Swatch Group heads towards record year

The Swatch Group is very satisfied with sales from its luxury brands Keystone

The Swatch Group has reported a 21.4 per cent rise in its first-half net profit to SFr267 million ($209 million), boosted by strong demand for its luxury watches.

The world’s largest watchmaking concern, which includes such brands as Breguet, Omega and Tissot, said sales had risen by 6.1 per cent to SFr2.08 billion.

A statement from the group’s headquarters in Biel in western Switzerland said that demand appeared to continue unabated, particularly for watches in the upper price bracket.

It said the trend was evident at this year’s World Watch and Jewellery Show in the northern Swiss city of Basel.

The group said sales had shown the strongest growth in Asian countries, particularly in China, Hong Kong, Japan and Taiwan.

Sales growth had also been recorded in the United States, while sales in Europe had grown only in individual regions.

Visible growth signs

But the statement added that there were visible signs of growth in consumer demand in Europe which should positively affect sales in the second half.

Analysts polled by Reuters had on average expected the concern to report a first-half net profit of SFr255 million.

“The result was probably pretty much in line with consensus although a bit better than my estimates. Organic watch growth of 8.9 per cent is stronger than I expected, driven by its high-end stable of watches,” said analyst Jon Cox at Kepler Equities in Zurich.

Underlining the strong momentum in the Swiss watch industry, Swiss watch exports rose 11 per cent in the first six months of 2005 and reflected a growing trend for luxury timepieces.

The Swatch Group commented that sales growth of its high-end watches was significantly higher in the first six months than the figures published by the Biel-based Federation of the Swiss Watch Industry.

Operating income

Operating income after extraordinary items rose by 9.3 per cent compared with the same period last year to SFr293 million.

The group has a considerable exposure to the dollar and related currencies. Currency movements in the first half had a negative impact of 1.4 per cent.

Weakness of the dollar last year cut SFr33 million off the group’s full-year net income. But the currency gained about ten per cent against the Swiss franc from April to June.

In their outlook, the management and board of directors were “very confident” about the remainder of the year which, providing currencies remained stable, could lead to a new record high for group sales.

The share price of the Swatch Group has risen by about ten per cent this year, lower than the 25 per cent advance by Richemont, the world’s second-largest luxury goods company.

swissinfo with agencies

Key facts

The Swatch Group made a net profit of SFr267 million in the first half, an increase of 21.4 per cent over the comparable period last year.
Sales rose by 6.1 per cent to SFr2.08 billion.
The group, which is based in Biel, employs about 20,000 people in 50 countries.

In brief

The Swatch Group is the largest watchmaking concern in the world.

It has a host of watch brands, including Breguet, Blancpain, Omega, Longines, Tissot, Rado, Hamilton, Certina, Calvin Klein and Swatch.

Swatch was the official timekeeper at the Olympic Games in Atlanta (1996), Sydney (2000) and Athens (2004).

Omega is to take over responsibility at Turin (2006), Beijing (2008) and Vancouver (2010).