News After several years of steady progress, the Swatch Group’s net profit suffered a setback in 2008. But the total is more than 800 million francs nonetheless.
While today’s crisis leaves no one unscathed, some are less affected than others. The Swatch Group falls into the latter category. Indeed the world’s largest watch manufacturer saw its operating profit fall by only 2.7% to 1,202 million francs last year on turnover of 5,966 million, a slight increase (+0.4%, but +4.3% at constant exchange rates). Net profit meanwhile was hit by a financial loss, falling by 17.4% to 838 million. Shareholders’ equity remained solid at 5.5 billion, or 75.3% of the total balance sheet, compared to 71.5% for the previous financial year.
With respect to watches and jewellery, where turnover rose to 4,796 million (+1.8%), operating profit registered a decline of 10% to 828 million. This can be attributed mainly to the substantial and exceptional marketing investments incurred for the Beijing Olympic Games.
Operating profit rose by 19.6% to 281 million however in the production of movements and watch components, an area where business flourished with gross sales of 1,810 million (+7.5%).
Finally, at the level of electronic systems and despite a turnover down by 15.9% to 530 million, operating profit increased by 5.1% to 104 million. This figure gives grounds for great satisfaction and is the result of the group’s withdrawal from the automotive sector in the second half-year.
Based on these results, the board of directors has decided to propose an unchanged 2008 dividend to the annual general meeting which will be held on 15 May this year, namely 85 centimes per registered share and 4.25 francs per bearer share. This proposal underlines its confidence that market conditions will improve between now and the end of 2009.
Despite anticipating a difficult environment, particularly during the early months of the year, the group is forecasting a return of confidence internationally in the second half-year and believes that slight growth is "entirely realistic" in 2009. It also considers that it is better prepared than others to face up to difficult situations thanks in particular to its positioning in all price segments, its strong geographical presence on all of the world’s markets and its highly integrated development and production capacities.
"More opportunities than risks"
It was an optimistic Nick Hayek who briskly led the Swatch Group’s traditional evaluation press conference on 18 March in Geneva. An increase in turnover this year is quite possible, at least in local currencies, was the message hammered home. "My only real concern for the moment is exchange rate fluctuations," he made clear since the group is refusing to increase its prices with a view to retaining if not strengthening its market share.
This optimism on the part of the Swatch Group CEO has its origins in the performance of Omega, Breguet, Blancpain and Swatch retail outlets, which announced sales for the first part of the year more or less comparable with those of January and February 2008. With the exception however of three markets: the United States, Japan and Spain. Feedback is equally positive from Tissot, CK and Rado. Nick Hayek does not envisage therefore either redundancies or additional short-time working, which at present is affecting 300 of the group’s 24,000 strong workforce. And he announced that R&D resources would be further bolstered (150 million last year). "2009 offers more opportunities than risks," he concluded.
March 20, 2009
