Swatch : Transcript of the conference call, January 30, 2026Download PDF (209.36 KB)

Full Regular Transcription The Swatch Group - Publication of Key Figures 2025

2026-01-30 at 2:00 pm CET

COMPANY REPRESENTATIVES

• Nick Hayek, Member of the Board and CEO of The Swatch Group

• Thierry Kenel, CFO

PRESENTATION Hayek Nick

Hello, everybody. First of all, I wish you all a Happy New Year, 2026. The year announces itself as a very speedy, very interesting, full of, I hope, positive expectations and surprises, and I hope positive surprises. So, I'm today here with Mr Kenel.

Kenel Thierry

Hello to everybody.

Hayek Nick

And with Mr Tschumi from the Treasury.

Mr Tschumi

Hello, everybody.

Hayek Nick

The chief controller, Mr Lopez, is at home sick with flu, and I just came back also for today and I've been touched by the flu. But we hope that we can respond to all your questions. I just heard, Moira, and I think this dates from the past, of course the sales side and investors, they can also ask questions. We open this key figures and our meetings. I remember when we made the US tariff information to all of you, we also opened, of course, the question for all the other people. So I think that is still from the past, and it's changing.

You have seen our publication, and it's true that the second half of the year saw an acceleration. Not as quick as I had hoped for, and with a Swiss franc that has become so strong that I have also not hoped for, to be honest, and that I consider as something that is more important to have an eye on for the Swiss watch industry, and for Switzerland in general. It's much more problematic than tariffs that will be implemented in one country or another one.

So, coming to 2025, we saw this acceleration starting in the second half, in the third quarter, and then accelerating in the fourth quarter, and even accelerating in December. And to tell you, in January, we see the same situation. There is an acceleration, a good situation, including China. That's important. We have many countries that developed during the years very well. But what is very interesting news is that China is rejoining, again, into positive figures.

And this is even more interesting when I look at December and January, when it comes to China. First of all, Chinese New Year last year was touching the 30th and 31st January, and this year it will only be mid-February. So you would all think that the comparison base is very difficult, and it will be difficult to develop a better sales than the year before. But it's the case. It performs well, and it's a real sign of acceleration.

And at Swatch Group, we also have a special comparison base. In China, we reduced the third party-distribution, not our own stores. Our own stores remained at the same level than the year before,

but we reduced by 15% the third-party distribution. It means multi-brand retailers that worked with us to focus on the real good point of sales, and where we can really focus all our efforts.

And despite this reduction, or perhaps because of this reduction, also 15% of our distribution network in China, we see positive numbers. So this is all an indication. And something is moving. And you have heard some reports from other companies working in jewellery or in watches, fast fashion, etc., they all feel also that China is moving in a more positive way. So we'll not expect that China is exploding in consumption by 20%, 30%, but thinking now, from the low base, a growth of 2%, 3%, 4% is certainly possible for some brands, even more. So, that is what we got as a signal. We wanted to share this with you, and we can go more into the detail in the discussion. I think it's important.

The second thing I wanted to say, because there are also investors listening, is we wrote that we decided to maintain our workforce. And what is new, perhaps I have to explain why we not only kept our workforce in the factories, but we didn't apply for short work. It means that we would be compensated by 80% of the cost, and insurance from the state. We said no, because we wanted to keep the flexibility in our factories, and our factories are a bit special.

The Swatch Group has central research and development. Asulab and CDNP, and then every brand has its own research and development. But what is important, every production company of the Swatch Group has a known ambition and responsibility, and the research and development within the factory. And these dates also from the time when we had to deliver third parties and, of course, we had always to remain competitive, and we have to remain competitive on all levels. So innovation is important.

So what we wanted is to keep the flexibility of this workforce to work inside the factories on new systems, on new ways to produce for the future. We developed the smart factory.

We are happy to receive you, part of you, to visit us. It's really a factory that nobody has shown until now, that is fully automated, where production of movements is done in a different way.

This we have done with people from the factories that usually are focused to deliver products, that you have to bring to the market to deliver for the consumer. And we said, wait a minute, now, at the moment, there is stock out there, we don't need to deliver at the moment, but we try to do this. Or I'll give you an example. For our hands factory, Universo, they have also their own research and development, and they use parts of their people to develop a new laser technology to permit, for example, Swatch now, what we did with the snow flakes, the Snow MoonSwatch, to be able to have a very quick laser in the production process, that can have algorithm of 300 different subjects on the dial within 40 seconds.

So these are all applications and things that we develop inside the factories. It's not the central research and development, it's there where it happens. The same with Comadur, ceramics. So we used a big part of the people to use and to try new ceramics, new machines, how we can do it. Because we develop also many machines ourselves. And we say, let's do this for preparation, for innovation, instead of letting the people at home taking money from the state. We want it to be flexible enough to use the people the way we want to do. That's the reasoning behind our thinking. That's why we have done it.

And, of course, the result is a big loss. But at the same time, we have gained a lot of innovation in this situation, for the production, for the future. And innovation doesn't measure how much less people you need in the future, but what can you do for improving the quality, the speed of delivering innovation to bring it to the market. And that's why the reasoning was to keep these people, and to accept that we had a loss of about 300 million coming from production.

