October 26, 2018 / 7:31 AM / 20 days ago

UPDATE 2-Swedish Match upbeat on tobacco-free nicotine pouches after Q3 forecast beat

* Q3 EBIT 1.3 bln SEK vs consensus 1.25 bln SEK

* Snus, snuff and nicotine pouch margin 47.0 pct

* CEO ups guidance for snus, snuff, nicotine pouches in the US

* Shares up in falling wider market (Adds CEO comment, share reaction)

STOCKHOLM, Oct 26 (Reuters) - Tobacco group Swedish Match reported on Friday slightly bigger profit growth than expected and said its relatively new tobacco-free nicotine pouch product saw sharp volume growth in the United States.

Third-quarter operating profit at the group, whose main business is its pasteurized moist snuff “snus” pouches in Scandinavia, jumped 20 percent from a year ago to 1.31 billion crowns ($144 mln), against a Reuters poll forecast for 1.25 billion.

The snuff and cigar maker has expanded in the U.S. cigar market in recent years and is pushing for similar success in the country with snus, which is banned in most of Europe and whose home market has become crowded.

More recently, it has also stepped up efforts to grow within the still small but fast-growing non-tobacco nicotine pouch segment in the United States with its ZYN product, as well as in Scandinavia.

“For international snus and nicotine pouches, we have now for two consecutive quarters reported positive operating results, stemming from strong volume growth for ZYN, improved pricing, and reduced marketing spending for U.S. snus,” CEO Lars Dahlgren said in a statement.

He later told Reuters in an interview the segment was likely to reach profitability on an annual basis this year.

“We go into the fourth quarter with very strong demand, particularly for ZYN, so it wouldn’t be unreasonable to estimate that a full-year result would be positive,” he said on the international snus and nicotine pouch segment.

Match’s previous guidance was for losses to be small, if any.

Its shares were up 0.9 percent at 0940 GMT, taking a year-to-date rise to 41 percent and bucking falls on the wider market in Stockholm.

The group is building a U.S plant for tobacco free nicotine pouches. Dahlgren said commercial production would start in the second quarter, and ZYN would be rolled out across the country in 2019, from western regions currently.

The operating margin at its key snus, snuff and nicotine pouch division widened in the quarter to 47.0 percent from 45.2 percent, in line with expectations.

$1 = 9.1266 Swedish crowns Reporting by Anna Ringstrom, additional reporting by Helena Soderpalm, editing by Niklas Pollard and David Evans/Emelia Sithole-Matarise

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