News Following a particularly difficult 2002-2003 financial year, the Richemont group has been forced to make around 200 employees redundant and close its Villeret plant.
The 2002-2003 financial year closed at the end of March this year ravaged the profitability of the Richemont group. Net profit of the world's No. 2 in luxury goods fell in fact by 22% to 642 million euros, and operating profit by 46% to 259 million, with turnover down 5% to 3,651 million. The fact that net profit exceeded operating profit can be explained by the group's holding in British American Tobacco, which yielded 486 million (without this, net profit totalled 156 million, -53% compared to 2001-2002). And prospects seem scarcely any better, with sales down by 19% at constant exchange rates for the first two months of the 2003-2004 financial year (April-May).
The group has therefore decided to take the bull by the horns and carry out an in-depth restructuring of some of its activities. The assembly unit for Cartier watches in Villeret will therefore be closed, little more than ten years after its inauguration, and its activities transferred to the company's site in La Chaux-de-Fonds. This measure is accompanied by the dismissal of around 200 employees, mainly in La Chaux-de-Fonds and in Geneva, but also in Villeret and in Fribourg, affecting approximately 5% of the group's workforce employed in the watch-manufacturing sector in Switzerland (4000 employees).
The reason for this difficult situation is of course in part due to the collapse of the stock markets, economic and political uncertainty, and the decline in tourism, not to mention the SARS epidemic. However, as the boss of the group Johann Rupert admits, "it would be unfair to blame all our troubles on external factors." Richemont was in fact insufficiently prepared for the turnround in the economic situation and reacted "too late", carried away by the euphoria that held sway up to the middle of 2001. This only worsened the effect of the crisis when it came.
With regard to brands, Alfred Dunhill and Lancel alone accounted for cumulative losses of 107 million euros in 2002-2003. In addition, several stores of the handbag specialist have had to be closed in the United States and in Belgium. Cartier and Van Cleef & Arpels, for their part, saw their sales contract by 8%, resulting in a loss of earnings of 185 million.
However, not all is doom and gloom in the activities of the group, which for example registered an increase in turnover by the three brands bought at a premium price in 2000 (Jaeger-LeCoultre, IWC and A. Lange & Söhne), as well as continued strong growth by Panerai. Meanwhile, cash flow released by the group's operating activities has practically doubled (556 million against 286), making it possible to reduce the level of net indebtedness to 1.18 billion euros, against 1.46 billion a year ago.
And, to end on a positive note, the effects of the corporate restructuring should be visible in the results of the first half of the 2003-2004 financial year, in other words at the end of September this year.
June 19, 2003
