Swatch 2011 Profit Advances 18% as Chinese Buy Omega Watches

Swatch Group AG, the largest maker of Swiss watches, reported an 18 percent gain in 2011 profit as Chinese consumers bought more Omega and Breguet timepieces.

Net income rose to 1.27 billion Swiss francs ($1.4 billion) from 1.07 billion francs a year earlier, the Biel-based company said in a statement today. The average of 15 analysts’ estimates gathered by Bloomberg was 1.28 billion francs. Revenue rose 11 percent to 6.76 billion francs.

Swatch is tapping growth in the Greater China region, where rising incomes are fueling demand for luxury goods. Swiss watch exports climbed 19 percent last year to a record 19.3 billion francs, with consumers in Asia accounting for more than half of the timepieces sold. Growth will probably continue in 2012, though “this is more and more challenging due to the high benchmark,” the company said.

“Revenue was a bit light of expectations, but watches are going great guns and the outlook was solid enough,” said Jon Cox, head of Swiss research at Kepler Capital Markets in Zurich.

A strong franc, which cuts the value of sales generated in dollars and euros, reduced revenue by about 700 million francs.

Watches and Jewelry

Sales of watches and jewelry climbed 14 percent to 5.95 billion francs. The operating margin narrowed to 22.7 percent from 23.9 percent a year earlier because of higher prices for gold and diamonds. The unit had “double-digit” growth in January.

Revenue from the unit that makes components and watch mechanisms rose 34 percent to 1.97 billion francs. Production “bottlenecks” remain even though the company expanded its manufacturing capacity, Swatch said. Sales at the electronics systems business declined 23 percent to 334 million francs, hurt by the strong franc and a “weakening in certain key markets.”

Swatch proposed a 15 percent dividend increase to 5.75 francs per bearer share and 1.15 francs per registered share.

Swiss watch exports will probably rise to another record in 2012, though growth may slow to a “single-digit” pace, Jean- Daniel Pasche, the head of the trade group, said in a Jan. 18 interview. While the market in Asia will continue to expand, growth in Europe will be “very low,” he said.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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