Swedish Match: Interim Report January - June 2006

-- Net sales for the second quarter amounted to 3,242 MSEK (3,384), and 6,193 MSEK (6,351) for the first six months

-- Operating income amounted to 920 MSEK (647) for the second quarter and 1,640 MSEK (1,185) for the first six months

-- Operating income, excluding a one time pension curtailment gain of 148 MSEK for the second quarter amounted to 772 MSEK and 1,492 MSEK for the first six months

-- Net income for the second quarter amounted to 616 MSEK (405), and 1,103 MSEK (752) for the first six months

-- EPS for the second quarter was 2.09 SEK (1.27), and 3.71 SEK (2.33) for the first six months
Summary of Consolidated Income Statement
----------------------------------------------------------------------
April - June January - June Full
year
MSEK 2006 2005 2006 2005 2005
-----------------------------------

Sales 3,242 3,384 6,193 6,351 13,311
Operating income 920 647 1,640 1,185 2,825
Income before tax 880 614 1,575 1,132 2,696
Net income incl. minority interest 616 405 1,103 752 1,777
Earnings per share (SEK) 2.09 1.27 3.71 2.33 5.61
----------------------------------------------------------------------

Sales and results for the second quarter

In local currencies and excluding divested businesses salesincreased by 2 percent. Reported sales for the second quarterdecreased by 4 percent to 3,242 MSEK (3,384). Currency translationimpacts have affected the sales comparison positively by 22 MSEK. Allproduct areas except lights and other operations demonstrated salesgrowth. Excluding divested businesses, sales were flat for Lights andOther operations.

For snuff, sales grew by 4 percent during the second quarter, to831 MSEK (800) while operating income decreased by 2 percent to 381MSEK (388). Swedish Match volumes increased in both the US andScandinavian markets. New products were launched in both the US andScandinavian markets. For the product area snuff, operating margin was45.9 percent (48.5). The decrease in operating margin is primarily aresult of expenses related to the product launches.

Sales of cigars in the second quarter increased to 888 MSEK (841)and operating income grew by 81 percent, to 202 MSEK (112). In thesecond quarter of 2005 restructuring costs of 75 MSEK were incurred.Sales and operating income for cigars grew in Europe and for USpremium cigars, while machine made cigars in the US showed a somewhatweaker development. Operating margin for cigars amounted to 22.7percent (22.2, excluding the 75 MSEK restructuring costs).

Group operating income for the second quarter reached 920 MSEK(647) including a one time pension plan curtailment gain of 148 MSEK.In last year's second quarter 75 MSEK of restructuring costs wereincurred. Excluding the one time pension plan curtailment gain thisyear and the restructuring costs previous year, operating incomeincreased by 7 percent or 50 MSEK. Currency translation impacts haveaffected the operating income positively by 10 MSEK.

Operating margin for the second quarter amounted to 23.8 percentexcluding the pension plan curtailment gain compared to 19.1 percentfor the second quarter 2005.

EPS (basic) for the second quarter was 2.09 SEK (1.29). EPS(diluted) was 2.08 SEK, compared to 1.27 SEK last year. Excluding thepension plan curtailment gain EPS (diluted) was 1.74 SEK (1.27).

Sales and results for the first six months

Sales for the first six months amounted to 6,193 MSEK (6,351), adecrease of 2 percent. Excluding divested businesses, sales increasedby 4 percent. In local currencies sales were flat, excluding divestedbusinesses. Operating income amounted to 1,640 MSEK (1,185). Lastyear's operating income for the first six months included 106 MSEKrestructuring costs in cigars and lights. This year's operating incomewas positively affected by the one time pension plan curtailment gainof 148 MSEK. Excluding the curtailment gain in 2006 and therestructuring costs in 2005, operating income during the first sixmonths increased by 16 percent to 1,492 MSEK (1,291).

EPS (basic) for the first six months was 3.71 SEK (2.33). DilutedEPS amounted to 3.70 SEK (2.32). Excluding the pension plancurtailment gain diluted earnings per share was 3.35 SEK compared to2.32 SEK during last year's first six months.

Group operating margin during the first six months was 24.1percent (18.7) excluding the pension plan curtailment gain in 2006.
Sales by product area
----------------------------------------------------------------------
April - June Chg January - June Chg
MSEK 2006 2005 % 2006 2005 %
-------------------------------------------

Snuff 831 800 4 1,615 1,503 7
Cigars 888 841 6 1,647 1,574 5
Chewing Tobacco 277 267 4 550 509 8
Pipe Tobacco & Accessories 218 218 0 456 434 5
Lights 368 524 (30) 755 962 (21)
Other operations 659 734 (10) 1,170 1,369 (15)
-------------------------------------------
Total 3,242 3,384 (4) 6,193 6,351 (2)
----------------------------------------------------------------------


