April 27, 2020 / 6:37 AM / a month ago

Swedish Match lands profit beat but sees pandemic hit ahead

FILE PHOTO: A Swedish Match concept store for the tobacco group's moist powder tobacco "snus" in Stockholm, Sweden October 24, 2018. Picture taken October 24, 2018. REUTERS/Anna Ringstrom

STOCKHOLM (Reuters) - Tobacco group Swedish Match (SWMA.ST) posted on Monday a bigger than expected rise in first-quarter profit but said the COVID-19 pandemic would hit results in the second quarter due to travel restrictions as well as a hangover from previous stockpiling.

Swedish Match’s biggest businesses are its moist snuff “snus” in Scandinavia and cigars in the United States though its relatively new non-tobacco pouch product “ZYN”, which it is rolling out across the United States, is growing fast.

The company said in a statement that national travel restrictions to curb the pandemic in Scandinavia had meant shipments of its products to border trade, ferries and airports nearly ceased in March.

However, U.S. deliveries rose on the back of higher demand as well as stockpiling by distributors and retailers towards the end of the quarter.

“We anticipate that in coming quarters, the benefit from increased shipment levels during the first quarter in the U.S. will unwind, while in Scandinavia the lost border/travel retail volumes may not be fully recoverable during 2020,” CEO Lars Dahlgren said.

“We expect to experience increases to our cost base as we work to accommodate necessary modifications to our processes and routines in the current situation, and some projects may need to be postponed or modified.”

However, Dahlgren said work to increase ZYN production capacity was proceeding according to plan. Swedish Match’s shares dipped 2% by 0809 GMT, taking a year-to-date rise on the back of ZYN’s performance and outlook to 27%.

Operating profit grew to 1.59 billion Swedish crowns ($159.2 million) from 1.19 billion a year earlier. The mean forecast in a Refinitiv poll of five analysts had been for a rise to 1.46 billion crowns.

The rival to British American Tobacco (BATS.L) and Altria (MO.N) said it had suffered few supply shortages and had enough stocks on hand to keep up production in case of delays. Most plants were operating at or near normal capacity, it added.

Reporting by Anna Ringstrom; editing by Niklas Pollard

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