So what we are aiming for in 2026 is that, if the growth continues, what we saw in the second part of the year, especially when we see the last quarter this December. Excuse me, I have a little bit a dry voice, it comes from the antibiotics that I had, so I have to take a glass of water, excuse me. So, what we think is, when the growth continues in this level into 2026, the biggest part of these losses

we can get rid of. And this will bring Swatch Group again back to operating income levels that should be around 500, 600 or more millions, depending also on the Swiss franc, of course. But this will be more acceptable levels than what we have delivered today, we know. Of course, we are aiming to do more than 1 billion, but this is what we are foreseeing now for 2026. Okay, that's what I wanted to tell you from the beginning. And then, we are happy to take your questions. The first one is Thomas Chauvet.

QUESTION & ANSWER Chauvet Thomas

Good afternoon, Mr Hayek, Mr Kenel, and Tschumi, thank you for taking my questions. I have two, and then a quick follow-up. The first one on sales back to mid-single digit growth in the second half, accelerating to 7% in Q4, with most regions positive, can you come back, Nick, to your introductory remarks on China? How did trends evolve through Q3 and Q4 relative to the first half, which was, I think, still down double-digit? What's the mood of your Chinese retail customer distributors ahead of Chinese New Year? And lastly, you mentioned last year that Chinese consumer behaviour is changing, and that was creating opportunities for strong brands, how are you adapting your approach to Chinese customers today, at home and abroad?

My second question on inventories, they're down for the first time in five years, if I'm not mistaken, which is encouraging, could you break down the 7.3 billion of inventory composition between raw materials, semi-finished and finished goods? And, given the rising gold prices, has the value of raw material inventories increased materially within that number, and how you're cover it in terms of gold for your production in 2016? And just to follow up on what you said on the recapture of the production losses, are you suggesting that if production is at breakeven in 26, the group's EBIT generation could be around 500 million to 600 million, including a break-even for production. Is that correct? Thank you.

Hayek Nick

Thomas, yes, I said, of course, if you take the 300 million away, or you go close to it, depends on the Swiss franc, what he is doing, we should do a minimum of around 500 million or 600 million. This is something that should be our goal. It's, by the way, also our budget. It's our objective to go there. And we don't need big miracles, we don't need a double-digit growth rate to achieve this. We can achieve this with a normal growth rate.

And when I see the United States, when I see the Middle East, when I see India, Australia, Korea, all what is growing parts of Europe, it's only missing China. That will add 2%, 3% of growth that will bring us to this situation. Yes, that's what I said. But again, be careful, I have never been the one that has said, this is our goal, but this is really what we have in the budget, and that's our objective, yes.

Now for China. Yes, the retailers mood is much better because the stock levels went down from the retailer.

Clearly, they saw, especially in the last quarter, and in December, that the stock levels went down. So they saw that they can reorder now products. They saw with our own distribution that the sell-out is happening. The e-commerce started with it very strongly. E-commerce continue very strongly. This was an announcement, pre-announcement, that consumption will come back. Yes, the mood of the retailer is certainly better than it was in the middle of the year.

Now, for Chinese New Year, what we see is that we have already Chinese people that are travelling to Hong Kong, because also Hong Kong has a January that is very strong. And for our people, it is not expected, because they also thought that this will be very difficult to achieve January numbers, or to go over them, compared with the last year, because Chinese New Year was at the end of the month of January. And Korea is the same thing. Very strong. And here, you have an impact of Chinese, certainly also the ones that cannot go to Japan anymore, but also the anticipation of good business in China is there.

Now, what we have to know is that it's not just luxury. I'm not 100% convinced that luxury is the one that is taking the biggest part of the growth. We see that brands like Tissot, for example, are really performing strong in the market. We see a brand like Breguet that is very strong in the market, especially in Hong Kong. We see that. Omega has also momentum that is strong in China. So, you see, there is really momentum. And the people are sensitive of new products, of concepts, of marketing. We see it with Swatch that are unique and special, and they are very sensitive.

And one thing, perhaps, you have to know, we did not do any price increase in China the last year, from no brand, despite the Swiss franc was a problem. We decided the Chinese are very price-sensitive, and they are also price sensitive when they think people want to take advantage of them. And there were some exaggerations in price increases, you know that, you follow this also. And we decided, no, we want to be stable, and we want to be strict, and we did no price increases in China. And at the moment, we have not foreseen to do price increases in China.

Now, to give you more colour for the development, that is really a change, third and fourth quarter. In the first half, you still had, in local currency, when I take China, we had over minus 20%, that was in the first half, was our turnover. Then, in the second half, you take the third quarter, it went down to below minus 10%. So we already reduced the comparison. And then, in the fourth quarter, China went positive.

So that's not only because the comparison base was much easier, there was really a serious change, a serious consumption change. And, as I said, December alone showed a strong growth, and January, again, is showing a strong growth, in local currency, always. So that's the situation. That's why we say here it looks like, since mid of the year, it starts to change. And again, our numbers are with a 15% less wholesale distribution. So not with increasing of distribution. It's with 15% less. And that's something you have to take in account. That's interesting to see. And I think it gives real reason for everybody, not just for the watch industry, for other industries, to be rather positive for 2026 when you look at China.

Now, the change in consumption. Yes, we have acted after the last time, and we have established a kind of scouting team that we have independent of the brands. We have a Far East procurement service, quality control company, we have a Swatch Art Peace Hotel that's independent, and we have also, Swatch marketing procurement service, which is, with a small team, looking at everything is happening in social media, everything that's happening in distribution, in pop-up stores, what are the trends of the younger people? And this independent of the positioning of one brand or another. And they are not people working that are established in the watch industry. It's people that are in the emotional consumer business.

And with them, we are talking directly with Switzerland to gain much more insight in what this market is doing and what could be new trends, especially in distribution. When I come to pop-up stores, and not the same boring concepts that we have everywhere in the world. So that's for China. I hope this is what you wanted to hear.

