July 21, 2017 / 8:06 AM / a year ago

UPDATE 1-Swedish Match Q2 profit up as US cigar volumes grow

(Adds detail, background, shares)

July 21 (Reuters) - Tobacco group Swedish Match posted on Friday quarterly profits matching expectations helped by higher U.S. cigar volumes but was slightly more cautious about prospects to grow volumes in the full year compared with 2016.

* Q2 EBIT from product areas, which excludes larger one-time items and share of net profit in spun-off Scandinavian Tobacco Group, grew 8 pct yr/yr to 1.09 bln SEK ($133 mln) vs. Reuters’ poll forecast 1.06 bln

* Operating margin at the snus and snuff division unexpectedly widened slightly, to 42.0 pct from 41.7 pct, vs. a forecast 40.9 pct as profit and sales in Scandinavia edged up helped by better price/mix and volume growth

* Swedish Match is expanding rapidly in the United States with machine-made cigars, and is also hoping for a break-through there with its Swedish-style wet snuff “snus”, as a spike in snus competition in core market Sweden challenges its dominant position and has eroded margins

* “Second quarter profit growth was led by cigars, but also aided by snus in Scandinavia. Shipment volumes grew sharply for cigars, and we saw growth for snus in Sweden, Norway, and the US,” CEO Lars Dahlgren said, adding that a new US user fee for cigar firms had a negative profit effect

* Company said cigar volumes were record high, with growth particularly strong for natural leaf cigars, and cigar profits were notably higher

* Shares up 2.5 pct at 0758 GMT, taking YTD rise to 4.4 pct

* Swedish Match stood by previous wording it aims to grow cigar volumes in the US in 2017, however addling a caution that the year-ago comparison for H2 is difficult Source text for Eikon: Further company coverage: (Reporting by Anna Ringstrom, Editing by Helena Soderpalm)

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