Swatch sees bottlenecks after strong first half

The Swatch Group says the current boom is set to continue Swatch

The Swatch Group, which is the world's largest watchmaking concern, has warned that strong demand could cause production problems in the second half of the year.

The group, which is based in Biel, said on Tuesday that capacity bottlenecks in many of its production units would “pose major challenges” to management for the remainder of the year.

Swatch reported first-half net profit of SFr460 million ($380.61 million), up almost 40 per cent over the comparable period last year

The company, which boasts the Breguet, Blancpain and Omega brands, announced earlier this year it was looking for 500 extra watchmakers to meet demand and that figure had not changed, according to Swatch Group spokeswoman Beatrice Howald.

“The Swatch Group not only has not enough watchmakers and staff in other professions but we do not have enough machines. If you do not have enough machines you do not have enough capacity to make the products,” she told swissinfo.

“We are trying hard and we have already achieved some results. But I don’t think we can resolve the problem by the end of the year unfortunately.”

Further expansion

In a statement, Swatch said that group further expansion was planned to tackle production bottlenecks.

The group was also heavily involved in setting up watchmaking schools to redress the shortage of skilled watchmakers, which appears widespread in the Swiss watch sector.

Howald said the Swatch Group planned to open or had already opened several watchmaking schools… “also abroad because we need after-sales service people there and we do not necessarily want to send our own watchmakers to do this”.

The schools are in Shanghai in China, two in Germany, one in Kuala Lumpur, Malaysia, one in the United States, and an internal school at Swatch Group headquarters in the US. The group also has a joint venture school in Manchester, England.

The Swatch Group said sales in the first six months were up by 16.7 per cent to SFr2.739 billion and its expectations for the second half-year were “high”.

Luxury goods

The company has benefited from rising demand for its high-end watches as the luxury goods sector is booming around the globe.

Swatch reported that its core business – watches and jewellery – had gained “significant” market share, with all geographical regions contributing to the growth.

The production segment had also made an important contribution to the performance.

“The results were above my estimates, which were already higher than consensus estimates,” said Patrik Schwendimann, an analyst at Zurich Cantonal Bank.

swissinfo, Robert Brookes

Key facts

First half 2007
Turnover SFr2.739 billion (+16.7%)
Operating profit: SFr511 (+27.1%)
Net profit: SFr460 million (+39.4%)

Swatch Group

The group has a stable of 18 brands in all price categories.

The Omega and Breguet brands are the major value drivers in the Watch and Jewellery business unit.

Other brands include Blancpain, Glashütte, Rado, Longines, Tissot, cK, Balmain and Swatch.

Swiss watch industry

There were 44,444 employees in the Swiss watch sector at the end of September 2006 (2, 716 more than at the same time in 2005).

The number of firms increased only slightly to 595 firms (+2).

The level of training production personnel has been rising steadily because highly qualified people are needed in the industry.

According to industry figures, 10.4% of production personnel now have a higher education and 39.6% hold a vocational diploma.

Semi-qualified or unqualified workers now account for just 48.2 % of production personnel and 40% of all employees.