statement of
Investment Guidelines. The plans provide benefits for the life of participants
(and often also their spouses). As such, increases in life expectancy will
result in an increase in the plans’ liabilities.
Other risks to which the plans are exposed include the risk that price
inflation will increase, which will result in higher pension payments being
due.
The post-retirement medical liabilities in the US reflect assumptions of
increases in future US health care costs (health care trend). If actual cost
increases outpace these assumptions, plan liabilities will increase.
Significant actuarial assumptions at the balance sheet date (expressed as
weighted average):
Group
Defined benefit
pension plans
Post-employment
medical benefits
Actuarial assumptions 2021 2020 2021 2020
Discount rate, % 2.6 2.2 2.7 2.4
Price inflation rate, % 2.5 2.4 2.5 2.5
Future salary increases, % 3.4 3.3 3.2 3.2
Future pension increases, % 3.3 2.7 – –
Medical cost trend rate, % – – 5.6 5.9
Sensitivity analysis of significant assumptions
Changes in the discount rate may have a significant effect on the Group
defined benefit obligation. An increase in the discount rate of 0.5 percent
would decrease the defined benefit obligation with 342 MSEK and a
decrease of 0.5 percent in the discount rate would increase the defined
benefit obligation with 383 MSEK. The effect from the sensitivity analysis is
based on a change in the discount rate assumption while holding all other
assumptions constant.
Changes in other actuarial assumptions are calculated not to have a
material effect on the Group defined benefit obligation. A change in the
future salary increases or the inflation rate of 0.5 percent is estimated to
have an effect on the defined benefit obligation of less than 1.0 and about
2.5percent respectively, holding other assumptions constant.
Change in the defined benefit obligations and plan assets
The movements in the defined benefit obligation over the year were as
follows:
Defined benefit
pension plans
Post-employment
medical benefits
Defined benefit obligations 2021 2020 2021 2020
Balance at beginning of year 3,794 3,931 1,103 1,167
Service cost 79 75 33 25
Interest expense on obligation 71 100 22 32
Settlement payments from
plan asset –59 – – –
Settlement payments from
employer – –9 – –
Contributions by plan
participants – – 4 4
Benefits paid –171 –164 –36 –39
Taxes paid –1 –1 – –
Settlement gain –4 0 – –
Changes in financial
assumptions –138 391 –83 113
Changes in demographic
assumptions 7 –5 5 –10
Experience assumptions 55 –45 23 –38
Translation differences 376 –479 113 –151
Balance at end of year 4,009 3,794 1,183 1,103
Profile of plan members of the
defined benefit obligation
Defined benefit
pension plans
Post-employment
medical benefits
2021 2020 2021 2020
Active employees 1,473 1,340 657 572
Deferred members 450 449 – –
Members in retirement 2,086 2,005 526 530
Balance at end of year 4,009 3,794 1,183 1,103
Weighted average duration of
defined benefit obligation 14 years 14 years 15 years 16 years
The movements in the fair value of plan assets of the year were as follows:
Defined benefit
pension plans
Post-employment
medical benefits
Plan assets 2021 2020 2021 2020
Fair value at beginning of year 3,425 3,644 71 102
Interest income on plan assets 59 88 1 2
Administrative expense –11 –10 0 0
Settlement payments from
plan asset –59 – – –
Settlement payments from
employer – –9 – –
Employer contributions 35 25 1 8
Employee contributions – – 4 4
Benefits paid –171 –164 –36 –39
Taxes paid –1 –1 – –
Return on plan assets,
excluding interest income 241 269 0 5
Translation differences 338 –417 6 –10
Fair value at end of year 3,857 3,425 46 71
The actual return on plan assets was positive and amounted to 301 MSEK
(364).
Plan assets at December 31 are comprised as follows:
Plan assets 2021 2020
Equity securities
1)
1,503 1,276
Debt instruments 1,326 1,303
Real estate 119 98
Other
2)
955 819
Total 3,903 3,496
1)
Equity securities consist of quoted securites in all material respect. The Group’s plan assets
does not hold any own shares.
2)
A large part pertains to the UK pension scheme annuity insurance policies.
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Income and expenses relating to post-employment
benefit plans recognized in the income statement
The amounts reported in the income statement consist of the following:
Post-employment defined
benefits income and expenses
Defined benefit
pension plans
Post-employment
medical benefits
2021 2020 2021 2020
Service costs 79 75 33 25
Effect of settlements –4 0 – –
Interest expenses on obligation 71 100 22 32
Interest income on plan assets –59 –88 –1 –2
Administrative expenses 11 10 0 0
Net expense reported in the
income statement 98 97 54 55
The net expense for defined benefit plans are reported under the following
headings in the income statement:
Post-employment defined
benefits income and expenses
Defined benefit
pension plans
Post-employment
medical benefits
2021 2020 2021 2020
Cost of goods sold 38 27 21 13
Administrative expenses 17 31 7 6
Selling expenses 31 27 6 6
Other income/expenses – 1 – –
Interest income –59 –88 –1 –2
Interest expenses 71 100 22 32
Net expense reported in the
income statement 98 97 54 55
Income and expenses relating to post-employment benefit
plans recognized in other comprehensive income
The amounts reported in other comprehensive income consist of the
following:
Post-employment defined
benefits income and expenses
Defined benefit
pension plans
Post-employment
medical benefits
2021 2020 2021 2020
Actuarial gains and losses on
obligations, incl. payroll taxes –76 341 –56 65
Return on plan assets, excluding
interest income –241 –269 0 –5
Change in assets ceiling 4 – – –
Net income (–)/expense(+)
reported in other comprehensive
income statement –313 71 –56 61
Post-employment employee benefits per country
Defined benefit pension plans and post-employment medical benefits as at
December 31 per significant country are comprised as follows:
2021
Present value
of obligation
Fair value of
plan assets
Assets
ceiling
Net liability/asset
in balance sheet
US 4,252 2,922 – 1,330
UK 770 774 –4 –
Rest of the world 182 207 – –25
Total 5,204 3,903 –4 1,305
2020
Present value
of obligation
Fair value of
plan assets
Net liability/asset
in balance sheet
US 3,937 2,554 1,383
UK 738 707 32
Rest of the world 231 235 –4
Total 4,906 3,496 1,411
NOTE 23 Continued
Significant actuarial assumptions as at December 31 per significant country (expressed as weighted average):
US UK Rest of the world
Defined benefit
pension plans
Post-employment
medical benefits
Defined benefit
pension plans
Defined benefit
pension plans
Actuarial assumptions 2021 2020 2021 2020 2021 2020 2021 2020
Discount rate, % 2.7 2.4 2.7 2.4 1.8 1.4 5.0 3.5
Price inflation rate, % 2.2 2.2 2.5 2.5 3.6 3.2 3.0 2.2
Future salary increases, % 3.2 3.2 3.2 3.2 – – 7.8 5.2
Future pension increases, % – – – – 3.4 3.1 1.5 0.9
Medical cost trend rate, % – – 5.6 5.9 – – – –
Expected contribution next year
Expected contributions for post-employment benefit plans for the full year
2022 amounts to 42 MSEK.
Defined contribution plans
The Group has certain obligations under defined contribution plans.
Contributions to these plans are determined by provisions in the respective
plan. Costs for defined contribution plans charged to income statement for
the year amounted to to 187 MSEK (191).
Multi-employer insurance plan
In Sweden there is a multi-employer insurance plan for salaried personnel
in Alecta. Due to that it is not possible to get sufficient information for each
companys’ specific obligation and fair value of related assets defined benefit
accounting cannot be applied and the Alecta pension plan is therefore
accounted for as a defined contribution plan. Swedish Match contribution to
Alecta for the year ended December 2021 was 70 MSEK (62). This
contribution represents 0.14 percent (0.11) of the total contributions paid
toAlecta. Swedish Match active members in the multi-employer plan are
0.08 percent (0.08) of all active members in the plan. Alecta has a collective
funding ratio as per December 2021 of 172 percent (148). The collective
funding ratio is a buffer for Alecta’s insurance commitments to protect
against fluctuations in investment return and insurance risks. It is the
difference between Alecta’s assets and the company’s insurance
commitments to policyholders and insured individuals. The collective
solvency is normally allowed to vary between 125 and 175 percent. If the
levelof collective solvency is less than 125 percent or exceeds 175 percent,
measures are to be taken in order to create conditions for restoring the
levelof collective solvency to the normal interval.
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24
Provisions
Non-current and current provisions at December 31 comprised the following:
Non-current provisions 2021 2020
Restructuring 3 7
Deferred compensation 459 434
Other operating provisions 4 3
Total non-current provisions 466 443
Current provisions 2021 2020
Other operating provisions 535 381
Total current provisions 535 381
Total non-current and current provisions 1,001 823
Movements in provisions during the year were as follows:
Provisions
Restructuring
provisions
Deferred
compensation
Other operating
provisions Total
Carrying value at beginning of year 7 434 383 823
Provisions made during the year 6 99 956 1,061
Provisions used during the year –7 –89 –831 –927
Provisions reversed during the year and changes in estimates – –2 –10 –12
Reclassifications –3 –19 7 –15
Translation differences, etc. – 36 34 70
Carrying value at end of year 3 459 539 1,001
25
Other liabilities
Other non-current liabilities at December 31 comprised the following:
Other non-current liabilities 2021 2020
Non-current liabilities – derivatives
1)
128 213
Non-interest bearing non-current liabilities
2)
38 43
Other non-current finacial liabilities 3 3
Total 169 258
1)
Non current liabilities for derivaties consisted of negative currency effects amounting to 106
MSEK (163) and negative fair value effects amounting to 22 MSEK (50).
2)
Non-interest bearing non-current liabilities mainly referred to additional obligations related to
acquisition of patent rights.
Other current liabilities at December 31 comprised the following:
Other current liabilities 2021 2020
Tobacco taxes 1,136 1,161
VAT liabilities 426 434
Current financial liabilities, derivatives 6 258
Other 34 23
Total 1,603 1,875
26
Accrued expenses and deferred income
Accrued expenses and deferred income at December 31 comprised the
following:
Accrued expenses and deferred income 2021 2020
Accrued wage/salary-related expenses 382 326
Accrued vacation pay 95 95
Accrued social security charges 88 84
Accrued interest 170 168
Other 326 344
Total 1,063 1,018
Restructuring
The provisions are generally expected to be settled within one year, but could
for certain portions be expected to be settled within a period of up to three
years.
Deferred compensation
The deferred compensation provision refers to the long term portion of
the long term incentive plan for key management personnel, which will be
settled within three years. Certain employees may elect to defer a portion
of their normal salary and/or bonus awards until a later date, and may elect
to defer compensation up until the date of retirement. From retirement,
payments may be spread over a period not to exceed 15 years. The deferrals
are invested and secured by corporate owned life insurance policies. The
deferred amount develops each year by the investment return. Accordingly,
the present value of the deferred amount is estimated to equal the initially
deferred amount plus accumulated return. For more information on
incentive programs and variable salaries see Note 5 Personnel.
For further information about provisions for pensions see Note 23
Post-employment benefits.
Other operating provisions
Provisions of operating character, and not related to restructuring or
deferred compensation, are reported as operating provisions. Other
operating provisions mainly refer to provisions for sales discounts, expected
product returns and outstanding redemptions of coupons. While provisions
related to sales discounts, sales refund and coupons are expected to be
realized within the year, they are replaced within the year, and as such the
provisions are classified as current.
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27
Financial instruments and financial risks
Operations
As a result of its international operations, Swedish Match is exposed to
financial risks. The term “financial risks” refers to fluctuations in Swedish
Match’s cash flow caused by changes in foreign exchange rates and interest
rates, and to risks associated with refinancing and credit. To manage its
financial risks, Swedish Match has a finance policy in place established by
the Board of Directors. The Group’s finance policy comprises a framework
of guidelines and principles governing the management of financial risks
and finance operations in general. The central functions consist of Financial
Services and Treasury, which are responsible for the Group’s borrowing
including securing financing needs, cash management including cash
pools and handling the liquidity surplus, as well as currency and interest
rate management. Treasury serves as an internal bank for the Group’s
financial transactions. The Group’s financial risk management is centralized
to capitalize on economies of scale and synergy effects, and to minimize
operational risks.
