UPDATE 1-Swedish Match Q2 profit, snus margin beat expectations

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STOCKHOLM, July 19 (Reuters) - Swedish Match on Thursday reported a bigger-than-expected rise in operating profit helped by a strong performance in snus and cigars.

“The second quarter was somewhat unusual in that all of our businesses performed at or above our own expectations,” CEO Lars Dahlgren said in a statement.

The wet snuff and cigar maker has grown in the U.S. cigar market in recent years and hopes for similar success there with snus, which is banned elsewhere in Europe and which faces increased competition in its home market.

Swedish Match signalled its performance in its “snus” moist powder tobacco product and nicotine pouches outside Scandinavia could swing into profit this year.

It had previously forecast a noticeably lower operating loss for snus and nicotine pouches outside Scandinavia in 2018.

“We now anticipate that losses, if any, for snus and nicotine pouches outside Scandinavia will be nominal for the full year,” it said in the report.

The firm predicted however that both the Scandinavian snus market and the U.S. cigar market would remain highly competitive this year.

Operating profit rose to 1.26 billion crowns ($142.1 million) from 1.09 billion, topping the 1.18 billion expected by analysts in a Reuters poll.

The operating margin for snus and snuff widened more than expected to 45.8 percent from 42.0 percent and beat a forecast of 44.4 percent.

Swedish Match shares were up 6.6 percent at 0744 GMT, having risen by around 40 percent so far this year through Wednesday’s close.

An adviser to the European Union’s top court said in April the EU ban on snus is valid.

Swedish Match had challenged the ban, arguing that new scientific data had shown it to be less harmful than cigarettes. The European Court of Justice will make a final decision this year.

$1 = 8.8675 Swedish crowns Reporting by Helena Soderpalm; editing by Jason Neely