News

Swedish Match: Half Year Report January - June 2008

STOCKHOLM, Sweden-(Business Wire)-July 18, 2008 - Swedish Match (STO:SWMA):

— Net sales for the second quarter increased to 3,284 MSEK (3,090)

— In local currencies, net sales were 12 percent above the same quarter of last year

— Operating profit for the second quarter increased to 733 MSEK (642)

— EPS for the second quarter increased by 22 percent to 2.02 SEK (1.66)

— We maintain our outlook for 2008 with improving sales and underlying operating profit for the Group compared to 2007. For further comments on the outlook please see Outlook for 2008 below

CEO Lars Dahlgren:

The second quarter confirms a continued strong development of the snus and snuff product lines. Tax-free and Norway compensated for lower volumes in Sweden and overall profit for snus in Scandinavia improved significantly compared to the second quarter of 2007. In the US the national launch of Red Man moist snuff continued, and our US snuff business gained market share during the quarter. For cigars, sales have started to return to more normal levels following a weak first quarter of 2008. The remaining product groups delivered solid results in local currencies. We maintain our outlook for 2008 with improving sales and underlying operating profit for the Group compared to 2007. -0- *T Summary of Consolidated Income Statement ——————————————————————————————————— April - January - Full June June year MSEK 2008 2007 2008 2007 2007 ——- ——- ——- ——- ————- Sales 3,284 3,090 6,103 5,752 12,551 Operating profit excl. larger one time items 733 642 1,276 1,176 2,730 Operating profit 733 642 1,276 1,176 2,997 Profit before income tax 614 563 1,041 1,031 2,662 Net profit for the period 512 441 854 773 2,056 Earnings per share, diluted (SEK) 2.02 1.66 3.35 2.89 7.80 —————————————————— ——- ——- ——- ——- ————- *T

Sales and results for the second quarter

In local currencies sales for the second quarter of 2008 increased by 12 percent compared with the second quarter of 2007. Reported sales for the second quarter increased by 6 percent to 3,284 MSEK (3,090). Currency translation has affected the sales comparison negatively by 175 MSEK.

For snuff, sales increased by 20 percent during the second quarter to 953 MSEK (794) and operating profit increased by 32 percent to 410 MSEK (311). Scandinavian snus sales were up 26 percent compared to the second quarter of the prior year, volumes measured in number of cans declined by 2 percent. Snuff sales in North America were up by 22 percent in local currency, as a result of a volume growth of 21 percent.

For cigars, sales increased by 7 percent during the second quarter to 908 MSEK (847). Operating profit increased in local currencies but due to translation effects declined in Swedish kronor to 184 MSEK (193). Sales for cigars grew in both the US and in Europe in local currencies as a result of acquired businesses. Operating profit increased in the US in local currency and remained flat versus prior year in Europe. Operating margin for cigars reached 20.3 percent (22.7).

Group operating profit for the second quarter increased by 14 percent to 733 MSEK (642). In local currencies operating profit increased by 21 percent. Currency translation has affected the operating profit comparison negatively by 47 MSEK.

Operating margin for the second quarter amounted to 22.3 percent compared to 20.8 percent for the second quarter of 2007.

Earnings per share (basic and diluted) for the second quarter increased by 22 percent to 2.02 SEK (1.66).

Sales and results for the first six months

Sales for the first six months amounted to 6,103 MSEK (5,752). In local currencies, sales increased by 11 percent. Operating profit amounted to 1,276 MSEK (1,176). Currency translation has affected the operating profit comparison negatively by 68 MSEK.

Group operating margin during the first six months was 20.9 percent (20.4).

EPS (basic) for the first six months was 3.36 SEK (2.89). Diluted EPS was 3.35 SEK (2.89). -0- *T Sales by product area ——————————————————————————————————— April - January - July Full June Chg June Chg 2007- year June MSEK 2008 2007 % 2008 2007 % 2008 2007 ——- ——- —- ——- ——- —- ——— ——— Snuff 953 794 20 1,774 1,457 22 3,606 3,289 Cigars 908 847 7 1,665 1,581 5 3,495 3,411 Chewing tobacco 227 253 -10 437 492 -11 901 956 Pipe tobacco & accessories 189 203 -7 387 408 -5 830 851 Lights 374 354 5 721 694 4 1,500 1,473 Other operations 634 638 -1 1,119 1,121 0 2,569 2,571 ——- ——- —- ——- ——- —- ——— ——— Total 3,284 3,090 6 6,103 5,752 6 12,901 12,551 ———————————— ——- ——- —- ——- ——- —- ——— ——— *T -0- *T Operating profit by product area ——————————————————————————————————— April - January - July Full June Chg June Chg 2007- year June MSEK 2008 2007 % 2008 2007 % 2008 2007 —— —— —- ——- ——- —- ——— ——- Snuff 410 311 32 728 541 34 1,553 1,366 Cigars 184 193 -4 296 357 -17 676 737 Chewing tobacco 77 82 -6 146 154 -5 305 312 Pipe tobacco & accessories 47 24 99 99 79 24 220 201 Lights 62 62 0 116 119 -3 249 252 Other operations -47 -29 -108 -74 -172 -137 —— —— —- ——- ——- —- ——— ——- Subtotal 733 642 14 1,276 1,176 9 2,830 2,730 Larger one time items Capital gain from sale of real estate 267 267 —— —— —- ——- ——- —- ——— ——- Total 733 642 14 1,276 1,176 9 3,098 2,997 —————————————- —— —— —- ——- ——- —- ——— ——- *T -0- *T Operating margin by product area ——————————————————————————————————— January - July Full April - June June 2007- year June Percent 2008 2007 2008 2007 2008 2007 ——— ——- - —— —— - ——— ——- Snuff 43.0 39.1 41.1 37.2 43.1 41.5 Cigars 20.3 22.7 17.8 22.6 19.3 21.6 Chewing tobacco 34.1 32.3 33.4 31.2 33.8 32.7 Pipe tobacco & accessories 25.0 11.7 25.5 19.4 26.5 23.6 Lights 16.6 17.5 16.0 17.1 16.6 17.1 ——— ——- - —— —— - ——— ——- Group* 22.3 20.8 20.9 20.4 21.9 21.8 ——————————————- ——— ——- - —— —— - ——— ——- *T