Chauvet Thomas

Yes, thank you, Nick.

Hayek Nick

I'll give the word now to Mr Kenel for the inventory.

Kenel Thierry

Yes, thank you, Mr Hayek. The inventory split is the following. By the end of December 25, in raw materials, we now have rounded 620 million. That means 6% less than the year before. In goods-in-progress, we have 370 million, minus 8%. Semi-finished goods, we have 2.26 billion, minus 1.1%. Finished goods, we do have 3.66 billion, that makes, 6.5% less. And in the customer service, here we have 380 million, that means 4% more than December 24.

Now, the split. In the gold position, we have gold position and diamonds of 2.2 billion. That makes 30% of the whole position of inventory.

And the gold that we have in the inventory, this is production gold, and it is in semi-finished and finished products, and the historical average purchasing price of this gold is 57,600. Because this is gold that we have within our production companies, and we are recycling what we process, we are recycling inside the "copeaux" and the scraps that we are recycling, are reusing the gold, and are processing the new alloys for ourselves. So that means that we have not bought a lot of gold, fresh gold from the outside.

Chauvet Thomas

Okay. But the value of gold and diamonds, at 2.2 billion, 30%, it's pretty much in line with the past. Is that not re-evaluated because of the evolution of gold prices in the last [overtalking] at least six months?

Kenel Thierry

No. The average value of the gold, we have the historical value in the production gold.

Hayek Nick

In our inventory, it's the gold price when we bought it, so there's a huge reserve in there.

Kenel Thierry

The average value I told you is 57,600. This is the average value in our production goal. And today, it is 126000?

Hayek Nick

126000. So, you see, we are very conservative people. We are very transparent. That's why we always said our inventory is not a big issue. So again, this is historical values that we have in there, so it's ground solid. I wanted to give you more info about China, because I just found a page about the December numbers, and I said January looks even better. Breguet China, for example, in local currency, in December, did plus 40%. Of course, I only talk about watches. The jewellery did also double-digit growth. Not as much as Breguet did. Then, you have most of the brands are positive. But I want to mention Tissot, for example, is plus 11%. Very strong they are behaving all the time.

You have even Hamilton that is plus 5.5%. You have plus also with Swatch. You have, of course, also Longines that is slowly coming up. Longines has been touched [?]. We closed many of the stores, third party stores, with Longines, but they are also coming back into positive. So you see, all these numbers are really a good indication that China is really moving forward.

So January, the same picture, and better for Hong Kong. And that's why there is really some reason for optimism. Okay?

Chauvet Thomas

Thank you.

Hayek Nick

Thank you, Thomas. Now, we have Madam Grippo.

Grippo Melania

Good afternoon, everyone. This is Melania Grippo from BNP Paribas. I've got two questions. So, first of all, thank you very much for the details on China. I wanted to ask you regarding another market, where you did particularly well last year, the US. I understand the growth was around 20% in local currency. What are you seeing there in January in US? And also, if you could please tell us what was the performance of Europe in 2025, and what you're currently seeing there. Thank you.

Hayek Nick

Thank you, Melania. You must be proud, there is a film now in the cinema that's called Melania. But not that it's you. Sorry. Look, I gave you the numbers of the US. The US had, in the first half, a growth in local currency of 11.5%, so was strong was good. And then, when you come to the second half of the year, they had, in the second half, a growth, an accelerated growth, of 24%. Within the third quarter, you had a peak of 30%, but this was due also to the selling because of the taxes, so you had a part of the retail who bought more products.

But what is interesting, we did also price increases, I will tell you later on about the price increases we did. Then, it continued in the fourth quarter with 18.7% plus. So the growth continued nearly 20%. And January is continuing on the same strong level in the United States. So consumption is healthy. And in the US, I give you some December numbers. So, in the US, Breguet did, in December, 55% more than the year before. Harry Winston did, by the way, also 50% plus. Then, you have Blancpain', did single-digit plus. You had Omega, it was 24% plus. You had Longines with 40% plus. You had Tissot with 27.5% plus. You had Hamilton with 42% plus. And you had Swatch that had 10% plus, because they were so high last year with our collaboration pieces.

So you see that the month only is way over 30% plus in local currency in the United States. And we did price increases the following way, to just complete this for you. So in the first half, we increased prices in May for the first time, when there was the first announcement of the 30%.

And then, we did price increases in the high end. That was around 10%. And with Omega 5%, Rado, Longines, Hamilton, Tissot, Mido, Certina, they all did 5%. Swatch did not increase the prices.

And then, in the second half, when we had the +39% tariff coming, we did a price increase 1stSeptember. And the price increase on 1stSeptember was another 12% in the high end. It was another 5% for Omega, and for the other brands that were 5%, they increased by 8%. And this time, Swatch increased also by 5%. And this was, of course, to counter the +39% tariff that they introduced, which will not compensate the total amount of the taxes, but which compensated, by the way, had to compensate, the part of the Swiss franc, because the weakening of the Swiss franc is dramatic.

So, you see, despite these price increases, you see a December very strong. So it continued without any impact, as if this makes watches even more interesting and seducing for the American consumer. What is important that you all have to know, there was a study that I told the Swiss Watch Federation one day to do, and I think you find it still there, the mechanical watches. What are the amount of people who know what the mechanical watch is, and what is the desire to buy a Swiss-made mechanical watch. And it came out of this study that about 80% of the Chinese consumers gave value to a mechanical watch, so they know what the mechanical watch is, and that they, of course, give big favour to a Swiss-made mechanical watch.

