/ 3 April 2003

SA’s Richemont share price hit by killer virus

After being beleaguered by such factors as generally poor equity market sentiment and poor financial results due to depressed global consumer confidence in recent months, the share price of South African-listed, Swiss-based luxury goods group Richemont (RCH), is now also coming under pressure from the spread of Severe Acute Respiratory Syndrome (Sars) in Hong Kong and Singapore — two of its usually strong sales markets, traders said on Thursday.

Richemont owns a portfolio of leading international brands including Cartier, Van Cleef & Arpels, Piaget, Montblanc, Dunhill and Lancel as well as the prestigious watch manufacturers Jaeger-LeCoultre, Baume & Mercier, IWC, Vacheron Constantin, A. Lange & S hne, and Officine Panerai.

Richemont’s shares were last trading on the JSE Securities Exchange at R10,35, down 2,8% so far on the day from R10,65 at Wednesday’s close. The share price is currently at a 3.5-year low after having fallen about 60% in the past 12 months.

It has plunged almost R6, or 37%, since the beginning of 2003, a move that traders ascribe partly to the falling equity market in general, but mainly due to its poor financial results, which have resulted largely from falling consumer spending on luxury items as global economic conditions have worsened.

In its September interims, total sales fell 3% to R1,78-billion and operating profit by 27% to R185-million. And in its January 29 trading update for the October-December quarter, overall sales were down 2%, with jewelry sales down 4% and watch sales up 1%.

Most recently, the group said in its March 20 trading update that operating profit would be as much as 40% below the 482 million rand recorded in 2002, after a 32% drop in 2001. This warning led to a significant plunge in the share price.

Now, although the disease has not yet made an appearance in South Africa, the company is one of the only South African entities so far to be directly impacted by SARS due to its rapid spread in Hong Kong and Singapore.

Luxury goods sales in the two city-states to tourists are important to the likes of Richemont, LVMH and Gucci, but tourists are staying away in droves for fear of contracting Sars.

In fact, the Asia-Pacific (ex-Japan) region was responsible for Richemont’s strongest sales growth in the October-December 2002 quarter, at 9% in constant

currency terms.

Richemont’s results for the full year to March 2003 are set to be announced on June 5. – I-Net Bridge