* Excluding larger one time items -0- *T EBITDA by product area ——————————————————————————————————— April - January - July Full June Chg June Chg 2007- year June MSEK 2008 2007 % 2008 2007 % 2008 2007 —— —— —- ——- ——- —- ——— ——- Snuff 448 347 29 804 614 31 1,701 1,511 Cigars 232 237 -2 393 446 -12 867 920 Chewing tobacco 82 87 -5 156 164 -5 322 330 Pipe tobacco & accessories 55 32 69 114 96 18 252 235 Lights 72 74 -3 136 142 -4 293 299 Other operations -46 -26 -105 -69 -165 -129 —— —— —- ——- ——- —- ——— ——- Total 842 750 12 1,498 1,393 8 3,271 3,166 —————————————- —— —— —- ——- ——- —- ——— ——- *T -0- *T EBITDA margin by product area ——————————————————————————————————— April - January - July Full June June 2007- year June Percent 2008 2007 2008 2007 2008 2007 —— —— - —— —— - ——— ——— Snuff 47.0 43.7 45.3 42.1 47.2 45.9 Cigars 25.5 28.0 23.6 28.2 24.8 27.0 Chewing tobacco 36.3 34.3 35.7 33.3 35.7 34.5 Pipe tobacco & accessories 28.9 15.8 29.5 23.6 30.4 27.6 Lights 19.2 20.8 18.9 20.5 19.5 20.3 —— —— - —— —— - ——— ——— Group 25.7 24.3 24.5 24.2 25.4 25.2 ———————————————— —— —— - —— —— - ——— ——— *T

Snuff/Snus

Sweden is the world's largest snuff market measured by per capita consumption. A substantially larger proportion of the male population uses the Swedish type of moist snuff called snus* compared to cigarettes. The Norwegian market is significantly smaller than the Swedish market but in recent years has experienced solid volume growth. The US is the world's largest snuff market measured in number of cans and is approximately six times larger than the Swedish market. In Sweden and Norway, Swedish Match has a leading position. In the US, the Group is well positioned as the third largest player. Some of the best known brands include General, Ettan, and Grov in Sweden, Timber Wolf and Longhorn in the US. In 2007, the Company launched a snuff line extension under its well known Red Man brand in the US market.

During the second quarter, sales increased by 20 percent compared to the same quarter of the previous year, to 953 MSEK (794), and operating profit increased by 32 percent, to 410 MSEK (311). Currency translation impacts have affected the sales and operating profit comparison negatively. Operating profit improved significantly in the Scandinavian snus business.

The operating margin in Scandinavia improved. In the US, the operating margin was lower than last year's second quarter due to continued substantial marketing costs related to the national roll-out of Red Man moist snuff. The operating margin for the total product group was 43.0 percent (39.1).

In Scandinavia, sales volumes measured in number of cans, were down by 2 percent during the second quarter compared to the previous year. Excluding hoarding effects in 2007 and 2008, sales volumes are estimated to have declined by somewhat less than 5 percent.

Sales and operating profit in Scandinavia increased as strong volume growth in Norway and tax-free channels and improved price levels more than offset the volume decline in the Swedish market.

In the US, sales volumes during the second quarter were up by 21 percent compared to the same period in the previous year. Volumes for Longhorn and Timber Wolf combined were up by 8 percent. The national roll-out of the Red Man brand continued, which contributed significantly to the volume increase. The Red Man launch is being supported by extensive marketing programs. At the beginning of the year, the Triumph brand of Swedish style snus was launched in a test market in Ohio as part of the joint venture with Lorillard. The product is currently available in most outlets that sell tobacco products in the state.

