October 28, 2016 / 7:30 AM / a year ago

UPDATE 1-Swedish Match Q3 profit tops expectations, warns of lower cigar performance

* Operations EBIT 1.09 bln SEK vs consensus 1.05 bln

* Snus & snuff margin 43.1 pct vs consensus 43.4 pct

* Sees notably weaker US cigars in Q4 vs Q3 (Adds detail)

STOCKHOLM, Oct 28 (Reuters) - Wet snuff and cigar firm Swedish Match posted on Friday a higher core third-quarter profit than expected but warned of lower U.S. cigar performance in the fourth quarter.

* EBIT before larger items affecting comparability and share of net profit in Scandinavian Tobacco Group 1.09 bln SEK ($120 mln) vs year-earlier 979 mln and Reuters poll forecast 1.05 bln, helped by 30 pct volume growth for cigars

* Snus and Snuff operating margin however slightly narrower than expected at 43.1 pct vs yr-ago 42.4 and a forecast 43.4 pct

* Scandinavia snus shipments down slightly in Q3 yr/yr due calendar effects, slower market growth and reduced market share. In the U.S., snus continued to trend well, Swedish Match said.

* Sees new U.S. FDA cigar user fees at around $2 mln in Q4

* Sees notably weaker performance for Other Tobacco Products division, which includes U.S. cigars, in Q4 vs Q3 due to the FDA fees, timing of promotions and planned factory downtime

* For cigars in the U.S., Swedish Match expects the market to continue to grow in 2016 but to remain highly competitive.

* Snus is Swedish Match’s main cash cow, sold mainly in Sweden but the company has been investing heavily in recent years in a launch of the product, which unlike traditional American wet snuff requires no spitting, in the United States.

* Sees slower Scandinavia snus market growth H2 vs H1, mainly due lower growth in Sweden. Timing and calendar effects could negatively impact shipment growth.

* Sees avg. price/snus can in Scandinavia 2016 matching 2015

* For U.S. moist snuff business, expects higher prices to more than compensate for negative mix effects in 2016

* Swedish Match proposed late on Thursday a special dividend of 9.50 crowns per share following a sale of shares in STG

* The Sweden-based company is awaiting a decision by U.S regulators to an application to market its Swedish-style wet snuff snus in the United States as less harmful than cigarettes.

$1 = 9.0717 Swedish crowns Reporting By Anna Ringstrom

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