Sales by product area
------------------------------------------------------------
12 months ended Full year Chg
MSEK Jun 30, -06 2005 %
---------------------------------

Snuff 3,244 3,131 4
Cigars 3,355 3,283 2
Chewing Tobacco 1,120 1,079 4
Pipe Tobacco & Accessories 942 920 2
Lights 1,729 1,936 (11)
Other operations 2,763 2,962 (7)
---------------------------------
Total 13,153 13,311 (1)
------------------------------------------------------------
Operating income by product area
----------------------------------------------------------------------
April - June Chg January - June Chg
MSEK 2006 2005 % 2006 2005 %
--------------------------------------------

Snuff 381 388 (2) 761 711 7
Cigars 202 112 81 359 248 45
Chewing Tobacco 78 83 (6) 162 152 6
Pipe Tobacco & Accessories 57 56 2 131 115 14
Lights 71 45 57 133 41 225
Other operations (17) (37) (55) (83)
--------------------------------------------
Subtotal 772 647 19 1,492 1,185 26
Larger one time items
Pension curtailment gain 148 - 148 -
Income from sale of real
estate - - - -
--------------------------------------------
Total 920 647 42 1,640 1,185 38
----------------------------------------------------------------------


Operating income by product area
---------------------------------------------------------------
12 months ended Full year Chg
MSEK Jun 30, -06 2005 %
-------------------------------------

Snuff 1,554 1,504 3
Cigars 724 613 18
Chewing Tobacco 356 347 3
Pipe Tobacco & Accessories 253 237 7
Lights 150 58 160
Other operations (111) (140)
-------------------------------------
Subtotal 2,926 2,618 12
Larger one time items
Pension curtailment gain 148 -
Income from sale of real
estate 206 206
-------------------------------------
Total 3,280 2,825 16
---------------------------------------------------------------
Operating margin by product area
-----------------------------------------------------------
April - June January - June
Percent 2006 2005 2006 2005
--------------------------------

Snuff 45.9 48.5 47.1 47.3
Cigars 22.7 13.3 21.8 15.7
Chewing Tobacco 28.3 31.2 29.4 29.9
Pipe Tobacco & Accessories 26.0 25.6 28.8 26.6
Lights 19.4 8.7 17.7 4.3
--------------------------------
Group(a) 23.8(a) 19.1 24.1(a) 18.7
-----------------------------------------------------------


Operating margin by product area
---------------------------------------------------------
12 months ended Full year
Percent Jun 30, -06 2005
----------------------------

Snuff 47.9 48.0
Cigars 21.6 18.7
Chewing Tobacco 31.7 32.1
Pipe Tobacco & Accessories 26.9 25.8
Lights 8.7 3.0
----------------------------
Group(a) 22.2(a) 19.7(a)
---------------------------------------------------------

(a) Excluding larger one time items

Snuff / Snus

Sweden is the world's largest snuff market measured by per capitaconsumption. In Sweden, a substantially larger proportion of the malepopulation uses the Swedish type of snuff called snus(b) compared tocigarettes. The Norwegian market, which is substantially smaller thanthe Swedish market, is at present showing strong growth. The US is theworld's largest snuff market measured in number of cans and isapproximately five times larger than the Swedish market. In Sweden andNorway, Swedish Match has a leading position. In the US, the Companyis well positioned as number three on the market. Some of the bestknown brands include General, Ettan, and Grov in Sweden, Timber Wolfand Longhorn in the US and Taxi in South Africa.

During the second quarter, sales increased by 4 percent versus theprevious year, to 831 MSEK (800), while operating income declined by 2percent, to 381 MSEK (388). Volumes increased in Scandinavia (1.2percent) as well as in the US (13.8 percent), measured in number ofcans. Operating margin reached 45.9 percent (48.5). The decrease inoperating margin is mainly attributable to expenses related to newproduct launches in Scandinavia and in the US. In Sweden the Companyhas launched Onico, a nicotine and tobacco free pouch product and inthe US the launch of Wolf Packs, Timber Wolf in pouched form, hascontinued.

Sales for the first six months amounted to 1,615 MSEK (1,503), anincrease of 7 percent. In Scandinavia sales volumes increased by 2.8percent measured in number of cans. In Sweden the increase was 1.4percent. Volumes in Norway and tax free sales also increased. Salesvolume of pouched snuff increased, while loose snuff sales volumedeclined marginally on the Swedish market. The proportion of pouchedsnuff for the first six months was 58 percent of the Swedish market,compared to 57 percent for the first six months in 2005.

In the US, year to date sales volumes were up by 19 percent versusprevious year measured in number of cans. Sales of Longhorn wereconsiderably higher than the year before, and also sales for TimberWolf increased.

Operating income year to date for the product area amounted to 761MSEK (711), up 7 percent. On the Scandinavian market operating incomeincreased mainly due to higher volumes and lower costs. In the US,operating income increased due to substantially higher volumes.Operating margin for snuff for the year to date was 47.1 percent(47.3).