Financial instruments
Swedish Match uses various types of financial instruments to hedge the
Group’s financial exposure arising in business operations and as a result
of the Group’s financing and asset and debt management activities. To
reduce Swedish Match’s financial exposure, derivative instruments, such as
currency forwards, currency swaps, interest rate swaps, and cross currency
interest rate swaps are used. A table showing all the derivatives that affected
the Group’s balance sheet and income statement is provided below.
Outstanding derivatives
2021 2020
Nominal Assets Liabilities Nominal Assets Liabilities
Currency derivatives 4,671 71 6 4,044 1 258
Interest-rate
and currency
derivatives* 10,493 745 173 9,991 460 259
Total 15,164 816 179 14,035 461 517
* In cash flow hedges
There are no conditions in these transactions that can cause any significant differences in the
hedging relation between these derivatives and their underlying liabilities.
Currency risks
Exchange rate fluctuations affect Group earnings and shareholders’ equity
in various ways:
• Earnings – when sales revenues and production costs are denominated in
different currencies (transaction exposure).
• Earnings – when the earnings of foreign subsidiaries are translated to SEK
(translation exposure).
• Earnings – if loans and deposits are made in other currencies than the
unit’s functional currency (translation exposure).
• Shareholders’ equity – when the net assets of foreign subsidiaries are
translated to SEK (translation exposure).
The consolidated income statement includes exchange rate gain of 7 MSEK
(loss of 13) in operating profit and loss of 5 MSEK (loss of 8) in net finance
cost.
Transaction exposure
A large part of the Group´s inflow and outflow in foreign currencies are
matched, which effectively limits the Group’s transaction exposure.
Transaction exposure arises when certain of the Group’s production units in
Europe make purchases of raw tobacco in USD, and through the European
operations’ exports of lighters and matches in USD. The largest exposure of
the Group is in NOK due to the sales of products in Norway which is produced
in Sweden.
The anticipated commercial net currency flow in the same currencies
(transaction exposure) is divided as following in MSEK:
NOK USD EUR PHP CHF Other Total
Transaction exposure 1,434 505 261 112 42 47 2,401
Percentage 60% 21% 11% 5% 2% 2%
As Swedish Match’s transaction exposures are limited, few hedging
transactions are executed. The hedging transactions are, if any, based
on risk exposures, current market conditions and other strategic
considerations. On December 31, 2021, no transaction exposure for 2022 has
been hedged. A general rise of 10 percent in the value of the SEK against all
of the Group’s transaction currencies is estimated to change consolidated
earnings before tax by the following in MSEK:
NOK USD EUR Other Total
143 51 –26 –12 156
Translation exposure
The most significant effect of currency movements on consolidated earnings
arises from the translation of subsidiaries’ earnings. Earnings in Group
companies are translated at average exchange rates. Effects mainly pertain
to USD, EUR, BRL and DKK. The single most important currency is the USD.
When the net assets of foreign subsidiaries are translated to SEK,
translation differences arise that are recognized directly in equity. The
exposures of net investment are as following in MSEK:
USD EUR DKK BRL Other Total
Translation exposure 2,002 218 241 158 115 2,734
Percentage 73% 8% 9% 6% 4%
The Group does not, as a general rule, hedge the net investments in foreign
subsidiaries. If the SEK strengthens by 10 percent against all the currencies
in which Swedish Match has foreign net assets, the shareholders’ equity
would be affected by the following amounts in MSEK, based on the exposure
at December 31, 2021:
USD EUR DKK BRL Other Total
200 22 –24 –16 –11 171
Interest-rate risk
The Swedish Match Group’s sources of financing mainly comprise of
shareholders’ equity, cash flow from current operations, and borrowing.
Interest-bearing loans and pension liabilities expose the Group to
interest-rate risk. Changes in interest rates have a direct impact on Swedish
Match’s net interest expense. Swedish Match policy is that the average
interest maturity should be less than 5 years, but the aim is to have as long
duration as possible, while still considering the maximum of 5 years. The
speed with which a permanent change of interest rate impacts net interest
expense depends on the interest maturity periods of the loans. The Group´s
objective for interest rate fixing is to achieve an even and foreseeable cost
of interest. Cross currency interest rate swaps are used mainly to convert
our borrowing in foreign currencies into SEK and fixed interest rates.
The average interest cost for outstanding bonds (including derivative
instruments) on December 31, 2021 was 2.1 percent (2.1). The average
interest maturity period for Group loans was 3.5 years (3.7 years), taking into
account cross currency interest rate swaps. The interest maturity structure
on December 31, 2021 was as follows:
Loans
Loans and effects
from derivatives
Year Fixed Variable Fixed Variable
2022 987 987
2023 1,784 450 1,984 250
2024 3,065 3,065
2025 3,088 3,088
2026 1,998 1,998
2027– 3,811 3,811
Total 14,734 450 14,934 250
The Group is exposed to interest rate risk in the transition to new benchmark
interest rates, due to the Group´s borrowing in floating interest rates.
The Group currently has two loans in scope of the IFRS 9 amendments
due to the interest rate benchmark reform with floating rate 3 month IBOR.
Of the variable rate loans linked to IBOR in the table above, one is not in a
hedging relationship, and has a nominal amount of 250 MSEK with interest
payments of 3 month STIBOR. The other loan has a nominal amount of
200 MSEK with interest payments of 3 month STIBOR, which is hedged in
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NOTE 27 Continued
an interest rate swap receiving 3 month STIBOR and paying fixed terms.
The terms of the hedged items match those of the corresponding hedging
instruments.
None of the Group’s current STIBOR linked contracts include adequate
and robust fall back provisions for a cessation of the referenced benchmark
interest rate. Different working groups in the industry are working on
fall back language for different instruments and different IBOR´s, which
Swedish Match is monitoring closely and will implement when appropriate.
At December 31, 2021, a general rise of 1 percent (100bp) in short term
interest rates of debt with variable interest rates and cash surplus was
estimated to increase consolidated earnings before tax by approximately
8 MSEK (18) on an annual basis. The net interest-bearing debt (including
net pension obligations and lease liabilities) at the same date amounted
to14,035 MSEK (13,523).
If interest rates were to rise with 1 percent (100bp) the total effect on
equity due to cash flow hedges would have a positive impact on the amount
by 2 MSEK (4).
Refinancing risk and liquidity
Refinancing risk is defined as the risk that funds become scarce and thus
more expensive than expected, and liquidity risk is defined as not being
able to make regular payments as a consequence of inadequate liquidity
or difficulty in raising external loans. Swedish Match applies a centralized
approach to the Group’s financing, whereby as much external borrowing as
possible is conducted centrally. Subsidiary borrowing can, however, take
place in countries where regulations and taxes make central financing
impossible or uneconomical. Swedish Match tries to limit its refinancing
risk by having a good distribution and length on its gross borrowing, and not
being dependent on individual sources of financing.
Swedish Match has a syndicated bank credit facility of committed 1,500
MSEK, which matures in December 2026. This was unutilized at year-end
and contained no financial covenants. It is defined as a reserve facility.
At year-end 2021, available cash funds and committed credit facilities
amounted to 3,621 MSEK. Of this amount, confirmed credit lines amounted
to 1,500 MSEK and cash and cash equivalents making up the remaining 2,121
MSEK. All cash and cash equivalents are available for use, none of this is
pledged or similar.
Most of Swedish Match’s financing consists of a global medium-term note
program (MTN) with a limit amount of 2,000 MEUR. The program is an
uncommitted borrowing program and the availability could be limited by
the Group’s creditworthiness and prevailing market conditions. In case of
market stress, if this program cannot be efficiently used, the syndicated
bank credit facility of 1,500 MSEK will be utilized if necessary. At December
31, 2021, a total of 15,179 MSEK of the global medium-term note program
was outstanding. The average maturity of the Group’s bond borrowing at
December 31, 2021 was 3.5 years.
Swedish Match’s undiscounted cash flows regarding sources of loans
and lease liabilities, including interest payments, negative derivatives
(derivatives with positive market values are excluded), accrued interest,
trade payables and their maturity profiles are distributed as follows:
Year
Other financial
liabilities
incl. interest
Negative
derivatives
Trade
payables
Total
value
Total
booked
value
2022 1,317 33 464 1,814 1,599
2023 2,526 34 2,560 2,354
2024 3,273 31 3,304 3,140
2025 3,240 33 3,273 3,157
2026 2,133 30 2,163 2,064
2027– 4,035 136 4,171 3,947
Total 16,524 297 464 17,285 16,261
Under the global MTN program, Swedish Match has issued bonds in SEK,
EUR, USD and CHF. Borrowing in EUR, USD and CHF is hedged into SEK by
cross currency interest rate swaps.
Liquidity within Swedish Match is handled centrally through local cash
pools. Group companies are required to deposit liquid funds in cash pool
accounts or, if these are not available, with the Group’s treasury unit.
Exceptions are only allowed when regulations prohibit cash pools or internal
deposits.
Cash flow and fair value hedges
Cash flow hedges
The table below shows the yearly change of the fair value of the hedging instruments, from opening balance, recognized in other comprehensive income and
the amounts that are reclassified in profit and loss during the year, previously recognized in other comprehensive income. There was no ineffectiveness in cash
flow hedge accounting during 2021.
2021
Opening balance
fair value Jan 1
Change in fair value
used for calculating
hedge ineffectiveness
Balance in cash flow
hedge reserve for
continuing hedges
Change in the fair value
of hedging instrument
recognized in OCI
Amounts reported in
the income statement
during the year
Closing balance
fair value Dec 31
Hedging instruments,
derivatives –135 135 –135 373 –292 –53
Total –135 135 –135 373 –292 –53
2020
Opening balance
fair value Jan 1
Change in fair value
used for calculating
hedge ineffectiveness
Balance in cash flow
hedge reserve for
continuing hedges
Change in the fair value
of hedging instrument
recognized in OCI
Amounts reported in
the income statement
during the year
Closing balance
fair value Dec 31
Hedging instruments,
derivatives –84 84 –84 –507 456 –135
Total –84 84 –84 –507 456 –135
Maturity profile over interest payments taking part in a cash-flow hedge:
2022 2023 2024 2025 2026 2027–
Fixed rate interest on
payments –235 –222 –189 –130 –72 –87
Fair value hedges
At year end there were no fair value hedges outstanding.
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NOTE 27 Continued
Liquidity risks and credit risks
To limit liquidity and credit risks, investments and transactions in derivative
instruments may be made only in instruments with high liquidity and with
counterparties having high credit ratings. In addition to bank accounts,
Swedish Match invests surplus funds in banks and institutions. The credit
risk of financial counterparties is monitored daily. Management has
further assessed that there is no change in the underlying risk affecting
the classification of financial instruments reported in the balance sheet. At
December 31, 2021, the average interest maturity for the Group’s current
investments was less than 1 month.
The Group’s finance policy regulates the maximum credit exposure to
various counterparties. The aim is that counterparties to Swedish Match in
financial transactions should have a credit rating of at least category A from
Standard & Poor’s or equivalent from Moody’s.
To reduce the credit risk in receivables from banks arising via derivative
instruments, Swedish Match has entered into netting agreements,
known as ISDA Master Agreements, with all of its counterparties. These
agreements grant rights to net market valuations on assets and liabilities
if the counterpart is in an event of default, as with suspended payments.
The following table shows the netted exposures per December 31, 2021. No
collateral has been received or pledged. The majority of the derivatives are
related to the Group´s central funding.
Financial instruments under master netting agreements
2021
Gross amount
for financial
instruments
Amounts of financial
instruments not netted in
the balance sheet, but
subject to netting agreement Net
Derivatives – Assets 816 –160 656
Derivatives – Liabilities 179 –160 19
2020
Gross amount
for financial
instruments
Amounts of financial
instruments not netted in
the balance sheet, but
subject to netting agreement Net
Derivatives – Assets 461 –178 283
Derivatives – Liabilities 517 –178 339
At December 31, 2021, credit exposure in derivative instruments amounted
to 656 MSEK, and credit exposure in cash and deposits at banks amounted
to 1,063 MSEK. Swedish Match reduces the risk of its customers failing to
fulfill their undertakings with the result that payment is not received for
accounts receivable as they are divided among many different customers. At
the reporting date, there was no significant concentration of credit risk in the
Group’s accounts receivable. The total amount of the Group’s trade receivables
was 1,843 MSEK (1,577). For more information see Note 18 Trade receivables.
