November 14, 2012 / 12:41 PM / 5 years ago

UPDATE 1-Swedish Match sees price war eventually easing

By Anna Ringstrom

GOTHENBURG, Sweden, Nov 14 (Reuters) - Swedish Match AB believes a price war in Sweden's wet snuff market should eventually ease as rivals are forced to follow price rises by the tobacco products group, its chief executive said on Wednesday.

The group had warned last month that cut-price competition in Swedish-style wet snuff, known as snus, w ould hit profits in the fourth quarter of 2012 and the first part of next year.

But Chief Executive Lars Dahlgren told analysts and investors he expected a narrowing later on of the price gap between premium and low-end snus, whose widening had encouraged a switch from high-margin premium brands where Swedish Match has its largest market share.

"If we are right about the type of discounts that much of the competition is giving to the retailers, I don't think these price levels you see today are sustainable because much of the competition must be bleeding right now," Dahlgren said at the company's capital markets day.

Swedish Match shares, which had dropped sharply after last month's warning, were little changed, down 0.1 percent at 220.8 crowns by 1150 GMT. The stock is well down on its yearly high of 294.5 crowns set in July.

Dahlgren, speaking at the west coast city of Gothenburg where the company's two snus factories are located, repeated the company's warning that fourth-quarter earnings would drop after its snus market share and premium snus volumes fell in the third quarter.

Swedish Match's unit making snuff and snus - put under the lip and sucked, mostly in pouches - accounts for more than half of group profit and a third of sales.

Premium snus in Sweden - including its General brand - accounts for the bulk of Swedish Match's sales in Scandinavia, the snus and snuff division's main market.

Swedish Match, whose rivals include Imperial Tobacco, BAT and Japan Tobacco, also expects its snus profit in Sweden to take a hit at the start of 2013, due to rising sales of lower-margin cheap snus and a decision not to raise prices on its premium snus in January despite a tax hike.

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