Excellent outlook for 2010, Swatch Group

09 Feb '10

6 min read

solid, with an improved equity ratio of 77.6% as at December 31, 2009 compared to 75.3% in the previous year, and also a much higher cash position. The average return on equity was a remarkable 13.3%.

Watches & Jewelry

In 2009, the segment Watches & Jewelry recorded gross sales of CHF 4 429 million, a decrease of only -5.5% at constant rates compared to the record year 2008 (-7.7% in CHF). This sales performance is substantially better than the export figures published by the Swiss Watch Federation, which means that the Group has once again increased its market shares in several price segments. Sales improved strongly
in the second half of 2009.

The segment's operating margin improved to 19.2% in 2009 (compared to 18.2% in 2008). This increase, achieved in a difficult year 2009, once again shows the Group's strength and dynamics. The higher margins came mainly from improvements by the important brands. Further efficiency increases in logistics and distribution also contributed to this strong increase in profitability.

In order to encourage the Group's long-term growth, retail activities were further expanded in strategic key locations.

The Production segment posted gross sales of CHF 1 489 million in 2009, a decrease of -17.7% versus
the strong previous year. This slowdown manifested itself in the second half of 2009.

Segment profitability suffered especially in the second half of 2009, due to lower volumes, a change in
product mix and by keeping the cost structure at constant levels. In connection with the clear commitment to preserve jobs for its employees in these difficult economic circumstances, Group management accepted a lower capacity utilization and a temporary decrease of operating margins.

Current order entries picked up in December 2009, which is an encouraging sign for the Production segment mid to long term. The overall improvement in terms of consumer confidence will lead to higher demand, with a certain delay compared to the watch segment. While maintaining the cost structure decreased the short-term profitability, it will pay off in the future. With the anticipated rebound of production volumes, the Group will not be obliged to make further adjustments.

Outlook for 2010

The Board of Directors and the Executive Group Management Board are very confident of achieving further organic sales growth and improved margins in 2010. The main reasons for this positive outlook are the excellent start in 2010, increasing order entries as well as the improving economic environment and market confidence worldwide. In addition, the Group's positioning in all market segments and its broad geographical presence represent important success factors in the watch industry. The solid balance sheet and the improved capability to generate cash flow will bring the Group in an even stronger position than before the financial crisis.

Omega'smission as official timekeeper at the Winter Olympics 2010 in Vancouver, starting at the end of this week, is one of many positive factors that will improve sales in 2010. Furthermore, the opening of the Swatch Art Peace Hotel mid 2010, during the World Exhibition in Shanghai, will represent another milestone for the Group. In order to gain further market share and strengthen its worldwide presence, the Group will also take advantage of interesting opportunities in the different markets.

Swatch Group

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