Swatch Group’s first-half net profit slid by 11.5 percent because of the costs of marketing at the Sochi winter Olympics, and unfavourable exchange rates, the Swiss watch maker said yesterday.
“The already overvalued Swiss franc strengthened further against currencies in all of the group’s important sales regions compared to the first half of the previous year,” it said.
Net profit fell to Sf680 million (R8 billion). But sales rose by 8.5 percent from the equivalent period last year to Sf4.5bn at constant exchange rates, Swatch said in a statement.
At current exchange rates, the sales increase was just 4 percent, totalling Sf4.3bn.
The strength of the Swiss franc is a recurrent problem for Swiss exporters, who have long made quality their selling point to offset currency effects and high labour costs.
“In local currency, all markets except for a small number of European countries remain on a growth course compared with the very high prior-year figures. This is also the case in China,” it said.
“In addition, all brands continued to invest heavily in marketing, particularly Omega during the winter Olympic Games in Sochi,” it added.
Marketing investment at the Games had a particular impact on its flagship Omega brand.
Overall, at Sf830m, operating profit was 8.8 percent lower than in the previous year, owing to exchange rate effects and Sochi spending.
Swatch said it was confident about its performance for the second half
of the year.