Swatch expects good times

ZURICH - Swatch Group expects price hikes and appetite for Swiss timepieces in Asia to help it offset the negative impact of the strong franc this year.

The group, which is best known for its colorful plastic Swatch watches but also owns higher-end brands such as Breguet, Blancpain and Omega, said on Tuesday that prospects were good, despite the currency drag.

A rise in the Swiss franc versus the euro and the dollar is giving the country's exporters a headache and watch manufacturers, which are particularly hard hit as the bulk of their costs are in francs, have had to raise prices.

Swatch could raise prices by 4 percent to 6 percent depending on the brand and the region, Chief Executive Nick Hayek told the TV station, CNBC.

Hayek told Reuters last month that he would increase prices to combat the strong franc and higher gold prices.

"Prospects remain good for the year as a whole, despite the current strength of the Swiss franc," the group said in a statement on Tuesday, adding that it aimed for sales of 10 billion Swiss francs ($10.45 billion) in the medium term.

Net profit rose 42 percent to 1.08 billion Swiss francs compared with the previous year and earnings before interest and taxes (EBIT) jumped to 23.5 percent from 17.6 percent, the group said.

"A strong set of figures with better than expected margins across the board," said Kepler Capital Markets analyst Jon Cox. "We like the company's exposure to China and see another strong year for the watch market," he added.

Swatch said it proposed a dividend increase of 25 percent to five Swiss francs per bearer share and one franc per registered share.

"The dividend increase is a little bit of a disappointment as the payout ratio is reduced from 28 percent to 25 percent and this despite the high net cash position of 1.8 billion Swiss francs," Rene Weber, an analyst at Vontobel, said.

Reuters

(China Daily 02/10/2011 page17)