- Sales grew by 2% to € 5,430 million and by 4 % at constant exchange rates
- Performance varied across regions and product lines
- Operating profit decreased by 4% to € 1,311 million, reflecting volatile trading conditions and unfavourable currency movements
- Operating margin declined by 160 basis points to 24.1 %
- Profit for the period declined by 23 % to € 907 million, reflecting primarily unrealized currency hedging losses
- Solid cash flow from operations of € 1,008 million.
Richemont results for the first half were fairly resilient overall, given the volatility of the environment that affected our clients and retailer partners in all regions, with the notable exceptions of the Americas and Middle East. Worth highlighting is the resilience of the jewellery category where sales rose by 10 % at constant exchange rates.
In this difficult environment, the Group’s Maisons benefited from successful product launches and, in certain markets, price increases. Lower precious material prices and cost containment measures helped mitigate subdued sales and the overall negative impact of foreign exchange rates. The decline in operating profit was limited to 4 %.
Net profit decreased by 23 %. Together with the lower operating profit, this reduction is explained by the substantial € 239 million mark-to-market charge associated with our well-established hedging programme. This compares to a gain of € 127 million in the comparative period.
Cash flow from operations remained solid, reflecting strict working capital management by the Maisons. Richemont has an exceptionally strong balance sheet with net cash of € 4.3 billion at 30 September 2014.
In the month of October, sales increased by 4 % at actual exchange rates. Sales in the month were 1 % lower at constant exchange rates, partly reflecting the exceptional level of high jewelery sales in the Asia Pacific region during the comparative period. In geographic terms, the volatile sales pattern seen during the six-month period continued into the month of October with growth in the Americas, Europe and the Middle East, but lower sales in the Asia Pacific region and Japan. Wholesale sales outperformed retail in certain regions. As in previous challenging periods, cost control measures have been put in place to preserve the Group’s cash flows.
At the same time Richemont’s Maisons will continue to pursue their differentiated marketing strategies and planned investment programmes. The external environment remains difficult ahead of the holiday trading period. Taking a longer-term view, the strength of the Maisons, the quality of our products, the skills of our artisans and the financial strength of Richemont means we can look forward positively. We remain confident that demand for high quality products will continue to grow in the global market.
Compagnie Financière Richemont SA
Geneva, 7 November 2014