For the first six months of the year, sales increased to 1,774 MSEK (1,457) and operating profit increased to 728 MSEK (541). Operating margin was 41.1 percent (37.2).

* Swedish snus is moist snuff which is produced using a special heat treated process, much like pasteurization, as opposed to other snuff products for which a fermentation process is used.

Cigars

Swedish Match is one of the world's largest producers of cigars and cigarillos. Swedish Match offers a full range of different cigars and brands. Well known brands include Macanudo, La Gloria Cubana, White Owl, Garcia y Vega, La Paz, Hajenius, Hollandia, Justus van Maurik, Willem II, and Salsa. The US is the largest cigar market in the world. Swedish Match has a leading position in the premium segment and is well established in the segment for machine made cigars. After the US, the most important cigar markets are in Europe, where Swedish Match is well represented in most countries. The largest markets for Swedish Match in sales terms in Europe are France, Benelux, Finland and Spain.

During the second quarter, sales were 908 MSEK (847), and operating profit amounted to 184 MSEK (193). Currency translation has affected the comparisons for both sales and operating profit negatively. In local currencies, sales in the second quarter increased by 16 percent compared to the same period of the previous year, while operating profit increased by 4 percent. Operating margin was 20.3 percent (22.7).

During the second quarter, US premium cigar volumes started to return to more normal levels, but were still below the level of the previous year (excluding acquisitions). Sales in local currencies (excluding acquisitions) were down approximately 10 percent in part due to the lower shipments, and in part due to mix shifts toward smaller and less expensive cigars. In the US, Cigars International, acquired in September 2007, has shown a strong performance.

Sales of mass market cigars in the US were down approximately 4 percent in local currency during the second quarter versus previous year, while operating income was stable. Volume declines were offset by price increases, some mix improvements and lower costs.

Cigar sales in Europe increased as a result of the Bogaert acquisition in June 2007. Excluding the impact of the Bogaert acquisition, sales and profits were lower due to difficult market conditions in some countries. In the Netherlands a smoking ban in all bars and restaurants was introduced effective July 1 which has impacted shipments during the period. Including the Bogaert acquisition, operating profit remained flat compared to the same period previous year.

For cigars in total, sales for the first six months amounted to 1,665 MSEK (1,581), while operating profit was 296 MSEK (357). In local currencies sales increased by 13 percent versus the previous year, while operating profit declined by 11 percent.

Chewing tobacco

Chewing tobacco is sold primarily on the North American market, mainly in the southern US. Swedish Match is the leading producer of chewing tobacco in the US. Well known brands include Red Man and Southern Pride. The chewing tobacco segment shows a declining trend.

During the second quarter, sales declined by 10 percent, to 227 MSEK (253). In local currency, sales of chewing tobacco increased by 3 percent as better prices more than compensated a decline in volumes. As a result of the weaker USD, operating profit declined by 6 percent, to 77 MSEK (82). In local currency, the operating profit increased by 8 percent. Operating margin was 34.1 percent (32.3).

Sales for the first six months amounted to 437 MSEK (492) while operating profit amounted to 146 MSEK (154). In local currency, sales for the first six months was up 1 percent, while operating profit grew by 8 percent. Operating margin was 33.4 percent (31.2).

Pipe tobacco and accessories

Swedish Match is one of the world's largest pipe tobacco companies. The Company has a significant presence in South Africa. Best Blend and Boxer are the most important brands in South Africa. The Borkum Riff brand is sold in over 60 countries. Accessories include the sales of papers and other smoking related items. Pipe tobacco consumption is declining in most established markets.

During the second quarter, sales declined by 7 percent to 189 MSEK (203) and the operating profit reached 47 MSEK (24). During the second quarter of 2007, operating profit was negatively affected by 20 MSEK by the closure of a manufacturing facility. The sales and operating profit comparisons are affected by the depreciation of the South African Rand. In local currencies, sales increased by 8 percent, while operating profit, excluding the costs of the plant closure in 2007, increased by 31 percent. The volume decline in South Africa, in both the first and the second quarter, has been more modest than what we consider to be the historic trend. The more efficient production setup also contributed to the improved profit. Operating margin was 25.0 percent (11.7).

Sales for the first six months amounted to 387 MSEK (408), while operating profit amounted to 99 MSEK (79). Operating margin was 25.5 percent (19.4).

Lights

Swedish Match is the market leader in a number of markets for matches. The brands are mostly local, with leading positions in their home countries. Larger brands include Solstickan, Three Stars, Fiat Lux, and Redheads. The Group's main brand for disposable lighters is Cricket. Swedish Match's largest market for lighters is Russia.

During the second quarter sales amounted to 374 MSEK (354), while operating profit amounted to 62 MSEK (62). Operating margin was 16.6 percent (17.5).

Sales for the first six months amounted to 721 MSEK (694), while operating profit amounted to 116 MSEK (119). Operating margin was 16.0 percent (17.1).

Other operations

Other operations include the distribution of tobacco products on the Swedish market, as well as corporate overhead costs.