However, the US was in there, if I remember well, around 20%. So big potential. And what we see now is that the young generation in the United States gets more and more interested in mechanical watches. We see it not just in the high end and luxury with the classical brands, we see it in brands like Tissot and also Swatch, of course. And Swatch is not innocent in this, because we launched the collaboration with Blancpain, we also pushed the collaboration with the MoonSwatch, that was copying or inventing a new version of a mechanical watch, the Speedmaster of Omega.

And this was interesting for the people to learn more about mechanical watches. And what we see now, also, with Tissot, that launched a mechanical watch, that the US, and especially women, are choosing, if they can, a mechanical watch over a quartz. There's still a price difference. The price is an issue. Tissot launched a mechanical watch that is around $350, I think, which started very well. And, by the way, one of our competitors from Japan, Casio, they decided to launch, and Casio is really digital, digital, digital, and quartz, they launched a mechanical watch. And these are really for the young people.

So we see a real trend, and people are fascinated to see the movement from the back.

If you take a mobile phone or a smartwatch, okay, you can open it and take a chip, and then try with a magnifier to look at the chip, it will not be very interesting, you will not see many things. But the

people are seduced and want to know, and are looking at, mechanical watches. And it's part of the emotional experience that people have. In China, it was always something, but they had it also because they don't like batteries in watches, they prefer mechanical watches.

And this is a trend that we see in the younger generation that is really there independent, of course, of the positioning, and if you are in the luxury segment or not. Of course, the symbol [?] is in luxury you are not quartz, you are mechanical. And this, in a way, has also brought, of course, the interest when innovation is there in the movement. It's not sufficient to have an old movement and put it in a watch that costs less, that you can have strong innovation in watches, and high quality watches like Swatch or like Tissot, with mechanical movements that are innovative and new. And people are buying into this, not just in China. It's more and more in the United States. And that's also thanks to social media. And that's something I wanted to highlight.

So this is about the United States. And, as I said, January looks really good. The only little point that I would signal in the United States is there is so much liquidity, and there is the stock market that is fuelling this liquidity. I think most of you are agreeing on that, that many people are buying shares, and buying also with borrowed money, and are used to have quick gains, and use these gains afterwards, before, or repaying a part of the borrowed money, and then buying an emotional product like watches. If the stock market in the US will explode and we will have a problem, then, of course, I don't think that the growth rates will continue the same way. But this will not touch watches only. But for the moment, I don't see that, but it's just something that we should not forget about. So that's about the US. You want to know more about the US?

Grippo Melania

No, thanks. Thanks a lot. Europe, maybe.

Hayek Nick

And now you want Europe, probably Italy. I will give you some indication of Europe. You have also an acceleration. Italy, for example, has also, in the fourth quarter, recovered and is now strongly positive in Europe, in local currency. You have Germany, Germany is positive in the second part. In the first part, Germany was minus 10, and in the second half, plus 4.6, with a very strong, where is Germany, a third quarter of slightly positive, and then a fourth quarter that was 9.1% plus. That's the right number, no?

Kenel Thierry

Yes.

Hayek Nick

Okay. Sorry, we have so many papers here and, as I said, I have some antibiotics, and my glass is on it. So sometimes I miss the number. So, you see also here it's positive. Switzerland was, in the first part, not very strong. Had a problem with tourism. But then, in the second half, they went from being below zero, they were minus 1, minus 2, they went up in the second half to plus 4.1, with the third quarter flat, and then the fourth quarter plus 9.9. Also, here you see a trend that the situation becomes more interesting.

So who do I have? The UK. The UK was minus 5 in the first half, and plus 9.2 in the second half, with a strong third quarter and also a strong fourth quarter. So, the third quarter was plus 12%, and the fourth quarter was plus 6.5%, despite the problems that you have in the United Kingdom. So very strange. Now, when I come to the UK, the UK, we did not do price increases in the UK for the watches. So no price increases in the watches for the UK. When you come to France, France had a problem in the first quarter of the ◻ompareson base with the Olympic Games coming and the retailers prepared to have them, so where they're slightly negative. And then, in the third quarter, they came closer to zero. Still, the Olympic Games were there. But when I look again to the third and the fourth quarter, in the third quarter, they were near zero, and then they went to become positive also in the fourth quarter.

Hayek Nick

Thank you. Anne-Laure Bismuth?

Bismuth Anne-Laure

Hello, thank you for taking my questions. So, I have a first question about the pricing, just to understand what was, at the group level, the pricing that was embedded in the algorithm of growth in 2025. And what do you have in mind for this year, given the production cost evolution? And my second question is about the Middle East, which is another fast-growing market. What is the exposure of the Swatch Group to that market, and what is your mid-term view or ambition for that market? Thank you very much.

Hayek Nick

Your connection is not very good. You said what market is important?

Bismuth Anne-Laure

The Middle East.

Hayek Nick

Ah, the Middle East. Excuse me, Middle East. And the first question was about pricing?

Bismuth Anne-Laure

Yes, in 25, and what do you have in mind for 26?

Hayek Nick

But you know we don't do a pricing in the headquarters. It's not the Swatch Group who does the pricing. The brands are independent. The brands are doing the price increases and adaptations, and according to the countries. And, of course, it's the Swiss franc who is the driving force in price increases. We have to see that there is a not too much difference between the countries. And, of course, there is a more price-sensitive brand like Swatch, because it's a lower market segment, and less price-sensitive brands that are in the higher segment. So I cannot foresee, I cannot tell you what will be the next steps in price increases that we will have to do.

