Jul 30, 2008
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Safilo H1 net falls, cuts 2008 forecasts

Jul 30, 2008

By Marie-Louise Gumuchian

MILAN (Reuters) - Italian eyewear maker Safilo reported a fall in net profit of more than a third in the first half of the year, hit by a weak dollar, and cut its 2008 forecasts because of weak European markets.

Safilo, whose brands include Armani, Dior and Gucci, said in a statement net profit fell to 21.1 million euros ($32.89 million) from 33.3 million euros a year ago. Net sales fell to 637 million euros from 667.8 million euros.

"We believe that the European market will continue to remain weak even in the upcoming months and we are therefore looking to the second part of the year with greater caution," Vice Chairman and Chief Executive Officer Massimiliano Tabacchi said in the statement.

Safilo cut its forecast for sales growth for the year to around 4 percent at constant exchange rates from a previous forecast of 7 percent to 8 percent.

It expects EBITDA at around 13.5 percent to 14 percent of revenues, down from a previous estimate of about 15 percent. Net profit should be 3 percent to 3.5 percent of revenues, down from a previous forecast of 4.5 percent to 5 percent.


Safilo registers around 40 percent of its business in dollars, and said its performance was penalised by the "ever more marked weakness of the U.S. dollar."

At constant currencies, net sales rose 1.3 percent.

American sales saw double-digit growth at constant exchange rates with the consolidation of new retail stores and a chain in Mexico as well as the "good increase" in prescription frames and sunglass sales volumes in the wholesale business.

Asia saw double-digit growth, with "particularly brilliant results" in the Chinese and Korean markets. Spain, Britain and Germany were particularly hit by fragile consumer buying.

In Italy, results were in-line with last year. Safilo noted weak re-orders in Europe in May and June.

Safilo competes with Italy's Luxottica , to whom it lost a deal with designer Stella McCartney. Analysts say Luxottica's signing the McCartney brand, part of French group PPR which also owns Gucci, puts more pressure on Safilo to renew the Gucci licence.

Tabacchi said negotiations on this were going "pretty good."

"We expect to have this renewal as soon as possible," he told analysts on a conference call.

Safilo shares closed up 7.26 percent at 1.15 euros before the statement came out.

(Editing by Richard Hubbard)

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