(b) 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 the world's second largest producer of cigars andcigarillos in sales value. Swedish Match offers a full range ofdifferent cigars and brands. Well known brands include Macanudo, LaGloria Cubana, White Owl, Garcia y Vega, La Paz, Justus van Maurik,Willem II, Salsa and Wings. The US is the largest cigar market in theworld where Swedish Match has a leading position in the premiumsegment and is well established in the segment for machine madecigars. After the US, the most important cigar markets are in Europe,where Swedish Match is well represented in most countries, with anespecially good market position in The Netherlands and in the Nordicarea.

During the second quarter, sales increased by 6 percent, to 888MSEK (841), and operating income increased to 202 MSEK (112). In thesecond quarter of 2005 restructuring costs of 75 MSEK were incurred.Excluding the restructuring costs in 2005, operating income increasedby 8 percent. Operating margin reached 22.7 percent (13.3). Operatingmargin excluding the restructuring cost in 2005 was 22.2 percent.Delivered unit volumes improved significantly in Europe while volumeswere somewhat lower in the US market for machine made cigars andstable in the US premium segment.

Sales for the first six months amounted to 1,647 MSEK (1,574), anincrease of 5 percent. Sales were up for premium cigars in the US,while sales were down for machine made cigars in the US and sales wereflat in Europe.

Operating income for the first six months grew by 45 percent to359 MSEK (248). Excluding restructuring costs of 75 MSEK in 2005,operating income grew by 11 percent. Operating margin amounted to 21.8percent (20.5, excluding restructuring costs of 75 MSEK). The increasein operating income is primarily due to lower costs as a result ofprevious restructuring measures, as well as from increased sales.

As previously announced, during the first quarter the companyacquired the Hajenius and Oud Kampen cigar brands with a strongpresence in the Dutch market from the Burger Group.

Chewing Tobacco

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

During the second quarter, sales increased by 4 percent, to 277MSEK (267), while operating income declined by 6 percent, to 78 MSEK(83). Operating margin was 28.3 percent (31.2).

Sales for the first six months grew by 8 percent to 550 MSEK(509), while operating income increased by 6 percent to 162 MSEK(152). In local currency, sales for the first six months were flat.Higher average prices partially compensated for volume loss. Operatingmargin amounted to 29.4 percent (29.9).

Pipe Tobacco and Accessories

Swedish Match is one of the largest pipe tobacco companies in theworld and its products are marketed worldwide. The Borkum Riff brandis sold in over 60 countries. The Company has its most significantpresence in South Africa, where local production takes place. BestBlend and Boxer are the most important brands in South Africa.Accessories include the sales of papers, filters, and other smokingrelated items, primarily in the UK and Australia. Pipe tobaccoconsumption declines on most established markets.

During the second quarter, sales reached 218 MSEK (218), andoperating income grew by 2 percent, to 57 MSEK (56). Operating marginwas 26.0 percent (25.6).

Sales for the first six months amounted to 456 MSEK (434).Improved price levels and a strong South African Rand compensated forlower volumes. Operating income was 131 MSEK (115). Operating marginamounted to 28.8 percent (26.6).

Lights (Matches and Lighters)

Swedish Match is a market leader in a number of markets formatches. The brands are mostly local, and have leading positions intheir home countries. Larger brands include Solstickan, Three Stars,Fiat Lux, and Redheads. The Company produces and distributesdisposable lighters and the main brand is Cricket. Swedish Match'slargest market for lighters is Russia.

During the second quarter, sales declined by 30 percent, to 368MSEK (524) while operating income increased to 71 MSEK (45). Excludingdivested businesses, sales for the second quarter grew by 1 percent.The increase in operating income is attributable to the effects of thepreviously implemented restructuring program for matches as well asgood volumes and mix during the quarter. Operating margin was 19.4percent (8.7).

Sales for the first six months amounted to 755 MSEK (962).Excluding divested businesses sales grew by 7 percent, mainly as aresult of positive currency impacts. Operating income during the firstsix months was 133 MSEK (41). These figures include costs of 31 MSEKfor the closure of the Valencia, Spain factory during the firstquarter 2005. Operating margin amounted to 17.7 percent (4.3).

Other Operations

Other operations include primarily the distribution of tobaccoproducts on the Swedish market, as well as corporate overheads.

Sales in Other operations for the first six months decreased to1,170 MSEK compared to 1,369 MSEK previous year. Sales have decreasedas an effect of divested businesses. Volumes in the Swedishdistribution business have also been lower than normal, especially inthe beginning of the year, as a result of hoarding in the end of 2005.For the first six months, operating income for Other operations was anegative 55 MSEK (negative 83).

