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Hermes bags record profits with luxury goods despite crisis
by Staff Writers
Paris (AFP) March 22, 2012

Hermes is the latest luxury products group to show that economic crises can have silver linings, announcing record sales and profits on Thursday.

Hermes, a symbol of French chic in accessories such as handbags and silk scarves, reported a record year in 2011 with a 40.9-percent rise in net profit.

It also said it would line the purses of shareholders with a bumper, but one-off, dividend.

The results are a bonus also for French luxury giant and rival LVMH, which has also reported an exceptional year and is seen as a predator having built up a 22.28 percent stake in Hermes.

European companies making luxury fashion clothing, watches and cars have reported strong or record profits and sales outlooks despite the long-running financial and then debt crises.

An underlying factor in their dynamic expansion is the appetite of new classes of consumers in emerging countries, notably Asia, for their high quality products which also serve as symbols of wealth, status and modernity.

Hermes reported record sales, and a net result of 594.3 million euros ($787 million).

The new record was built on a strong performance in 2010 which was also a record year.

Hermes is capitalised at 25.7 billion euros.

Chief executive Patrick Thomas told BFM Business radio in France: "We make beautiful objects ... I say this with pride, particularly for the skilled workpeople who make them. It is the only real explanation (for the success)."

He also observed, regarding the stake built up by LVMH headed by French business tycoon Bernard Arnault: "If I were called LVMH, I would try to buy Hermes, I don't say that it's a bad decision, but it's also my job to protect this house."

But Thomas said the seven-euro per share dividend would remain an exceptional item and that investors should not expect a similar gesture next year.

The price of shares in the group was showing a gain of 2.78 percent to 251.05 euros in afternoon trading on the Paris stock market.

The firm, which began by making leather goods for horse owners, said in addition to a dividend of 2.0 euros and would recommend a special dividend of 5.0 euros. This points to a total dividend payment by the company of 738.9 million euros.

"For years we have been reproached for a low return on the shares," Thomas said. The firm had also achieved spectacular results in 2010 but the dividend was 1.50 euros.

At the beginning of February Hermes reported an 18.3-percent rise in sales to 2.84 billion euros.

Operating profit rose by 32.5 percent from the 2010 figure to 885.2 million euros. Analysts had expected a rise of about 30.0 percent.

The operating margin was 31.2 percent of sales, the highest since the company was floated on the stock exchange in 1993.

The results included a capital gain of 29.5 million euros from the sale of 45 percent of Jean Paul Gaultier to Spanish firm Puig.

Hermes said that sales had risen strongly wherever it sells its products ranging from leather goods to clothing, jewellery, watches and tableware, and particularly in America and Asia.

Thomas told AFP in February that he hoped for growth of at least 10 percent this year, which would take sales above 3.0 billion euros.

Since 2005 the firm, created in 1837 and still family controlled, has doubled sales. Net profit has doubled in two years.

Thomas told BFM Business that the firm was deliberately restraining its growth by volume in the interests of raising standards.

Commenting on the Chinese brand Shang Xia which Hermes launched at the end of 2010 and which is to open a shop in Paris at the end of the year, Thomas said it "is destined to be sold worldwide."

Shang Xia sells jewellery, clothes and high-end furniture designed with a Chinese touch.

"We are taking our time so that the project succeeds. We're proceeding at our own rhythm," Thomas said.

At the beginning of February, LVMH reported a profits rise to 3.06 billion euros and a 16-percent rise in sales for 2011, and also forecast a strong year in 2012.

The other French luxury giant PPR reported a 2.3-percent profit rise to 986 million euros, and in Milan Prada has also reported a strong sales trend in 2011.

Swiss luxury goods giant Richemont has reported strong sales, especially on sales of watches and jewellery in Asia, and the Swiss watch industry has reported record exports for 2011 and expects an even better outcome this year.

German high-end car makers such as BMW, Porsche, Volkswagen and Audi have reported rising and even record sales, particularly in emerging markets

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Japan, China, SKorea conclude investment talks
Tokyo (AFP) March 22, 2012 - Japan, China and South Korea have concluded talks on a three-way investment treaty which could pave the way for the negotiation of a wider free trade agreement, Japanese officials said Thursday.

"The talks have effectively come to a settlement," Chief Cabinet Secretary Osamu Fujimura told a news conference, adding it creates the "legal framework for trilateral economic cooperation."

The three countries agreed terms on the investment pact at a "preparatory" meeting in Beijing on Wednesday, the Japanese Ministry of Economy, Trade and Industry said in a statement.

The end of the talks will "give impetus to discussions on a FTA (free trade agreement) between Japan, China and South Korea," the statement said.

Fujimura said the talks have an economic and political significance and will strengthen relations among the three countries.

Japan, China and South Korea agreed to work for an early signing of the pact, the statement said.

Their leaders could sign the pact when they hold an expected three-way summit in Beijing in mid-May, according to Japanese media reports.


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Japan logs surprise February trade surplus
Tokyo (AFP) March 22, 2012
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