Sales in Other operations for the second quarter amounted to 634 MSEK (638). Operating profit for Other operations was a negative 47 MSEK (negative 29).

Sales for the first six months amounted to 1,119 MSEK (1,121). Operating profit for the first six months was a negative 108 MSEK (negative 74).

Taxes

The Group tax expense for the first half of the year amounted to 187 MSEK (258), corresponding to a tax rate of 18 percent (25).

Earnings per share

Earnings per share (basic and diluted) for the second quarter amounted to 2.02 SEK (1.66). For first half of the year, basic earnings per share amounted to 3.36 SEK (2.89), and diluted earnings per share amounted to 3.35 SEK (2.89).

Depreciation and amortization

Total depreciation and amortization for the first half of the year amounted to 221 MSEK (217), of which depreciation on property, plant and equipment amounted to 153 MSEK (152) and amortization of intangible assets amounted to 68 MSEK (65).

Financing and cash flow

Cash flow from operations for the first half of the year increased to 653 MSEK compared with 571 MSEK for the same period of the previous year. Corporate income tax payments during the first half of the year were 346 MSEK, compared with 325 MSEK in 2007. The cash flow for the first six months, in 2008 as well as in 2007, was adversely impacted by high payments of tobacco taxes following year end hoarding of tobacco products in the Swedish market.

The net debt as per June 30, 2008 amounted to 8,017 MSEK compared to 7,127 MSEK at December 31, 2007. The increase of 890 MSEK includes dividend payments of 886 MSEK and share repurchases, net, of 634 MSEK. Investments in property, plant and equipment amounted to 138 MSEK (289).

During the first half of the year new bond loans of 786 MSEK were issued. Repayment of bond loans for the same period amounted to 642 MSEK.

Cash and cash equivalents amounted to 2,404 MSEK at the end of the period, compared with 3,439 MSEK at the beginning of the year. As of June 30, 2008, Swedish Match had 2,868 MSEK in unutilized committed credit lines.

Net finance cost for the first half of the year increased to 235 MSEK (145) as a result of higher average net debt and increased interest rates.

Average number of employees

The average number of employees in the Group during the first half of the year was 11,824 compared with 12,075 for the full year 2007.

Share structure

The Annual General Meeting on April 22, 2008 approved a mandate to repurchase shares for a maximum amount of 3,000 MSEK until the next Annual General Meeting with the condition that the Company at any time does not hold more than 10 percent of the shares of the Company. In addition, in accordance with the resolution at the Annual General Meeting, 12.0 million shares held in treasury have been cancelled. The total amount of registered shares in the Company after the cancellation of shares is 255,000,000 shares. In June, after Annual General Meeting approval, the Company issued 1,592,851 call options to senior Company officials and key employees for the stock option program for 2007. These call options can be exercised from March 1, 2011 to February 29, 2013. The exercise price is 172.68 SEK.

During the first six months 5.3 million shares were repurchased for 696 MSEK at an average price of 135.52 SEK. Total shares bought back by Swedish Match since the buyback programs started have been repurchased at an average price of 78.66 SEK. During the first six months the Company sold 0.8 million treasury shares at an average price of 78.22 SEK as a result of option holders exercising options. As per June 30, 2008 Swedish Match held 3.5 million shares in its treasury, corresponding to 1.4 percent of the total number of shares. The number of shares outstanding, net after repurchase and after the sale of treasury shares, as per June 30, 2008 amounted to 251.5 million. In addition, the Company has call options outstanding as of June 30, 2008 corresponding to 4.6 million shares exercisable in gradual stages from 2008-2013.

Other events

On May 13, 2008, the Swedish Match Board of Directors appointed Lars Dahlgren as the new President and CEO of Swedish Match AB, effective June 1, 2008. Also effective June 1, 2008, Joakim Tilly was appointed Chief Financial Officer of the Group.

Swedish Match AB (publ)

Swedish Match AB (publ) is the Parent company of the Swedish Match Group.

Sales in the Parent company for the first six months amounted to 1 MSEK (6). Profit before tax amounted to 602 MSEK (loss 262) and net profit to 858 MSEK (loss 192). The main sources of revenues for the Parent company are dividends and Group contributions from subsidiaries. Group contributions are typically received at the end of the year.

The Group's treasury operations are included in the operations of the Parent company and include the major part of the Group's external borrowings. Some of these loans have variable interest rates and an increase of interest rates during the next six months could increase the interest expense in the Parent company.

Capital expenditures during the first six months amounted to 0 MSEK (1). The cash flow for the period was negative 743 MSEK (positive 1,282). Cash and bank at the end of the period amounted to 2,066 MSEK compared with 2,808 MSEK at the beginning of the year. During the first half of the year the Parent company made share repurchases, net, of 634 MSEK and paid dividends of 886 MSEK.

Risk factors

Swedish Match faces intense competition in all of its markets and for each of its products and such competition may increase in the future. In order to be successful the Group must promote its brands successfully and anticipate and respond to new customer trends. Restrictions on advertising and promotion may, however, make it more difficult to counteract loss of consumer loyalty. Competitors may develop and promote new products which could be successful, and could thereby have an adverse effect on Swedish Match's results of operations.