Taxes

Total tax for the first six months amounted to 473 MSEK (380),corresponding to an average tax rate of 30 percent (34). Following arevised double taxation treaty between Sweden and the US, the Companyis no longer providing for a five percent withholding tax on netincome from its US operations. The revised taxation treaty has not yetbeen ratified. In addition, the effective tax rate of the Group hasdecreased as a result of a more efficient structure following therestructurings and divestments in 2005.

Earnings per share

Earnings per share for the first six months amounted to 3.71 SEK(2.33). This year's earnings per share, for the first six months, waspositively affected by the one time pension plan curtailment gain by0.36 SEK.

Depreciation and amortization

Total depreciation and amortization amounted to 221 MSEK (229), ofwhich depreciation on tangible assets amounted to 157 MSEK (170) andamortization of intangible assets amounted to 64 MSEK (59).

Financing and cash flow

At the close of the period the Group's net debt amounted to 4,444MSEK, as compared to 674 MSEK on December 31, 2005, an increase of3,770 MSEK. The increase is primarily due to share repurchases of2,328 MSEK payments of dividend of 627 MSEK, unusually high taxpayments and the acquisition of the Hajenius and Oud Kampen cigarbrands. The Group's direct investments in tangible fixed assetsamounted to 124 MSEK (203).

Cash flow from operations was negative 310 MSEK compared with apositive 948 MSEK a year ago. Cash flow from operations has beennegatively affected by unusually high tax payments of 1,308 MSEKcompared with 330 MSEK during the first six months 2005. Income taxpayments include tax payments during the first quarter afterdissolution of a Swedish tax allocation reserve in 2005. Cash flowfrom operations also includes higher than normal payments of exciseduties following the high volumes in the Swedish distribution inDecember 2005.

During the period new bond loans of 4,185 MSEK have been issued,including the issuance of a 300 MEUR Eurobond transaction which wasdone under the Group's Global MTN program.

Cash and bank balances, together with short term investments,amounted to 4,072 MSEK at the end of the period, compared with 3,657MSEK at the beginning of the year.

Net financing cost for the first six months amounted to a negative65 MSEK (negative 53).

Average number of Group employees

The average number of employees in the Group during the first sixmonths was 12,411 compared with 14,333 for the full year 2005. Thenumber of employees decreased as a result of the divestment ofbusinesses and rationalizations within several product areas.

Share structure

The Annual General Meeting on April 20, 2006 renewed the mandateto repurchase shares up to 10 percent of the shares of the Company. Inaddition, a decision was made to cancel 24.0 million shares held intreasury, with a contemporaneous bonus issue of an amount equivalentthe amount represented by the cancelled shares or 28.8 MSEK. With thelatter transaction the Company's share capital did not decreasethrough the cancellation of shares. The total amount of registeredshares in the Company after the cancellation of shares is 300,596,181shares with a ratio value of 1.2959 SEK. In June, after Annual GeneralMeeting approval, the Company issued 523,817 call options to seniorCompany officials and key employees for the stock option program for2005. These call options can be exercised from March 2, 2009 toFebruary 28, 2011. The exercise price is 127.10 SEK.

During the first six months 24.3 million shares were repurchasedat an average price of 107.76 SEK. As at June 30, 2006 Swedish Matchheld 17.6 million shares in its treasury, corresponding to 5.9 percentof the total number of shares. Total shares bought back by SwedishMatch since the buyback programs started have been repurchased at anaverage price of 65.53 SEK. During the first six months the Companyalso sold 1.4 million treasury shares at an average price of 67.50 SEKas a result of option holders exercising their options. The number ofshares outstanding, net after repurchase and after the sale oftreasury shares, as per June 30, 2006 amounted to 283.0 million. Inaddition, the Company has call options outstanding as of June 30, 2006corresponding to 4.0 million shares exercisable in gradual stages from2006-2011.

Other events and events after the period

As previously announced, in January, 2006, the Company sold itsArenco subsidiary. Arenco manufacture machines for match manufacturingand packaging in Kalmar and Halmstad, Sweden and Shanghai, China.

On March 31, 2006 the Company divested its advertising lights andaccessories business.

On March 31, 2006 the Company acquired the Hajenius and Oud Kampenpremium cigar brands, related production machinery and the Hajeniuscigar shop in Amsterdam from the Burger Group. The two brands, thatare primarily sold in the Netherlands, Belgium and Germany have anannual turnover of approximately 12 MEUR.

In February 2006 Philip Morris USA. Inc., initiated legalproceedings against Pinkerton Tobacco Co. LP in the United StatesDistrict Court of Virginia, in Richmond alleging that the use ofcertain Western themes in the marketing of the Company's Longhornmoist snuff products infringes its intellectual property rights. OnJune 30 A Filing for Dismissal was filed in the US District Court(Richmond Division). As the matter has been resolved and dismissed byagreement of the parties, no damages have been awarded to either partyby any court.

