3rd UPDATE: Swatch 2nd Half Net +11%, Remains Upbeat But Shares Fall
Friday March 14th, 2008 / 11h08
(Recasts headline, adds comment and background) By Martin Gelnar Of DOW JONES NEWSWIRES ZURICH -(Dow Jones)- Watch and jewelry maker Swatch Group AG (UHR.VX) Friday unveiled an 11% rise in second-half net profit - fueled by booming demand - lifted its dividend and reiterated an upbeat outlook for 2008. Still, expectations of currency and input cost headwinds, and the company's failure to surpass analyst expectations, lead to a negative reaction by the stock. The world's largest watch producer by sales saw its bottom line rise in the second half to 553 million Swiss francs ($548 million) from CHF499 million in the year-ago period, according to a calculation by Dow Jones Newswires. Net profit for the 12 months surged 22% to CHF1.01 billion from CHF827 million in 2006, slightly below analyst forecasts of CHF1.03 billion. Operating profit rose to CHF1.24 billion from CHF973 million despite higher gold and diamond prices. Full-year sales, reported in January, rose by 18% to CHF5.94 billion. The company sees further sales growth and an increase in profitability this year, pointing to a strong trend in the first two months of 2008. "The results are solid enough, a little bit more could have been expected," Landsbanki Kepler analyst Jon Cox said. Among the challenges Swatch Group faces is the strengthening of the Swiss franc, which makes exports more expensive, Cox said. On the Swiss bourse at 0930 GMT, Swatch Group bearer shares fell 4%, or CHF11.50, to CHF291.75 in a slightly higher general market. Zuercher Kantonalbank downgraded the stock, citing a tougher business environment and the company's failure to surprise on the upside. The stock seems highly valued given a price-earnings ratio of 15.2 times forward earnings which compares to a range of between 12.2x and 15.4x that Swatch's peers have, analyst Patrik Schwendimann noted. Bank Sal. Oppenheim analyst Urs Diethelm said net profit was slightly below consensus views due to lower financial income - CHF37 million in 2007 versus CHF84 million in the year-ago period - but noted that operating profit was very robust, reflecting a strong contribution by the company' watches and jewelry operations. Those operations, which account for the bulk of the group's top and bottom line, increased operating margin to 20.6% from 19.8%. Sal. Oppenheim and Kepler Equities both have a buy rating on the share with price targets of CHF400 and CHF350, respectively. Continued turmoil on financial markets could severely hamper demand for luxury goods, a product category that's very sensitive to consumer sentiment. But some analysts argue a so-called super cycle in the luxury goods industry, driven by a surge in demand from emerging markets such as China and India, will more than compensate for a softness in mature markets. Swatch Group, the maker of premium brands such as Omega and Breguet but also of the low-end Swatch, has a lower exposure to luxury markets compared with rivals such as Compagnie Financiere Richemont SA (CFR.VX). It also has a large industrial base that manufactures watch parts and batteries for third parties. Europe accounts for nearly half of Swatch Group's sales. The U.S., an increasingly difficult market given signs of a sharp economic downturn, generates around 11% of revenue. The company, controlled by the Hayek family, proposed a dividend increase to CHF4.25 from CHF3.50 per bearer share and to CHF0.85 from CHF0.70 per registered share. Bank Vontobel said the company's dividend payout ratio is at around 23% which is below sector average. "I had hoped they would rectify this somewhat," analyst Rene Weber said. He reiterated a buy rating and a CHF400 target. With Omega being the official sponsor of the 2008 summer Olympic games in Beijing, the company expects to benefit from strong business is China. In December, Swatch Group increased its stake in Chinese retailer Xinyu Hengdeli Holdings Ltd. (3389.HK) to 8.09% from 7.25%. French luxury goods company LVMH Moet Hennessy Louis Vuitton SA (LVMUY) in February reported an 8% increase in full-year net profit, to EUR2.03 billion. Company Web site: http://www.swatchgroup.com -By Martin Gelnar, Dow Jones Newswires; +41 43 443 8042; martin.gelnar@dowjones.com
LVMH est le leader mondial des produits de luxe. Le CA par famille de produits se répartit comme suit : - articles de mode et de maroquinerie (33,9%)...
