Swatch Group clocks up strong performance

The global economic upswing is cause for optimism at the Swatch Group Keystone

The world's largest watchmaking group, Swatch, has reported net profit for last year of SFr621 million ($475.2 million), up 21.3 per cent over 2004.

It said it had a “brilliant performance” in its core segment of watches and jewellery, with a growth surge of 50 per cent in the jewellery sector.

Although the net profit figure was slightly below market expectations, the manufacturer of brands including Breguet, Omega, Longines, Tissot and Swatch said a promising start to the year made it optimistic for 2006.

The group reported last month that United States and Asian demand for its top-end watches helped boost 2005 sales by 8.3 per cent compared with the previous year to a record SFr4.497 billion.

It is proposing an increased dividend of 42.9 per cent, with a payout per bearer share of SFr2.50 and SFr0.50 per registered share.

Fourteen analysts polled by Reuters had on average expected the Swatch Group to post a net profit of SFr630 million.

They pointed to a disappointing performance at the group’s production unit, in which operating profit fell by four per cent.

Components

Swatch Group not only produces finished watches but also makes components for other brands.

“The components division looks worse than expected after production closure in Malaysia and tough second-half comparables,” commented Jon Cox at Kepler Equities.

Another analyst, Melanie Flouquet at JP Morgan, said the financial figures were not enough to drive the stock.

“These numbers are good but unlikely to be enough to drive further outperformance at this stage versus its peers,” she said.

In its outlook for 2006, Swatch commented that the first few months of the year had show the same strong performance experienced at the end of last year.

Group sales, operating profit and net profit had again “substantially increased” compared with last year.

The positive currency situation had supported “this pleasing trend”.

Swatch management said in a statement from the group’s headquarters in Biel that it expected a further increase in sales for the coming year, leading to higher profitability across all its businesses.

All geographic regions were reporting higher sales and the noticeable global economic upswing was cause for optimism for the remainder of the year.

swissinfo with agencies

Key facts

Swatch Group financial figures 2005:
Gross sales: SFr4.497 billion (+8.3%)
Operating profit: SFr735 million(+14%)
Net income: SFr621 million (+21.3%)
Proposed dividends: SFr2.50 (bearer share) and SFr0.50 (registered share)

In brief

The Swatch Group is the world’s largest manufacturer and distributor of finished watches.

It owns 18 major watch brands and employs more than 20,000 persons in over 50 countries.

At the top end of the market, the brands include Breguet, Blancpain and Omega.

Swiss watchmaking exports continue to boom. Exports rose to SFr930.9 million ($715 million) in February, 9.5% higher than the corresponding month last year.

Watchmaking exports reached a record SFr12.3 billion last year, 10.9% up on 2004.