Swatch Group Sees Excellent Year; 2009 Profits Drop

By Martin Gelnar

Of DOW JONES NEWSWIRES

ZURICH -(Dow Jones)- Swatch Group AG (UHR.VX) Tuesday said its earnings in 2009 were depressed by restructuring measures and sagging demand in some markets, but it expects business to be excellent this year due to increasing orders and improving economic prospects.

The company said it is confident of achieving further organic sales growth and improved margins in 2010, and added it is ready to grow through acquisitions if opportunities arise.

Net profit attributable to shareholders for 2009 fell 9% to 759 million Swiss francs ($709 million) from CHF834 million a year ago, beating analyst estimates of CHF700 million.

The operating margin fell to 17.6% from 21.2%, but was above market consensus views of around 16.2%.

Sales, reported previously, fell 9.1% to CHF5.42 billion from CHF5.97 billion a year ago.

The company plans to trim its dividend to CHF0.80 per registered share from CHF0.85 a year ago, and to CHF4 versus CHF4.25 per bearer share.

"The company has done an excellent job in containing costs, which bodes very well for 2010 as the rebound in watch sales comes through," Kepler analyst Jon Cox said. Cox, who has a buy rating and a CHF325 price target, said consensus expectations may move some 20% higher.

The shares closed at CHF268.50. They have gained 2% so far this year.

Reports by other luxury groups have been mixed.

French giant LVMH Moet Hennessy Louis Vuitton (MC.FR) last week reported a 13% slide in 2009 net profit to EUR1.76 billion and said prospects for a recovery remain uncertain.

Hermes International (RMS.FR) said it expects a gradual pickup in the pace of sales growth this year as it posted an 8.5% rise in revenue to EUR1.91 billion in 2009.

-By Martin Gelnar, Dow Jones Newswires, +41 43 443 8042; martin.gelnar@dowjones.com

(END) Dow Jones Newswires

February 09, 2010 02:20 ET (07:20 GMT)

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