Swatch optimistic for 2013 after strong January

Reuters Business News
Posted: Feb 04, 2013 12:54 AM
Swatch optimistic for 2013 after strong January

By Silke Koltrowitz

ZURICH (Reuters) - Swatch Group SA <UHR.VX> is optimistic about growth prospects for this year after the world's biggest watchmaker reported a 26 percent rise in 2012 profit and hiked its dividend.

The company, which makes colorful plastic watches and high-end timepieces, said healthy growth in January justified an optimistic outlook for 2013.

"There is a realistic prospect of long-term growth in the Swiss watch industry of five to ten percent per year," the company said in a statement on Monday.

"The signals from the markets around the world clearly indicate continued healthy growth potential for the Swiss watch industry and the Swatch Group."

The company reinforced this optimism with a 17 percent increase in its dividend to 6.75 Swiss francs ($7.48) per bearer share from 5.75 francs in 2011, and 1.35 francs per registered share, previously 1.15 francs.

The outlook for luxury goods companies, including Swatch, had become more uncertain due to slower growth in China, which is a big market for fashion and high-end watches, such as the Swiss company's Breguet and Omega brands.

Swiss rival Richemont <CFR.VX> surprised investors last month by saying sales growth had ground to a halt in the Asia-Pacific region.

Other luxury companies have been more optimistic on China. British brand Burberry <BRBY.L>, which had warned about deteriorating trading conditions in China in September, said earlier this month consumer sentiment there had improved.

Full-year results from Swatch, which also makes Tissot watches, showed net income rising 26 percent to 1.61 billion Swiss francs ($1.78 billion), ahead of expectations in a Reuters poll.

The group's operating margin rose to 25.4 percent, versus 23.9 percent a year ago, which impressed analysts.

"Strong set of figures driven by improved profitability in watches and production. I presume much of that is down to upgrades in manufacturing, which makes the production process more efficient," Kepler Capital Markets analyst Jon Cox said.

Vontobel's Rene Weber said Swatch managed to increase its operating margin, while the world's biggest luxury goods group LVMH <LVMH.PA> reported a decline last week. "(Swatch) will be one of the top performers in full year 2012.

Swatch released a 14 percent rise in gross sales to 8.14 billion francs last month, saying it wanted to grow sales faster than its peers in 2013 and possibly score another double-digit increase.

($1 = 0.9029 Swiss francs)

(Reporting by Silke Koltrowitz; Editing by Daniel Magnowski and Jane Merriman)