Credit ratings
At December 31, 2021, Swedish Match had the following credit ratings from
Standard & Poor’s and Moody’s Investor Service:
Standard & Poor’s Moody’s
Long term rating: BBB Baa2
Outlook: Stable Stable
Carrying value and fair value
Swedish Match applies IFRS 9 to classify and measure financial instruments
IFRS 13 is applied for financial instruments measured at fair value on the
balance sheet which implies using a fair value hierarchy that reflects the
significance of input used according to the following levels:
• Level 1 - Quoted prices (unadjusted) in active markets.
• Level 2 - Inputs other than quoted prices included within Level 1 that are
observable, either directly or indirectly. The input data consists mainly
of the compounded interest rates from interest rate swaps, basis swaps
and conversion rates for variable interest rates to create relevant Cross
Currency Interest Rate Swap (CCIRS) rates. The created interest rates are
used to calculate the market value by discounting the external outstanding
CCIRS flows including the actual market valuation of involved currencies.
• Level 3 – Inputs that are not based on observable market data.
The following table shows carrying value (including accrued interest) and
fair value for each category of financial instruments, including their levels
in the fair value hierarchy, at December 31, 2021. Items measured at fair
value through profit and loss (FVTPL) consist of derivatives, for which hedge
accounting is not applied. Derivatives attributable to cash flow hedges are
measured at fair value via other comprehensive income (FVOCI) in level 2 of
the fair value hierarchy. In assessing the fair values of these derivatives, the
Group uses a variety of methods and makes assumptions based on market
conditions at each reporting date. Quoted market prices or dealer quotes
for identical or similar instruments are used. Items not valued at fair value
are measured at amortized cost. Trade receivables are measured at their
transaction price. All items, except loans and borrowings, have a short
duration and are considered non- interest bearing, and therefore, the total
carrying value of the financial instruments corresponds to the estimated fair
value. The carrying amount for loans and borrowings differ from their fair
value as a consequence of changes in the market interest rates, determined
by using current official market quotations for our outstanding bonds or
similar instruments and discounting future cash flows. The values presented
are indicative and may not necessarily be realized.
Carrying value and fair value
The following table show carrying value and fair value for financial instruments per December 31, 2021.
2021
Financial
instruments
measured at FVTPL
Financial assets
measured at
amortized cost
Financial
liabilities
measured at
amortized cost
Cash flow hedges
measured at
FVOCI
Other receivables
and liabilities
Total
carrying
value
Estimated
fair value
Trade receivables – 1,843 – – – 1,843 1,843
Other non-current financial receivables – 36 – 700 601 1,337 1,337
Other current assets and financial
receivables 71 92 – 43 271 476 476
Prepaid expenses and accrued income
1)
– – – 2 153 155 155
Cash and cash equivalents – 2,121 – – – 2,121 2,121
Total assets 71 4,092 – 745 1,025 5,932 5,932
Loans and borrowings – – 15,187 – – 15,187 15,499
Other non-current financial liabilities – – 307 128 41 476 476
Other current liabilities 6 – 102 – 1,590 1,699 1,699
Accrued expenses and deferred income
1)
– – 125 45 892 1,063 1,063
Trade payables – – 464 – – 464 464
Total liabilities 6 – 16,185 173 2,523 18,889 19,201
1)
Accrued interest income on cash flow hedges is reported in the balance sheet as Prepaid expenses and accrued income and accrued interest expense on cash flow hedges is reported as Accrued
expenses and deferred income.
Fair value measurement by level Level 1 Level 2 Level 3 Total
Derivative financial assets – 816 – 816
Derivative financial liabilities – 179 – 179
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NOTE 27 Continued
The following table show carrying value and fair value for financial instruments per December 31, 2020.
2020
Financial
instruments
measured at FVTPL
Financial assets
measured at
amortized cost
Financial
liabilities
measured at
amortized cost
Cash flow hedges
measured at
FVOCI
Other receivables
and liabilities
Total
carrying
value
Estimated
fair value
Trade receivables – 1,577 – – – 1,577 1,577
Other non-current financial receivables – 3 – 459 473 935 935
Other current assets and financial
receivables 1 69 – – 246 315 315
Prepaid expenses and accrued income
1)
– – – 1 115 117 117
Cash and cash equivalents – 3,411 – – – 3,411 3,411
Total assets 1 5,060 – 460 834 6,355 6,355
Loans and borrowings – – 15,364 – – 15,364 15,713
Other non-current financial liabilities – – 208 213 45 466 466
Other current liabilities 258 – 77 – 1,617 1,952 1,952
Accrued expenses and deferred income
1)
– – 122 46 850 1,018 1,018
Trade payables – – 409 – – 409 409
Total liabilities 258 – 16,180 259 2,512 19,209 19,558
1)
Accrued interest income on cash flow hedges is reported in the balance sheet as Prepaid expenses and accrued income and accrued interest expense on cash flow hedges is reported as Accrued
expenses and deferred income.
Fair value measurement by level Level 1 Level 2 Level 3 Total
Derivative financial assets – 461 – 461
Derivative financial liabilities – 517 – 517
28
Pledged assets
Pledged assets at December 31 comprised the following:
Pledged assets for debt to credit institutions
and other commitments 2021 2020
Floating charges – 3
Endowment insurances 160 132
Other 5 2
Total 165 137
29
Commitments and contingent liabilities and assets
Contingent liabilities
Guarantees on behalf of subsidiaries referred to undertakings on behalf
of the companies over and above the amounts utilized and recognized as
liabilities by the companies. Other guarantees and contingent liabilities
referred to contractual commitments with tobacco growers for future
purchases of leaf tobacco, guarantees made to government authorities for
Group companies fulfillment of undertakings in connection with imports and
payment of tobacco taxes.
Contingent liabilities 2021 2020
Guarantees on behalf of subsidiaries 303 291
Other guarantees and contingent liabilities 252 185
Total 556 476
Legal disputes
The Group is involved in a number of legal proceedings. Although the
outcomes of these proceedings cannot be predicted with any certainty, and
accordingly, no guarantees can be made, management is of the opinion
that obligations attributable to these disputes, if any, should not have any
significant impact on the results of operations or the financial position of
Swedish Match.
Contingent assets
As per December 31, 2021, the Group had no contingent assets.
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30
Group companies
Swedish Match subsidiaries are owned to 100 percent by Swedish Match Group, with exception of one Swedish subsidiary of which Swedish Match holds the
shares to 95 percent as well as an insignificant non-controlling interest in a foreign subsidiary.
Subsidiary’s domicile, country
Ownership share, %
Subsidiary holdings
1)
2021 2020
Swedish Match da Amazonia S.A. Brazil 100 100
Swedish Match do Brazil S.A. Brazil 99,7 99,7
Swedish Match Comercio Importacao e Exportacao Ltda
2)
Brazil – 100
Swedish Match Denmark A/S Denmark 100 100
House of Oliver Twist A/S Denmark 100 100
Swedish Match Dominicana, S.A.S. Dominican Republic 100 100
Swedish Match France SAS France 100 100
Swedish Match Deutschland GmbH Germany 100 100
Swedish Match Lighters BV Netherlands 100 100
Swedish Match Overseas BV Netherlands 100 100
Fire-Up International B.V.
3)
Netherlands 100 –
Swedish Match Distribution A/S Norway 100 100
Swedish Match Norge A/S Norway 100 100
Swedish Match Philippines Inc. Philippines 100 100
SMINT Holdings Corp. Philippines 100 100
Swedmat Corp. Philippines 100 100
Swedish Match Philippine Sales Inc. Philippines 100 100
Swedish Match Fósforos Portugal, SA Portugal 100 100
Road Cargo Sweden Holding AB Sweden 100 100
Lysstickan AB Sweden 100 100
SMD Logistics AB Sweden 100 100
Swedish Match Industries AB Sweden 100 100
Swedish Match Intellectual Property AB Sweden 100 100
Swedish Match North Europe AB Sweden 100 100
Gotlands Snus AB Sweden 95 95
Svenska Tändsticksbolaget Försäljningsaktiebolag Sweden 100 100
Swedish Match Holding AB Sweden 100 100
Swedish Match US AB Sweden 100 100
Swedish Match Jupiter AB Sweden 100 100
SMD Edge AB
4)
Sweden 100 100
Svenskt Snus AB Sweden 100 100
Nyz AB Sweden 100 100
V2 Distribution Sverige AB
5)
Sweden – 100
Swedish Match Treasury Switzerland AG Switzerland 100 100
Swedish Match Switzerland AG Switzerland 100 100
Swedish Match Kibrit ve Cakmak Endustri A.S. Turkey 100 100
Swedish Match Cigars Holding Inc. USA 100 100
Swedish Match Cigars Inc. USA 100 100
Swedish Match USA Inc. USA 100 100
Swedish Match Leaf Tobacco Company USA 100 100
Swedish Match North America LLC USA 100 100
The Pinkerton Tobacco Co. LLC USA 100 100
1)
The designation includes both directly and indirectly owned companies. Dormant companies are not included.
2)
Merged with Swedish Match do Brazil S.A.
3)
Acquired in February 2021.
4)
Changed name, previously Swedish Match Estongo AB.
5)
Liquidated in September 2021.
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NOTE 31 Continued
Reconciliation of liabilities arising from financing activities
Non-cash changes
Dec 31, 2020 Acquisitions Cash flows
Changes
in lease
liabilities
Adj. current
portion from
non-current
Foreign
exchange
movement
Fair value
changes Dec 31, 2021
Long-term borrowings 13,514 1 1,393 – –945 234 – 14,197
Short-term borrowings 1,850 1 –1,848 – 945 42 – 990
Lease liabilities 285 – –89 189 – 18 – 403
Net assets held to hedge long-term
borrowings –248 – –12 – – –279 –82 –621
Total liabilities from financing activities 15,401 2 –556 189 – 15 –82 14,968
32
Related parties
The Group’s related parties include associated companies and key
management personnel with significant influence over the Group. Key
management personnel with significant influence over the Group are
Swedish Match Board of Directors and members of the Group Management
Team. Related parties transactions are conducted at an arms-length basis.
For information about the Group’s transactions with associated companies,
see Note 15 Investments in associated companies. For information about
remuneration to the Board of Directors and Group Management Team, see
Note 5 Personnel. Besides this, and disregarding intergroup transactions
that are eliminated in the consolidated financial statements of the Group, no
other significant related parties transactions have been conducted during
the year.
33
Information about the Parent Company
Swedish Match AB (publ), Corporate Identity Number: 556015-0756, is a
company domiciled in Stockholm and registered in Sweden.
The Parent Company’s shares are listed on Nasdaq Stockholm. The
address of the head office is Sveavägen 44, postal address: SE-118 85
Stockholm, Sweden.
The consolidated financial statements for 2021 include the Parent
Company and its subsidiaries, jointly referred to as “the Group”. The Group
also comprises the Group’s interest in associated companies.
34
Subsequent events
On September 14, 2021, Swedish Match announced its intention to separate
its cigar business via a spin-off to shareholders and a subsequent listing on
a US national securities exchange. The separation was initially expected to
be completed in the second half of 2022, at the earliest. While the Board of
Swedish Match still has the strategic intent to separate the cigar business,
and views this as a move that would further enhance the prospects for
Swedish Match’s US smokefree business, as well as for its US cigar
business, the Board decided on March 14, 2022 to suspend the preparations
for the contemplated spin-off until further notice.
The Board decision was prompted by information received from US
Food and Drug Administration (FDA) that substantial equivalence (SE)
designations had been denied for SE applications corresponding to about 3
percent of Swedish Match’s 2021 cigar volume. It cannot be ruled out that
additional SE applications for the cigar assortment will be denied in the first
instance as FDA continues to work through remaining applications. Swedish
Match plans to appeal the non-SE designations by the FDA by requesting
a supervisory review and Swedish Match remains confident that it will be
given the opportunity to provide the FDA with sufficient data in order to
demonstrate that the cigars in question are substantially equivalent to their
predicate products insofar that the changes that have taken place do not
raise questions of public health.
