Press release

Swatch Group: Key Figures 2003

Biel, March 25, 2004

• Group result 2003 of CHF 492 million, thanks to marked improvements in the 2nd half of 2003 – virtually the same as in the previous year
• Continued strengthening of the Group’s financial basis through a high free cash flow in the year
• Over 31 % dividend increase
• Resumption of the share buy-back program
• 2004 confirms the positive trend of the second half of 2003

Overview for the Group as a whole

1*) The decline in the percentages can be attributed to the issue of a convertible bond of CHF 411.6 million and the resulting increase in the balance sheet total.

Profit distribution At its meeting of March 24, 2004, the Board of Directors decided to propose to the Annual General Meeting scheduled for May 27, 2004 a dividend increase of 31.8 %, i.e. per bearer share CHF 1.45 (previous year CHF 1.10) and per registered share CHF 0.29 (previous year CHF 0.22).
In addition, the Board decided to resume the share buy-back program. The exact time will be published in a stock market announcement.

Watches

The Group’s brands were able to substantially improve their sales and earnings in the second half of 2003 compared with the first half year.
As stated in the published half-year results for 2003, consistent implementation of strategy and avoidance of short-term emergency measures has borne fruit.
All of the brands gained substantial market share. A stable price policy, focused marketing investments, and innovative new launches have played as important a role as the company’s further strengthened presence in various regions such as the Middle East. As a result, every improvement in the mood of consumers could be immediately communicated internally and speedily utilized.
This development raises confidence for the current year. The slight reduction in negative currency influences towards the end of the year has also had a positive effect on both sales growth and profitability. Moreover, further efforts have been made with regard to costs – and will continue to be made in the future.
Thanks to an increase in demand in the second half of 2003, stocks were further reduced over this period compared to the figures for June 30, 2003.

Restatement of the segments

As already announced in the half-year report for 2003 and with the sales figures for 2003, changes have been made to the Group’s segment structure.
To take better account of the products and markets of the Microcomponents and Omega Electronics companies within Group structures, these two businesses were transferred from «Watch, Watch Movements and Component Production» to the «Electronic Systems» segment. The resulting prior-year changes are shown below for both divisions. At Group level, sales and results are not affected.

PRODUCTION OF WATCHES, MOVEMENTS AND COMPONANTS

ELECTRONIC SYSTEMS

Watches, watch movements and component production

As a result of lower sales in the first half of 2003 – for reasons explained in the half-year report – stocks with third-party customers as well as those for the company’s own brands increased by mid 2003. This meant that the production segment felt the consequences of reduced orders in the second half of the year. This affected both mechanical movements and Swiss-made quartz movements.
These volume losses also had a negative effect on the margin development in this segment. The missing margin contributions had an impact on the profitability. Price increases in a small number of movement calibers were only able to compensate this development to a limited degree.
The situation was exacerbated by various exceptional factors, such as business relocations (Favre & Perret S.A.) and the restructuring of organization and production in "Habillage" companies (e.g. Lascor).
Sales in this segment indicate a slightly underproportional increase in comparison to the watch segment during the first few months of the current year. However, the order books of the production companies indicate a substantial increase in demand from approximately April 2004 onwards. As volumes pick up, operating margins will also increase.
Further restructuring and measures to enhance efficiency will also make a positive contribution to increased productivity and therefore increased operating margins.

Electronic systems

Thanks to the improved environment in the semiconductor industry, combined with the fact that sales figures were revised upwards in the mobile telephony sector, this segment clearly revived in the second half of 2003.
As a result of transferring two Group companies from the “Production of watches and movements” segment to the “Electronic systems” segment, profitability in this division has been diluted slightly compared to the previous presentation. However, the operating result (EBIT) rose by more than 12% in this segment. In combination with EM Microelectronic-Marin SA, a substantial portion of this increase was made by Sokymat Automotive GmbH, which joined the Group at the beginning of 2003.
As a niche supplier with an extremely strong market position, the Group is also set to benefit from the market recovery mentioned above. Pressure on the prices of components is expected to ease off a little, which will be reflected in an improved margin.

Outlook for 2004

In view of the improved situation in the second half of 2003, as well as initial results and current expectations for this year, the Board of Directors and the Executive Group Management are confident. In conjunction with the slow but steady recovery of the global economy, the mood of consumers is improving in a number of markets. This is bound to be reflected in higher sales for the Group.
The Group intends to further expand its leading position on the global market. There is still a strong demand for luxury products and, even more importantly, the Swatch Group sees significant potential in the long term for its brands in all price segments to expand in numerous markets.
Plans for product launches, various marketing initiatives, the impetus connected with the company’s presence in Athens before and during the Olympic Games 2004, as well as our continued attention to cost control will most certainly play a part in enabling us to achieve our ambitious sales and profitability targets.
In our planning, however, we are not able to take full account of the possibility and the associated consequences of events out of our control, another substantial rise in the Swiss franc compared to our main currencies, and other external

Contacts

Edgar Geiser, CFO, et Thomas Dürr, Corporate Treasurer
The Swatch Group SA, Biel-Bienne
Tél. : +41 32 343 68 11, Fax +41 32 343 69 16
e-mail : investor.relations@swatchgroup.com

Béatrice Howald, PR & Press Office
The Swatch Group SA, Biel-Bienne
Tél. : +42 32 343 68 33, Fax +41 32 343 69 22
e-mail : presse@swatchgroup.co