Biel-Bienne, March 27, 2003 – Further to the sales figures published on February 5, 2003, the year-end key data for the Group are as follows:
Overview for the Group as a whole
At its meeting of March 26, 2003, the Board of Directors decided to propose to the Annual General Meeting scheduled for May 28, 2003 a dividend increase of 10 %, i.e. per registered share CHF -.22 (previous year CHF -.20) and per bearer share CHF 1.10 (previous year CHF-.1).
The portfolio of Swatch Group watch brands reported a well-balanced and positive trend in 2002. All the major brands achieved growth in local currency terms and won market share. The brands in the top price category achieved particularly strong growth.
The improved operating margin for 2002 compared to 2001 shows that the Group is capable of adapting rapidly to difficult general conditions.
The improved operational profitability in the second half is attributable mainly to the product mix and to further efforts made on the cost side. Including investments for the development of the various retail activities, marketing expenditure remained at the same high level as in the previous year. The inauguration of further stores also had a favourable effect on the margin trend.
Watches, watch movements and component production
The operating margin in the watch, watch movement and component production segment improved strongly against the same period last year. Product renewals and a higher percentage of mechanical movements were the main elements which helped to increase sales and profitability. The moderate negative currency influence in this segment mainly affected the low-price segment of watch movements sold in Hong Kong. Continuous price pressure, especially in the second half of the year, and sharper negative currency influences slightly weakened the operating margin in the second half of the year compared to the first six months. Restructuring measures in this segment generated non-recurring cost effects which were also largely concentrated in the second half of the year.
The continuing very difficult environment in the mobile phone industry (price pressure, flat volumes) made an increase in profitability in the second half of the year impossible. Thanks to further cost adjustments and market share gains made by some component suppliers, an attractive operating margin was achieved in comparison with the last financial year.
The market segment in which Oscilloquartz (oscillators) is active was particularly hard-hit in 2002. The reluctance of telecom companies to invest in equipment obliged this Group company to take tough cost-cutting measures and also narrowed profitability substantially.
The strong market position of some companies as suppliers of niche products and the relatively low stock levels on the customer side make us confident for the year 2003. Demand for miniaturized products with very low power consumption will rise in the medium to long term, after a phase of stagnation which has lasted for nearly two years. The companies which operate in this sector will benefit substantially from their strong market position. Further prospects are opened up by the acquisition of SID Sokymat Identifikations-Komponenten GmbH.
Outlook for 2003
The Swatch Group is confident for the current year. This positive sentiment is strengthened by a good start of sales to consumers in the first two and a half months, despite highly adverse currency factors. The operating result for the first few months points to an encouraging growth trend.
However, it would not be reasonable to make a precise forecast of profit and sales for the current year against the present background of geopolitical and economic tension. The macroeconomic risks referred to above are further aggravated by the continuous strengthening of the Swiss franc.
The depressed basic sentiment observed in today’s environment does not reflect the thinking and action of the Swatch Group or our experience in the first part of this year. The excellent financial strength, high liquidity and our important world market share hold out the prospect of a great many further development opportunities for Group sales and profits in the future. Our budgets for 2003 show growth for these core parameters. All the key areas of the Group’s business can benefit from these opportunities, but the main focus will continue to be placed on the watch segment.
CFO, et Thomas Dürr, Corporate Treasurer
Howald, PR & Press Office