31
Supplementary information to cash flow statement
The definition and composition of cash and cash equivalents is cash and
bank and other current investments.
Interest paid and interest received 2021 2020
Interest received 34 49
Interest paid –317 –281
Total –283 –232
Interest payments and interest receipts are reflected in cash flow from
operations.
Adjustments for non cash items 2021 2020
Result sale of fixed assets –31 –16
Net change in defined benefit plans 121 121
Change in accrued interest –2 44
Change in market value revaluations and unrealized
exchange rate differences 52 –318
Realized exchange rate differences moved to financing –111 304
Other –72 –62
Total –42 72
Investments in associated companies and other companies
No investments have been made in associated companies during 2021 nor
2020.
Investment of subsidiaries
Acquisition of subsidiaries in 2021 includes consideration paid relating to the
acquisition of Fire-Up International B.V. and in 2020 refers to the remaining
consideration related to the acquisition of Gotlandssnus in 2018.
Divestment of subsidiaries
No divestments of subsidiaries have been made during 2021 nor 2020.
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Swedish Match 2021 115
Parent Company income statement
Parent Company statement of comprehensive income
MSEK Note 2021 2020
Sales 1 32 27
Administrative expenses 2, 7, 25 –252 –279
Other operating income and expenses 3 –9 4
Operating loss –229 –248
Result from participation in Group companies 4 3,137 3,898
Interest income and similar items 4 0 –
Interest expenses and similar items 4 –359 –345
Profit after financial items 2,549 3,305
Appropriations 5 2,356 2,042
Profit before income tax 4,905 5,347
Income tax expense 6 –363 –314
Profit for the year 4,543 5,033
MSEK Note 2021 2020
Profit for the year 4,543 5,033
Other comprehensive income that may be reclassified to the income statement
Effective portion of changes in fair value of cash flow hedges 24 82 –51
Income tax relating to components of other comprehensive income 6 –17 11
Other comprehensive income, net of tax for the year 65 –41
Total comprehensive income for the year 4,608 4,992
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Parent Company balance sheet
MSEK Note December 31, 2021 December 31, 2020
Assets
Tangible assets 7 0 0
Non-current financial assets
Participations in Group companies 8 30,857 31,156
Other non-current receivables 9 700 459
Deferred income tax assets 6 51 61
Total non-current financial assets 31,608 31,675
Total non-current assets 31,608 31,676
Current assets
Receivables on Group companies 3,153 2,416
Income tax receivables 6 29 73
Other receivables 10 79 30
Prepaid expenses and accrued income 11 33 36
Total current assets 3,293 2,555
Cash and other current deposits 24 109 250
TOTAL ASSETS 35,010 34,481
Equity 12
Restricted equity
Share capital 390 390
Unrestricted equity
Reserve for fair value –42 –107
Retained earnings 5,390 6,528
Profit for the year 4,543 5,033
TOTAL EQUITY 10,280 11,843
Untaxed reserves 13 2,965 2,675
Other provisions 14 69 93
Total provisions 69 93
Non-current liabilities
Bond loans 15 14,197 13,514
Other liabilities 16 128 213
Total non-current liabilities 14,325 13,726
Current liabilities
Bond loans 987 1,849
Trade payables 10 9
Liabilities to Group companies 6,138 4,064
Other liabilities 2 2
Accrued expenses and deferred income 17 233 218
Total current liabilities 7,371 6,143
TOTAL EQUITY AND LIABILITIES 35,010 34,481
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Statement of changes in Parent Company equity
Restricted equity Unrestricted equity
2020 Note Share capital
Reserve for
fair value
1)
Retained
earnings
Profit for
the year Total equity
Equity at beginning of year 12 390 –66 10,162 1,485 11,970
Profit for the year – – – 5,033 5,033
Other comprehensive income, net of tax for the year – –41 – – –41
Total comprehensive income for the year – –41 – 5,033 4,992
Allocation of profit – – 1,485 –1,485 –
Dividend – – –2,020 – –2,020
Repurchase of own shares – – –3,099 – –3,099
Cancellation of shares –18 – 18 – –
Bonus issue 18 – –18 – –
Equity at end of year 390 –107 6,528 5,033 11,843
1)
Reserve for fair value consists of a hedge reserve.
Restricted equity Unrestricted equity
2021 Note Share capital
Reserve for
fair value
1)
Retained
earnings
Profit for
the year Total equity
Equity at beginning of year 12 390 –107 6,528 5,033 11,843
Profit for the year – – – 4,543 4,543
Other comprehensive income, net of tax for the year – 65 – – 65
Total comprehensive income for the year – 65 – 4,543 4,608
Allocation of profit – – 5,033 –5,033 –
Dividend – – –2,369 – –2,369
Repurchase of own shares – – –3,802 – –3,802
Cancellation of shares –10 – 10 – –
Bonus issue 10 – –10 – –
Equity at end of year 390 –42 5,390 4,543 10,280
1)
Reserve for fair value consists of a hedge reserve.
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Cash flow statement for the Parent Company
MSEK Note 2021 2020
Operating activities 24
Profit after financial items 2,549 3,305
Adjustments for non-cash items and other 272 324
Income tax paid –325 –558
Subtotal 2,496 3,071
Increase (–)/Decrease (+) in operating receivables –5 –8
Increase (+)/Decrease (–) in operating liabilities 15 4
Net cash generated from operating activities 2,506 3,067
Investing activities
Disposal of tangible assets – 0
Shareholders contribution – –292
Net cash used in investing activities – –292
Financing activities
Proceeds from non-current borrowings 1,813 3,702
Repayment of borrowings –2,270 –1,300
Repurchase of own shares –3,802 –3,099
Dividend –2,369 –2,020
Changes in financial receivables/liabilities Group companies 3,992 –192
Other –12 –16
Net cash used in financing activities –2,648 –2,925
Net decrease in cash and cash equivalents –142 –150
Cash and cash equivalents at the beginning of the year 250 400
Cash and cash equivalents at end of year 109 250
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Notes for the Parent Company
All amounts referred to in the notes of the Parent Company financial statements are in millions of Swedish kronor (MSEK) unless stated otherwise.
The amounts within brackets refer to the preceding year, 2020.
For remuneration and other benefits to Parent Company President and other members of Group management, see Note 5 Personnel for the Group on page 94.
1
Sales
Sales refer to services provided to Group companies.
2
Audit fees
Expenses for auditor´s fees are included in the administrative expenses as
set out in the table below. The audit firm for 2021 and 2020 was Deloitte.
Audit fees 2021 2020
Audit services 2 2
Other services 1 1
Total 3 2
3
Other operating income and expenses
Other operating income and expenses mainly relates to foreign exchange
gains and losses as well as a write-down of an operating receivable.
4
Financial items
Result from participation in Group companies 2021 2020
Dividends received 3,436 4,185
Write-downs of participations in subsidiaries –299 –287
Total 3,137 3,898
The impairment loss during 2021 was recognized due to reduced equity in a
subsidiary following a dividend.
Interest income and similar items 2021 2020
Net foreign exchange gains 0 –
Total 0 –
Interest expenses and similar items 2021 2020
Interest expenses relating to Group companies –40 –32
Interest expenses relating to other financial liabilities
measured at amortized cost –224 –220
Interest expenses relating to financial instruments
measured at fair value in hedging relationships –90 –85
Other financial expenses –4 –7
Net foreign exchange losses – –2
Total –359 –345
5
Appropriations
Appropriations 2021 2020
Difference between reported depreciation
andaccording to plan
Equipment, tools and fixtures 0 0
Tax allocation reserve
Appropriation for the year –550 –475
Reversal of appropriation 260 125
Group contributions
Group contributions received 3,140 2,406
Group contributions granted –494 –14
Total 2,356 2,042
6
Income tax
Income tax reported in income statement 2021 2020
Current tax expense for the period –370 –319
Deferred tax due to temporary differences 7 5
Total –363 –314
Income tax reported in other comprehensive income 2021 2020
Effective portion of changes in fair value of cash flow
hedges –17 11
Total –17 11
2021 2020
Reconciliation of effective tax rate (%) MSEK (%) MSEK
Income before tax 4,905 5,347
Swedish statutory tax rate 20.6 –1,011 21.4 –1,144
Non-taxable dividends –14.4 708 –16.8 896
Tax exempt income –0.1 7 – –
Non-deductible expenses 1.3 –65 1.2 –65
Effect of enacted change of tax rate 0.0 1 0.0 1
Standard interest income, tax
allocation reserve 0.1 -3 0.0 –2
Reported effective tax 7.4 -363 5.9 –314
Sweden reduced the corporate tax rate from 21.4 percent to 20.6 percent as
of January 1, 2021.
The change to the current tax receivables/liabilities during the period is
explained below:
Current income tax receivables/liabilities 2021 2020
Carrying value at beginning of year –73 166
Current tax expense 370 319
Paid tax –325 –558
Carrying value at end of year –29 –73
Net tax receivables amounted to 29 MSEK and consisted of taxes to be
refunded on income for the year.
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The tax effects of deductible temporary differences that resulted in deferred
tax assets at December 31 are summarized below:
Deferred income tax assets 2021 2020
Hedge reserve 11 28
Provision 40 33
Carrying value at end of year 51 61
The following reconciles the deferred tax assets at the beginning of the year
to the end of the year.
2021
Balance
Jan. 1
Charges to profit
for the year
Charges to other
comprehensive income
Balance
Dec. 31
Hedge reserve 28 – –17 11
Provision 33 7 – 40
Total 61 7 –17 51
2020
Balance
Jan. 1
Charges to profit
for the year
Charges to other
comprehensive income
Balance
Dec. 31
Hedge reserve 17 – 11 28
Provision 28 5 – 33
Total 46 5 11 61
7
Tangible assets
Equipment, tools and fixtures 2021 2020
Cost at beginning of year 0 4
Intercompany sales – –4
Disposals – 0
Cost at end of year 0 0
Accumulated depreciation at beginning of year 0 –4
Depreciation for the year 0 0
Intercompany sales – 4
Disposals – 0
Accumulated depreciation at end of year 0 0
Net carrying value at end of year 0 0
Depreciation charges on tangible assets are included in administrative
expenses in the income statement and amounted to 0 MSEK (0).
8
Group companies
2021 Balance Jan. 1
Shareholder’s
contribution Liquidation Impairments Balance Dec. 31
Costs of acquisitions 55,264 – – – 55,264
Impairments –24,108 – – –299 –24,407
Carrying value 31,156 – – –299 30,857
2020 Balance Jan. 1
Shareholder’s
contribution Liquidation Impairments Balance Dec. 31
Costs of acquisitions 57,516 292 –2,544 – 55,264
Impairments –26,365 – 2,544 –287 –24,108
Carrying value 31,151 292 – –287 31,156
Shares in subsidiaries, directly owned
Subsidiary Corp. Reg.no. Domicile Number of shares Ownership, % 2021 Ownership, % 2020
Svenskt Snus AB 556367-1261 Stockholm, Sweden 1,000 100 1 100 300
Swedish Match North Europe AB 556571-6924 Stockholm, Sweden 1,000 100 16,689 100 16,689
SMD Logistics AB 556571-7039 Stockholm, Sweden 1,000 100 2,350 100 2,350
Svenska Tändsticksbolaget
Försäljningsaktiebolag 556012-2730 Stockholm, Sweden 34,403,000 100 8,949 100 8,949
Swedish Match Holding AB 556367-1253 Stockholm, Sweden 2,000 100 14 100 14
Swedish Match Industries AB 556005-0253 Tidaholm, Sweden 30,853 100 95 100 95
Swedish Match US AB 556013-4412 Stockholm, Sweden 96,000 100 0 100 0
Svenska Tändsticks AB 556105-2506 Stockholm, Sweden 1,000 100 0 100 0
Svenska Tobaks AB 556680-3028 Stockholm, Sweden 100,000 100 0 100 0
Swedish Match USA, Inc 62-1257378 USA 1,000 100 849 100 849
Swedish Match Cigars Holding Inc 81-0733029 USA 1,000 100 1,739 100 1,739
Swedish Match Dominicana S.A.S. 55338STI Dominican Republic 9,249,907 99.99 171 99.99 171
Swedish Match Distribution A/S 930567647 Norway 500 100 0 100 0
SA Allumettiére Causemille
1)
Algeria 10,000 100 0 100 0
The Burma Match Co Ltd
2)
Myanmar 300,000 100 0 100 0
Vulcan Trading Co. Ltd
3)
Myanmar 4,000 100 0 100 0
Carrying value at end of year 30,857 31,156
1)
Nationalized in 1963.
