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Home Archivio 1998 Swatch Group: Results for the First 1998 Semester

Swatch Group: Results for the First 1998 Semester

Sales	1998 1. Semester	1997 1. Semester	Variation in %
Unit sales: Watches, movements, stepping motors (in million units)	56.0	50.4	+ 11.1%
Gross Sales (at the same exchange rates as in the 1997) in million CHF	1541	1414	+ 9.0%
Effect of the variation of the exchange rate in million CHF	-25	-	-1.8%
Gross Sales of the first semesters in million CHF	1516	1414	+7.2%

The growth of 9% or 7.2.% respectively still represents the double of growth realized by the rest of the Swiss watch exports, showing according to the „Fédération Horlogcre" F:H. some 3% (without the Swatch Group) in the first 1998 semester.

Income

in million CHF

1998

1. Semester

1997

1. Semester

Variation

in %

Operating income prior to estimated impact from currencies and price reductions on HongKong movements (Yen)

- in % of gross sales

193

12.7%

162

11.5%

+19.1%

Estimated impact from currencies and price reduction on HongKong movements

-21

Operating income of first semester

172

162

+6.2%

Net financial income (incl. partially non-realized profit)

Exchange differences, extra-ordinary results, precaut-ionary provision and taxes

143

-68

-50

+1330%

+36%

Net income first semester

- in % of gross sales

247

16.3%

122

8.6%

+102.5%

Cash-Flow first semester

- in % of gross sales

340

22.4%

218

15.4 %

+56%

The watch sector including all price segments as well as the production sector of watches and components and the electronic systems activities have contributed to the development of gross sales. Only Telecom and some smaller activities of lesser importance have shown negative growth as compared to 1997.

While the European and U.S. markets have grown strongly during the first six months - in local currencies and in Swiss francs - the Asian business in spite of strong market developments in Japan and Taiwan for example, totally show a smaller growth in local currencies, and in Swiss Francs a reduction of some 3% due to currency effects, and this in spite of a massive reduction of the watch movement prices in Hong Kong of approximately 14% in the first semester (Yen).

The negative currency influence is mainly due to European currencies, the Yen and other Asian currencies.

After deduction of a substantial precautionary provision for some risks, the net income in the current year has been influenced as well by non-realized profits on our share portfolio reflecting the positive trend at the stock exchange per June 30, 1998. We therefore expressly declare that any extrapolation on the end of year is not recommendable. Part of these non-realized profits might vanish depending on the development of the stock exchange and of the currencies.

July sales (+12.1% sales growth in Swiss Francs, after deduction of 2.6% exchange effects, net sales growth of +9.5%) and sales of the first days of August are pointing to an acceleration of growth for the leader brands Swatch and Omega as well as Tissot, but also for other brands. This evolution is mainly due to intensified sell-outs (+22% in July) in Europe and in the United States, and further enhanced at Swatch by the opening of new Swatch Megastores in Paris (France) and Geneva (Switzerland) and the positive development of Swatch-owned distribution channels in England, Japan and the U.S. (New York) as well as at the world exhibition in Lissabon, combined with an appealing product offer.

EM Marin, Micro Crystal and other high-tech companies of the Swatch Group show a very positive growth trend during the first semester as well as in the month of July 1998.

Moreover, Swatch and other brands will launch attractive and unexpected new products during the coming few weeks.

For the second 1998 semester, our expectations are accordingly high since we are traditionally realizing the major part of our operating income during this period. However, we must point out again and expressly that the whole business year 1998 will be strongly influenced by the strong sales months of September to December as well as by currency and economic effects. We are therefore not in a position at this period of the year to give any binding statement on the entire year especially also with regard to the mentioned non-realized stock exchange profits of the first semester.

All in all we are nevertheless confident that the 1998 income will be even more positive than the 1997 income and that the Swatch Group will have a good 1998.

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Swatch Group: Results for the First 1998 Semester