What is clear is, if the Swiss franc continues like this, we have to make price increases within the next one, two or three months. We have to see. But then, it's really in the hands of the brands. They make their studies, they look at the competition, at the market situation, at the market share they have. They look, at the same time, at the overall price pyramid that they have in all the countries. There's always the danger of parallel markets that develop. And then, they make a proposal to the headquarters.

And here, in the headquarters, we have then a discussion in the management board. And the management board will decide if we accept these price increases or not. But the initiative is taken by the brands. And it's always the Swiss franc that is the trigger. It's not looking at the margin, what you earn or not. It's the Swiss franc, and to try to keep the right equilibrium in a price pyramid worldwide. That's how we work.

of the glass operations. You can tell this, Mr Kenel.

Kenel Thierry

Yes, we sold a Rivoli eyewear branch, and therefore the figures are not one-to-one benchmarked. But in the Middle East, we have also a huge acceleration. And also because Saudi Arabia is doing strong growth.

Hayek Nick

Yes, but I would like to stick to Rivoli. We were really strong and had many shops. How many shops we had for glasses only? I think many shops. And then, we made a deal with a big glass distribution, or with a glass, yes, distribution company. We took a participation, a minority participation, and they took over the stores. And, of course, the relevant turnover of Rivoli. And when you take this out on the comparison basis, it's like Mr Kenel said, the growth is good, strong.

And Saudi Arabia, the new affiliate that we created, is very strong. It's very strong. And here, of course, we need, and we have, to open stores. We did open two Swatch stores. We did open, I think, one Omega store, and there are many retail or shops, new shopping malls, where we are doing ourselves the stores, or we have some partners down there. So it's very dynamic. I cannot have comparable basis numbers, because the Swatch Group Saudi Arabia is not existing long enough, but Saudi Arabia is very promising, very strong.

It's like India. In India, we were, 20 years ago, the first ones who made the company.

Also, India is growing double-digit. But the Middle East is moving forward, and they are not influenced by the situation and the troubles we had in the Middle East between Israel, between Iran and the US. We also saw that there will be some impact because of what's happening in Iran, for example, and attacks. But there was nothing feelable. We felt nothing negative in the business.

Bismuth Anne-Laure

Thank you. And what is your exposure to that market, please?

Hayek Nick

To the Middle East?

Bismuth Anne-Laure

Yes.

Hayek Nick

What position we have? Where are we, more or less?

Kenel Thierry

Middle East, we do have about 10% of our turnover.

Hayek Nick

10% of the turnover. And India, just to add, because India is really interesting?

Kenel Thierry

In India, the growth rate, you mean?

Hayek Nick

No, you said that the turnover. India is smaller than the Middle East, of course.

Kenel Thierry

Yes, it's smaller than the Middle East.

Hayek Nick

So it's about 5% now, 4%, 5%?

Kenel Thierry

I don't have the number, but it's about 7%. They have a really quite good, strong growth rate, very strong growth rate.

Hayek Nick

Okay. And what is interesting, for example, all the brands are very looked-for in India, but the brand that has the biggest turnover in India, and the big turnover, is Rado. Just for the people who always want to forget about brands that are not luxury and have only luxury in their mind. There are brands that many people, in these countries where you have many people, are searching for, as well as in Saudi Arabia. Rado is a very strong brand in Saudi Arabia and in India. Okay. Thank you. Let's move to Jon Cox.

Cox Jon

Good afternoon, guys. Thanks for the questions, and the access on this. Just back on the production, and what you were saying about removing the losses, etc., in the second half of the year, sales growth was much better than H1, but the overall group profitability remained pretty fragile. Is that just because you were selling or getting rid of the inventory, or reducing the inventory, rather than focusing on the production and actually making new product and selling that? I'm just wondering on why the operating profit would be so low in the second half when you had growth resuming.

And I'm just wondering, what sort of growth do you think you need in 2026 for that production? You mentioned growth to be double-digit, just what is that? Mid-single-digit, potentially, or high-single-digit? And a point of clarification, you were talking about China, I guess you were talking about mainland China, or were you talking about Greater China when you mentioned the figures.

Hayek Nick

[Overtalking] about Mainland China. I was talking about mainland China.

Cox Jon

Okay. And if you could give us some commentary in Hong Kong? Thanks.

Hayek Nick

No, wait. I can give you some Hong Kong feeling, also. I said that January looks really good in Hong Kong, but all what I said about China was about China, mainland China. It was not about including Hong Kong or Macau. It was about mainland China, all what I said before.

Also, the 15% less distribution was about mainland China, and not including Hong Kong and Macau. By the way, Hong Kong and Macau, we nearly have no wholesale distribution. It's only own stores. But I can give you Hong Kong, who was at the minus 20 in the first half, recovered also to nearly flat in the fourth quarter. So you see, also, that there is a movement that I said before. In January, we see that they're already better than the year before, with a comparison base of Chinese New Year, where the people came to Hong Kong. So they are on a good trend also.

But to come back, yes, of course, until the production can start again to make things and to produce, you have to get rid of inventory. The brands have a lot of inventory. Of course, they have to get rid of inventory. And the stores that we have have also inventory. And it's clear that you will have a delay in growth and the impact on the production. And then, the marketing, we decided to continue a high level of marketing. In December, we spent a lot of money in marketing.

