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Swatch reports net profit growth slows

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(Globalpost/GlobalPost)

The world's biggest watch-making group Swatch reported on Tuesday that net profit growth slowed in the first half of the year, but still beat analysts' expectations.

The company, most known for its brightly coloured plastic-cased watches, reported only single-digit net profit growth for the the first time since 2009.

Net profit grew 6.1 percent to 768 million Swiss francs ($820 million, 622 million euros) during the first six months of the year.

Swatch Group sales meanwhile ticked in 8.7 percent higher at 4.1 billion Swiss francs, the company said in its earnings statement.

The watchmaker stressed that it was the victim of its own success last year, with growth appearing weak compared to "the very strong first half year 2012."

The net profit was slightly higher than the 733 million francs expected by analysts polled by the AWP financial agency, while the sales were in line with expectations.

In recent years, the Biel-based group has seen its business balloon on a seemingly insatiable appetite by Chinese consumers for luxury watches, but company chief Nick Hayek warned in March that the massive growth could not go on forever.

Over the last six months, Swiss watch exports to China have slowed, in part owing to a recent ban on ads for extravagant gifts in an anti-corruption push.

Earlier this month the French luxury products group Hermes reported signs of a slowing of demand in China for its watches.

Swatch Group nonetheless said the outlook for the remainder of the year remained "very promising," stressing that "a strong second half-year is expected."

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

The watchmaker said on Tuesday that it aimed to launch a number of new products in coming months.

And it said it would continue to work to integrate recently purchased US jeweller and watchmaker Harry Winston, which it insisted has "huge, almost untapped market potential in the high jewelry and watches activities."

Vontobel analyst Rene Weber described the results as "robust, considering the deterioration of the overall economic environment."

However, he lamented "the lower visibility in the results," after Swatch Group decided to present its figures in two rather than three divisions, having lumped its watchmaking components business into its watches and jewellery segment.

Following Tuesday's announcement, Swatch Group shares rose 3.40 percent to 547.50 Swiss francs in midday trading, well ahead of the Swiss stock exchange's main index, which was up just 0.12 percent.

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