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Swatch H1 profit falls 9 pct, confident on H2

ZURICH - Swatch Group posted a 9 percent fall in first-half net profit on Friday as the weak dollar and a loss on investments weighed, but gave a confident outlook due to demand in emerging markets.

The world's largest watchmaker said net profit before minorities fell to 418 million Swiss francs ($384.5 million), slightly above the average estimate of 411 million francs in a Reuters poll.

‘Despite all the negative reports of the financial sector and the increase in costs worldwide, the group management still expects sales and profitability to show solid positive development in the second half-year,’ said the group, whose Omega brand is the official timekeeper of the Olympics.

The company was hit by a financial loss as it wrote down the value of investments, which include an 8 percent stake in its Chinese retail partner Xinyu, whose shares have lost over 30 percent so far this year.

The group is best known for its colourful plastic Swatch watches and also owns higher-end brands such as Breguet and Blancpain.

Investors have been looking at luxury goods makers such as Swatch, Swiss rival Richemont and France's LVMH -- which have benfited from several years of strong growth powered by Asia -- for any signs of cooling in demand, but sales seem to be holding up so far.

Operating profit rose 16 percent to 593 million francs, while gross sales jumped 14 percent to 2.973 billion francs. The group's operating margin rose to 21 percent from 19.6 percent in the year-ago period.

Swatch trades at 11.5 times 2009 earnings, while Richemont trades at 13.7 times, according to Reuters data.