Press Release


Biel/Bienne, 14 August 2007

• Excellent start into 2007, with highly promising outlook for the full year
• Despite significant capacity bottlenecks, substantial rise of 16.7 % in gross sales to CHF 2.74 billion, and as much as 20.0 % for Watches & Jewelry segment
• Above-average increase of 27.1 % in operating profit from CHF 402 million to CHF 511 million
• Operating margin up from 18.0 % to 19.6 %
• Overproportional rise of 39.4 % in net income to CHF 460 million, reinforced by good financial result

Group Overview
The world leader in the watch industry continues to enjoy robust growth. In the first half of 2007, gross sales climbed by a substantial 16.7 % to CHF 2 739 million. At +0.3 %, the currency effect was slightly positive. Our core business, the Watches & Jewelry segment, once more demonstrated its strong position as the growth engine of the Group. The Production segment, too, made a significant contribution to the Group's outstanding performance.

With its 18 brands in all price categories, the Swatch Group continues to benefit from strong worldwide demand for watches and jewelry. Due to renewed growth surge in its core business, the Group gained significant market shares, with all geographical regions contributing to this considerable growth. Various innovative retail ideas were realized, including the opening of the N. G. Hayek Center in Tokyo, the first outlet shops with our US joint venture partner, and the acquisition of airport shops in France. The Group also opened additional boutiques in premier locations. All of this proved a key factor in boosting the Group's market position in key markets and strengthening the share accounted for by retail activities. Naturally, this resulted in a certain increase in finished product inventories.

The Production segment for watches, watch movements and components also posted record sales thanks to strong demand across all areas. Due to substantial expansion of capacities, the Production segment reported a strong growth in the period under review. This was boosted by increased demand from third-party customers as well as Group companies. Further expansion is planned in order to tackle existing production bottlenecks. There is still a shortage of skilled watchmakers, and the Group is heavily involved in setting up watchmaking schools to redress this deficiency.

Another highly cyclical trend is dictating the environment in which the Electronic Systems segment operates. Increasing pressure on component prices in the mobile telephony sector impacted the development of this segment in the first half of 2007.

Despite a very cautious investment policy, the financial result was substantially higher than in the prior-year period, due among other elements to gains on capital markets and investments. In spite of the weak US dollar and yen, the currency result was also positive as the Group profited from the strong euro.

Given the Swatch Group's strategic thrust, coupled with its strong brand portfolio and sound market position backed by a strong industrial base, the Executive Group Management Board and the Board of Directors have every confidence in the Group's performance for the remainder of this year. The Group's expectations for the second half-year are high. In view of the sustained positive mood among consumers worldwide, there is every indication that the current boom will continue. Sales for July 2007 and initial estimates for the current month point to further strong growth. However, capacity bottlenecks in many of the Group's production companies will pose major challenges to management in the second half-year.

In view of the fact that the favorable currency situation resulting from the strong euro enjoyed by the Group in the first half-year may weaken in the second half. Consequently, exposure in the major currencies has been appropriately hedged.


Béatrice Howald, Head of PR/Press, Swatch Group
+41 32 343 68 33, Fax +41 32 343 69 22

Edgar Geiser, CFO, et Thomas Dürr, Corporate Treasurer
The Swatch Group AG, Biel-Bienne
Tél. +41 32 343 68 11, fax +41 32 343 69 16
e-mail :


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