2004 was a good year for the Swatch Group - opposite is one of the latest designs for his Jaquet Droz brand: the Tourbillon Minute-Repeater, only eight of which will be produced - and for 2005, the prospects are excellent. A brief overview.
After three consecutive years of moderate decline, the Swatch Group’s sales resumed an upward trend last year. At 4,152 million francs, they increased by 4.7% and even 6.2% excluding exchange rate effects, which accounted for 60 million francs in 2004 (56 million in the second half-year alone). Sales of watches, movements and stepper motors remained stable at 127.2 million pieces (127.1 million in 2003).
With 3,135 million francs, the watch sector was the star performer in 2004: +7.3% (+9.1% in constant currencies). Prestige and luxury brands (Breguet, Blancpain, Glashütte, Jaquet Droz, Léon Hatot), but also Omega, Longines and Rado, recorded two-digit growth. Among the middle-of-the-range contributors, Tissot and Calvin Klein posted increases close to 10%, while in the basic segment, led by Swatch and Flik Flak, progress was more modest. Indeed, this segment is hardest hit by the weakness of the dollar and is also the most exposed to competition from watches produced in China. In terms of markets, while Asia and the Middle East recorded satisfying growth, in Europe many brands faced serious challenges. It remains true nonetheless that its strategy of caution regarding price increases, combined with an attractive product range in all segments, enabled the group to win market share.
Meanwhile, the production of watches, movements and components posted an increase in turnover of 3.6% (+4.1% in constant currencies) to 1,284 million francs, a positive result attributable solely to group companies, whose purchases totalled 770 million (+13.7%), while sales to third parties, even after recovering in the second part of the year, fell by 8.5% to 514 million. A particular feature of this sector is growth in the design and production of jewellery for Breguet, Léon Hatot, Omega, Calvin Klein and Swatch.
Lastly, the electronic systems sector developed very positively with sales of 543 million francs, up by 6.3% (+6.5% in constant currencies), even though a slight stalling of progress, affecting the companies Renata and Micro Crystal in particular, was evident in the second half-year. Here, too, business with group companies (+14.0% to 49 million) outperformed sales to third parties (+5.6% to 494 million).
For 2004, the Swatch Group is counting on a further increase in operating profit (594 million in 2003), which is due to be published at the end of March. The board claims to be confident moreover for the current year, during which the emphasis will be placed on the group’s internal growth, although, depending on opportunities that may arise, acquisitions are not to be excluded in the light of an excellent cash-flow and a solid financial situation.
February 22, 2005