2)
Nationalized in 1968.
3)
Nationalized in 1969.
In addition, shares are owned in Union Allumettière Marocaine S.A. Ownership is purely formal. Group companies hold all rights and obligations.
NOTE 6 Continued
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9
Other non-current receivables
Other non-current receivables consisted of derivatives including exchange
rate differences and fair values of cross currency and interest rate swaps
of700 MSEK (459).
10
Other receivables
Other receivables 2021 2020
Derivatives 43 –
Tax account 34 26
VAT receivables 2 3
Other current receivables 0 0
Carrying value at end of year 79 30
11
Prepaid expenses and accrued income
Prepaid expenses and accrued income 2021 2020
Accrued interest income 2 1
Prepaid bank charge 6 2
Prepaid rent 5 4
Other prepaid expenses 19 28
Carrying value at end of year 33 36
Other prepaid expenses mainly referred to receivables for pension
contributions.
12
Equity
For information regarding the change in Parent Company equity see
Statement of changes in Parent Company equity.
Number of registered shares in the Parent Company are detailed below:
Number of registered shares 2021 2020
Issued at beginning of year 1,622,000,000 1,699,500,000
Cancellation –42,000,000 –77,500,000
Total shares outstanding at end of year 1,580,000,000 1,622,000,000
Of which held by Swedish Match AB –48,764,810 –37,929,170
Total shares outstanding, net of shares held
by Swedish Match AB 1,531,235,190 1,584,070,830
Total outstanding shares quota value 0.2465 0.2402
Repurchase of own shares
Repurchase of own shares encompass the acquisition cost for treasury
shares owned by the Parent Company. At December 31, 2021, the Parent
Company’s holding of treasury shares amounted to 48,764,810 shares
(37,929,170).
Number of shares held in treasury and cumulative repurchases of own
shares included in retained earnings are detailed below:
Number of shares
(thousands)
Cumulative effect on
equity (MSEK)
2021 2020 2021 2020
Balance at beginning of year 37,929 67,217 –37,528 –34,429
Repurchase of own shares
during the year 52,836 48,212 –3,802 –3,099
Allocated to retained earnings
by cancellation of shares –42,000 –77,500 10 18
Bonus issue – – –10 –18
Balance at end of year 48,765 37,929 –41,330 –37,528
The Annual General Meeting on April 13, 2021 renewed the mandate to
repurchase up to 10 percent of the shares of the Company. In addition,
a decision was made to cancel 42.0 million shares held in treasury, with
a simultaneous bonus issue, without issuing new shares, of an amount
equivalent to the amount represented by the cancelled shares or 10 MSEK.
Furthermore the shareholders approved the proposal that the reduction
will be allocated to a fund for use pursuant to a resolution adopted by the
Annual General Meeting. During the year it was resolved to split each of the
Company’s shares into ten shares (ratio 10:1). All references to shares and
earnings per share in this document have been restated to reflect this split.
During the year 52,836 million shares were repurchased for 3,802 MSEK
atan average price of 71.96 SEK.
Total shares bought back since the buyback program started have been
repurchased at an average price of 15.95 SEK.
As per December 31, 2021 Swedish Match held 48.8 million shares in its
treasury, corresponding to 3.09 percent of the total number of shares.
The number of shares outstanding, net, as per December 31, 2021,
amounted to 1,531.2 million.
Dividend
After the balance sheet date, the Board proposed a dividend for 2021 of 1.86
SEK per share (1.50). The proposed dividend amounts to 2,848 MSEK based
on the 1.531 billion shares outstanding at the end of 2021. The ordinary
dividend for 2020, paid in 2021, amounted to 2,369 MSEK corresponding to
1.50 SEK per share.
Reserve for fair value
Reserve for fair value consists of a hedge reserve, the change during the year
is explained below:
Hedge reserve 2021 2020
Carrying value at beginning of year –107 –66
Effective portion of changes in fair value of cash flow
hedges 82 –51
Income tax –17 11
Carrying value at end of year –42 –107
The hedge reserve includes the accumulated effective portion of changes in
fair value of cash flow hedges attributable to interest rate hedges.
13
Untaxed reserves
Untaxed reserves 2021 2020
Excess depreciation:
Tangible assets
Carrying value at beginning of year 0 0
Excess depreciation for the year 0 0
Total 0 0
Tax allocation reserve:
Carrying value at beginning of year 2,675 2,325
Reversal of appropriation –260 –125
Appropriation current year 550 475
Total 2,965 2,675
Carrying value at end of year 2,965 2,675
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14
Other provisions
Non-current and current provisions at December 31 comprised the
following:
Other provisions 2021 2020
Pension obligations 39 64
Deferred compensation 31 29
Carrying value at end of year 69 93
Whereof total non-current 63 88
Whereof total current 6 5
Movements in provisions during the year were as follows:
2021
Pension
obligations
Deferred
compensation Total
Carrying value at beginning
of year 64 29 93
Provisions made during the
year 2 16 18
Provisions used during the
year 0 – 0
Provisions reversed during
the year and changes in
estimates –27 0 –27
Provisions reclassified to
accrued expenses – –15 –15
Carrying value at end of year 39 31 69
2020
Pension
obligations
Deferred
compensation Total
Carrying value at beginning
of year 70 28 98
Provisions made during the
year 3 17 20
Provisions used during the
year 0 – 0
Provisions reversed during
the year and changes in
estimates –10 0 –10
Provisions reclassified to
accrued expenses – –15 –15
Carrying value at end of year 64 29 93
Pension obligations
Pension obligations included provisions recognized for special income taxes
on pension obligations secured in endowment insurances and provisions
for post-employment defined benefit obligations. At year-end 2020 the
major part of the pension provisions referred to a pension trust for former
employees in the divested Swedish Match UK Ltd. Due to changes in
assumptions, the updated valuation at year-end 2021 reflected a decreased
pension obligation and no provision was recognized. Payments relating to
the pension obligations later than five years after balance sheet date are
calculated to an amount of 38 MSEK.
Deferred compensation
Deferred compensation referred to long term incentive plans for certain
managers which will be settled within three years.
15
Bond loans
Bond loans issued under the GMTN program that are due for payment later
than five years after the balance sheet date amounted to 3,811 MSEK (4,411).
Bond loans issued in foreign currency and floating interest rate are hedged
by cross currency interest rate swaps to convert borrowing into SEK and
fixed interest rates.
Year MSEK
2027 3,067
2028 445
2029 300
Total 3,811
16
Other liabilities
Other liabilities mainly consisted of the change in fair value of the derivatives,
due to increase or decrease of interest rates and currencies. Derivative
liabilities with maturity over five years after the balance sheet date amounted
to 127 MSEK (210).
17
Accrued expenses and deferred income
Accrued expenses and deferred income 2021 2020
Accrued interest expenses 170 168
Accrued incentives including social security charges 40 39
Accrued social security charges 6 5
Accrued vacation pay 3 3
Personnel expenses 0 0
Other accrued expenses 13 2
Deferred income – 0
Carrying value at end of year 233 218
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Carrying value and fair value
The following table shows carrying value and fair value for financial instruments per December 31, 2021.
2021
Financial assets
measured at
amortized cost
Financial liabilities
measured at
amortized cost
Cash flow
hedges measured
at FVOCI
Other
receivables and
liabilities
Total
carrying value
Estimated
fair value
Other non-current financial receivables – – 700 – 700 700
Receivables on Group companies 3,153 – – – 3,153 3,153
Other current receivables – – 43 65 108 108
Prepaid expenses and accrued income
1)
– – 2 31 33 33
Cash and cash equivalents 109 – – – 109 109
Total assets 3,262 – 745 96 4,103 4,103
Loans and borrowings – 15,184 – – 15,184 15,496
Other liabilities – – 128 2 130 130
Liabilities to Group companies (current) – 6,138 – – 6,138 6,138
Accrued expenses and deferred income
1)
– 125 45 63 233 233
Trade payables – 10 – – 10 10
Total liabilities – 21,457 173 65 21,695 22,007
1)
Accrued interest income on cash flow hedges is reported in the balance sheet as Prepaid expenses and accrued income and accrued interest expense on cash flow hedges is reported as Accrued
expenses and deferred income.
Fair value measurement by level Level 1 Level 2 Level 3 Total
Derivative financial assets – 745 – 745
Derivative financial liabilities – 173 – 173
The following table shows carrying value and fair value for financial instruments per December 31, 2020.
2020
Financial assets
measured at
amortized cost
Financial liabilities
measured at
amortized cost
Cash flow
hedges measured
at FVOCI
Other
receivables and
liabilities
Total
carrying value
Estimated
fair value
Other non-current financial receivables – – 459 – 459 459
Receivables on Group companies 2,416 – – – 2,416 2,416
Other current receivables – – – 103 103 103
Prepaid expenses and accrued income
1)
– – 1 35 36 36
Cash and cash equivalents 250 – – – 250 250
Total assets 2,666 – 460 138 3,264 3,264
Loans and borrowings – 15,363 – – 15,363 15,713
Other liabilities – – 213 2 215 215
Liabilities to Group companies (current) – 4,064 – – 4,064 4,064
Accrued expenses and deferred income
1)
– 122 46 50 218 218
Trade payables – 9 – – 9 9
Total liabilities – 19,558 259 52 19,869 20,219
1)
Accrued interest income on cash flow hedges is reported in the balance sheet as Prepaid expenses and accrued income and accrued interest expense on cash flow hedges is reported as Accrued
expenses and deferred income.
Fair value measurement by level Level 1 Level 2 Level 3 Total
Derivative financial assets – 460 – 460
Derivative financial liabilities – 259 – 259
18
Carrying value and fair value of financial instruments
Swedish Match applies IFRS 9 to classify and measure financial instruments.
IFRS 13 is applied for financial instruments measured at fair value on the
balance sheet which implies using a fair value hierarchy that reflects the
significance of input used according to the following levels:
– Level 1 – Quoted prices (unadjusted) in active markets
– Level 2 – Inputs other than quoted prices that are observable, either
directly or indirectly. The input data consists mainly of the compounded
interest rates from interest rate swaps, basis swaps and conversions
rates for variable interest rates to create relevant Cross Currency Interest
Rate Swap (CCIRS) rates. The created interest rates are used to calculate
the market value by discounting the external outstanding CCIRS flows
including the actual market valuation of involved currencies.
– Level 3 – Inputs that are not based on observable market data
The following table shows carrying value (including accrued interest) and
fair value for each category of financial instruments at December 31, 2021.
Derivatives attributable to cash flow hedges are carried at fair value via
other comprehensive income (FVOCI) in level 2 of the fair value hierarchy. In
assessing the fair values of these derivatives, a variety of methods are used
to make assumptions based on market conditions at each reporting date.
Quoted market prices or dealer quotes for identical or similar instruments
are used. Items not valued at fair value are measured at amortized cost.
All other items, except loans and borrowings, have a short duration and
are considered non-interest bearing, and therefore, the total carrying
value of the financial instruments corresponds to the estimated fair value.
The carrying amount for loans and borrowings differ from their fair value
as a consequence of changes in the market interest rates, determined by
using current official market quotations for outstanding bonds or similar
instruments and discounting future cash flows. The values presented are
indicative and may not necessarily be realized.
For more information see Note 27 Financial instruments and financial risks
for the Group on page 110.
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Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
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Swedish Match 2021 124
19
Derivatives under netting agreements
To reduce the credit risk in receivables from banks arising via derivative
instruments, Swedish Match has entered into netting agreements,
known as ISDA Master Agreements, with all of its counterparties. These
agreements grant rights to net market valuations on assets and liabilities if
the counterpart is in an event of default, as with suspended payments. The
following table shows the netted exposures per December 31. No collateral
has been received or pledged. All the derivatives are related to Group’s
central funding.
