Richemont H1 profit jumps to €1.8 bln as jewellery demand lifts sales

Investing.com -- Compagnie Financiere Richemont SA’s (SIX:CFR) first-half profit rose sharply to €1.8 billion, driven by the non-recurrence of a €1.2 billion write-down booked a year earlier and steady demand for its jewellery brands, the Swiss luxury group said on Friday.

Profit from continuing operations increased 4% to €1.796 billion for the six months to Sept. 30. Revenue rose 5% at actual rates to €10.6 billion, or 10% at constant exchange rates, with second-quarter sales up 14% at constant rates after a 6% rise in the first quarter.

Chairman Johann Rupert said the group delivered “a remarkable top line performance in the first half led by sustained local demand” and cited “the benefit of the Group’s several growth engines” during the period.

Operating profit increased 7% to €2.36 billion, giving a margin of 22.2%. Gross profit rose 2% to €6.94 billion, while gross margin fell to 65.3% from 67.2% due to currency movements, higher raw material costs and the first effects of new U.S. duties. 

The group said the tariffs could cost “circa €0.3 billion” this fiscal year if current rates remain in place.

The Jewellery Maisons - Cartier, Van Cleef & Arpels, Buccellati and Vhernier, remained the company’s largest division, with sales up 9% to €7.75 billion, or 14% at constant exchange rates. 

Operating profit for the segment rose 9% to €2.54 billion, with a 32.8% margin. Richemont said demand for jewellery and watch collections increased across regions, supported by new launches and high jewellery events in Europe and Asia.

Sales at Specialist Watchmakers fell 6% to €1.56 billion, or 2% at constant rates, with the group citing weaker demand in China, Hong Kong and Macau despite an improvement in the second quarter. 

Operating profit dropped to €50 million from €160 million, pressured by currency effects, higher gold prices and U.S. duties.

The “Other” business area, which includes Fashion & Accessories Maisons, Watchfinder and other activities, posted €1.31 billion in sales, down 1% at actual rates and up 2% at constant rates. 

The segment recorded a €42 million operating loss, including a €33 million loss in Fashion & Accessories Maisons. Richemont cited continued strength at Alaïa and Peter Millar and improved momentum at Chloé.

Regional results showed Europe up 10% to €2.59 billion, the Americas up 11% to €2.6 billion, and the Middle East and Africa up 13% to €965 million. 

Asia Pacific was stable at actual rates and up 5% at constant rates, while Japan fell 5% to €1.03 billion. Direct-to-client sales accounted for 76% of group revenue.

Richemont ended the period with €6.52 billion in net cash. Operating cash flow rose to €1.85 billion, and dividend payments totalled €1.89 billion. Inventories stood at €9.61 billion, representing 18.1 months of inventory rotation.

Rupert said the group “will need to continue navigating through uncertain times” but noted “encouraging signs” in several business areas in the second quarter.