Swatch says net profit up 26% to 1.6 bn Swiss francs

The world's biggest watch-making group Swatch said on Monday its net profit soared 26 percent last year, beating market expectations and boosting its share price.

Swatch, most known for its brightly coloured plastic-cased watches saw its net profit balloon to 1.6 billion Swiss francs (1.3 billion euros, $1.76 billion).

Hailing "a high level of capacity utilisation, innovative production methods and traditionally strong cost controls," the group also said its operating profit swelled nearly 23 percent year-on-year to 1.98 billion Swiss francs.

Analysts surveyed by Swiss financial news agency AWP had expected a more modest increase in the watchmaker's net profit to 1.4 billion francs on an operating profit of 1.8 billion francs.

Following the news, the price of shares in the watchmaker surged 2.5 percent to 530.50 Swiss francs in late morning trading on a Swiss stock exchange up 0.25 percent.

Earlier, Swatch, which often publishes parts of its results in advance, had reported that its 2012 sales rose by 14 percent to 8.1 billion francs.

"Swatch Group convinced with a strong performance," Bank Sarasin analyst Patrick Hasenboehler said in a research note.

The Swiss company said its all-important watches and jewellery division had seen its operating profit leap 20.8 percent to 1.6 billion Swiss francs, despite large-scale investments in marketing to promote its luxury Omega brand during the London Olympics.

The group said it had especially seen strong growth in sales of its mid-range and high-priced products.

While Swatch's low-end plastic watches are perhaps its most recognisable, the Swiss company operates in every price range, from the Flik Flak kid's watches to prestigious timepieces under for instance the Breguet brand which can cost more than one million Swiss francs a piece.

The Biel-based group is also Switzerland's leading provider of watchmaking components, and in 2012, its production unit saw its operating profit swell 37.3 percent to 442 million Swiss francs.

This, it said, was largely due to its "high level of capacity utilisation and new revolutionary production methods."

Swatch said its board would propose raising the dividend by 17.4 percent to 6.75 Swiss francs for each bearer share and to 1.35 francs for each registered share.

For 2013, the watchmaker said "the signals from the markets around the world clearly indicate continued healthy growth potential for the Swiss watch industry and the Swatch Group."

It estimated the Swiss watch industry had realistic long-term growth prospects of 5.0-10.0 percent per year.

Swatch also said it expected its recent purchase of US jeweller and watchmaker Harry Winston showed great growth potential.

The Swiss company announced the acquisition last month aimed at allowing it to expand its luxury offerings and compete with the likes of Bulgari, owned by LVMH, Richemont's Cartier and British diamond merchant Graff.

Vontobel analyst Rene Weber meanwhile said he did not expect the Harry Winston purchase to improve on the Swiss group's record 25.4-percent operating margin going forward, since the US jeweller traditionally enjoyed far narrower margins than Swatch.