• Gross sales up +8.3% to CHF 4 497 million.
• Growth in all segments.
• Modestly positive currency effects in 2005 (+0.6%).
• Strong cash flow, solid growth in operating result and Group net income expected.
• Optimistic outlook for current year.
• Launch of new share buyback program in the amount of CHF 300 million.


CHF millions 2005 2004 % change
      In local currency currency effect Total
Gross sales        
Watches & jewelry



+8,6% +0.8% +9.4 %


1304 1245 +4.7% 0.0% +4.7 %
Electronic systems 548 543 +0.9% +0.1% +1.0 %
General services
8 11     +6.4%
Consolidation (800) (788)      
Total 4497 4152 +7.7% +0.6% +8.3%
Sales of watches, movements and stepping motors (in million units) 107.5 127.2     -15.5%

Group Overview

All Group divisions reported higher sales last year. As in previous years, the most substantial increase was in the luxury watches segment, which continues to enjoy very strong demand.
Sales in the production and electronic systems divisions saw solid growth despite reduction of certain activities in the area of movements in the lowest price category.
There was a slightly positive currency effect in 2005 for the first time in several years, due in particular to positive developments during the second half of the year. Our very selective hedging strategy with regard to foreign currency risks over the past year proved to be the right decision.
The decrease in unit sales of watches, movements and stepping motors by approximately 20 million units can be attributed to two main factors: on the one hand, to the planned and already announced reduction in the amount of movements in the lowest price category manufactured and sold in the Far East, and on the other hand, to the considerable fall in sales of stepping motors due to the decline in the US automobile market.

Watches and Jewelry

CHF millions 2005 2004 % change
      In local currency currency effect Total
Gross sales 3437 3141 +8.6% +0.8% +9.4%

The Group’s core business grew more than the other Group divisions. The luxury segment, particularly the Breguet, Blancpain and Jaquet Droz brands as well as the Omega brand, saw substantial double-digit growth, with the Group winning significant market shares and strengthening its already solid market position.
The Group also achieved strong growth in the premium and mid-price segment, most notably during the second half of the year, and the additional marketing push in the first half of the year paid off, particularly for the Longines, Rado and Tissot brands. In the mid-price segment, Calvin Klein as well as the other brands made pleasing progress. Potential for growth in this segment remains exceptionally high in America, Japan and China.
In the low price segment, headed up by the Swatch brand, the second half of 2005 went according to plan, and the Group succeeded in achieving its targeted increase in sales thanks to measures introduced in the first half of the year to scale down its range of products. This was bolstered by pleasing developments in the jewelry division. The positive development witnessed over recent months coupled with the measures implemented in the product, marketing and distribution divisions clearly indicate that this positive trend will continue.
The Group’s retail activities made good progress in 2005 thanks to new shops in targeted locations, and sales income from this activity should make an increasing contribution to earnings.
Once again, Asia and China proved to be the major drivers for growth. An encouraging trend is also underway in the US, Japan and the Middle East. While it is lagging behind the levels of growth being witnessed elsewhere, Europe, too, is showing signs of economic recovery, and there are clear indications of an increase in consumer spending.


CHF millions 2005 2004 % change
      In local currency currency effect Total
Gross sales          
-Third parties 537 509 +5.4% +0.1% +5.5%
-Group 767 736 +4.2%   +4.2%
Total 1304 1245 +4.7% 0.0% +4.7%

The production division posted gross sales growth of 4.7% in 2005.
This is all the more remarkable considering that – as announced in the explanation accompanying our half-year figures – a part of our activities in the lowest price category (movements manufactured and sold in the Far East) was suspended. This resulted in the closure of several manufacturing facilities and a reduction in capacities in Malaysia and China, which has a negative impact on sales in 2005 but will have a positive influence on profitability in 2006.
The level of orders in the components division remained high throughout 2005, while the movements product mix developed in tandem with the watch division, which is moving clearly in the direction of mechanical movements.
The measures that have been implemented, coupled with our high order backlog, paint an optimistic picture for the future.


CHF millions 2005 2004 % change
      In local currency currency effect Total
Gross sales          
-Third parties 517 494 +4.64% +0.1% +4.7%
-Group 31 49 -36.7%   -36.7%
Total 548 543 +0.9% +0.1% +1.0%

This division of the Group also saw an increase in sales in the second half of 2005, which offset the slightly negative trend recorded during the first half of the year. In an environment characterized by continued falling prices and relentless price pressure, the Quartz (Micro Crystal as supplier to the mobile phone market) and EM Marin (RFID) divisions posted particularly pleasing growth. Rising demand for mobile phones in the second half of 2005 was the primary factor in the gross sales increase of 1.0% on an annualized basis in this segment.
The markets for microelectronics and mobile phones are expected to recover further during the current year. We thus anticipate a further increase in sales and profitability in this segment.


The strong increase in sales in the watch segment (in particular with regard to high-end watches) will lead to a substantial increase in operative margins in this segment. Factors which weighed down business in the first half of the year, such as higher commodity and diamond prices, additional marketing expenditures in the US for the Omega, Longines and Tissot brands, investments in customer service and the adverse effect of negative currency movements, were able to be partially offset. Price increases that were only realized towards the end of last year will impact in full in 2006.
As indicated in our half-year report, the profitability of the watch movements and components division will be hampered by impairments incurred due to production facility closures. This one-off effect notwithstanding, a marked increase in earnings power is expected in this segment as well. Subsequent years will confirm this, as the segment is now well on the way to improving efficiency and increasing profitability.
Profitability in the electronic systems segment will be largely dependent on how prices develop for the individual components and on general market demand. Here, too, our goal is to maintain our strong market position and to boost earnings power.
The financial result will be considerably better than in the previous year and will thus make a corresponding contribution to increasing Group net income. The Group expects 2005 to be a record year, both in terms of operating result and Group net income.
The Group’s successful strategy and the rigorous manner in which it is implemented will provide the basis for continued very solid growth in 2006 as well.
The CHF 250 million share buyback program will draw to a close in the next few days, and the Board of Directors of the Swatch Group AG has approved a further share buyback program in the amount of CHF 300 million. The new share buyback program will be launched as soon as the requisite stock exchange and official approvals have been obtained. The start date of the new program will be announced in a separate press release.


Edgar Geiser, CFO, and Thomas Dürr, Corporate Treasurer
The Swatch Group Ltd., Biel/Bienne
Tel +41 32 343 68 11, fax +41 32 343 69 16 e-mail:

Béatrice Howald, Head of Media Relations,
The Swatch Group Ltd., Biel/Bienne
+41 32 343 68 33, Fax +41 32 343 69 22