Swatch posts rise in net profit

The Swatch logo as seen from the starting blocks at the Athens Olympics Keystone

Switzerland's Swatch Group has posted a 17 per cent rise in first-half net profit to SFr217 million ($171 million).

Releasing its results on Tuesday, the world’s largest watchmaker attributed the improvement to a recovery in demand for luxury goods.

Sales topped SFr1.9 billion, up 8.6 per cent on the same period last year.

“It’s bang in line with consensus,” analyst James Amoroso from Bank Pictet told swissinfo.

Nine analysts polled by Reuters had predicted a 17 per cent growth in net profit to SFr218 million on sales of SFr1.9 billion.

“Overall performance appears lower than I would have expected, but when you strip out SFr20 million spent on marketing for the Olympics, the results are actually stronger than expected,” commented Amoroso.

Swatch – the official timekeeper at the Athens Games – attributed growth to higher spending in the United States and Asia on its luxury brands Omega and Blancpain.

Recovery

The maker of Omega, Tissot and Rado watches said sales had risen as the industry recovered from a global travel slump caused by war in Iraq and the Sars virus.

Swatch, which has a stable of 18 brands spanning all sectors of the watch market, said finished watches and electronic systems had driven high-end growth, while its share of the global watch market continued to rise.

“Despite relatively uncertain political circumstances, fears of further terrorist attacks and an uncertain outlook for the Swiss franc, consumer behaviour in Europe has stabilised and improved slightly,” the watchmaker said in a statement.

More growth is occurring in the US and Asia, Swatch added.

Swiss watch exports rose for a sixth consecutive month in July, boosted by a nominal 6.3 per cent increase in shipments to the US and a 13 per cent rise to number two export market Hong Kong, the Federation of the Swiss Watch Industry said on Friday.

Strong demand

First-half earnings before interest and tax (Ebit) rose by 20 per cent to SFr269 million, boosted by brisk sales of high-margin luxury watches.

Swatch said Breguet had drawn strong demand, while other top-end brands were matching sales expectations.

As the official Olympic timekeeper, Swatch has its logo on the starters’ blocks for sprinting events at the 72,000-seat Olympic stadium in Athens and on the touch pads in the Olympic pool.

The company is one of ten main sponsors of the 2004 games, which was expected to attract a television audience of about four billion people worldwide.

But not all the company’s exposure has been positive. The results come just over a week after the US Labor Department decided not to go ahead with a complaint filed against Swatch in the US, in which former employees alleged tax evasion and harassment.

The Labor Department rejected the case, saying the accusations dealt with alleged actions outside the US.

swissinfo, Elizabeth Meen

Key facts

The Swatch Group – which includes the Breguet, Blancpain, Omega, Longines and Swatch brands – has posted the first rise in first-half profit since 2000.
In 2003, the group recorded a profit of SFr492 million ($395.9 million), with sales of SFr3.845 billion.
The total value of Swiss watches and movements exported in 2003 was SFr10.17 billion.

In brief

Sales in the first half of 2004 topped SFr1.9 billion, up 8.6% on the same period last year.

Net profit was SFr217 million ($172.9 million).

First-half earnings before interest and tax rose by 20% to SFr269 million, boosted by brisk sales of high-margin luxury watches.