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Swedish Match Falls as U.S. Cigars Disappoint: Stockholm Mover

Swedish Match AB, the maker of Longhorn snuff, declined the most in almost eight months in Stockholm trading after it warned that full-year earnings at its U.S. cigars and chewing tobacco unit will decline.

The shares lost as much as 5.9 percent to 217.3 kronor, their steepest intraday drop since Feb. 20 and lowest price since April 29. The stock fell 4.2 as of 11:33 a.m. local time, with trading volume at more than three times the daily average in the past three months. Swedish Match was the biggest decliner on the STOXX Europe 600 index.

Third-quarter operating profit at the U.S. cigars and chewing tobacco unit fell by as much as 60 million kronor ($9.3 million) from a year earlier as it steps up price cuts and promotions in the face of mounting competition, the maker of Red Man and Timber Wolf chewing tobacco said in a statement. The division accounts for about a fifth of group revenue.

“During recent months, competitive activities for U.S. cigars have intensified further, which has resulted in lower-than-expected volumes and operating profit for our U.S. mass-market cigar business in the third quarter,” the Stockholm-based company said. The division’s operating profit for the full year will also be below last year’s level.

“This is a disappointment, but it’s not a huge surprise,” Haakon Aschehoug, an analyst at DNB ASA in Oslo, said in a telephone interview today, adding that he had anticipated operating profit to be unchanged for the unit both for the third quarter and the full year. As the cigar business generates a relatively small part of the company’s profit, today’s news is “not the end of the world,” he said.

Of the 23 analysts that cover Swedish Match and share their ratings with Bloomberg, 14 advise their clients to buy the shares, two have hold ratings and seven advise clients to sell. The average share-price estimate is 259.65 kronor, based on 17 estimates.

Swedish Match is scheduled to report earnings for the three months through September on Oct. 29.

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