Swedish Match has a substantial part of its production and sales in EMU member countries as well as South Africa, Brazil and the US. Consequently, changes in exchange rates of euro, South African rand, Brazilian real and the US dollar in particular may adversely affect the Group's results of operations, cash flow, financial condition or relative price competitiveness in the future. Such effects may occur both in local currencies and when such local currencies are translated into Swedish currency for purposes of financial reporting.

Regulatory and fiscal changes in the countries where the Group is operating related to tobacco and other taxes as well as to the marketing, sale and consumption of tobacco products may have an adverse effect on Swedish Match's results of operations.

For a further description of risk factors affecting Swedish Match, see Report of the Board of Directors in the published Swedish Match Annual Report for 2007.

Outlook for 2008

The outlook presented in the interim report for the first quarter of 2008 remains valid with the exception of the tax rate.

For the full year we expect both sales and underlying operating profit to exceed the levels in 2007, driven primarily by a strong performance in the snuff/snus product area. We expect the Scandinavian snus business to continue to deliver strong results for the remainder of the year, and in the US we expect further market share gains and volume growth.

As expected, the cigar business performed better in the second quarter than in the first, and in the US we see room for some further improvement for the remainder of the year.

The revised estimate for the full year tax rate is 18 percent (previous guidance around 20 percent), due to a number of factors including items of temporary nature and a weak USD exchange rate.

Potential change to the Swedish income tax legislation

On June 24, 2008 the Swedish Ministry of Finance submitted for comments a proposal from the tax authorities that would severely limit the tax deductibility of interest expenses on intra-group loans in Sweden effective 2009. In the proposal the tax authorities also mentioned that the resulting additional tax revenue could be used to finance a general lowering of the Swedish corporate income tax rate, currently at 28 percent. Most initial comments in the media to the proposal have been negative as the proposal affects normal business transactions.

If the tax legislation were to be changed based on the proposal from the tax authorities, Swedish Match estimates that the tax rate may rise to around 25 percent in 2009. This estimate is uncertain both with respect to the amount of additional income tax Swedish Match would have to pay as well as the timing of a possible change to the legislation.

Accounting principles

The financial information in this report has been prepared in accordance with the International Financial Reporting Standards (IFRS) approved by the European Commission for application within the EU. The report is prepared in accordance with the Accounting Standard IAS 34 Interim Financial Reporting. The accounting principles are the same as in the 2007 Annual Report. The financial reporting of the Parent company has been prepared in accordance with the Annual Accounts Act and RFR 2.1 Reporting for legal entities.

Forward-looking information

This report contains forward-looking information based on the current expectation of the Swedish Match Group's management. Although management deems that the expectations presented by such forward-looking information are reasonable, no guarantee can be given that these expectations will prove correct. Accordingly, the actual future outcome could vary considerably compared to what is stated in the forward-looking information, due to such factors as changed conditions regarding business cycles, market and competition, changes in legal requirements and other political measures, and fluctuation in exchange rates.

Additional information

This report has not been reviewed by the Company's auditors. The January-September 2008 report will be released on October 29.

The Board of Directors and the CEO declare that the half year report gives a true and fair view of the operations, position and result of the Company and the Group and describes the major risks and uncertainties of the Company and the companies in the Group.

Stockholm, July 18, 2008 -0- *T Conny Karlsson Andrew Cripps Charles A. Blixt Kenneth Ek Chairman Deputy Chairman Board member Board member Karen Guerra Arne Jurbrant Eva Larsson Joakim Board member Board member Board member Lindstrom Board member Kersti Meg Tiveus Lars Dahlgren Strandqvist Board member President and CEO Board member *T -0- *T Key data ——————————————————————————————————— 12 months January - June ended Full year Jun 30, 2008 2007 2008 2007 —————- —————- —————- —————- Operating margin, %(1) 20.9 20.4 21.9 21.8 Operating capital, MSEK 8,078 8,867 8,078 8,439 Return on operating capital, %(1) 33.4 33.1 Net debt, MSEK 8,017 8,235 8,017 7,127 Investments in property, plant and equipment, MSEK(2) 147 289 400 541 EBITDA, MSEK(3) 1,498 1,393 3,271 3,166 EBITA, MSEK(4) 1,344 1,241 2,968 2,865 EBITA interest cover 6.0 8.7 7.4 9.0 Net debt/EBITA 2.7 2.5 Share data(5) Earnings per share, SEK Basic 3.36 2.89 8.34 7.82 Diluted 3.35 2.89 8.32 7.80 Number of shares outstanding at end of period 251,530,000 260,038,200 251,530,000 255,874,800 Average number of shares outstanding 253,855,908 267,277,508 255,893,845 262,604,644 Average number of shares outstanding, diluted 254,350,043 267,771,232 256,509,679 263,405,637 ——————————— —————- —————- —————- —————- *T

