The world watch industry number-one, which also announced a 15 per cent increase in its dividend payout today, said it had seen a double-digit percentage rise in watch and jewellery sales in January, although experts say the overall pace of industry growth is likely to slow to 5-10 per cent this year as sluggish demand in mature markets takes its toll.
Net profit at the Swiss-based group, known better for its colourful plastic watches than for ownership of high-end brands such as Omega and Breguet, rose 18.1 per cent, in line with expectations, to 1.276 billion Swiss francs (RM4.16 billion) in 2011. “The strength of the group’s brands was noticeable not only in Greater China, but in all other regions as well, and in the very strong growth rates across all price segments,” the group said in a statement.
Swatch shares, which have already gained nearly 18 per cent so far this year, were down 4.2 per cent by 1000 GMT on investor disappointment over a modest dividend rise to 5.75 francs from 4.99 and a sharp drop in profits at its electronic components division caused by the impact of a strong Swiss franc.
“There was no positive surprise in terms of a higher payout or a share buyback,” Vontobel analyst Rene Weber said, adding the 15 per cent dividend hike resulted in a lower payout ratio of 24 per cent of earnings compared to 25 per cent the previous year.
Swatch Group said it still expects growth this year but cautioned this would be more challenging to achieve on top of last year’s strong performance.
Rising commodity prices – especially for diamonds and gold – put pressure on watch and jewellery margins but the company said it did not intend to raise its sales prices.
Operating profits at Swatch Group’s electronics components and systems division sank 79 per cent to 13 million francs, as the strong Swiss franc made it very difficult for the unit to win orders in this very competitive market.
Its electronic components unit makes products for industries such as the automotive, consumer and industrial electronics markets and it also makes products used in electronic timing mechanisms as well as microchips, including radio chips.
“Overall a solid set of figures with watches and jewellery profitability better than expected,” said Kepler Capital Markets analyst Jon Cox. “However, the electronics division has weighed on the overall result which might impact shares today.”
The firm, based in Bienne, said last month its sales rose to a record 7.1 billion Swiss francs in 2011. – Reuters
