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Arabian Post
5 days ago
- Business
- Arabian Post
Swatch Group Reports Steep Profit & Sales Fallout
Arabian Post Staff -Dubai Swatch Group's first‑half figures underscore a deepening crisis in its key Asian markets after the Swiss watch‑maker disclosed a 7.1 per cent drop in sales, generating CHF 3.059 billion, falling short of market forecasts of CHF 3.2 billion. Operating profit plunged 67 per cent year‑on‑year to CHF 68 million, signalling an urgent warning to investors and management alike. China, alongside Hong Kong and Macau, remains the primary weak spot, contributing 27 per cent of total revenues. Falling demand across these regions continues to undermine core sales and profit performance. Despite encouraging double‑digit growth in North America and market share gains in countries such as Japan, India and the Middle East, these gains have yet to compensate for the shortfall from Greater China. ADVERTISEMENT Net profit attributable to owners collapsed to CHF 3 million, compared with CHF 136 million during the same six‑month period last year. This dramatic decline illustrates the scale of the downturn, making it Swatch's worst half‑year performance in recent memory. Analyst commentary has been scathing: Vontobel described this period as 'an ugly half year for Swatch Group in all respects'. The fallout from slowed Chinese consumer activity has been compounded by negative currency effects—Swiss franc appreciation cut CHF 113 million from turnover relative to constant‑currency comparisons. Adding fresh complexity, new U. S. tariffs threaten to raise costs on Swiss watch imports by up to 31 per cent. Industry stakeholders now warn that these levies could further weigh on margins, with retailers like Watches of Switzerland projecting a margin squeeze in the year ahead. Beyond external pressures, a growing number of investors are scrutinising Swatch's internal governance. Shareholder activism has surfaced, with calls for more oversight of the centrally controlled Hayek family, whose dual‑class voting structure remains a source of contention. Net profits collapsed by 75 per cent to CHF 219 million in 2024, but critics assert that this malaise runs deeper. GreenWood Investors, led by Steven Wood, has launched a push to join the board, advocating for brand revitalisation, governance reforms and a strategy pivot toward luxury exclusivity akin to Hermès and Ferrari. Management, though addressing short‑term volatility, emphasises Swatch's entrenched strengths. Its vertically integrated manufacturing, with over 150 production sites, and the success of the affordable MoonSwatch line demonstrate resilience. The company has pledged that cost‑cutting measures and a pipeline of new product launches—particularly in the U. S. and Japan—should drive a rebound in the second half of the year. The first‑half slump follows broader downturns last year, when revenue declined 12.2 per cent to CHF 6.74 billion in 2024, and operating profit fell 75 per cent to CHF 304 million. That drop reinforced trading floor rumours of governance fatigue and brand dilution at high‑end labels like Omega and Breguet. Economically, China's consumer landscape remains unsettled. A combination of property market stress, slower GDP growth and official campaigns discouraging conspicuous consumption have dampened luxury spending. Swiss watch exports to China and Hong Kong plunged by double digits in early 2024, while only the lower‑priced Swatch line bucked the trend in the region, gaining 10 per cent in sales volume. Swatch Group's corporate ambition to maintain full production capacity and avoid layoffs during weak demand, while strategically commendable, has weighed on margins—especially in the production segment. Management asserts this decision safeguards long‑term capabilities and is now beginning to bear fruit, with production margins improving since June. Mixed signs beyond China offer guarded optimism. North America posted record sales, Japan recorded robust growth, and emerging markets like India and the Middle East offered upside. These regions now form the central axis of Swatch's recovery strategy.
Mint
15-07-2025
- Business
- Mint
Trump threatened Brazil with 50% tariffs. How he is using trade as a political cudgel.