In a matter regarding the use of the Cohiba brand in the UnitedStates, Cubatabaco has been seeking to cancel General Cigar'sregistration for the Cohiba trademark in the US. The US Court ofAppeals of the Second Circuit concluded that General Cigar was therightful owner of the Cohiba trademark in the US. The matter wasappealed to the US Supreme Court, and the Supreme Court denied reviewof the case. General Cigar is now seeking a final order of dismissalfrom the district court. The district court will hold a hearing on therequest for a final order of dismissal in September.

In accordance with the decision by the shareholders at the AGM onApril 20, 2006, the chairman of the Board, Bernt Magnusson, has formeda Nominating Committee with four representatives of the majorshareholders of the Company. In addition to Mr. Magnusson theCommittee consists of William N Booth (Wellington Management Company),Michael Allison (Morgan Stanley), Mads Eg Gensmann (Parvus AssetManagement) and Andy Brown (Cedar Rock Capital). Mads Eg Gensmann hasbeen elected chairman of the Committee. Among the Directors, BerntMagnusson and Tuve Johannesson have announced that they will not standfor another term. Bernt Magnusson first joined Swedish Match in 1979and has been the chairman since 1996. Tuve Johannesson joined theBoard in 2002.

Swedish Match AB (publ)

Swedish Match AB (publ) is the parent company of the Swedish MatchGroup. Sales in the parent company for the first six months amountedto 7 MSEK (10). Loss after financial items and before dividends fromsubsidiaries for the same period amounted to 315 MSEK (loss 75) andnet loss to 267 MSEK (loss 61).

Capital expenditures during the first six months amounted to 0MSEK (1). The cash flow for the period was 104 MSEK (negative 1,152).Cash and bank at the end of the period amounted to 415 MSEK (436).

Accounting principles

The financial information in this interim report has been preparedin accordance with the International Financial Reporting Standards(IFRS) approved by the European Commission for application within theEU. The report is prepared in accordance with the Accounting StandardIAS 34 Interim Financial Reporting. The accounting principles are thesame as in the 2005 Annual Report.

From 2006 Swedish Match reports its operation in six primarysegments: snuff, cigars, chewing tobacco, pipe tobacco & accessories,lights, and other. The lights segment comprises the former matches andlighters segments. Previous periods have been restated.

Additional information

The January-September 2006 report will be released October 25,2006.

Stockholm, August 3, 2006

Sven Hindrikes

President and Chief Executive Officer

Review report

Introduction

We have reviewed the interim report for Swedish Match AB (publ),reg. no 556015-0756, for the period January-June 2006. Management isresponsible for the preparation and presentation of this interimreport in accordance with IAS 34 and the Annual Accounts Act. Ourresponsibility is to express a conclusion on this interim report basedon our review.

Scope of review

We conducted our review in accordance with the Standard on ReviewEngagements SOG 2410, Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by FAR. Areview of interim financial information consists of making inquiries,primarily of persons responsible for financial and accounting matters,and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance withthe Standards on Auditing in Sweden RS and other generally acceptedauditing practices. The procedures performed in a review do not enableus to obtain a level of assurance that would make us aware of allsignificant matters that might be identified in an audit. Therefore,the conclusion expressed based on a review does not give the samelevel of assurance as a conclusion expressed based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causesus to believe that the accompanying interim report is not prepared, inall material respects, in accordance with IAS 34 and the AnnualAccounts Act.

Stockholm, August 3, 2006

KPMG Bohlins AB

Thomas Thiel

Authorized Public Accountant
Key data
----------------------------------------------------------------------
January - June
2006 2005
--------------------------
Operating margin, %1) 24.1 18.7
Operating capital, MSEK 8,114 8,764
Return on operating capital, %1)
Return on shareholders' equity, %

Net debt, MSEK2) 4,444 2,531
Net debt/equity ratio, %2) 183.5 57.3
Equity/assets ratio, % 14.4 28.2
Investments in tangible assets, MSEK 124 203
EBITDA, MSEK3) 1,714 1,414
EBITA, MSEK4) 1,557 1,244
EBITA interest cover 24.0 24.5
Net debt/EBITA
Share data5)
Earnings per share, SEK
Basic 3.71 2.33
Diluted 3.70 2.32
Excluding larger one time items, diluted 3.35 2.32
Excluding amortization and larger one time
items, diluted 3.52 2.47
Shareholders' equity per share, SEK 8.55 14.15
Number of shares outstanding at end of
period 282,989,781 311,763,281
Average number of shares outstanding 297,216,755 319,594,254
Average number of shares outstanding,
diluted 298,259,390 320,566,384
----------------------------------------------------------------------


Key data
----------------------------------------------------------------------
12 months ended Full year
Jun 30, 2006 2005
---------------------------
Operating margin, %1) 22.2 19.7
Operating capital, MSEK 8,114 7,765
Return on operating capital, %1) 34.7 34.7
Return on shareholders' equity, % 62.3 36.6

