News In 2006, the world’s foremost watch group achieved the best result in its history by recording sales in excess of five billion francs. And the party is set to continue this year!
Last year, turnover of the Swatch Group broke through the five billion franc barrier for the first time. Showing an increase of 12.3%, sales in fact rose to 5,050 million. The number of pieces sold however fell by 51.3%, from 107.5 million watches, movements and stepper motors in 2005 to 52.3 million last year! This downturn of around 55 million pieces is due essentially to the sharp reduction of inexpensive movements produced and sold in the Far East since production was brought to a halt in Malaysia.
"All segments broke sales records during the past year," said the group in an official statement. Turnover for watches and jewellery accounted for nearly four fifths of the total. It increased to 3,912 million francs, up by 13.8%, including 0.8% attributable to a favourable exchange rate effect. While luxury brands remained in front, all price segments and brands recorded large "or very large" increases. Breguet, Blancpain, Glashütte Original and Omega registered growth in two figures. However Jacquet Droz encountered difficulties due to insufficient production capacities.
Orders for jewellery (production, setting) increased sharply, thereby contributing to the group’s most dynamic sector. However, strong demand on all fronts also revealed "production bottlenecks" in the first half-year. This situation means the group will be confronted by "major challenges during the current year", continued the Swatch Group. Having experienced delivery and capacity problems, particularly for luxury products, the group has had to reconcile itself to making "substantial" additional investments in production.
The production sector registered important gains (+6.9%), benefiting directly from strong demand for movements and components. Total turnover was 1,394 million: 562 million with third party producers (+4.7%) and 831 million with group-owned firms (+8.5%).
In electronic systems, turnover increased to 593 million, up by 9.0%. All companies confirmed their growth in the second half-year, with only one exception active in the automotive sector.
The surge in turnover will bring about a "proportionally higher operating profit". Margins in the various segments are set to increase sharply on a yearly basis. In the movements and components sector, profitability will be "excellent", in phase with that of watches. However the group adds that it will in part suffer from a negative exchange rate effect in the second half-year, and from the high price of gold, which will depress margins slightly. In addition, the Chinese duty on luxury products – in place since April 2006 – has also made temporary inroads into profitability.
On this basis, the Swatch Group is expecting a "slightly better" financial result than in 2005, which should attain "record values". For 2007, the management and board of directors are counting on a "continuation of these pleasing trends" and are considering the launch of a new share buyback programme.
February 06, 2007