And as I said, we decided about some real innovations that we are testing and investing things in the factories. So this is always a little bit… You have, in one quarter, more turnover when you have stock. And we have always said we have too much stock. You have to get rid of that stock. Then, the Swiss franc is a certain issue. And until the production can kick in again, we'll always have a delay that will take at least six months. This is the way that things are happening. That's why we are counting, now, with the same numbers of growth that we would have over the whole year. You will have an acceleration also in the production. It will not be in the first three months. It will take more time, but it will immediately force the factories to deliver products to the brands, to deliver to the markets. That's how it works.

Cox Jon

Okay, so you're saying that if the sales are where you were for 2025 overall, production would actually would break even or be close to break-even?

Hayek Nick

No. Jon, I said, clearly, when you look at the second half of the year, you have a good third quarter and a very good fourth. And I said, if we continue now, in this momentum, now in 2026, over the whole year, then we will have a big chance to have not the losses anymore, or not the same way than we had before.

Cox Jon

So the 7% you saw in Q4.

Hayek Nick

Yes, but the 7% was still with the second quarter. That was not with a third quarter that was not already up to the level and positive. The acceleration came on the fourth quarter. The third quarter was an acceleration towards the first half. And then, it was confirmed with an even stronger acceleration in the fourth quarter, with another acceleration in January. And if I think about the next year, I don't take the first half or the first seven months or eight months of the year. I take now the vision over the next year, what I have seen in the last four months, what is happening in the markets. So that's the calculation that we do.

Cox Jon

Very clear. Thank you.

Hayek Nick

Thank you, Jon. Mrs Pusz.

Pusz Zuzanna

Thank you for taking my questions, and good afternoon. I have just two questions, actually. So, first of all, I'm just wondering what has driven specifically the outperformance you had in H2 versus the Swiss watch exports? Because I think you did roughly 5% sales growth, Swiss watch exports were down 3%. Would you say it was mainly, I don't know, product mix, regional mix? Just to get an idea.

And then, just a follow-up on raw materials, because I think you have mentioned quite a few times in the past the level of gold that is on the balance sheet, and diamonds, but I don't think we've ever had it disclosed in an annual report. Do you think you may start disclosing it at any point? Just so we could track it every year. Thank you.

Kenel Thierry

About the gold position, no, we do not disclose that in the balance sheet, because it's not required and then one should state all kinds of precious metals. But we tell you that on each call, and you can follow it year by year. So this is no problem. But it's not disclosed in the balance sheet.

Pusz Zuzanna

So you don't consider putting it in an audited annual report.

Kenel Thierry

No, because then you have to put diamonds and everything else.

Hayek Nick

Zuzanna, you know what? We are not a bank. Since we are not a bank, no. We are showing the real values of our inventory, and we are showing what we have in the inventory, what is important, what's the strategy of the group. And then, we are handling them with clear criteria that are controlled. So our talk is really controlled, and on the conservative side. We always are on the conservative side. And in there, we just say, when we are criticised, yes, one third of it is gold and diamonds, so don't worry, it's not fish. That was always what I said.

Pusz Zuzanna

Oh, no, I don't think we ever suspected it was fish. It's just that it would be helpful to see it in an annual report. And also, just, sorry, to check, is it disclosed within the semi-finished goods? Because, I guess, raw materials were around 600 million, so they wouldn't add up to the 2.2 billion. Is it in semi? Where does it exactly sit, if you look at the split of the inventories you have?

Kenel Thierry

It is split all over, but it is in semi-finished the most of it, and in the finished products.

Hayek Nick

No, it's split everywhere where gold is in the production process. Because there is a lot happening in our factories. You have cases that you do in gold, you have dials, you have hands, you have everything. But one thing is common, it's the quality of the gold and the weight of the gold. So it's not important is it a finished watch or not a finished watch. So, of course, this we are always disclosing. We are giving you a detailed operation. Why should we start…? My God, you know how many components we are doing per month or per day? It's millions.

Pusz Zuzanna

But I guess if it's so important, it's such a big part of your balance sheet value, if we had it in an audited annual report, I think it would be just helpful for investors.

Hayek Nick

We'll think about it, Zuzanna, It's fine. We'll think about it. Now, the first question?

Pusz Zuzanna

The first one was what do you think has driven the outperformance versus the Swiss watch exports. Because Swiss watch exports were down, I think, roughly 3% in H2, and you've done much better. So do you think that it's a higher exposure to, I don't know, the US? Is it maybe the lower price point? What do you think has driven the fact that you've done so much better than the industry?

Hayek Nick

I always say, and even if it's in our favour I say it, export numbers have nothing to do with sales numbers. Export numbers are not sold products. We are exporting products, and some companies are exporting to agents, and they are in export numbers and they are sold products. Other are not, in the same way, in the export numbers. You cannot conclude that, if we are better than the export numbers of the Swiss watch industry, that we outperformed everybody. I can start to deliver to all affiliates tomorrow tons of products that we put in a warehouse somewhere, and then you have export numbers that are high. The export numbers is an indication of the situation in a market.

If you have a wholesale distribution, or you have a retail distribution, or you make e-commerce, this is affecting the Swiss Watch Federation export numbers. You have also any exports you do for exhibitions. If you make a huge exhibition that has watches worth of 200 million, it will go into an export number. But those are not sold, but are in the export numbers. I don't know if you knew that.

the situation. So export numbers are really not giving a right indication.

But one thing, yes, we have an advantage that we are in the other segments. If you study the export number in December, you see, oh, the segment of 200 to 500 is growing strongly. The lower market segment below 200 is growing. And the other segment also. It's not just the luxury. So the luxury up there, all up there, is growing not so strongly. So who is in this segment? The Swatch Group. So we have the brand Longines, Rado, Tissot, Hamilton, Swatch. Yes, this is an advantage of the Swatch Group. Yes, you are right, this is an advantage. And this you should take in consideration, I agree, that this is something the Swatch Group has and the others not. If you read an interview in Le Temps, if you don't have it, we can send it to you, an interview with the…

Pusz Zuzanna

That would be great.