1) Excluding a gain of 267 MSEK from the sale of head office buildings in Stockholm during the fourth quarter 2007

2) Includes investments in assets held for sale and biological assets

3) Operating profit excluding larger one time items adjusted for depreciation, amortization and writedowns of tangible and intangible assets

4) Operating profit excluding larger one time items adjusted for amortization and writedowns of intangible assets

5) Profit attributable to equity holders of the Parent -0- *T Consolidated Income Statement in summary ——————————————————————————————————— MSEK January - April - June Chg June Chg 2008 2007 % 2008 2007 % ——— ——— —- ——— ——— —— Sales, including tobacco tax 6,031 5,645 11,032 10,268 Less tobacco tax -2,746 -2,555 -4,930 -4,515 ——— ——— —- ——— ——— —— Sales 3,284 3,090 6 6,103 5,752 6 Cost of sales -1,687 -1,629 -3,121 -2,997 ——— ——— —- ——— ——— —— Gross profit 1,598 1,461 9 2,982 2,756 8 Sales and administrative expenses* -870 -821 -1,708 -1,582 Share of profit in equity accounted investees 5 2 2 2 ——— ——— —- ——— ——— —— Operating profit 733 642 14 1,276 1,176 9 Financial income 33 40 74 76 Financial expenses -153 -119 -309 -221 ——— ——— —- ——— ——— —— Net finance cost -119 -79 -235 -145 ——— ——— —- ——— ——— —— Profit before income taxes 614 563 9 1,041 1,031 1 Income tax expense -102 -122 -187 -258 ——— ——— —- ——— ——— —— Net profit for the period 512 441 16 854 773 10 ————————————————- ——— ——— —- ——— ——— —— Attributable to: Equity holders of the Parent 512 441 853 773 Minority interests 0 0 0 0 ——— ——— —- ——— ——— —— Net profit for the period 512 441 16 854 773 10 ————————————————- ——— ——— —- ——— ——— —— Earnings per share, basic, SEK 2.02 1.66 3.36 2.89 Earnings per share, diluted, SEK 2.02 1.66 3.35 2.89 ————————————————- ——— ——— —- ——— ——— —— Consolidated Income Statement in summary ——————————————————————————————————- MSEK 12 months Full ended year Chg Jun 30, 2008 2007 % ———- ———- —- Sales, including tobacco tax 23,616 22,852 Less tobacco tax -10,715 -10,301 ———- ———- —- Sales 12,901 12,551 3 Cost of sales -6,703 -6,578 ———- ———- —- Gross profit 6,198 5,973 4 Sales and administrative expenses* -3,102 -2,976 Share of profit in equity accounted investees 1 1 ———- ———- —- Operating profit 3,098 2,997 3 Financial income 162 165 Financial expenses -588 -501 ———- ———- —- Net finance cost -426 -336 ———- ———- —- Profit before income taxes 2,672 2,662 0 Income tax expense -536 -606 ———- ———- —- Net profit for the period 2,136 2,056 4 ———————————————————————— ———- ———- —- Attributable to: Equity holders of the Parent 2,135 2,055 Minority interests 1 1 ———- ———- —- Net profit for the period 2,136 2,056 4 ———————————————————————— ———- ———- —- Earnings per share, basic, SEK 8.34 7.82 Earnings per share, diluted, SEK 8.32 7.80 ———————————————————————— ———- ———- —- *T

* Including a gain of 267 MSEK from sale of head office buildings in Stockholm during the fourth quarter 2007 -0- *T Consolidated Balance Sheet in summary ——————————————————————————————————— MSEK Jun Dec 30, 31, 2008 2007 ——— ——— Intangible assets 4,081 4,419 Property, plant and equipment 2,306 2,388 Financial fixed assets 1,070 1,011 Current operating assets 4,868 5,204 Other current investments 5 5 Cash and cash equivalents 2,404 3,439 ——— ——— Total assets 14,735 16,467 ———————————————————————————— ——— ——— Equity attributable to equity holders of the Parent -420 720 Minority interest 3 4 ——— ——— Total equity -417 724 Non-current provisions 1,326 1,292 Non-current loans 9,084 8,768 Other non-current liabilities 557 567 Current provisions 38 60 Current loans 1,011 1,271 Other current liabilities 3,136 3,785 ——— ——— Total equity and liabilities 14,735 16,467 ———————————————————————————— ——— ——— *T -0- *T Consolidated Cash Flow Statement in summary ——————————————————————————————————— MSEK January - June 2008 2007 ——————- ——— Profit before income taxes 1,041 1,031 Adjustments for non-cash items and other 153 208 Income tax paid -346 -325 Cash flow from operating activities before changes in working capital 848 914 Cash flow from changes in working capital -195 -343 ——————- ——— Net cash from operating activities 653 571 Investing activities Acquisition of property, plant and equipment* -138 -289 Proceeds from sale of property, plant and equipment 74 25 Acquisition of intangible assets -2 -67 Acquisition of subsidiaries, net of cash acquired -6 -365 Divestment of business operations 5 - Changes in financial receivables etc. -4 38 Changes in current investments 0 51 ——————- ——— Net cash used in investing activities -70 -607 Financing activities Changes in loans 102 743 Dividends paid to equity holders of the Parent -886 -664 Repurchase of own shares -696 -1,975 Stock options exercised 62 122 Other -116 39 ——————- ——— Net cash used in financing activities -1,534 -1,735 Net decrease in cash and cash equivalents -951 -1,771 Cash and cash equivalents at the beginning of the period 3,439 3,042 Effect of exchange rate fluctuations on cash and cash equivalents -84 17 ——————- ——— Cash and cash equivalents at the end of the period 2,404 1,288 ————————————————————————- ——————- ——— *T

