R I C H E M O N T/ M E D I CLINIC Swiss rolls on stocks
Sales at luxury goods company Richemont will likely be dealt another blow in the coming months should the Swiss franc, now a free-floating currency, grow stronger in value.
The Swiss franc soared against all major global currencies after the Swiss National Bank (SNB) scrapped a threeyear-old cap on its currency value against the euro, sending a shock wave through markets and stunning traders who had bet against the franc.
Back home, companies with exposure to Switzerland had mixed results. On the one hand, judging by the recent slump in Richemont’s share price to a three-month low on the JSE, investors retreated from a company where a strong franc could eat into future profits.
On the other, waiting in the wings to gain from the franc’s appreciation, is Mediclinic International. The private hospital group derives half its profits from Switzerland. In the six months to September 2014, about 52% of the group’s normalised earnings came from there.
Mediclinic’s share price rallied to a record high of R112,88 on January 15 after the SNB announced that buying foreign reserves to keep the franc’s value suppressed against the euro was no longer sustainable.
The share price increased by 11% in 2014, beating the 7% gain booked by the JSE’s all share index. Richemont’s share price performance lagged the general market, ending flat at R105.
The Swiss central bank has been resisting pressure for some time to abandon the cap it imposed on its currency when investors scurried into the country to get away from the eurozone’s economic troubles during 2010 and 2011.
Switzerland’s economy is heavily reliant on exports and the SNB was fearful that a toostrong franc would undermine economic growth.
Though Richemont is headquartered in Switzerland, it has Richemont’s luxury brands Sales stagnated operations all over the world. It is listed on the SIX Swiss Exchange and trades SA depository receipts on the JSE.
In its latest trading update, the maker of lavish Cartier watches and specialist Mont-