He did it for Mark Carney in Canada. He did it for Anthony Albanese in Australia. Did Donald Trump just secure re-election for Luiz Inácio Lula da Silva in Brazil? That is investors biggest worry about the U.S. president's threat to slam 50% tariffs on imports from the Latin American giant. 'I'm most concerned that what just happened will help Lula a lot," said Thierry Larose, portfolio manager for emerging markets local debt at Vontobel asset management, using the third-term Brazilian leader's nickname. 'That is why I'm cautious on the market." Equity investors apparently agree. The iShares Brazil exchange-traded fund has sold off 5% since Trump's announcement last Wednesday. Brazilian assets have been on a tear for most of this year. Stocks are up by nearly a quarter. The real has climbed 12% against the dollar, the best-preforming major currency outside Russia's thinly traded ruble. One reason is a low starting point, said Malcolm Dorson, head of emerging markets strategy at Global X ETFs: Stocks cratered by 35% in 2024. Another is expectation that the 79-year-old Lula will be out of a job after elections in October 2026, with approval ratings stuck below 30%. 'When Lula had brain surgery in December, the market rose 5% in an hour," Dorson noted. Trump's announcement less than a week ago looks like political manna for the beleaguered leftist veteran. Brazil has relatively little to fear economically from Washington's wrath. Exports to the U.S. account for less than 2% of gross domestic product, compared with 30% for Mexico, Larose calculated. And the top exports—coffee, crude oil and iron ore—can be sold elsewhere. Trump's tariff letter mentioned trade only parenthetically. His principal demand was that Brazilian courts drop their prosecution—'witch hunt," as he put it—of former President Jair Bolsonaro, who was indicted in February for conspiring to violently overturn the 2022 election. Bolsonaro lost to Lula by less than 2 percentage points. Brazilian voters have high regard for their judiciary, said Duncan Wood, a senior adviser at the Inter-American Dialogue, a U.S.-based think tank for Western Hemispere issues. 'There's traditionally been a high level of trust in Brazilian courts as apolitical," Wood said. That has enabled Lula to respond as defender of national sovereignty. Trump's move was 'a total lack of respect," Lula told local journalists. 'I have nothing to talk about with him." Lula 3.0 has, in fact, seen more impasse and muddle-through than leftist revolution, noted Sarah Glendon, senior sovereign analyst for Latin America at Columbia Threadneedle Investments. A more conservative Congress has bottled up Lula's signature populist initiative, eliminating income tax for anyone earning real 5,000 ($899) a month or less. Many of Brazil's fiscal challenges, like indexation of benefits and many wages, are embedded in the country's constitution. That means any government will struggle to reduce debt payments, which eat up 30% of government revenue, or to keep inflation under control, Glendon asserted. 'It's not necessarily the case that the fiscal position would be better without Lula," she concluded. On the other hand, with 95% of its debt issued in local currency, Brazilian credit is in no medium-term peril. Still, investors are gaming out the complex political calculus of the next 15 months. Brazilian elections turn more on charismatic personalities than parties, Dorson said. Lula, dominant on the left, is dangling a new run despite his age and health, with no clear successor if he steps aside. Bolsonaro has been banned from running, even if he stays out of jail. But he remains 'the puppet master" on the right, Dorson sais. Markets are hoping Bolsonaro endorses Tarcisio de Freitas, a center-rightist who has earned high marks as governor of São Paulo state, Brazil's largest. 'Freitas getting elected could release the mother of all rallies for Brazil," Dorson predicted. Bolsonaro might also name his son Eduardo, who has been lobbying Trump for him in the U.S., or wife Michelle as a stand-in. To Wood, of the Inter-American Dialogue, what is clear is that Trump's latest sallies have dimmed hopes of a U.S. reboot with Latin America, which were kindled by the appointment of Marco Rubio as secretary of state. Rubio is the son of Cuban immigrants and speaks Spanish. Trump twinned his threat to Brazil with the promise of a 50% tariff on copper, which would strike at the economic lifeline of two more Southern neighbors, Chile and Peru. The president capped his week by setting a 30% tariff on Mexican imports as of Aug. 1. 'There was actually hope in the beginning of this administration," Wood said. Instead, leaders across the region are weighing other geopolitical options. 'It's not like we can't survive without the U.S.," Lula told a Brazilian interviewer. His political survival might even look better. Write to editors@
Reuters
10-07-2025
- Business
- Reuters
Barry Callebaut lowers annual targets again due to cocoa bean prices
July 10 (Reuters) - Swiss chocolate maker Barry Callebaut (BARN.S), opens new tab cut its volume guidance for the third time this year on Thursday due to what it described as unprecedented market conditions in the cocoa bean market, as it reported nine-month results in line with market expectations. The world's biggest chocolatier, which supplies key food producers such as KitKat maker Nestle (NESN.S), opens new tab, expects its sales volume to fall by 7% in the year ending on August 31. It had previously said it expected the cocoa sales volume to fall by a mid-single-digit percentage due to volatility in cocoa bean prices that trade in London at around 5,455 pounds per metric ton . Its shares were down 2.8% at 0618 GMT in premarket, with analysts flagging concerns that the management's low visibility and another profit warning could hurt the investment case and fail to reassure investors on the difficult environment. The low visibility "could also raise question about the company's management information system", analyst Matteo Lindauer from Vontobel said. Despite London cocoa futures falling to an eight-month low on Monday on expectations of a rise in production in South America, industry sources told Reuters that the key West African cocoa producing region was likely to see a 10% decline in the upcoming 2025/26 season. Barry Callebaut also lowered its operating earnings target, saying they would rise by a mid to high single-digit percentage in constant currency this year. In April, it had guided for a double-digit rise. Its sales volume was 1.6 million tonnes in the nine months to the end of May, meeting analysts' average forecast in a company-provided poll, even as they fell 9.5% year-on-year in the third quarter of the financial year. Despite this, revenue increased by a half during the nine-month period, as the chocolatier passed on raw material costs to its customers. (This story has been corrected to say the company has cut its guidance three, not two, times this year, in paragraph 1)
