Richemont’s profits jumps in the first-half 2017

Luxury goods maker Richemont expects first-half net profit to rise by more than two-thirds, partly benefiting from the nonrecurrence of exceptional items.

Swiss watchmakers are recovering from a severe downturn in demand, mainly due to a collapse of the Hong Kong market that had prompted the world's second-biggest luxury group to buy back excess inventory of unsold watches and cut jobs and replace almost all its brand chiefs.

The company also noted improved trading performance and more favourable currency exchange rates. Total sales rose for the period rose 10% on an actual currency basis, it said. On a constant currency basis, total sales were up 12%.

Richemont's operating profit for the six months ended Sept. 30 showed an increase of approximately 45% against the comparative period, while net profit for the period is expected to rise by about 80%, the company in a statement.

The positive profit statement signals an even better than expected margin improvement, Vontobel analyst Rene Weber said in a note, reiterating a "buy" rating on the stock.

"We expected a margin increase of 420 basis points, but now it is even at 500 basis points which will be mainly driven by the most important earnings contributor, Jewellery Maisons Cartier and Van Cleef & Arpels, which was impacted last year from watch buybacks at Cartier," Weber said.

Exane BNP Paribas' Luca Solca, who has a "neutral" rating on Richemont, said he expected "limited positive support from this confirmation — especially as no further top-line growth acceleration seems apparent".

Shares in the company were indicated to open 1.7 percent higher based on pre-market indications. Richemont shares have already risen more than 31 percent this year on expectations of a recovery. The company is due to report half-year results on November 10.