Time runs out for Swiss watchmakers

Marcia Klein, South African Sunday Times, 8 June 2003

You know the world's biggest economies are in trouble when 5% of Swiss watchmakers are about to lose their jobs.

This is one of the consequences of worse-than-expected results from Swiss group Richemont, which announced the need for further restructuring and consolidation in the year ahead.

Its results include the euro107-million combined losses of Alfred Dunhill and leather goods company Lancel, higher than expected restructuring costs and no good news about the year ahead.

To his credit, Richemont executive chairman Johann Rupert has warned for about three years against "over-optimism" about the group's prospects.

As usual, the market, despite previous warning, still reacts when the bad news is out and the share lost nearly 2% to R13.05. This is worse than the drops following last month's resignation of chief executive Alain Dominique Perrin and the profit warning in March.

Sales dropped 5% to euro 3.65-billion, reflecting static sales in constant currency terms, but lower sales due to the strength of the euro. Operating profit, which Rupert warned could drop by as much as 40%, was in fact 46% lower at euro 259-million after restructuring and impairment charges of euro 91-million, or 32% down excluding the charges.

Net profit dipped 53%, and the group's share of associate British American Tobacco was 2% down at euro 486-million.