Nov 13, 2011
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Richemont sparkles as Chinese luxury demand defies gloom

Nov 13, 2011

ZURICH - Swiss luxury group Richemont pointed to "significantly higher" operating profits in 2011, as strong demand in China defies the gloomy global economic climate, in results on Friday.

Sales for the six months ending September 30 jumped 29 percent to 4.21 billion euros ($5.75 billion), while net profit for the period was up 10 percent at 709 million euros.

Sales in the Asia-Pacific region soared 48 percent to 1.71 billion euros, "primarily driven by mainland China, which is now Richemont's third-largest market after Hong Kong and the US."

Despite a debt crisis, European markets also returned sales growth of 20 percent to 1.51 billion euros. However, demand came less from the continent itself than from travellers, as well as Russia, noted Richemont, which owns brands such as Cartier and Piaget.

Sales in Japan also held up despite a devastating earthquake and an ensuing nuclear disaster in March, rising 8 percent to 380 million euros.

Johann Rupert, chairman and chief executive of the group described the earnings as "solid" and issued a positive forecast for the rest of the financial year.

"For the second half of the financial year, we face both the impact of global economic problems on the luxury goods industry in general, and the demanding comparative figures against which group sales will be measured," he acknowledged.

"Notwithstanding these challenges and based on the group's performance for the year to date, operating profit for the full year is expected to be significantly higher than last year," said Rupert.

The group's jewellery proved its most popular product, with sales rising 34 percent to 2.17 billion euros.

"Both Cartier and Van Cleef and Arpels performed exceptionally well," said Richemont.

Watch sales were also ticking up 30 percent, as demand for high-end horlogerie held despite the economic slowdown.

Analysts hailed the earnings.

"Overall, the group's performance remains formidable, particularly at its key value driving maisons," said Bank Helvea, adding that the first half results beat its forecasts.

Bank Vontobel also said that the results were "clearly above expectations" as it said that it would hike its forecasts for the group.

Bank Wegelin noted that even if growth was beginning to slow in markets like China, "there is a long way to go before market saturation."

"The fast growing new middle and upper class in Asia would like to show in future what they have achieved through luxury products in established market," it said.

At 1043 GMT, stocks in Richement were trading up 0.12 percent at 48.14 francs, while the Swiss Market Index was up 0.38 percent.

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