Swatch Group: Again with record sales and profit

• Sales in the Watches & Jewelry segment, despite capacity bottlenecks, grew a strong +27.4% at constant rates or +13.3% at current rates, to CHF 2 913 million.
• Gross sales for the Group of CHF 3 362 million exceed the record half year 2010 by +24.2% at constant rates and +11.4% at current rates¹⁾.
• Strongly overvalued Swiss franc leads to a negative currency impact on sales of CHF 387 million at 2010 rates.
• Record operating profit of CHF 756 million (+20.8%), with an operating margin of 23.7% (21.8% in 2010). 
• Net income of CHF 579 million up +24.5% versus the record half year 2010, representing 18.2% of net sales (16.2% in 2010).
• Positive outlook in local currency. Continuing strong growth in all segments and regions, which is constrained by uncurbed speculation in the Swiss franc.

¹⁾on a comparative basis, excluding Lasag and the step motor activity of Microcomponents

The global leader in the watch industry, with its 19 brands, grew by a strong +24.2% at constant rates and on a comparative basis, generating gross sales of CHF 3 362 million in the first half of 2011. This very positive growth spanned all major regions and all price segments. Key contributory factors included not only a combination of strong brands and expansion of the distribution and retail network, but also the Production segment, which increased its gross sales by a massive +28.5% at constant rates. Investments were made on an ongoing basis in a bid to reduce production bottlenecks and there are plans to increase capacity further.

The continuing overvaluation of the Swiss franc, in particular against the USD and the EUR, adversely impacted gross sales by CHF 387 million or –12.8% versus 2010. The overvalued Swiss franc reduces margins at the Group’s foreign distribution companies, while the high volatility makes exchange-rate related price adjustments difficult. The strength and volatility of the Swiss franc have to be considered as extremely problematic for Switzerland.

Despite these negative currency effects and the general rise in commodity prices, the Group succeeded in increasing profitability in the first half of 2011, thanks to a motivated and costconscious workforce. Operating profit grew by +20.8% to CHF 756 million. Net income grew even more, by +24.5% to CHF 579 million. The Group generated total operating cash flow for the period of CHF 362 million.

Outlook

The outlook for the Group in the second half of the year remains promising, particularly given the fact that July is confirming the trend in sales and results of the first half. The Group will continue to consolidate its global market presence and invest further in production capacities and staff training in order to maintain its strategy of healthy and sustainable growth. Continuing strong growth and the positive outlook in local currency will, however, be hampered by uncurbed speculation in the Swiss franc. This will further negatively impact sales growth as well as operating profit and net income.

The long-term policy of the Swatch Group is and always will be to win market share. Even in the current difficult exchange rate situation with the strongly overvalued Swiss franc, this successful strategy will be maintained.