* Includes investments held for sale and biological assets -0- *T Consolidated Statement of Recognized Income and Expense ——————————————————————————————————— MSEK January - June 2008 2007 ————- ———— Net profit for the period recognized in the income statement 854 773 Income and expenses recognized in equity: Effective portion of changes in fair value of cash flow hedges 42 32 Translation difference in foreign operations -519 22 Tax on items taken to/transferred from equity -12 -9 ————- ———— Total transactions taken to equity -489 45 ————- ———— Total income and expense recognized for the period 365 818 —————————————————————————- ————- ———— Attributable to: Equity holders of the Parent 364 818 Minority interest 0 0 ————- ———— Total income and expense recognized for the period 365 818 —————————————————————————- ————- ———— *T -0- *T Change in Shareholders' Equity ——————————————————————————————————— MSEK January - June 2008 2007 ————- ————— Opening balance as per January 1 724 2,041 Total income and expense recognized for the period 365 818 Repurchase of own shares -696 -1,975 Stock options exercised 62 122 Share-based payments, IFRS 2 15 14 Dividends paid to equity holders of the Parent -886 -664 Cancellation of shares -18 - Bonus issue 18 - Minority interest 0 0 ————- ————— Closing balance as per June 30 -417 356 ————————————————————————- ————- ————— *T -0- *T Income Statement in summary for Parent company ——————————————————————————————————— January - Full MSEK June year 2008 2007 2007 ——- —— ——— Net sales 1 6 6 Cost of sales 0 -3 -3 ——- —— ——— Gross profit 1 3 3 —————————————————————————— ——- —— ——— Selling and administrative expenses -168 -131 -351 Operating loss -167 -128 -348 Income from participation in Group companies 1,521 1 17,714 Net finance cost -752 -134 -368 Profit after financial items 602 -262 16,998 Appropriations 0 0 11 Profit before income tax 602 -262 17,009 Income tax 256 70 30 ——- —— ——— Profit for the year 858 -192 17,039 —————————————————————————— ——- —— ——— *T -0- *T Balance Sheet in summary for Parent company ——————————————————————————————————— MSEK Jun Dec 30, 31, 2008 2007 ——— ——— Intangible and tangible assets 12 19 Financial fixed assets 53,183 52,082 Current assets 4,693 7,381 ——— ——— Total assets 57,888 59,482 ———————————————————————————— ——— ——— Equity 21,554 22,182 Untaxed reserves 13 13 Non-current liabilities 26,798 26,421 Provisions 38 20 Current liabilities 9,485 10,846 ——— ——— Total liabilities 36,334 37,300 ——— ——— Total equity and liabilities 57,888 59,482 ———————————————————————————— ——— ——— *T -0- *T Quarterly data ——————————————————————————————————— MSEK Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 ——— ——— ——— ——— ——— ——— Sales, including tobacco tax 5,502 5,595 6,097 4,623 5,645 5,984 Less tobacco tax -2,260 -2,335 -2,640 -1,961 -2,555 -2,713 ——— ——— ——— ——— ——— ——— Sales 3,242 3,261 3,457 2,663 3,090 3,272 Cost of sales -1,657 -1,675 -1,877 -1,368 -1,629 -1,702 ——— ——— ——— ——— ——— ——— Gross profit 1,584 1,586 1,581 1,295 1,461 1,570 Sales and administrative expenses -805 -780 -772 -762 -821 -810 Share of profit in equity accounted investees 5 3 3 0 2 0 ——— ——— ——— ——— ——— ——— 785 809 811 534 642 759 Larger one time items Capital gain from sale of real estate - - - - - - Pension curtailment gain 148 - - - - - ——— ——— ——— ——— ——— ——— Operating profit 933 809 811 534 642 759 Financial income 26 34 39 36 40 33 Financial expenses -77 -101 -107 -102 -119 -137 ——— ——— ——— ——— ——— ——— -51 -67 -68 -66 -79 -105 Larger one time items Gain on sale of securities - - 111 - - - ——— ——— ——— ——— ——— ——— Net finance cost -51 -67 43 -66 -79 -105 ——— ——— ——— ——— ——— ——— Profit before income taxes 882 742 854 468 563 655 Income tax expense -264 -113 -251 -136 -122 -164 ——— ——— ——— ——— ——— ——— Net profit for the period 617 628 603 332 441 491 ————————————— ——— ——— ——— ——— ——— ——— Attributable