Hayek Nick

With the Longines president.

He told them that their market share in Japan, in the price segment there, Longines, is 75%, has grown to 75%, of course, in a market that has become smaller, because nobody is there, nobody wants to go there. Everybody wants to go luxury, luxury, luxury. Pushed also by all the fantasies of some, I don't say who. And yes, the Swatch Group is different. It costs more money, we have more factories, we have more stock, we do more in this area.

But this is a big difference of Swatch Group to all the others. And there might be also an indication that, yes, they have an advantage. It's not just a disadvantage that they own all of these brands, they have also the entry level of the young people that they bring to the Swiss-made. Yes, this is an advantage. But I would be careful just to take monthly export numbers or yearly export numbers, and then say you outperform. Yes, in some areas we do, but in some areas we don't know how these numbers are coming across. And this is [overtalking]…

Pusz Zuzanna

Okay, thank you. And, sorry, just a follow-up on gold and diamonds. Can you tell us what's the split within that 2.2 billion, how much of it is gold, how much of it is diamonds?

Hayek Nick

We have to take Patrik Schwendimann, he will join Emmi. He is becoming the new investor relations, and he has no time to spend to wait longer. Thank you, Zuzanna. Patrik Schwendimann.

Schwendimann Patrik

Thank you. Patrik Schwendiman, Zürcher Kantonalbank Bank. Good afternoon, Gentlemen. How much gold do you have in your balance sheet at the end of the year, in terms of tons? And how much gold have you have used in 25, in terms of tons? That's my first question. Then, secondly, I appreciate the unchanged dividend, is there any change in the dividend policy? And thirdly, there are unfortunately still a lot of discounts, not only for you but in the whole Swiss watch industry, for many watch brands in the grey market and on internet platforms, how can you improve the situation here? Thank you.

Hayek Nick

Patrik, it's very easy. Is being and controlling the selling much stronger. And, yes, that's the most thing we can do. You have this situation, but if you have a situation of differences in values, or you have tariffs that are hitting a market or another one, then you come to these situations that you have discounts that are offered, and there are easy ways to shortcut. This is a problem that we know. And of course, the one thing that should be done is that we have to be more careful with the selling. And

in the discount policy, in the United States. Have you seen anything?

Schwendimann Patrik

No, not really.

Hayek Nick

You see, that's an indication. The demand is really there. What we have to be careful is, altogether, that we are not trying to sell too much to make a sell-in the retailer. Here, I agree with you. So you are asking about the policy in…?

Schwendimann Patrik

Dividend policy.

Hayek Nick

You want to ask if we change the policy or...?

Schwendimann Patrik

No. I appreciate that the dividend is unchanged despite a decrease in the profits, so my question is there any change in the dividend policy, that you also, in the future, will have a higher payout ratio? Obviously not the same as in 25, but overall, to be more generous?

Hayek Nick

We have to honour the shareholder also, because that we have 300 million losses in the production, that we are not asking for short work compensation, which would at least reduce the losses in a high three-digit number if you would do that. This is our decision here that we did. So the shareholder cares nothing for this, that we did this decision.

If we would have asked for the state insurance aid or state aid, if you want so, of the short time work, then we would probably end up with an operating income at the same level or more than the year before. And also in the net profit. And that's why we decided we will give the same dividend. That's one thing.

But the second thing is, if you look at the third quarter, the fourth quarter, the development, the momentum that is happening, also the momentum in the brands, when you look at Breguet, when you look at Omega, apart from all the others, and you see the development going into January, and that was our signal that, yes, the year was difficult, but we are optimistic for 2026. And that's a signal also to say thank you to the shareholder, to this difficult time. But we are believing that 2026 is a good year for the Swatch Group, and will bring us back to these levels that I said before. We have a lot of work in front of us, and that's why we kept the dividend at these levels.

Schwendimann Patrik

Perfect, many thanks. And regarding the gold?

Kenel Thierry

Regarding the gold, we can tell you we have a position that is 21.8 tons by the end of the year. And you should have a different view about that. We are processing gold within our production pipeline. That means we are processing about six tons a year. But that does not mean that we are using six tons a year. 80% is recycled within our production cycle, and we take back the scrap and everything, and we treat that and process that to do new alloys and to do new semi-finished products. And the

Hayek Nick

Pardon?

Schwendimann Patrik

Let's talk about this later on.

Yes why not? Maybe some fresh ideas. Just at the beginning of March. Beginning of March.

Hayek Nick

So you will see the other side. I'm really happy that I will see, Mr Schwendiman, that, after one or two years, says, oh, my God, they have always the same questions. We will be on the call. Okay.

Schwendimann Patrik

Thanks a lot for all the...

Hayek Nick

All the best, Mr Schwendiman. Okay. Mrs Dadhania?

Dadhania Piral

Good afternoon.

Hayek Nick

Oh, sorry.

Dadhania Piral

It's Piral from RBC. That's okay.

Hayek Nick

Piral Dadhania.

Dadhania Piral

Dadhania, yes, that's right. Thank you for taking my question, I have one. Is there any change to your view around potential acquisitions or disposals? One of your large competitors made a disposal of a long-standing Swiss watch brand only last week, and we are obviously aware of some of the more smaller, independent brands suffering in what has been a fairly tough demand environment. So is there any possibility that you might change your approach to either acquiring or disposing of, probably acquiring, other brands within the portfolio? Thank you.

