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Swatch sees 'healthy growth' for 2017 after profit plunges

Swatch said November, December and January had showed 'very good growth, particularly in China
Swatch said November, December and January had showed 'very good growth, particularly in China

Swatch Group has said it expects "healthy growth" for 2017 after net profit nearly halved in 2016, as weak watch sales and overcapacity hit profitability at the world's biggest watchmaker. 

Swiss watchmakers have been grappling with eroding sales in their biggest markets, Hong Kong and the US, and tourist shoppers avoiding Europe for fear of extremist attacks.

But mainland China sales have recently turned the corner. 

"Based on the positive development of the last three months, healthy growth is expected for the year 2017," the company, based in Biel in western Switzerland, said in a statement. 

Pointing to a turnaround, Swatch said November, December and January had showed "very good growth", particularly in mainland China. 

Still, for 2016 net profit at the maker of Omega and Longines watches slumped 47% to a worse-than-expected 593 million Swiss francs.

This reflected the company's reluctance to cut costs that are higher than at peers partly because Swatch has to supply watch movements to the industry. 

Analysts in a Reuters poll had been expecting net income of 653 million francs. 

The group said its operating profit margin deteriorated to 10.7%, from 17.2% last year. 

It proposed cutting its dividend to 6.75 francs per share, down from 7.50 francs a year earlier. 

Sales at constant currencies slid 10.8% to 7.55 billion francs, mirroring a 10% decline in Swiss watch exports in 2016. 

Swatch Group's shares have risen 10.7% so far this year, on hopes of a market recovery. A 1 billion franc share buy-back currently under way is also supporting the share price.