Net debt, MSEK2) 4,444 674
Net debt/equity ratio, %2) 183.5 13.3
Equity/assets ratio, % 14.4 30.2
Investments in tangible assets, MSEK 249 328
EBITDA, MSEK3) 3,506 3,206
EBITA, MSEK4) 3,120 2,807
EBITA interest cover 26.1 26.6
Net debt/EBITA 1.4 0.2
Share data5)
Earnings per share, SEK
Basic 7.00 5.61
Diluted 6.98 5.59
Excluding larger one time items, diluted 6.33 5.30
Excluding amortization and larger one time
items, diluted 6.67 5.61
Shareholders' equity per share, SEK 8.55 16.60
Number of shares outstanding at end of
period 282,989,781 305,901,281
Average number of shares outstanding 303,939,804 315,128,554
Average number of shares outstanding,
diluted 304,884,594 316,226,392
----------------------------------------------------------------------

1) Excluding larger one time items

2) Pension liabilities are not included in net debt

3) Operating income excluding larger one time items adjusted for depreciation, amortization and writedowns

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

5) Net income attributable to Swedish Match equity holders
Consolidated Income Statement in summary
----------------------------------------------------------------------
April - January - June Change
June
MSEK 2006 2005 2006 2005 %
----------------------------------------

Sales, including tobacco tax 5,502 5,604 10,299 10,490
Less tobacco tax (2,260) (2,220) (4,106) (4,139)
----------------------------------------
Sales 3,242 3,384 6,193 6,351 (2)
Cost of goods sold (1,657) (1,842) (3,123) (3,471)
----------------------------------------
Gross profit 1,584 1,542 3,070 2,880 7

Sales and administrative
expenses(c) (670) (901) (1,436) (1,703)
Shares in earnings of
associated co. 5 6 6 8
----------------------------------------
Operating income 920 647 1,640 1,185 38

Financial income 25 22 56 47
Financial expenses (65) (55) (121) (99)
----------------------------------------
Net financing cost (40) (33) (65) (53)
----------------------------------------

Income before taxes 880 614 1,575 1,132 39
Taxes (264) (209) (473) (380)
Net income for the period 616 405 1,103 752 47
----------------------------------------------------------------------
Attributable to:
Swedish Match equity holders 616 404 1,102 744
Minority interests 0 2 0 8
----------------------------------------
Net income for the period 616 405 1,103 752 47
----------------------------------------------------------------------

Earnings per share, basic, SEK 2.09 1.27 3.71 2.33
Earnings per share, diluted,
SEK 2.08 1.27 3.70 2.32
----------------------------------------------------------------------



Consolidated Income Statement in summary
----------------------------------------------------------------------
12 months ended Full year Change
MSEK Jun 30, -06 2005 %
-------------------------------------

Sales, including tobacco tax 21,929 22,120
Less tobacco tax (8,776) (8,809)
-------------------------------------
Sales 13,153 13,311 (1)
Cost of goods sold (6,931) (7,278)
-------------------------------------
Gross profit 6,223 6,033 3

Sales and administrative
expenses(c) (2,959) (3,226)
Shares in earnings of associated
co. 15 18
-------------------------------------
Operating income 3,280 2,825 16

Financial income 100 91
Financial expenses (241) (219)
-------------------------------------
Net financing cost (141) (128)
-------------------------------------

Income before taxes 3,139 2,696 16
Taxes (1,011) (919)
Net income for the period 2,128 1,777 20
----------------------------------------------------------------------
Attributable to:
Swedish Match equity holders 2,127 1,769
Minority interests 1 9
-------------------------------------
Net income for the period 2,128 1,777 20
----------------------------------------------------------------------

Earnings per share, basic, SEK 7.00 5.61
Earnings per share, diluted,
SEK 6.98 5.59
----------------------------------------------------------------------

(c) Including income from sale of real estate of 206 MSEK during the third quarter 2005 and a pension curtailment gain of 148 MSEK during the second quarter 2006
Consolidated Balance Sheet in summary
----------------------------------------------------------------------
MSEK
June 30, Dec 31,
2006 2005
-----------------------

Intangible fixed assets 4,153 4,265
Tangible fixed assets 2,289 2,488
Financial fixed assets 1,361 1,150
Current operating assets 4,923 5,245
Short-term investments 2,513 1,929
Cash and bank 1,559 1,729
-----------------------
Total assets 16,798 16,806
----------------------------------------------------------------------

Swedish Match equity holders 2,419 5,079
Minority interests 3 3
-----------------------
Total equity 2,422 5,083

