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August 15, 2009

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Swatch winds up with better-than-forecast profit

SWATCH Group, the world's largest watch maker, expects demand to pick up in the second half as it posted a forecast-beating first-half net profit, sending its shares 10 percent higher yesterday.

The group, best known for its colorful Swatch watches, said net profit fell to 301 million Swiss francs (US$280 million), above the average estimate of 275 million francs in a Reuters poll, as a recovery in financial markets in the second quarter boosted its investments.

The sales development of the past few months and current order entries were showing signs of recovery, and second-half sales should be in line with the second half of 2008, with some brands seen posting a rise in sales, according to the Swiss company.

Several Swatch brands, such as Omega, Tissot, Longines and CK Hamilton, had all posted higher profits in July compared with last year, Chief Executive Nick Hayek told Reuters.

Mid-range brands such as Tissot and Longines are holding up better as consumers favor less expensive marques, while limited exposure to the tough United States and Japanese markets is also helping the company.

In early trading, shares in the group rose 10.1 percent to 231.30 francs, easily outperforming a 1.5 percent rise in the DJ Stoxx personal and household goods index.

"The company outperformed the sharply declining watch sector, and its margin and net profit decline were ahead of expectations," Vontobel analyst Rene Weber said.


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