Straits Times
19-06-2025
- Business
- Straits Times
Swiss watch exports slump in May as US tariffs shake market
The latest data underscore the impact US President Donald Trump's trade policies are having on the watch sector. PHOTO: REUTERS Swiss watch exports slump in May as US tariffs shake market ZURICH – Swiss watch exports dropped by almost 10 per cent in May led by a slump in shipments to the US, reversing the previous month's surge when manufacturers were trying to get ahead of a looming trade war. Total shipments fell 9.5 per cent to 2.1 billion Swiss francs (S$3.35 billion), the Federation of the Swiss Watch Industry said in a statement on June 19. Exports to the US, the single-biggest market, were down just over 25 per cent. The latest data underscore the impact US President Donald Trump's trade policies are having on the watch sector. The US imposed a 10 per cent levy on imports from Switzerland in early April, and has threatened as much as 31 per cent if a new trade deal is not reached. The watch industry would be hit hard by any increase. Asia continued to suffer, with shipments to China, Japan and Hong Kong all registering double-digit declines in the latest data. 'The rise of 'luxury fatigue,' a declining 'feel-good factor' from luxury purchases, and worsening consumer sentiment all contribute to a less optimistic outlook,' Vontobel analyst Mr Jean-Philippe Bertschy said in a note. The Swiss watch industry's weakness matches a wider trend for the export-dependent country, as overall monthly foreign sales declined 42 per cent, narrowing Switzerland's trade surplus the most in almost five years. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
The Hindu
09-06-2025
- Business
- The Hindu
Shaken by crises, Switzerland fetters UBS's global dream
Switzerland announced reforms on Friday to make its biggest bank UBS safer and avoid another crisis, hampering the global ambitions of a lender whose financial weight eclipses the country's economy. UBS emerged as Switzerland's sole global bank more than two years ago after the government hastily arranged its rescue of scandal-hit Credit Suisse to prevent a disorderly collapse. The demise of Credit Suisse, one of the world's biggest banks, rattled global markets and blindsided officials and regulators, whose struggle to steer the lender as it lurched from one scandal to the next underscored their weakness. On Friday, speaking from the same podium where she had announced the Credit Suisse rescue in 2023 as finance minister, Switzerland's president Karin Keller-Sutter delivered a firm message. The country would not be wrongfooted again. "I don't believe that the competitiveness will be impaired, but it is true that growth abroad will become more expensive," Keller-Sutter said of UBS. "We've had two crises. 2008 and 2023," she said. "If you see something that is broken, you have to fix it." During the global financial crisis of 2008, UBS was hit by a losses in subprime debt, as a disastrous expansion into riskier investment banking forced it to write down tens of billions of dollars and ultimately turn to the state for help. Memories of that crisis also linger, reinforcing the government's resolve after the collapse of Credit Suisse. For UBS, which has a financial balance sheet of around $1.7 trillion, far bigger than the Swiss economy, the implications of the reforms proposed on Friday are clear. Switzerland no longer wants to back its international growth. "Bottom line: who is carrying the risk for growth abroad?" said Keller-Sutter. "The bank, its owners or the state?" The rules the government proposed demand that UBS in Switzerland holds more capital to cover risks in its foreign operations. That move, one of the most important steps taken by the Swiss in a series of otherwise piecemeal measures, will make UBS's businesses abroad more expensive to run for one of the globe's largest banks for millionaires and billionaires. Following publication of the reform plans, UBS Chairman Colm Kelleher and CEO Sergio Ermotti said in an internal memo that if fully implemented, they would undermine the bank's "global competitive footprint" and hurt the Swiss economy. Strategy The reform would require UBS to hold as much as $26 billion in extra capital. Some believe the demands may alter the bank's course. "It could be that UBS has to change its strategy of growth in the United States and Asia," said Andreas Venditti, an analyst at Vontobel. "It's not just growing. It makes the existing business more expensive. It is an incentive to get smaller and this will most likely happen." Credit Suisse's demise exploded the myth of invincibility of one of the wealthiest countries in the world, home to a global reserve currency, and proved as unworkable a central reform of the financial crisis to prevent state bailouts. For many in Switzerland, the government's reforms are long overdue. "The bank is bigger than the entire Swiss economy. It makes sense that it should not grow even bigger," said Andreas Missbach of Alliance Sud, a group that campaigns for transparency. "It is good that the government did not give in to lobbying by UBS. The question is whether it is enough. We have a banking crisis roughly every 12 years. So I'm not really put at ease." UBS CEO Ermotti had lobbied against the reforms, arguing that a heavy capital burden would put the bank on the back foot with rivals. The world's second-largest wealth manager after Morgan Stanley is dwarfed by its U.S. peer. Morgan Stanley shares value the firm at twice its book value, compared with UBS's 20% premium to book. On Friday, the bank reiterated this message, saying that it strongly disagreed with the "extreme" increase in capital. But others are sceptical that the government has done enough. Hans Gersbach, a professor at ETH Zurich, said there was still no proper plan to cope should UBS run into trouble. "The credibility of the too big to fail regime remains in question."