Long-term provisions 2,626 3,072
Long-term loans 6,744 2,867
Other long-term liabilities 8 17
Short-term provisions 74 293
Short-term loans 1,772 1,464
Other current liabilities 3,152 4,010
-----------------------
Total shareholders' equity, provisions and
liabilities 16,798 16,806
----------------------------------------------------------------------
Consolidated Cash Flow Statement in summary
----------------------------------------------------------------------
MSEK Jan - Jun Jan - Jun
2006 2005
----------------------------------------------------------------------

Income after financial items 1,575 1,132
Non-cash items and taxes paid (1,260) (126)
Cash flow from operations before changes in
Working Capital 315 1,006
Cash flow from changes of Working Capital (625) (57)
--------------------
Cash flow from operations (310) 948
Investments
Investments in property, plant and equipment (124) (203)
Sales of property, plant and equipment 84 45
Investments in intangibles (270) -
Payment of minority shares in General Cigar - (1,099)
Acquisition of subsidiaries and associated
companies (19) -
Divestment of business operations 31 -
Changes in financial receivables etc. (174) (19)
Changes in short-term investments(d) (585) 1,067
--------------------
Cash flow from investments (1,056) (208)
Financing
Changes in loans 4,185 728
Dividends (627) (612)
Repurchase of own shares (2,328) (895)
Sale of treasury shares 94 23
Other (8) (166)
--------------------
Cash flow from financing 1,316 (923)
Cash flow for the period (50) (183)
Cash and bank at the beginning of the period 1,729 1,187
Translation difference attributable to cash and
bank (120) 60
--------------------
Cash and bank at the end of the period 1,559 1,064
----------------------------------------------------------------------

(d) Refers to investments in short term securities as part of the cash management activities. The sum of cash and bank and short-term investments amounted to 4,072 MSEK at the end of the period compared to 3,657 MSEK at the end of 2005.
Change in Shareholders' equity
----------------------------------------------------------------------
MSEK January - June 2006

--------------------------------------
Swedish Match Minority Total equity
equity holders interest
--------------------------------------
Opening balance as per Dec 31 5,079 3 5,083
Repurchase of own shares (2,619) (2,619)
Sale of treasury shares 94 94
Dividend paid (627) (627)
Acquisition of minority shares
in General Cigar -
Fair value reserve IAS 39 etc. 20 20
Translation difference for the
period (631) (1) (632)
Net income for the period 1,103 0 1,103
--------------------------------------
Closing balance at end of period 2,419 3 2,422
----------------------------------------------------------------------


Change in Shareholders' equity
----------------------------------------------------------------------
MSEK January - June 2005

--------------------------------------
Swedish Match Minority Total equity
equity holders interest
--------------------------------------
Opening balance as per Dec 31 4,579 481 5,060
Repurchase of own shares (895) (895)
Sale of treasury shares 23 23
Dividend paid (612) (612)
Acquisition of minority shares
in General Cigar (532) (532)
Fair value reserve IAS 39 etc. 24 17 41
Translation difference for the
period 547 35 582
Net income for the period 744 8 752
--------------------------------------
Closing balance at end of period 4,411 9 4,420
----------------------------------------------------------------------
Quarterly data
--------------------------------------------------------
MSEK Q2/04 Q3/04 Q4/04
-----------------------

Sales, including tobacco tax 5,628 5,761 5,343
Less tobacco tax (2,252)(2,342) (2,132)
-----------------------
Sales 3,376 3,419 3,211
Cost of goods sold (1,864)(1,804) (1,843)
-----------------------
Gross profit 1,512 1,615 1,367

Sales and administrative expenses (925) (913) (861)
Shares in earnings of associated
co. 0 (1) 2
-----------------------
587 702 508
Larger one time items
Pension curtailment gain - - -
Income from sale of real estate - - -
Income from settlement with UST 104 - -
Match impairment charges - (150) -
Provision for acquisition of
shares in Wimco Ltd - (90) -
-----------------------
Operating income 691 462 508

Financial income 60 49 7
Financial expenses (87) (73) (74)
-----------------------
Net financial cost (27) (24) (67)
-----------------------

Income before tax 664 438 441
Income taxes (247) (213) (145)
-----------------------
Net income for the period 417 225 297
--------------------------------------------------------
Attributable to:
Swedish Match equity holders 397 206 273
Minority interests 20 19 23
-----------------------
Net income for the period 417 225 297
--------------------------------------------------------


Quarterly data
---------------------------------------------------------------
MSEK Q1/05 Q2/05 Q3/05 Q4/05
------------------------------

Sales, including tobacco tax 4,886 5,604 5,754 5,876
Less tobacco tax (1,918) (2,220)(2,294)(2,376)
------------------------------
Sales 2,967 3,384 3,461 3,500
Cost of goods sold (1,629) (1,842)(1,848)(1,959)
------------------------------
Gross profit 1,338 1,542 1,612 1,540

