Record half-year results in terms of both sales and profit

• Sales in the Watches & Jewelry segment rose in local currency by a strong 32.9% (30.6% in CHF) compared with the first half 2009 and by 10.1% (9.3% in CHF) compared with the previous record half-year 2008.
• Performance substantially better than the export figures for the first six months of 2010 published by the Federation of the Swiss Watch Industry.
• The Group’s gross sales of CHF 3 031 million exceeded the 3 billion mark for the first time in the first half-year, an increase of 22.2% versus 2009 and 2% compared with 2008.
• Significant increase of 81.4% in operating profit to CHF 626 million or 21.8% of net sales.
• Net income 54.5% higher at CHF 465 million or 16.2% of net sales.
• Continued strong growth in July for watches across all segments and regions (in local currencies).
• Positive outlook for the second half-year with the launch of numerous new products, such as, for example, the Breguet world exclusive chronograph «Type XXII 10 Hz», which was personally initiated and introduced by the recently deceased Nicolas G. Hayek.

The Swatch Group again confirmed its leadership position in the first half of 2010. Watches & Jewelry experienced extraordinarily strong growth across all segments and regions. The long-term orientation of the Group’s successful strategy, with its presence in all segments, the integrated production in Switzerland and the distribution to the end customer, will be further expanded.

The improved economic environment allowed the Group to increase gross sales by 22.2% to CHF 3 031 million compared with the first half of 2009. This even exceeds sales for the first half of 2008 and represents a new record for the Swatch Group.

Exchange rates went through a very volatile period during the first six months of 2010, which had a slightly negative effect of –1.9% on Group sales.

Profitability rose strongly in the first half of 2010, despite the sharp increase in the price of gold and the Group’s traditionally very cautious approach to consumer price increases. Operating profit increased by 81.4% to CHF 626 million. This represents an operating margin of 21.8% of net sales (14.7% in the first half of 2009). Net income rose by 54.5% to CHF 465 million (CHF 301 million in the first half of 2009). Operating cash flow, at CHF 633 million, was CHF 386 million higher than in the prior-year period (CHF 247 million).

Outlook

Growth has been solid in July, and we expect a strong result for the second half of 2010 in terms of both sales and profit. The Swatch Group will continue to expand its successful retail activities globally in the second half of 2010, for example with the opening of the Breguet boutique on the Bahnhofstrasse in Zurich. The major challenge will be to quickly overcome the capacity bottlenecks which already exist in some production areas.

Following the tragic event of the sudden death of its founder and Chairman of the Board of Directors Nicolas G. Hayek on 28 June, the Group, within 48 hours, unanimously elected Mrs Nayla Hayek as the new Chair of the Board of Directors. The executive positions at Breguet and Jaquet Droz which became vacant were also immediately filled with the appointment of Marc A. Hayek. This shows again that the Group, when faced with exceptional circumstances, acts with strong leadership – quick, calm and long term.