to: Equity holders of the Parent 617 628 603 332 441 491 Minority interest 0 0 0 0 0 0 ——— ——— ——— ——— ——— ——— Net profit for the period 617 628 603 332 441 491 ————————————— ——— ——— ——— ——— ——— ——— Quarterly data ——————————————————————————————————— MSEK Q4/07 Q1/08 Q2/08 ———- ——— ——— Sales, including tobacco tax 6,600 5,002 6,031 Less tobacco tax -3,073 -2,183 -2,746 ———- ——— ——— Sales 3,527 2,818 3,284 Cost of sales -1,880 -1,434 -1,687 ———- ——— ——— Gross profit 1,647 1,384 1,598 Sales and administrative expenses -851 -838 -870 Share of profit in equity accounted investees -1 -3 5 ———- ——— ——— 795 543 733 Larger one time items Capital gain from sale of real estate 267 - - Pension curtailment gain - - - ———- ——— ——— Operating profit 1,062 543 733 Financial income 56 40 33 Financial expenses -142 -156 -153 ———- ——— ——— -86 -116 -119 Larger one time items Gain on sale of securities - - - ———- ——— ——— Net finance cost -86 -116 -119 ———- ——— ——— Profit before income taxes 976 427 614 Income tax expense -185 -85 -102 ———- ——— ——— Net profit for the period 791 341 512 ———————————————————————— ———- ——— ——— Attributable to: Equity holders of the Parent 791 341 512 Minority interest 0 0 0 ———- ——— ——— Net profit for the period 791 341 512 ———————————————————————— ———- ——— ——— *T -0- *T Sales by product area ——————————————————————————————————- MSEK Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 ——- ——- ——- ——- ——- ——- ——- ——- ——- Snuff 831 785 963 662 794 852 981 821 953 Cigars 888 903 857 735 847 902 928 757 908 Chewing tobacco 277 273 240 238 253 243 222 210 227 Pipe tobacco & accessories 218 217 226 205 203 220 223 198 189 Lights 368 360 388 340 354 374 405 347 374 Other operations 659 723 784 483 638 682 769 484 634 ——- ——- ——- ——- ——- ——- ——- ——- ——- Total 3,242 3,261 3,457 2,663 3,090 3,272 3,527 2,818 3,284 ———————- ——- ——- ——- ——- ——- ——- ——- ——- ——- *T -0- *T Operating profit by product area ——————————————————————————————————- MSEK Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 ——- ——- ——- ——- ——- ——- ——- ——- ——- Snuff 383 385 462 231 311 383 441 318 410 Cigars 207 231 168 164 193 185 195 112 184 Chewing tobacco 81 95 76 72 82 83 75 69 77 Pipe tobacco & accessories 58 68 63 56 24 64 58 51 47 Lights 72 64 51 57 62 67 67 54 62 Other operations -17 -35 -9 -45 -29 -22 -41 -61 -47 ——- ——- ——- ——- ——- ——- ——- ——- ——- Subtotal 784 808 811 534 642 759 795 543 733 Larger one time items Capital gain from sale of real estate - - - - - - 267 - - Pension curtailment gain 148 - - - - - - - - ——- ——- ——- ——- ——- ——- ——- ——- ——- Subtotal 148 - - - - - 267 - - ———————- ——- ——- ——- ——- ——- ——- ——- ——- ——- Total 932 808 811 534 642 759 1,062 543 733 ———————- ——- ——- ——- ——- ——- ——- ——- ——- ——- *T -0- *T Operating margin by product area* ——————————————————————————————————- Percent Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 ——- ——- ——- ——- ——- ——- ——- ——- ——- Snuff 46.1 49.1 48.0 34.9 39.1 45.0 45.0 38.7 43.0 Cigars 23.4 25.6 19.6 22.3 22.7 20.5 21.0 14.8 20.3 Chewing tobacco 29.3 34.7 31.7 30.1 32.3 34.3 34.1 32.7 34.1 Pipe tobacco & accessories 26.5 31.5 28.0 27.1 11.7 28.9 25.9 26.0 25.0 Lights 19.5 17.7 13.1 16.8 17.5 17.8 16.4 15.5 16.6 ——- ——- ——- ——- ——- ——- ——- ——- ——- Group 24.2 24.8 23.5 20.0 20.8 23.2 22.5 19.3 22.3 ———————- ——- ——- ——- ——- ——- ——- ——- ——- ——- *T

* Excluding larger one time items ____________ Swedish Match AB (publ), SE-118 85 Stockholm Visiting address: Rosenlundsgatan 36, Telephone: +46 8 658 02 00 Corporate Identity Number: 556015-0756 www.swedishmatch.com ____________

The character of the information in this report is such that it shall be disclosed by Swedish Match AB (publ) in accordance with the Swedish Securities Markets Act. The information was disclosed to the media on July 18, 2008 at 08.00 a.m (CET).

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