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Press release

Swatch Group:

Improved sales development in the second half 2002 as compared to first six months in spite of weaker currency ratios;

Group sales 2002: CHF 4,062 million after CHF 166 million currency exchange losses; CHF 4,228 million in local currency terms;

Unit sales of watches and watch movements sales +3.0%;

Substantial market share gains in a difficult year

Biel, February 5, 2003

  • 2002 sales for the entire Group expressed in local currency terms rose +2.6 % in the second half and +1.1 % for the year as a whole
  • Growth of the watch division in local currency terms was +5.1% in the 2nd half of 2002 and +3.2% for the year as a whole
  • Higher market shares were achieved in all watch segments
  • Group sales in Swiss francs were lower by –1.9% in the second half and –2.87% for the year as a whole
  • Favorable impact of the improvement in sales in the second half 2002 on the expected operating and net result for the full year.

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For The Swatch Group Ltd., 2002 proved to be a very exacting and challenging year, as it was for other companies. The universally hoped-for recovery of the global economy did not materialize as expected in the second half of the year; on the contrary, the general conditions became still more difficult as the year 2002 progressed.
Despite global political instability, uncertain prospects for the future, subdued consumer sentiment and a Swiss franc whose value rose constantly, leading to currency exchange losses of CHF 166 million, the Swatch Group achieved organic growth of +1.1% in the year 2002 in local currency terms. This clearly reflects the Group’s ability to adapt quickly and flexibly to changed external economic conditions
Sustained market share growth in all segments and ongoing cost control had a determining influence on this positive business trend. New product launches and technical innovations were important features of the good development in the year 2002. The very solid balance sheet numbers and high liquid funds give the Group the necessary freedom to focus fully on its operational business and on its unchanged development strategy in future years.

Overview of the whole Group

Sales in CHF millions 2002 2001 % variance
   
In local currency
Currency effect
Total
Watches

2’980

3’034

+ 3,2 %
- 5,0 %
- 1,8 %

Watch production

1’408
1’392
+ 1,9 %
- 0,8 %
+ 1,2 %
Electronic systems
375
422
- 10,2 %
- 0,9 %
- 11,1 %
Central services
33
14
Consolidation
(734)
(680)
Total
4’062
4’182
+ 1,1 %
- 4,0 %
- 2,9 %
Sales of watches, movements and stepping motors (in million units)
116,8
113,4
+3 %

One particularly positive indicator for the new year 2003 is the fact that the development of the Group in the second half of 2002 was much stronger than at the beginning of the period. This acceleration of growth included all segments, but in particular finished watches, for which currency-adjusted growth of +5.1% was achieved in the second half.
However, further massive strengthening of the Swiss franc and prevailing geopolitical uncertainties merit a cautionary note.

Watches

Sales 2002 (prior year CHF 3,034 million)

CHF 2’980 millions
Variance against prior year
- in local currencies
- with currency effect

+ 3,2 %
- 1,8 %

The portfolio of Swatch Group watch brands achieved a very balanced, positive trend in 2002. As already indicated in our half-year results, all the important brands showed growth in local currency terms.
Growth of the brands in the top price category was particularly strong, bringing a growing return on the Group’s strategy of expansion in the luxury segment. The Group’s best-selling brand, Omega, is performing on a high level and reported further growth in local currency terms last year.
All the other brands also made their contribution to a successful year 2002. After a difficult 2001, the Swatch brand was back on the path to growth. Proprietary retail stores played an important role.
Organic sales growth of +3.2 % in the watch segment was adversely affected by a negative currency effect of CHF 152 million or –5.0 %.
The regional trend in the finished watch segment continues to show a very balanced picture, as already reported at the half year. However, within the individual regions, some countries such as Germany reported somewhat disappointing results in 2002 because of high consumer uncertainty and the economic recession.

Watch, watch movement and component production

Sales 2002
(prior year CHF 1’392 million)

CHF 1’408 millions

Variance against prior year
- in local currencies
- with currency effect

+ 1,9 %
+ 1,2 %
   
of which third parties
(prior year CHF 767 million)

CHF 740 millions
- 3,5 %

Sales growth in this segment was marked by continuing very solid demand for watch movements. In 2002, Group investments in this segment were focused mainly on the expansion of production facilities in the top price segment and on rationalization of the medium-range and basic segments.
Movements in the lowest price category sold in the Far East recorded a slightly negative impact. The adverse currency influence and continuing sustained pressure on prices inhibited positive sales progression in this particular segment.
As in the watch segment, the Group also takes an optimistic view of the future for watch movement and component production. This is reflected in the order books and further growth in demand for both complex mechanical watches and products in the medium and basic price category will have a positive impact on deliveries of watch movements and exterior parts.

Electronic systems

Sales 2002
(prior year CHF 422 million)
CHF 375 millions
Variance against prior year
- in local currencies
- with currency effect

- 10,2 %
- 11,1 %
of which third parties
(prior year CHF 374 million)
CHF 322 millions
- 13,9 %

The anticipated recovery in the electronic systems segment only materialized to a limited extent in the second half of the year. Especially in the chip industry, pressure on prices remains strong, although a moderate increase in demand is observed in the area of low-frequency crystals.
The performance reported by individual companies in the electronic systems segment varied in the year 2002. EM Marin still had to contend with pressure on prices in the microchip industry but achieved good results, even if they were lower than in 2001. On the other hand, Micro Crystal was even able to increase sales slightly against the previous year by gaining further market shares in the area of low frequency crystals.
Future prospects in this segment continue to be viewed with moderate optimism. The strong market position of individual companies as niche product suppliers and the relatively low stock inventories on the client side give grounds for confidence for the year 2003. Demand for miniaturized products with very low current consumption is set to grow in the medium to long term after a period of stagnation which lasted for nearly two years. The companies which operate in this field will benefit considerably because of their strong market position. The acquisition of SID Sokymat Identifikations-Komponenten GmbH holds further promising prospects.

Profit forecast for 2002
The results with details for each Group division and the balance sheet are due to be published on March 27, 2003. It is expected that the favorable sales development in the second half as compared to the first half of 2002 will have a positive impact on the expected operating and net result for the full year 2002. This indication can be taken as evidence that the Swatch Group is continuing to develop on target in a difficult environment and is solidly positioned in its business area.

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


 

 

 

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