Sales and administrative expenses (802) (901) (860) (869)
Shares in earnings of associated
co. 2 6 4 5
------------------------------
538 647 756 678
Larger one time items
Pension curtailment gain - - - -
Income from sale of real estate - - 206 -
Income from settlement with UST - - - -
Match impairment charges - - - -
Provision for acquisition of
shares in Wimco Ltd - - - -
------------------------------
Operating income 538 647 962 678

Financial income 26 22 15 31
Financial expenses (46) (55) (55) (67)
------------------------------
Net financial cost (20) (33) (40) (36)
------------------------------

Income before tax 518 614 922 642
Income taxes (172) (209) (353) (186)
------------------------------
Net income for the period 347 405 569 456
---------------------------------------------------------------
Attributable to:
Swedish Match equity holders 340 404 569 456
Minority interests 7 2 0 0
------------------------------
Net income for the period 347 405 569 456
---------------------------------------------------------------


Quarterly data
-------------------------------------------------
MSEK Q1/06 Q2/06
----------------

Sales, including tobacco tax 4,797 5,502
Less tobacco tax (1,846) (2,260)
----------------
Sales 2,951 3,242
Cost of goods sold (1,456) (1,657)
----------------
Gross profit 1,495 1,584

Sales and administrative expenses (775) (818)
Shares in earnings of associated
co. 1 5
----------------
721 772
Larger one time items
Pension curtailment gain - 148
Income from sale of real estate - -
Income from settlement with UST - -
Match impairment charges - -
Provision for acquisition of
shares in Wimco Ltd - -
----------------
Operating income 721 920

Financial income 31 25
Financial expenses (56) (65)
----------------
Net financial cost (25) (40)
----------------

Income before tax 696 880
Income taxes (209) (264)
----------------
Net income for the period 487 616
-------------------------------------------------
Attributable to:
Swedish Match equity holders 487 616
Minority interests 0 0
----------------
Net income for the period 487 616
-------------------------------------------------
Sales by product area
----------------------------------------------------------------------
MSEK

Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06
------------------------------------------------------

Snuff 814 791 726 703 800 809 819 785 831
Cigars 846 848 790 734 841 874 834 759 888
Chewing Tobacco 282 285 237 242 267 290 280 273 277
Pipe Tobacco &
Accessories 214 234 242 216 218 241 245 238 218
Lights 487 495 508 437 524 454 521 387 368
Other operations 734 766 708 635 734 792 800 510 659
------------------------------------------------------
Total 3,376 3,419 3,211 2,967 3,384 3,461 3,500 2,951 3,242
----------------------------------------------------------------------
Operating income by product area
----------------------------------------------------------------------
MSEK

Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06
----- ----- ----- ----- ----- ----- ----- ----- -----

Snuff 365 371 287 324 388 401 392 380 381
Cigars 156 174 108 136 112 188 176 158 202
Chewing Tobacco 82 82 67 69 83 94 100 83 78
Pipe Tobacco &
Accessories 53 69 72 60 56 62 60 75 57
Lights (29) 35 5 (4) 45 47 (31) 62 71
Other operations (40) (30) (30) (47) (37) (37) (20) (38) (17)
----- ----- ----- ----- ----- ----- ----- ----- -----
Subtotal 587 702 508 538 647 756 678 721 772
Larger one time
items
Pension
curtailment
gain - - - - - - - - 148
Income from
real estate
sale - - - - - 206 - - -
Income from
settlement
with UST 104 - - - - - - - -
Match
impairment
charges - (150) - - - - - - -
Provision for
acquisition of
shares in
Wimco Ltd. - (90) - - - - - - -
----- ----- ----- ----- ----- ----- ----- ----- -----
Subtotal 104 (240) - - - 206 - - 148
---------------- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total 691 462 508 538 647 962 678 721 920
---------------- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating margin by product area
---------------------------------------------------------------------
Percent

Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06
----- ----- ----- ----- ----- ----- ----- ----- -----

Snuff 44.8 46.9 39.5 46.0 48.5 49.5 47.8 48.5 45.9
Cigars 18.5 20.6 13.6 18.6 13.3 21.5 21.1 20.8 22.7
Chewing Tobacco 29.0 28.8 28.4 28.6 31.2 32.5 35.6 30.5 28.3
Pipe Tobacco &
Accessories 24.6 29.7 29.8 27.6 25.6 25.7 24.4 31.3 26.0
Lights (5.9) 7.0 0.9 (1.0) 8.7 10.5 (5.9) 16.1 19.4
----- ----- ----- ----- ----- ----- ----- ----- -----
Group(e) 17.4 20.5 15.8 18.1 19.1 21.9 19.4 24.4 23.8
--------------- ----- ----- ----- ----- ----- ----- ----- ----- -----

(e) Excluding larger one time items Swedish Match AB (publ), SE-118 85 Stockholm Visiting address: Rosenlundsgatan 36, Telephone: 08 658 02 00 Corporate Identity Number: 556015-0756 www.swedishmatch.com