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Swatch Watches & Jewelry segment reports higher sales in 2008
12
Mar '09
Given the strong demand from internal and external customers, production ran at full capacity in 2008. This enabled the profitability of the segment to once again increase considerably. The strong rise to an operative margin of 16.1% was mainly driven by increased volumes. Also, the high utilization of production facilities and, once again, a more favorable product mix towards high-end watch movements helped to further improve the operating margin. Another contributing factor was the Group's ongoing enforcement of rigorous cost control.

The segment's operating profit reached CHF 104 million in the year under review, which represents an operating margin of 19.8%. This includes the gains on disposal of two Group companies. Excluding these gains, the operating margin for 2008 was similar to the operating margin reported for the first half of the year 2008.

Nevertheless, lower capacity utilization and ongoing price pressure on electronic components continued to impact the segment performance during 2008. The difficult economic environment, with fewer orders on hand and lower visibility, forced some companies to cut back temporary staff and reduce working hours.

Outlook for 2009
The Board of Directors and the Executive Group Management Board are strongly committed to the Group's clear, healthy growth strategy of broad geographical presence in all main markets of the world, its unprecedented positioning in all market price segments as well as its reliance on its highly integrated production and product development capabilities with its innovative research and technical know-how.

In addition, the Group runs a very extensive and efficient distribution system in all important world markets with its own local management close to the end-consumers. The solid balance sheet and the past experience of more difficult market conditions are other key assets in this period. Over the years the Group has developed and steadily trained a high cost-consciousness and operates a dynamic pro-active style of decision taking adopting swiftly to new circumstances, conditions and opportunities.

Therefore, even though the Group anticipates a challenging environment particularly in the first months of the year 2009 and it expects that the confidence at the international level can be restored in the second part of the year, modest growth in 2009 over 2008 is our realistic expectation and planning.

The Group will take advantage of interesting opportunities to gain market share and further strengthen its global presence. This fundamental confidence and the long term perspective of the Group is underpinned by the daily monitoring of continued consumer demand experienced in our own retail stores as well as the current size of the order books. It should be noted that the beginning of 2009 has to be compared with extremely successful record first months in 2008.


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