Financial instruments: Richemont’s net profit plunges

Drop slightly less than 36% but in line with expectations

ZURICH: Richemont, the world’s second luxury goods group with brands like Cartier and Piaget, confirmed that its annual net profit fell by more than a third due to losses on financial instruments.

During its financial year 2014-15, ending on March 31, the Swiss company earned €1.3 billion ($1.4 billion) in net profit, down 35 percent from a year earlier.

The drop was slightly less than the 36-percent decline Richemont signalled in a profit warning last month, but in line with the expectations.

The Geneva-based company, which owns brands such as Jaeger Le Coultre, Van Cleef & Arpels and IWC, had warned in April of “non-cash, mark-to-market losses on financial instruments, including monetary items and derivatives.”

The Swiss central bank in a shock move in January ended an exchange cap of the Swiss franc to the euro, resulting in a sharp rise in the value of the Swiss currency.

“As a consequence, the Swiss franc dramatically appreciated from the pegged level of 1.20 to the euro to 1.04 at 31 March 2015,” Richemont chairman Johann Rupert said.

This hit Richemont as it keeps its books in euros,” he said, adding there was a possibility that the group would be impacted on a longer-term basis, depending on how exchange rates develop.

Richemont however said its sales had inched up four percent during the year to 10.4 billion euros.

The rise, which was only one percent in constant exchange rates, reflected “growth in jewellery, haute horlogerie and steel watches, as well as growing demand in Europe, the Middle East and the Americas,” it said. The amount however fell short of analyst expectations that Richemont sales during the year would tick in at 10.9 billion euros.

Published in The Express Tribune, May 23^rd, 2015.

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