June 8 (Bloomberg) -- Cie. Financiere Richemont AG, the world's second-largest luxury-goods maker, said annual earnings dropped 10 percent as gains from its stake in British American Tobacco Plc a year earlier weren't repeated.

Net income fell to 1.09 billion euros ($1.39 billion) in the 12 months ended March 31, the Geneva-based company said today in a statement. Profit at the main luxury-goods business climbed 47 percent. The shares slid as much as 7 percent as the company said it can't tell how falling stock prices and changes in the global economy will affect demand for luxury goods.

Chief Executive Officer Norbert Platt, who used to manage the company's Mont Blanc brand, is selling less-profitable clothing units to focus on marketing products including the men's Cartier Tank Francaise watch, which retails for about $4,000 to wealthy Asians and Americans. The company, which owns the Dunhill luggage and Cartier jewelry brands, sold U.K. men's fashion company Hackett Ltd. last June and divested its Old England menswear brand in March.

Revenue in April and May gained 18 percent, with ``strong demand seen in all regions,'' Executive Chairman Johann Rupert said in the statement. Richemont said in April that annual sales gained 17 percent to 4.31 billion euros.

The Swiss company's shares fell as much as 4.1 Swiss francs to 54.2 francs in Zurich as stocks slumped across Europe. The Swiss Market Index of the 26 largest and most actively traded companies dropped as much as 2.3 percent.

Dividend Increase

Richemont stock has fallen 4.2 percent this year, while LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury- goods maker, has slipped 4 percent. Swatch Group, the world's biggest watch maker, has gained 2.5 percent.

Richemont's annual profit was less than the median estimate of 1.15 billion euros from six analysts surveyed by Bloomberg News. Second-half net income climbed to 565 million euros from 485 million euros a year earlier, according to the full-year results.

Profit at the company's main luxury-goods business gained 14 percent to 338 million euros in the second half.

Sales growth at LVMH accelerated in April, Chief Executive Officer Bernard Arnault told shareholders last month, after rising 15 percent in the first quarter on Asian demand for products such as Dom Perignon champagne and Tag Heuer watches.

Bloomberg calculated Richemont's second-half results by subtracting first-half figures from today's full-year results. Company spokesman Alan Grieve declined to confirm the figures. Richemont has an 18.6 percent stake in British American Tobacco, the world's second-largest publicly traded cigarette maker.

Richemont plans to increase the ordinary dividend 20 percent to 60 cents a share. The company will also pay a separate dividend of 50 cents, giving a total payment of 1.10 euros a share.

To contact the reporter on this story: Hugo Miller in Geneva on hugomiller@bloomberg.net.

Last Updated: June 8, 2006 03:46 EDT