Hayek Nick

This depends on the brand. And if it is an opportunity for us, we have always looked into brands. By the time when Breitling was on sale, we also looked at Breitling. We decided no.

So we are not people that are not looking at things, but that's not our main objective. We always get some proposals and contacts. And yes, if the brand is right and the opportunity is there, we can always look. It's not our first priority, but we are not totally excluding this. Okay?

Dadhania Piral

Thank you. Could I maybe just clarify what the China Q4 growth rate was? Because I think you gave us H1 and Q3, but you didn't give us Q4.

Yes, I gave.

Dadhania Piral

Sorry, I apologise.

Hayek Nick

I said, at the beginning, it was the first half was double-digit minus. Then, the second half was still below, was not recovering all the double-digit losses. And then, you had a third quarter that started stronger, and the fourth quarter who was positive. The fourth quarter was already positive. And then, I gave you the numbers of the brands in the country. I don't know if you missed that.

Dadhania Piral

I got that. Thank you.

Hayek Nick

You had Breguet, 40%. I gave you all the numbers. You had from Omega to Tissot, etc. So that's the situation. And always in local currency. So just to say, you went from a minus 26 in the first half to. in the fourth quarter. to be positive on a comparable base that is difficult because of Chinese New Year, especially in December. That's what I said. Don't forget. And don't forget, we have 15% less wholesale distribution in China. That's what I said also, to see and to look into the numbers. So it means that the market itself is probably even stronger growing. Okay, thank you.

Dadhania Piral

Thank you.

Hayek Nick

And now, we take the last one that we have on the list, it's David Da Maia.

Da Maia David

Hi. Thank you. Thank you for taking my question. I have one, actually, regarding your current trading. The comment you made on January, just to clarify, in the press release you mentioned that you generated a growth of 10% in Q4, excluding Greater China, so if I understood correctly, you said that in China in January growth was still positive, with Hong Kong improving. So is it fair to assume that in January your growth was double-digit, totally?

Hayek Nick

You mean without China?

Da Maia David

With China, including Greater China?

Hayek Nick

Including greater China, you mean in December? You mean in December?

Da Maia David

No, in January my question is.

Hayek Nick

In January? Yes, January continuing in the trend. And, yes, there I included Hong Kong. Hong Kong is performing very strong. And we really have a very interesting trend in January for mainland China, but also for when I take Greater China, also Greater China. Macau is not as good performing as Hong Kong.

Da Maia David

So it's fair to say that your total growth in January was close to 10%, including Greater China?

Hayek Nick

Careful. We are today the 30th, we still have two days to go. So it's the same momentum and it's accelerating. This I can say. I cannot give you a number, it would not be serious because we have two days missing, to have all the numbers. But what is important, yes, in our own retail, we have it already. In our own retail, it's done. Here, the growth is very strong.

It's important to know this is showing always the consumption, the own retail. And the own retail is performing there, where you said, that's true. This I can confirm to you already.

And without that we have increased a lot in own retail, by the way that's something I want to add. I take the opportunity. We have now a total of 1,438 own doors [?] in the world, and last year we had 1,428. So we only added ten. So our growth, or better third quarter and fourth quarter has nothing to do with just adding stores. So it's really on a comparable basis. That was important to know. So yes, if it is own retail, it's anyway a different world. But as I said before, the wholesale part plays a role. We decreased the wholesale part, and this has a certain impact. Okay? David, is this okay?

Da Maia David

Okay, thank you very much.

Hayek Nick

Thank you. Okay, Ladies and Gentlemen, thank you. And I know there are a lot of investors listening. I think the fact that we have so many manufacturing companies and that manufacturing companies have research and development, do so much innovation, I'm asking if it would be a good idea to have, during the year, an investors' day, where we can invite all the investors to experience what manufacturing in Switzerland means in different factories, so that you understand why the hell these crazy people there have decided to maintain these people, and to accept losses in these factories, to see the innovative approach to factories.

We are certainly miles away and in front of many, many competitors, what we are doing, and not just in the watch industry, and I would be proud to show this to investors. So I'm really thinking about that. I have to discuss it, if this is something we could do. I think it is worth it. Everybody talks about manufacturing and industry, and I think it would be an interesting moment to have a kind of investors' day here at Swatch Group, around this whole subject.

And then, there is a second point. I will probably ask some of the analysts, and there might be some analysts or investors that would give me feedback, because in investor relations, you have, from morning to evening, analysts asking us the same questions. And it's always standardised, always more, it's statistical, etc. We have created AI-DADA for Swatch. This is our artistic intelligence. So we would say AI-NANA. AI-NANA is the more female approach. If I would be able to have four or five of you analysts sitting and training AI-NANA to make the perfect investor relation person, it would certainly be somebody 24 hours available, responding to many of the analysts questions that I have to fill out, the sheet that you have to fill out, the spreadsheet. And it would learn during the process.

But for this, we want to train AI-NANA. And if there are some analysts that are interesting to helping us in this, and you find this idea good, I would continue to proceed on it. I-data is very successful. We just launched it yesterday in France, and this personalised Swatch watch is done by our artistic intelligence designer, AI-DADA. It's a real success and has a roll-out worldwide. So please give me some feedback on this, and I thank you for the interest. I'm sorry for my voice, still a little bit under antibiotics. So we're looking forward to see you soon, hopefully in Switzerland, and you will hear from us. So have a nice end of the week and a nice weekend. Bye-bye to everybody.

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