The world's biggest watchmaker, Swatch, boosted net profit by nearly a quarter in the first half of the year to SFr330 million ($278 million), easily beating market expectations.
Sales at the maker of brands such as Omega and Tissot rose 13 per cent to SFr2.35 billion, against strong demand for luxury timepieces.
Swatch said on Thursday sales across all segments were healthy, but particularly in the top price category.
Earnings at markets of luxury goods are particularly sensitive to changes. Analysts point out that heightened fears of terrorist attacks can hurt tourism, thereby reducing sales of tax-free goods such as watches.
Swatch's bottom line was helped by currency effects, which helped lift sales by more than two per cent, but also stringent cost controls, according to a company statement.
The market was expecting profits of rather less than SFr300 million.
"Experts underestimate the positive market environment, the good product mix and the margin potential," said the Wegelin bank in a research note.
The group said its outlook for the second half was positive, but warned that sales in the second half might slow because of a weakening in the global economy.
"The Swatch Group is alert to the current economic and political environment, which may have a dampening effect on consumer spending over the remaining months of 2006," the company said.
The Swiss group's main competitor, French luxury firm, LVMH, posted similar results last month, with first half revenues up by 12 per cent.
swissinfo with agencies
The Swatch Group is the world's largest manufacturer and distributor of finished watches, and also produces watch movements and electrical systems.
It owns 18 major watch brands and employs more than 20,000 people in over 50 countries.
At the top end of the market, the brands include Breguet, Blancpain and Omega.
Watchmaking exports reached a record SFr12.3 billion last year, 10.9% up on 2004.