Swatch Group: Key Figures 2012

Group Overview
In 2012, the Swatch Group exceeded its eight-billion-franc target for gross sales. In an economic environment that remained extremely nervous, the Group increased gross sales by 14.0% to CHF 8 143 million, one billion more than in 2011. Foreign currencies stabilized somewhat against the Swiss franc but remain significantly weaker than two years ago. Had the currency situation been the same as in 2010, sales would have been some CHF 500 million higher in the year under review.

Thanks to a high level of capacity utilization, innovative production methods and traditionally strong cost controls, operating profit increased to CHF 1 984 million, a rise of 22.9% compared to 2011. The operating margin improved from 23.9% to 25.4%. Overall, this resulted in net income of CHF 1 608 million, a rise of 26.0% on 2011.

With equity of CHF 9 344 million and an equity ratio of 83.3%, the Group has an extremely solid and independent financing. The average return on equity was 18.5% (16.8% in 2011). The Group generated an operating cash flow of CHF 999 million, despite further investments in net working capital. In addition, a total of almost CHF 500 million was used for investments. Around 1 500 new jobs were created in 2012, thereof 900 in Switzerland, and a further 280 positions were added as a result of acquisitions. This increased the total headcount of the Swatch Group around the world to over 29 700.

The Board of Directors of the Swatch Group will propose the following dividend for 2012 to the Annual General Meeting on 29 May 2013: CHF 6.75 per bearer share and CHF 1.35 per registered share. This increase in the dividend payment to shareholders of 17.4% versus the previous year is due to the good results achieved in 2012 and underscores the continued optimistic outlook for business performance in 2013.

Watches & Jewelry
The Watches and Jewelry segment saw a further significant increase in sales. Gross sales amounted to CHF 7 298 million, up 15.6% on 2011. All brands contributed to this good result, with the high range and middle range price segments recording very strong growth. In geographic terms, sales growth was distributed over all continents, in particular outside the Greater China area, such as Europe, the United States, Russia and the Middle East.

The segment’s operating profit increased by 20.8% to CHF 1 633 million, which corresponds to an operating margin of 23.5%. Despite ongoing unfavorable currency developments, the Swatch Group maintained its long-term policy of not implementing any short-term price increases, which allowed it to continue gaining new market shares across all areas. In marketing, continuing high investments, some amounting to hundreds of millions of Swiss francs, have been spent for the further development of the various brands, in particular for Omega during the very successful Olympic Games in London.

In the multibrand retail sector, the already well established Tourbillon retail brand continued to develop extremely well, with new openings in the United States in particular. The introduction of the new and innovative retail concept for brands in the segments from Swatch to Longines, which operates under the name “Hour Passion”, was extremely successful. In addition to airport operations, the first boutiques were opened in Paris and Moscow and “Hour Passion” stores will be opening soon in London and Rome.

Production
In the year under review, the Production segment continued to benefit from strong demand. This gratifying situation resulted in sales growth of 10.0% to CHF 2 217 million. Production capacities were adapted and extended further, which eased some of the production bottlenecks. Simon Et Membrez, acquired in 2012, was incorporated into the Group’s financial statements for the first time. The lower level of growth in this segment in the second half of the year is due mainly to the sharp drop in diamond prices and a change in the mix of diamonds used.

The segment achieved a significant further increase in profitability, due not least to the high level of capacity utilization and new revolutionary production methods. Operating profit increased by 37.3% to CHF 442 million, corresponding to an operating margin of 20.0% (2011: 16.3%).

Electronic Systems
The market environment for the Electronic Systems segment failed to improve significantly. In the year under review, performance continued to be impacted by both the weak US dollar and ongoing uncertainty in some key markets. The segment posted gross sales of CHF 311 million, down 7.4% on 2011.

The segment margins also continued to suffer in 2012 as a result of massive price pressures and an unchanged unfavorable currency constellation. Operating profit was only just in positive territory. Our goal is to significantly increase both sales and profits in this segment in 2013 with our unique, high-quality products, despite the difficult environment.

Outlook for 2013
The signals from the markets around the world clearly indicate continued healthy growth potential for the Swiss watch industry and the Swatch Group. As always, the focus is on producing innovative and high-quality Swiss products in every segment. Against this backdrop, there is a realistic prospect of long-term growth in the Swiss watch industry of five to ten percent per year.

The Swatch Group continues to have substantial potential for 2013, thanks also to the integration of Harry Winston to the brand portfolio. With this acquisition, the Swatch Group is present in all segments, including jewelry, with world-renowned, first-class brands with their fully integrated vertical production.

Media Contact:
The Swatch Group Ltd Media Béatrice Howald Spokesperson Biel/Bienne Phone: 032 343 68 33 www.swatchgroup.com

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