Financial instruments under master netting agreements
2021
Gross amount
for financial
instruments
Amounts of financial
instruments not netted in the
balance sheet, but subject to
netting agreement Net
Derivatives – Assets 745 –97 647
Derivatives – Liabilities 173 –97 76
2020
Gross amount
for financial
instruments
Amounts of financial
instruments not netted in the
balance sheet, but subject to
netting agreement Net
Derivatives – Assets 460 –134 326
Derivatives – Liabilities 259 –134 124
20
Operating lease agreements
Total expense for operating lease agreements for 2021 amounted to 21
MSEK (14). Operating leasing agreements mainly refer to rental of office
and storage premises. The contracts are non-cancellable during the agreed
leasing period and the agreements include indexation clauses.
Future annual minimum lease payments under the terms of
non-cancellable operating lease agreements with initial or remaining terms
of one year or more fall due as follows:
Minimum lease payments 2021 2020
Within one year 25 19
Between 1–5 years 25 48
Later than 5 years – –
Total 50 67
Certain parts of the leased premises are sub-leased to a subsidiary of
Swedish Match AB. Rental income for the year relating to items that are
being subleased to a subsidary amounted to 17 MSEK (12).
21
Pledged assets and contingent liabilities
Pledged assets
Pledged assets referred to endowment insurance policies pledged as
security for pension obligations amounting to 157 MSEK (128).
In accordance with IAS 19, endowment insurance policies pledged as
securities for certain defined contribution obligations have been netted
against the pension obligation in other provisions.
Contingent liabilities 2021 2020
Guarantees on behalf of subsidiaries 303 291
Total 303 291
22
Distribution of earnings
Proposed distribution of earnings
Dividend (1.86 SEK based on 1,531,235,190 shares) SEK 2,848,097,453
Retained earnings to be carried forward SEK 7,042,718,802
Total amount SEK 9,890,816,255
23
Related parties
Summary of transactions with related parties
Subsidiaries
2021 2020
Revenues
Dividends 3,436 4,185
Group contribution 3,140 2,406
Sale of services 32 27
Rental income 17 12
Expenses
Group contribution –494 –14
Interest expenses –40 –32
Purchase of goods/services –29 –44
Receivables 3,153 2,416
Liabilities 6,138 4,064
Contingent liabilities 303 291
Transactions with related parties are determined at an arms-length basis.
For remunerations to key management personnel, see Note 5 Personnel for
the Group.
In the normal course of business, the Parent company conducts various
transactions with subsidiaries. For information about directly owned
subsidiaries, see Note 8 Group companies.
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Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
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Swedish Match 2021 125
Reconciliation of liabilities arising from financing activities
Non-cash changes
2020 Cash flows
Adj. current portion
from non-current
Foreign exchange
movement
Fair value
changes 2021
Long-term borrowings 13,514 1,393 –944 234 – 14,197
Short-term borrowings 1,849 –1,849 944 42 – 987
Net assets held to hedge long-term borrowings –248 –12 – –279 –82 –621
Total liabilities from financing activities 15,115 –468 – –3 –82 14,562
25
Post-employment benefits
Swedish Match AB has post-employment benefit obligations that are
insured by Swedish pension trust arrangements. Swedish Match AB also has
assumed the role as sponsor and Principal Employer for a pension trust for
former employees in the divested Swedish Match UK Ltd.
As per December 31, 2021 the Swedish pension trust arrangement and
the pension plan for employees in UK show a net surplus. In accordance with
RFR 2 the net surplus in the pension plans was not recognized in the balance
sheet.
The tables below specify the pension obligations assumed by Swedish Match AB:
Defined benefit pension plans 2021 2020
Present value of funded obligations 833 827
Fair value of separately held assets –977 –887
Surplus, net –144 –60
Net surplus in pension trust not recognized in balance
sheet 144 92
Net pension liability recognized in the balance sheet 0 32
Specification of movements in the net liability recognized in the balance
sheet attributable to pension:
Net pension liability 2021 2020
Balance at beginning of year 32 43
Benefits paid 12 20
Contribution received from pension trust –12 –20
Change in pension provision –32 –11
Balance at end of year 0 32
140 MSEK (92) of the total net pension asset is covered by “Tryggandelagen”.
Specification of expenses and income attributable to pension:
Defined benefit pension plans 2021 2020
Difference between contribution received from pension
trust and benefits paid 0 0
Interest cost on obligation –12 –16
Actual return on separately held assets 59 47
Change in pension provision 32 11
Net income for pension 80 42
Pensions covered by insurance premiums:
Costs for pension insurance premiums recognized in
income statement –19 –17
Change in surplus in pension trust –48 –31
Net pension costs recognized in income statement
attributable to pension 13 –6
The expenses attributable to pension are recognized in the income
statement under administration costs.
The actual return on separately held assets expressed in percentage is 6.7
percent (4.9 percent).
Separately held assets of the pension trusts are comprised as follows:
Separately held assets 2021 2020
Debt instruments 76 72
Equity securities 172 130
Other
1)
729 684
Total 977 887
1)
Large part refers to the UK annuity policies at the insurance company Aviva.
Significant actuarial assumptions at the balance sheet date
The obligations are calculated based on a weighted average discount rate
of1.8 percent (1.3).
A contribution to the UK pension plan will be paid during the first quarter
of 2022 in an amount of approximately 6 MSEK.
24
Supplementary information to cash flow statement
Interest paid and received and dividend received 2021 2020
Dividend received 3,436 4,185
Interest paid, non-Group companies –316 –261
Interest paid, Group companies –40 –32
Total 3,080 3,892
Interest payments and interest receipts are reflected in cash flow from
operations.
Adjustments for non cash items and other 2021 2020
Depreciation 0 0
Write-down of subsidiaries 299 287
Change in accrued interest 5 48
Change in pension provision –32 –11
Total 272 324
Cash and cash equivalents 2021 2020
Cash and bank 0 0
Other current deposits
1)
108 250
Total 109 250
1)
Other current deposits have been classified as cash and cash equivalents based on that they
are readily convertible to known amounts of cash.
26
Subsequent events
No significant events has occurred after the balance sheet date.
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Auditor’s report
To the general meeting of the shareholders of Swedish Match AB (publ)corporate identity number 556015-0756
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of Swedish
Match AB (publ) for the nancial year 2021-01-01–2021-12-31. e annual
accounts and consolidated accounts of the company are included on pages
11, 31–33, 71–72 and 75–126 in this document.
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects,
the nancial position of the parent company as of 31 December 2021
and its nancial performance and cash ow for the year then ended in
accordance with the Annual Accounts Act. e consolidated accounts have
been prepared in accordance with the Annual Accounts Act and present
fairly, in all material respects, the nancial position of the group as of 31
December 2021 and their nancial performance and cash ow for the year
then ended in accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU, and the Annual Accounts Act. e statutory
administration report is consistent with the other parts of the annual
accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts
the income statement and balance sheet for the parent company and the
group.
Our opinions in this report on the annual accounts and consolidated
accounts are consistent with the content of the additional report that has
been submitted to the parent company’s Board of Directors in accordance
with the Audit Regulation (537/2014) Article 11.
Basis for Opinions
International Standards on Auditing (ISA) and generally accepted auditing
standards in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent
of the parent company and the group in accordance with professional
ethics for accountants in Sweden and have otherwise fullled our ethical
responsibilities in accordance with these requirements. is includes that,
based on the best of our knowledge and belief, no prohibited services
referred to in the Audit Regulation (537/2014) Article 5.1 have been
provided to the audited company or, where applicable, its parent company
orits controlled companies within the EU.
We believe that the audit evidence we have obtained is sucient and
appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional
judgment, were of most signicance in our audit of the annual accounts and
consolidated accounts of the current period. ese matters were addressed
in the context of our audit of, and in forming our opinion thereon, the
annual accounts and consolidated accounts as a whole, but we do not
provide a separate opinion on these matters.
Valuation of intangible assets
Swedish Match reports intangible assets of MSEK 2 281 as of 31 December
2021. For cash generating units (“CGUs”) which contain intangible assets,
the determination of recoverable amount, being the higher of fair value less
costs to sell and value in use, requires judgement on behalf of management
in both identifying and valuing the relevant CGUs. Management prepared
impairment assessments by CGU, as required under accounting standards,
which were based on a value in use calculation. Such calculations are based
on management’s judgements of variables such as sales growth, EBITDA
margin, terminal growth rate of free cash ow, and discount rate.
Disclosures regarding intangible assets are included in note 1 Accounting
principles and note 11 Intangible assets.
Our audit procedures included, but were not limited to:
• evaluated the design and implementation of relevant internal controls
over the impairment assessment process including identifying indicators
of impairment;
• with the support of our internal valuation specialists, evaluated and
challenged key assumptions in management’s valuation model, including
assumptions of sales growth, EBITDA margin, terminal growth rate, and
discount rate;
• tested the mathematical accuracy of the valuation model used by
management, and
• evaluated the appropriateness of disclosures made in the nancial
statements.
Other information than the annual accounts and consolidated accounts
is document also contains other information than the annual accounts
and consolidated accounts and is found on pages 2–10. 12–30, 34–70, 73–74,
130–135 and 149–151. e Board of Directors and the Managing Director
are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not
cover this other information and we do not express any form of assurance
conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated
accounts, our responsibility is to read the information identied above and
consider whether the information is materially inconsistent with the annual
accounts and consolidated accounts. In this procedure we also take into
account our knowledge otherwise obtained in the audit and assess whether
the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
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Responsibilities of the Board of Directors and the Managing Director
e Board of Directors and the Managing Director are responsible for the
preparation of the annual accounts and consolidated accounts and that they
give a fair presentation in accordance with the Annual Accounts Act and,
concerning the consolidated accounts, in accordance with IFRS as adopted
by the EU. e Board of Directors and the Managing Director are also
responsible for such internal control as they determine is necessary to enable
the preparation of annual accounts and consolidated accounts that are free
from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, e Board
of Directors and the Managing Director are responsible for the assessment
of the company’s and the group’s ability to continue as a going concern.
ey disclose, as applicable, matters related to going concern and using the
going concern basis of accounting. e going concern basis of accounting
is however not applied if the Board of Directors and the Managing Director
intends to liquidate the company, to cease operations, or has no realistic
alternative but to do so.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the annual
accounts and consolidated accounts as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinions. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs
and generally accepted auditing standards in Sweden will always detect a
material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they
could reasonably be expected to inuence the economic decisions of users
taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibilities for the audit of the annual
accounts and consolidated accounts is located at the Swedish Inspectorate
of Auditors website: www.revisorsinspektionen.se/ revisornsansvar. is
description forms part of the auditor´s report.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts,
we have also audited the administration of the Board of Directors and the
Managing Director of Swedish Match AB (publ) for the nancial year
2021-01-01–2021-12-31 and the proposed appropriations of the company’s
prot or loss.
We recommend to the general meeting of shareholders that the prot to be
appropriated in accordance with the proposal in the statutory administration
report and that the members of the Board of Directors and the Managing
Director be discharged from liability for the nancial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted auditing
standards in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent
of the parent company and the group in accordance with professional
ethics for accountants in Sweden and have otherwise fullled our ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sucient and
appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Managing Director
e Board of Directors is responsible for the proposal for appropriations
of the company’s prot or loss. At the proposal of a dividend, this includes
an assessment of whether the dividend is justiable considering the
requirements which the company’s and the group’s type of operations, size
and risks place on the size of the parent company’s and the group’s equity,
consolidation requirements, liquidity and position in general.
e Board of Directors is responsible for the company’s organization
and the administration of the company’s aairs. is includes among other
things continuous assessment of the company’s and the group’s nancial
situation and ensuring that the company’s organization is designed so
that the accounting, management of assets and the company’s nancial
aairs otherwise are controlled in a reassuring manner. e Managing
Director shall manage the ongoing administration according to the
Board of Directors’ guidelines and instructions and among other matters
take measures that are necessary to fulll the company’s accounting in
accordance with law and handle the management of assets in a reassuring
manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby our
opinion about discharge from liability, is to obtain audit evidence to assess
with a reasonable degree of assurance whether any member of the Board of
Directors or the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission which can give
rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act, the
Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the
company’s prot or loss, and thereby our opinion about this, is to assess with
reasonable degree of assurance whether the proposal is in accordance with
the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with generally accepted auditing
standards in Sweden will always detect actions or omissions that can give
rise to liability to the company, or that the proposed appropriations of the
company’s prot or loss are not in accordance with the Companies Act.
