Swatch CEO Says Annual Sales Will Fall Short of 9 Billion Francs

Swatch Group AG, the biggest maker of components for Swiss watches, said annual revenue will fall short of 9 billion francs ($10.1 billion) this year because of unfavorable currency fluctuations.

The company’s sales growth will be closer to 10 percent than 5 percent this year, Chief Executive Officer Nick Hayek said in an interview today. While the company had previously said it would “flirt” with a sales level of 9 billion francs this year, currencies have not cooperated, he said.

“We still will do very good results, but exchange rates are unfortunately not helping us, that’s all,” Hayek said. “Making 9 billion with these exchange rates will be difficult.” The executive added that he is “very optimistic” for next year and sees double-digit percentage growth if currency fluctuations ease.

The dollar has declined about 5.4 percent against the Swiss franc in the past year, while the yen has slumped 21 percent. Givaudan SA, the world’s largest flavorings maker, this month reported its first decline in sales for at least six quarters as emerging-market currencies from Brazil to India dropped against the Vernier, Switzerland-based company’s domestic currency.

Swatch fell as much as 3.8 percent to 564 Swiss francs in Zurich trading, the steepest drop since June 20. The stock was down 1.8 percent at 576 francs at 4:52 p.m.

Earlier today, Swatch gained regulatory permission to gradually cut deliveries of timepiece mechanisms to competitors, a move that may cause some companies to run short of components.

Mechanical Movements

Swatch will be allowed in 2014 to reduce shipments of mechanical movements to other Swiss watch producers to 75 percent of the average of shipments between 2009 and 2011, the antitrust overseer, known as Comco in French and Weko in German, said in a statement today. That will fall to 65 percent in 2016 and 55 percent in 2018.

Swatch’s ETA unit is estimated by analysts to make about two-thirds of the mechanical movements used in the timepieces made in the country. The company won provisional backing in 2011 to start cutting deliveries to competitors, though the regulator this year sought to renegotiate an agreement that would have ended sales of all movements and other watch parts by 2025.

Today’s accord “allows Swatch Group, to gradually reduce the supply of mechanical movements,” the regulator said. The agreement includes a clause to help small and medium-sized companies in the event of “economic hardship,” it said.