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Swatch expects strong second half as earnings beat estimates

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Swatch Group AG forecast a strong end to the year after sales growth accelerated in May and June.

[ZURICH] Swatch Group AG forecast a strong end to the year after sales growth accelerated in May and June.

Consumer demand for Swiss watches remains high, the Biel, Switzerland-based company said in a statement Thursday, pushing the stock up the most in more than two years.

The outlook provided a boost for Swatch after a year in which earnings have been weighed down by price increases resulting from the Swiss National Bank's January decision to stop trying to limit gains in the franc. The industry had already been struggling from ebbing Chinese demand.

"The worst of the newsflow for the watchmakers is over," Jon Cox, an analyst at Kepler Cheuvreux, said by e-mail.

The stock rose as much as 5.8 per cent and was up 4.8 per cent at 405.1 francs as of 9.21 am in Zurich.

Swatch said it expects revenue in the greater China region will increase in local currencies in the second half. That's the biggest market for Swiss watches. New products such as a namesake Swatch timepiece that can make mobile payments and a James Bond model of Omega watches will also buoy sales, the watchmaker said.

"Despite the Swiss franc dilemma, group management expects a strong second half," the company said. "Further positive growth in local currency is expected." First-half operating profit declined 8.3 per cent to 761 million francs (S$1.1 billion) as the franc's surge against the euro and weak demand in Hong Kong eroded sales. The results beat analysts' estimates for 741.7 million francs. In the euro region, revenue increased by a double-digit percentage in euro terms, Swatch said, without being more specific.

BLOOMBERG