Richemont Profit Drops 31%; Chief Executive to Retire

Source from:  Bloomberg 05/15/2009

Cie. Financiere Richemont SA, the world's largest jewelry maker, reported a 31 percent profit drop and said Chief Executive Officer Norbert Platt will retire. Platt, 61, will step down at the end of the year after developing diabetes, Chairman Johann Rupert told reporters on a conference call today. Rupert declined to comment on a successor for Platt, who before becoming CEO in 2004 spent 17 years as head of the company's Montblanc watch unit. Net income slid to 1.08 billion euros ($1.5 billion) in the 12 months through March as watch profitability slipped and the company spun off a stake in British American Tobacco Plc, Richemont said. Operating profit dropped 12 percent to 982 million euros, beating the 945 million-euro average of seven analysts' estimates compiled by Bloomberg. Rupert said he demanded contingency plans from all of Richemont's brands to show how they can keep cash flow positive should sales fall as much as 30 percent. Swiss watch shipments to the U.S. fell by 50 percent in March, according to trade group statistics. Bulgari SpA, the world's third-largest jeweler, reported its first quarterly loss in a decade this week. "We are going to have some tough times," Rupert said today, adding that he doesn't know whether the slowdown will last one year or six. "Live with it. Get used to it." April sales dropped 19 percent, Richemont said today. Analysts such as Urs Diethelm of Bank Sal. Oppenheim Jr. & Cie. and Patrick Hasenboehler of Sarasin said Platt's departure was a negative surprise. "Norbert Platt did a lot at the company in terms of bringing financial discipline," said Jon Cox, an analyst at Kepler Capital Markets. "He may have done it so well that there is no need for a replacement as a CEO in the way he was." The German executive broadened the Mont Blanc pen brand into watchmaking and helped Richemont achieve record sales and operating profit of more than 1 billion euros in the prior fiscal year, Richemont said. He also helped Richemont spin off its stake in BAT, which Rupert today called a "security blanket." Investment Plan Richemont has net cash of 822 million euros and plans to invest in improving its brands and service, the chairman said. "Any company that we may wish to buy is not for sale," Rupert said. Richemont rose 1.28 francs, or 6.2 percent, to 22 francs in Zurich trading. The stock has dropped 37 percent in the past 12 months, more than the 22 percent decline in larger competitor LVMH Moet Hennessy Louis Vuitton SA. The owner of the Vacheron Constantin and Piaget brands cut its dividend to 30 cents a share from 78 cents, mostly because of the spinoff of its stake in BAT. Richemont said it plans to have closed 62 stores in the two years through March 2010, including 34 Montblanc shops. The luxury-goods maker will extend a stock buyback program, and repurchase as many as 10 million so-called A shares over the next two years. That's 5.4 million more than previously planned and would represent a 1.7 percent stake. Richemont said it's in talks to sell the Montegrappa pen brand and a "small" Italian jewelry design workshop. Lower Shipments Net income beat the 799 million-euro average analyst estimate. Sales rose 2 percent to 5.42 billion euros. Richemont said Jan. 19 that market conditions are the "toughest" since its creation 20 years ago. Swiss watchmakers have been forced to curtail production and cut jobs after exports of their timepieces slumped. Shipments dropped 27 percent in March, the most on record. "A recovery is still far away," Aurelie Husson Dumoutier, an analyst at Societe Generale, wrote in a May 12 note as she cut her rating on Richemont to "sell" from "hold." Enditem