Swatch Group: Strong growth in sales in the year 1999

Swatch Group: Strong growth in sales in the year 1999

Biel / Bienne (Switzerland), January 28, 2000 – With a sales growth of roughly +11% compared to 1998, the Swatch Group has achieved a new record in sales of CHF 3.626 billion. The finished watches sector has strongly grown with an increase of +14.4%.
In the sector of the electronic systems, under the exclusion of the one-time special effect of the development adjustments invoiced to the former joint-venture partner MCC / Mercedes for the initially planned hybrid engine of the smart car, a sales growth of +15.3% has been achieved.

The following key figures illustrate this:

Gross sales in million CHF	1999	1998	Variation
Finished Watches	2,729	2,385	+ 14.4 %
Watch Production	1,189	1,246	- 4.6 %
Electronic Systems	377	382	- 1.3 %
Elimination of the one-time effect of the MCC/Mercedes joint venture in 1998	377	(55) 327	+15.3%
Central Services	12	11	+ 9.1 %
Consolidation	(682)	(755)
TOTAL	3,626	3,269	+ 10.9 %


Sales of watches, movements and stepping motors in million units	103.5	118.8	- 12.9 %

Thanks to the attractive products in all the brands and in every price segment, the growing distribution structure, the exceptionally sound industrial basis and the worldwide solid management, the Swatch Group is in an excellent position to achieve its ambitious expansion and development goals.
Excluding the one-time special effect of the development adjustments invoiced to the former joint-venture partner MCC / Mercedes for the initially planned hybrid engine of the smart car, the Group’s sales have even grown by +12.8%. The first consolidation of the Breguet Group, with Nouvelle Lemania and Valdar starting on July 1, 1999, contributed to this result with approximately 1.1%.

Finished watches
1999 Gross Sales : CHF 2,729 million (in 1998: CHF 2,385 million) +14,4%
All price segments developed positively in 1999 compared to 1998. The growth rate of +9.2% in the first half of the year more than doubled in the second semester with +18.9%. The growth of the brands in the luxury segment was especially dynamic, and was additionally strongly enhanced by the acquisition of Breguet. In this segment, a growth rate of +30% was achieved in the second semester. The sales of Omega and Longines contributed particularly to this success. Rado clearly recovered from its temporary weakness in the precedent year.
As announced at various occasions, the middle segment with the Calvin Klein (cK) watches but also strongly with Tissot, expanded considerably and even beyond expectations.
In the basic segment, Swatch in particular opened up new fields of activities with the introduction of the Swatch .Beat and the new universal Internet Time, as well as with the expansion of its point of sales, thus unwrapping new dimensions for the future of this brand. Flik Flak developed a moderate growth, while the private label sector suffered a decrease.
Watches, Watch Movements and Components Production

Gross Sales 1999:
Total CHF 1,189 million (in 1998 CHF 1,246 million) - -4.6%
Including third parties - CHF 574 million (in 1998 CHF 560 million) - +2.5%
This sector is dominated by the largest production unit of the Group, ETA. In the second half of the year, the movement business with third party clients for Swiss-made movements has not only been stabilized, but accelerated in line with the progress of the whole watch industry, as illustrated by the positive development of the Swiss export statistics.
However, the price and quantity pressure on movements of the lower segment is still influencing the market. These movements are mainly produced abroad and marketed in Hong Kong. No efforts have been spared reduce the cost structure of our production, and the management decreased at the same time the sales of these movements. This also explains the considerable decrease in the unit sales of watches and movements.
Temporary decreasing orders from the Swatch Group owned watch brands were as well influencing this sector, as the brands concentrated their efforts on further reducing their inventories.

Electronic Systems
Gross Sales 1999:
Total CHF 377 million (in 1998 CHF 382 million) -1.3%
Including third parties - CHF 320 million (in 1998 CHF 323 million) - -0.9%
As mentioned, this sector includes the one-time special effect of the development adjustments invoiced to the former joint-venture partner MCC / Mercedes for the initially planned hybrid engine of the smart car, of CHF 55 million. Furthermore, EM Marin, and Renata in particular suffered a sales decrease resulting from the delivery reduction of low-cost quartz movement due to the drastical cut in low priced movements sales as explained above.
Without these significant measures, the sales growth of the electronic systems sector would have been considerably higher (estimation: +18.0% to 18.5%).
Micro Crystal’s sales increased strongly due to the extensive supply of quartz oscillators to mobile telephone manufacturers. EM Marin have successfully utilized their capacities for other third parties. Renata are focusing their main efforts on the realization of the rechargeable Lithium-Ion batteries for mobile telephones. The first sales of these new products are expected in the second half of the year 2000.
Expectations of operating profit and net profit
In view of these positive developments, the Swatch Group Management Board expects the operating income to grow over and above sales growth, to slightly over 500 CHF million. Thanks to the positive contribution of the financial result, the net profit is expected to grow over 20% as compared to 1998.
The precise key figures of the year-end closing as per December 31, 1999, will be published on Thursday, March 16, 2000.

Important dates:
March 16, 2000 Publication of key figures of the year 1999
May 3, 2000 morning: Press conference on the 1999 results
afternoon: Analysts’s conference
May 23, 2000 General Assembly of Shareholders
May 26, 2000 Dividend payment
August 29, 2000 Publication of the results of the first semester 2000

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Swatch Group: Strong growth in sales in the year 1999