A further description of our responsibilities for the audit of the
management’s administration is located at the Swedish Inspectorate of
Auditors website: www.revisorsinspektionen.se/revisornsansvar. is
description forms part of the auditor´s report.
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Swedish Match 2021 128
Stockholm, March 24, 2022
Deloitte AB
Peter Ekberg
Authorized Public Accountant
The auditor’s examination of the ESEF report
Opinion
In addition to our audit of the annual accounts and consolidated accounts,
we have also examined that the Board of Directors and the Managing
Director have prepared the annual accounts and consolidated accounts in a
format that enables uniform electronic reporting (the Esef report) pursuant
to Chapter 16, Section 4 a of the Swedish Securities Market Act (2007:528)
for Swedish Match AB for the nancial year 2021-01-01– 2021-12-31.
Our examination and our opinion relate only to the statutory requirements.
In our opinion, the Esef report #[checksum] has been prepared in a format
that, in all material respects, enables uniform electronic reporting.
Basis for Opinion
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in more detail in
the Auditors’ responsibility section. We are independent of Swedish Match
AB in accordance with professional ethics for accountants in Sweden and
have otherwise fullled our ethical responsibilities in accordance with these
requirements.
We believe that the evidence we have obtained is sucient and appropriate
to provide a basis for our opinion.
Responsibilities of the Board of Directors and the Managing Director
e Board of Directors and the Managing Director are responsible for the
preparation of the Esef report in accordance with the Chapter 16, Section
4 a of the Swedish Securities Market Act (2007:528), and for such internal
control that the Board of Directors and the Managing Director determine
is necessary to prepare the Esef report without material misstatements,
whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to obtain reasonable assurance whether the Esef report
is in all material respects prepared in a format that meets the requirements
of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528),
based on the procedures performed.
RevR 18 requires us to plan and execute procedures to achieve reasonable
assurance that the Esef report is prepared in a format that meets these
requirements.
Reasonable assurance is a high level of assurance, but it is not a guarantee
that an engagement carried out according to RevR 18 and generally accepted
auditing standards in Sweden will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could reasonably be
expected to inuence the economic decisions of users taken on the basis of
the Esef report.
e audit rm applies ISQC 1 Quality Control for Firms that Perform
Audits and Reviews of Financial Statements, and other Assurance and Related
Services Engagements and accordingly maintains a comprehensive system of
quality control, including documented policies and procedures regarding
compliance with professional ethical requirements, professional standards
and legal and regulatory requirements.
e examination involves obtaining evidence, through various
procedures, that the Esef report has been prepared in a format that enables
uniform electronic reporting of the annual accounts and consolidated
accounts. e procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement in the report,
whether due to fraud or error. In carrying out this risk assessment, and in
order to design audit procedures that are appropriate in the circumstances,
the auditor considers those elements of internal control that are relevant
to the preparation of the Esef report by the Board of Directors and the
Managing Director, but not for the purpose of expressing an opinion on the
eectiveness of those internal controls. e examination also includes an
evaluation of the appropriateness and reasonableness of assumptions made
by the Board of Directors and the Managing Director.
e procedures mainly include a technical validation of the Esef report,
i.e., if the le containing the Esef report meets the technical specication
set out in the Commission’s Delegated Regulation (EU) 2019/815 and a
reconciliation of the Esef report with the audited annual accounts and
consolidated accounts.
Furthermore, the procedures also include an assessment of whether the
Esef report has been marked with iXBRL which enables a fair and complete
machine-readable version of the consolidated statement of nancial
performance, nancial position, changes in equity and cash ow.
Deloitte AB, was appointed auditor of Swedish Match AB by the general
meeting of the shareholders on the 2021-04-13 and has been the company’s
auditor since 2017-05-04.
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Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
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Swedish Match 2021 129
Five year summary 2017–2021
Condensed consolidated income statement, MSEK 2021 2020 2019 2018 2017
1)
Sales 18,489 16,698 14,739 12,966 11,751
Gross profit 12,240 10,947 9,363 8,133 7,396
Larger one-time items 300 – –367 – 373
Operating profit 8,286 6,991 5,307 4,812 4,592
Net finance cost –345 –347 –247 –281 –240
Profit before income tax 7,941 6,644 5,060 4,531 4,353
Profit for the year 6,218 4,888 3,896 3,578 3,400
EBITDA
2)
8,601 7,580 6,222 5,227 4,600
1)
Financial statements for 2017 have been restated in accordance with IFRS 15. For further information about the impact from the adoption of IFRS 15, see Note 1.
2)
Excluding larger one-time items.
Condensed consolidated balance sheets, MSEK 2021 2020 2019 2018 2017
1)
Intangible assets 2,281 2,237 2,355 2,708 2,088
Property, plant and equipment
2)
4,556 3,633 3,255 2,941 2,558
Right-of-use assets 388 278 255 – –
Investments in associated companies 41 42 42 24 22
Other non-current assets and operating receivables
3)
25 20 18 19 22
Other non-current financial assets and receivables 1,832 1,556 1,826 1,420 1,254
Total non-current assets 9,123 7,765 7,750 7,113 5,944
Other current financial receivables 374 219 195 226 263
Current operating assets and receivables 4,534 3,732 3,905 3,762 3,171
Cash and cash equivalents 2,121 3,411 2,370 2,886 3,998
Total current assets 7,029 7,362 6,471 6,874 7,432
Assets held for sale
4)
– 28 16 – –
Total assets 16,152 15,155 14,237 13,987 13,376
Equity attributable to equity holders of the Parent –6,686 –7,814 –6,324 –5,611 –4,202
Non-controlling interests 17 16 16 16 1
Total equity –6,669 –7,798 –6,308 –5,595 –4,201
Non-current financial provisions 1,397 1,268 1,228 1,186 1,200
Non-current loans 14,197 13,514 12,130 12,282 10,277
Other non-current financial liabilities
5)
1,883 1,926 1,626 1,140 1,218
Other non-current operating liabilities 504 485 434 415 368
Total non-current liabilities 17,981 17,194 15,417 15,024 13,063
Current loans 990 1,850 1,300 1,229 1,253
Other current financial liabilities
6)
368 653 715 245 534
Other current operating liabilities 3,482 3,257 3,112 3,085 2,727
Total current liabilities 4,840 5,759 5,127 4,559 4,514
Total liabilities 22,821 22,953 20,544 19,582 17,577
Total equity and liabilities 16,152 15,155 14,237 13,987 13,376
1)
Restated in accordance with IFRS 15.
2)
Includes forest plantations.
3)
Includes pension assets and derivatives financial instruments.
4)
Assets held for sale refers to land. The fair value less costs to sell are not expected to be lower than the carrying value.
5)
Includes pension obligations and derivative financial instruments.
6)
Includes short term derivatives financial instruments.
Condensed consolidated cash flow, MSEK 2021 2020 2019 2018 2017
2)
Net cash from operating activities 6,336 5,607 5,080 3,705 3,402
Net cash used in/from investing activities –1,156 –1,173 –815 –1,204 1,594
Net cash transferred to shareholders –6,171 –5,119 –4,766 –5,423 –5,498
Net cash used in/from other financing activities –440 2,000 –38 1,727 1,215
Net decrease/increase in cash and cash equivalents –1,431 1,315 –539 –1,195 713
Cash and cash equivalents at beginning of the year 3,411 2,370 2,886 3,998 3,364
Effects of exchanges rate fluctuations on cash and cash equivalents 141 –274 23 83 –79
Cash and cash equivalents at end of year 2,121 3,411 2,370 2,886 3,998
CFO comment
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Financial overview
Quarterly data
Proposed distribution of earnings
Definitions
Consolidated statements Parent Company statements
The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Swedish Match 2021 130
Key data
1)
2021 2020 2019 2018 2017
2)
Net debt, MSEK 14,035 13,523 11,925 10,843 8,183
Investments in property, plant and equipment, MSEK 1,172 1,126 720 649 369
Operating margin from product segments, % 44.8 43.8 40.5 39.0 37.9
Operating margin
3)
, % 44.8 41.9 36.0 37.1 39.1
EBITA interest cover 24.3 21.4 23.4 17.5 12.6
Net debt/EBITA 1.7 1.9 2.1 2.2 1.9
Share data
Share capital, MSEK 390 390 390 390 390
Ordinary dividend per share, SEK
4)5)
1.86 1.50 1.25 1.05 0.92
Special dividend per share, SEK
5)
– – – – 0.74
Earnings per share, basic and diluted, SEK
Including larger one time items 3.97 3.04 2.32 2.06 1.89
Including larger one time items and excluding income from STG
5)
3.97 3.04 2.32 2.06 1.84
Excluding larger one time items and income from STG
5)
3.82 3.22 2.54 2.06 1.64
1)
All key ratios have been calculated excluding larger one–time items, unless otherwise stated.
2)
Restated in accordance with IFRS 15.
3)
Group operating margin including Larger one–time items
4)
Board proposal.
5)
In May 2021, a share split (10:1) was made. Historical share data in this report has been restated in accordance with IAS 33.
Sales by product segments, MSEK 2021 2020 2019 2018 2017
1)
Smokefree 12,120 10,651 8,914 7,477 6,661
Cigars 4,688 4,533 4,249 3,890 3,457
Lights 1,338 1,149 1,200 1,246 1,291
Sales from segments 18,145 16,332 14,363 12,612 11,410
Other operations 344 366 376 353 342
Sales 18,489 16,698 14,739 12,966 11,751
1)
2017 has been restated in accordance with IFRS 15.
Operating profit/loss by product segments, MSEK 2021 2020 2019 2018 2017
1)
Smokefree 5,998 5,142 3,997 3,317 2,798
Cigars 1,841 1,796 1,577 1,412 1,314
Lights 297 222 238 189 211
Operating profit from product segments 8,136 7,160 5,812 4,918 4,323
Other operations –150 –169 –137 –106 –104
Sale of STG shares – – – – 197
Income from defined benefit plan amendment – – – – 69
Capital gain from sale of land – – – – 107
Settlement income 300 – – – –
Impairment charge – European chewing tobacco business – – –367 – –
Operating profit 8,286 6,991 5,307 4,812 4,592
1)
2017 has been restated in accordance with IFRS 15.
Operating margin by product segments, % 2021 2020 2019 2018 2017
1)
Smokefree 49.5 48.3 44.8 44.4 42.0
Cigars 39.3 39.6 37.1 36.3 38.0
Lights 22.2 19.3 19.8 15.2 16.4
Operating margin from product segments 44.8 43.8 40.5 39.0 37.9
1)
Restated in accordance with IFRS 15.
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Quarterly data 2020–2021
2021 2020
Condensed consolidated income statements, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Sales 4,751 4,778 4,505 4,455 4,136 4,400 4,133 4,029
Gross profit 3,099 3,166 2,990 2,986 2,677 2,990 2,672 2,607
Operating profit 1,901 2,075 1,956 2,354 1,650 2,048 1,693 1,601
Net financial cost –83 –88 –85 –89 –80 –105 –84 –78
Profit before income tax 1,818 1,987 1,871 2,265 1,570 1,943 1,609 1,523
Profit for the period 1,457 1,540 1,441 1,780 1,244 1,222 1,254 1,168
EBITDA
1)
2,070 2,227 2,107 2,197 1,796 2,193 1,841 1,749
1)
Excluding larger one-time items.
Key data Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Operating margin, % 40.0 43.4 43.4 52.8 39.9 46.5 41.0 39.7
Investments in property, plant and equipment, MSEK 313 284 298 277 379 231 324 192
Earnings per share, basic SEK
1)
0.94 0.99 0.92 1.12 0.78 0.76 0.78 0.72
1)
A share split (10:1) was made in May 2021. Historical share data in this report has been restated in accordance with IAS 33.
