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Richemont confirms financial losses cut profit

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Richemont confirms financial losses cut profit
Photo: Richemont
11:10 CEST+02:00
Geneva-based Richemont, the world's second largest luxury goods group, confirmed on Friday that its annual net profit fell by more than a third due to losses on financial instruments.

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

The drop was slightly less than the 36-percent decline Richemont signalled in a profit warning last month, but in line with the expectations of analysts polled by the AWP financial news agency.
   
The company warned in April that "non-cash, mark-to-market losses on financial instruments, which include monetary items and derivatives."
   
Multinationals often use financial instruments to try to protect themselves against changes in exchange rates in the different countries they operate, but unexpected changes can lead to losses.
   
The Geneva-based group, which owns top global brands like Cartier, Piaget and IWC, meanwhile said its sales had inched up four percent in during the year to €10.4 billion.

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.

And the company said its operating profit swelled 10 percent to €2.7 billion — slightly better than analyst expectations — boosted especially by its sale of an investment property.

Richemont said its sales in April had ballooned nine percent in actual exchange rates compared to the same month last year, but that they slumped eight percent at constant exchange rates.

Richemont's board said it would stick to its aim of gradually increasing the company's dividends over time, and would propose for the financial year 2014/15 dishing out 1.60 Swiss francs ($1.70, 1.50 euros) per share to shareholders, up from 1.40 a year earlier.
   
Following the news, the company saw its share price slump 1.73 percent to 85.35 francs a piece in morning trading as the Swiss stock exchange's main SMI index slipped just 0.1 percent.

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