Sales by product segments, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Smokefree
3,242 3,100 2,955 2,823 2,606 2,842 2,695 2,508
Cigars
1,063 1,237 1,138 1,249 1,152 1,184 1,069 1,128
Lights 357 354 321 305 288 277 275 309
Sales from product segments 4,663 4,691 4,414 4,376 4,045 4,303 4,039 3,945
Other operations 88 87 90 78 91 97 94 84
Sales 4,751 4,778 4,505 4,455 4,136 4,400 4,133 4,029
Operating profit by product segments, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Smokefree
1,547 1,558 1,428 1,465 1,168 1,519 1,301 1,154
Cigars
343 481 458 560 481 499 378 438
Lights 67 60 103 67 46 57 52 67
Operating profit from product segments 1,957 2,099 1,988 2,092 1,695 2,075 1,731 1,659
Other operations –57 –24 –32 –37 –45 –28 –38 –58
Settlement income – – – 300 – – – –
Operating profit 1,901 2,075 1,956 2,354 1,650 2,048 1,693 1,601
Operating margin by product segments, % Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Smokefree
47.7 50.3 48.3 51.9 44.8 53.5 48.3 46.0
Cigars
32.3 38.8 40.3 44.8 41.7 42.2 35.4 38.8
Lights 18.7 17.0 31.9 22.0 16.0 20.5 18.9 21.7
Operating margin from product segments 42.0 44.7 45.0 47.8 41.9 48.2 42.9 42.1
EBITDA by product segments, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Smokefree
1,668 1,663 1,532 1,561 1,269 1,617 1,401 1,252
Cigars
365 502 479 581 503 520 400 460
Lights 78 71 113 77 54 67 62 78
EBITDA from product segments 2,111 2,236 2,124 2,219 1,826 2,204 1,863 1,790
EBITDA margin by product segments, % Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Smokefree
51.4 53.6 51.8 55.3 48.7 56.9 52.0 49.9
Cigars
34.3 40.6 42.1 46.5 43.6 43.9 37.4 40.8
Lights 21.8 20.0 35.3 25.3 18.8 24.1 22.7 25.2
EBITDA margin from product segments 45.3 47.7 48.1 50.7 45.1 51.2 46.1 45.4
Depreciation, amortization and impairments, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Property, plant and equipment 124 110 109 101 105 103 106 105
Right-of-use assets 26 24 23 23 23 23 23 22
Intangible assets 19 19 18 18 18 19 20 21
Total 169 152 151 142 146 145 149 148
Net finance cost, MSEK Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Interest income 12 6 7 11 5 7 8 30
Interest expense –91 –92 –90 –93 –91 –109 –93 –87
Net interest expense –79 –86 –84 –83 –86 –102 –85 –57
Other finance costs, net –4 –3 –2 –6 6 –3 1 –21
Total net finance cost –83 –88 –85 –89 –80 –105 –84 –78
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Dividend pay-out ratio (%)
SEK 2021 2020
Dividend per share (proposed after year-end) 1.86 1.50
Adjusted earnings per share from continuing operations,
basic 3.82 3.22
Dividend pay-out ratio (%) 49 47
Definition/calculation
100 x Dividend (proposed after year-end) ÷ Adjusted earnings per share
from continuing operations, basic
Purpose
Used as a measure of the percentage of net profits distributed as a dividend
to the shareholders.
Dividend yield (%)
SEK 2021 2020
Dividend per share (proposed after year-end) 1.86 1.50
Share price at year-end 72.02 63.78
Dividend yield (%) 2.58 2.35
Definition/calculation
100 x Dividend (proposed after year-end) ÷ Share price at year-end
Purpose
Used as a measure of cash return to shareholders.
Total return (%)
SEK 2021 2020
Share price at year-end 72.02 63.78
Dividend paid 1.5 1.25
Return on reinvested dividend 0.02 0.13
Share price at preceding year-end 63.78 48.28
Total return (%) 15.3 35.0
Definition/calculation
100 × (Share price at year-end – Share price at preceding year-end) +
(Dividend paid + Return on reinvested dividend) ÷ Share price at preceding
year-end
Purpose
Used as a measure of the Group’s total value creation for the shareholder,
including cash returns and share price appreciation/ depreciation.
P/E ratio
SEK 2021 2020
Share price at year-end 72.02 63.78
Earnings per share from continuing operations, basic 3.97 3.04
P/E ratio 18.1 21.0
Definition/calculation
Share price at year-end ÷ Earnings per share
Purpose
Used as a measure of the estimated market value based on net profit
generation.
Definitions
Swedish Match presents several financial measures not defined under IFRS with the aim of enabling effective evaluation of the Group’s financial position
and performance for investors and for the Group’s management. This means that these measures are not always comparable with measures used by other
companies and shall therefore be considered as a complement to measures defined according to IFRS. Swedish Match applies these alternative key ratios
consistently over time. The key ratios are alternative performance measures according to ESMA guidelines unless otherwise stated.
Sales from product segments
Definition/calculation
Sales from reportable segments, which excludes Other operations
Purpose
Used as a measure of sales performance of the core commercial businesses
of Swedish Match, excluding the impact of Other operations (incl. Swedish
distribution function).
Operating profit/loss (EBIT) from product segments
Definition/calculation
Operating profit from reportable segments, which excludes Other operations
and larger one-time items
Purpose
Used as a measure of operating performance of the core commercial
businesses of Swedish Match, excluding the impact of Other operations
(incl. Swedish distribution function) and items which impacts comparability
between periods.
Operating margin from product segments (%)
Definition/calculation
100 × Operating profit from product segments ÷ Sales from product
segments
Purpose
Used as a measure of operational profitability of the core commercial
businesses of Swedish Match excluding the impact of Other operations (incl.
Swedish distribution function).
Profit for the period, excluding larger one-time items
Definition/calculation
Profit for the period excluding larger one-time items
Purpose
Used as an alternative measure of profit for the period of the ongoing
business which is not affected by items which impact comparability between
periods.
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Swedish Match 2021 133
EBIT multiple
MSEK 2021 2020
Market capitalization 110,280 101,032
Net debt 14,035 13,523
Non-controlling interest 17 16
Operating profit 8,286 6,991
EBIT Multiple 15.0 16.4
Definition/calculation
(Market capitalization + Net debt + Non-controlling interest) ÷ Operating
profit
Purpose
Used as a measure of Group enterprise value in relation to operating profit
generation.
EBITA and EBITDA
MSEK 2021 2020
Profit for the period 6,218 4,888
Income tax expense 1,723 1,756
Net finance cost 345 347
Operating profit for the period 8,286 6,991
Larger one-time items –300 –
Amortization and impairment of intangible assets 75 77
EBITA 8,061 7,068
Depreciation and impairment of tangible and
right-of-use assets 540 511
EBITDA 8,601 7,580
EBITA
Definition/calculation
Profit for the period excluding larger one-time items, net finance cost, tax,
amortization and impairments of intangible assets
Purpose
Used as a measure of operating performance relative to the financial
obligations of the Group.
EBITDA
Definition/calculation
Profit for the period excluding larger one-time items, net finance cost,
income tax, depreciation, amortization and impairments of tangible,
intangible and right-of-use assets
Purpose
Used as an alternative measure of operating performance that is not
impacted by historical investments and the related accounting treatment
of such investments as well as items which impact comparability between
periods.
EBITDA and EBITDA margin from product segments
MSEK 2021 2020
Operating profit for the period 8,286 6,991
Less operating loss from Other operations 150 169
Less larger one-time items –300 –
Operating profit from product segments 8,136 7,160
Amortization, depreciation and impairment of intangible,
tangible and right-of-use assets 615 588
Less amortization, depreciation and impairment of
intangible, tangible and right-of-use assets for
Other operations –61 –65
EBITDA from product segments 8,690 7,684
Sales from product segments 18,145 16,332
EBITDA margin from product segments, % 47.9 47.0
EBITDA from product segments
Definition/calculation
Operating profit from product segments excluding depreciation,
amortization and impairments of tangible, intangible and right of use
assets.
Purpose
Used as an alternative measure of operating performance for the core
commercial businesses of Swedish Match, that is not impacted by historical
investments and the related accounting treatment of such investments as
well as items which impact comparability between periods.
EBITDA margin from product segments (%)
Definition/calculation
100 × EBITDA from product segments ÷ Sales from product segments
Purpose
Used as an alternative measure of operating profitability for the core
commercial businesses of Swedish Match.
Larger one-time items
MSEK 2021 2020
Settlement income 300 –
Total larger one-time items in operating profit 300 –
Income tax expense on settlement income –62 –
Tax charge including interest related to an adverse ruling
in a tax case in Sweden -286
Total larger one-time items in net profit 238 -286
Definition/calculation
Larger one-time items are separately disclosed non-recurring income and
cost which usually refer to larger capital gains or losses on divestments,
larger asset impairments and restructuring costs and other larger
non-recurring income and costs recognized during the period
Purpose
Used to provide information regarding items which impact comparability
between periods.
DEFINITIONS Continued
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DEFINITIONS Continued
Adjusted earnings per share
Basic and diluted 2021 2020
Profit for the period attributable to equity holders of
the Parent, MSEK 6,217 4,888
Settlement income in net profit, MSEK –238 –
Tax charge including interest, MSEK – 286
Profit for the period attributable to equity holders
of the Parent, excl. larger one-time items, MSEK 5,979 5,174
Weighted average number of shares outstanding,
thousands
1)
1,565,397 1,608,665
Adjusted earnings per share, SEK 3.82 3.22
1)
A share split (10:1) was made in May 2021. Historical share data in this report has been restated in
accordance with IAS 33.
Definition/calculation
Profit for the period excluding larger one-time items net of tax ÷ Average
number of shares outstanding
Purpose
Used as an alternative measure of earnings per share which is not affected
by items which impact comparability between periods.
EBITA interest cover
MSEK 2021 2020
EBITA 8,061 7,068
Interest income 36 49
Interest expense –367 –379
EBITA interest cover 24.3 21.4
Definition/calculation
EBITA ÷ (Interest income - Interest expense)
Purpose
Used as a measure of the ability to fund interest expenses.
Net debt/EBITA
MSEK 2021 2020
Net debt 14,035 13,523
EBITA 8,061 7,068
Net debt/EBITA 1.7 1.9
Definition/calculation
Net debt ÷ EBITA
Purpose
Used as an indication of the duration (in years) required to fund existing net
financial obligations with free cash flows from the ongoing business.
Net debt
MSEK 2021 2020
Non-current loans 14,197 13,514
Current loans 990 1,850
Components of derivatives (liabilities)
1)
112 420
Components of derivatives (assets)
2)
–851 –546
Non-current lease liabilities
3)
307 208
Current lease liabilities
4)
96 77
Net provision for pensions and similar obligations
3)
1,445 1,503
Net asset for pensions and similar receivables
5)
–140 –92
Cash and cash equivalents –2,121 –3,411
Net debt 14,035 13,523
1)
Included in Other non-current financial liabilities and Other current financial liabilities in the
condensed consolidated balance sheet.
2)
Included in Other non-current financial assets and receivables and Other current financial receivables
in the condensed consolidated balance sheet.
3)
Included in Other non-current financial liabilities in the condensed consolidated balance sheet.
4)
Included in Other current financial liabilities in the condensed consolidated balance sheet.
5)
Included in Other non-current financial assets and receivables in the condensed consolidated balance
sheet.
Currency components of derivatives included in the net debt are recognized
in the condensed consolidated balance sheet based on the total value of all
components in the financial instrument, i.e. if the total value of the financial
instrument is an asset, but includes a negative derivative component, that
derivative component is recognized as a negative asset in the condensed
consolidated balance sheet and vice versa.
Definition/calculation
Current and non-current loans, adjusted for components of derivatives
(assets and liabilities) relating to these loans + net provisions for pensions
and similar obligations + current and non-current lease liabilities – cash
and cash equivalents and other short-term investments
Purpose
Used as a measure of net financial obligations.
Market capitalization
MSEK 2021 2020
Share price at year-end, SEK 72.02 63.78
Number of shares outstanding at year-end 1,531,235,190 1, 584,070,830
Market capitalization, billions SEK 110.3 101.0
Definition/calculation
Share price at year-end × Number of shares outstanding at year-end
Purpose
Used as a measure of the market value of the Group.
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Quarterly data
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Definitions
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The Group Sustainability Shareholder information Financial reports Corporate GovernanceOur business
Swedish Match 2021 135