On the back of the Covid19 crisis, the financial world sought refuge wherever it was available. The Swiss Franc is an old and trusted friend in such situations. As a result the ‘Franc appreciated 3.7% against the euro and 12% against the dollar on average, causing a headache for Swiss companies with their biggest sales in the euro zone and particularly the United States’ as per Reuters.
This is an issue not just for Swiss watchmakers of course, but it is indeed an especially annoying one for the Swiss Watchmakers. Why? Because their more significant production costs are to be found in Switzerland. On the flipside, most of their revenue is derived from sales in the United States and Asia.
This is nowhere near as dramatic as in 2015 when the Swiss unpegged the Franc from the Euro which blew the minds (and nerves) of many. That currency ‘issue’ triggered downright uproar and also some literary marvels such as the salty response given by H.Moser’s CEO at the time condemning the move by the Swiss (for your information, the full letter at the bottom of this article).
However, while nothing like 2015, this does add on top of the covid19 crisis which is in itself terrorising the industry. The coming weeks the bigger groups are releasing their quarterly results which will help us understand how they are managing through these turbulent times. Swatch Group is scheduled for a late January announcement with the other groups around that time as well.
Hereunder the letter posted by Edouard Meylan as referenced in this article:
Dear Mr. President,
I wanted to personally and publicly thank you, regarding your dramatic move releasing the minimum Swiss Franc exchange rate of 1.20 to the Euro.
When I woke up that morning I had a strange feeling. As I checked the news, I wondered, “What am I going to do today?” aside from our usual business in January. There was no new conflict, no big news about emerging markets slowing down, and thank goodness, no new terror attack.
I am an entrepreneur, and I own a small watch manufacture called H. Moser & Cie, based in Schaffhausen, Switzerland. Very Rare is our tagline at H. Moser & Cie. Very Rare, because we produce 1,000 watches, we are entrepreneurs in an independent, family-owned business that employs 55 people, and because we are a manufacture in the true sense of the word, developing and producing our own ingenious watches.
As an entrepreneur in a small Swiss company, I like a challenge; whether it’s the pressure from the big luxury groups in supply or distribution. Or, a fight to do more with small budgets against the avalanche of big advertising and marketing. Well, today, Mr. President, your dramatic move helped step it up a notch: over 95% of our watches are sold to people outside of Switzerland, and the first retailers called the same day to cancel orders.
So this morning at 10:38 when my CFO sent me an email titled “Breaking News”, I thought “aha, finally something to do”. Something that forces me to find smart solutions to continue our growth and improving profitability and to ensure continuity for H. Moser & Cie. and the jobs for 55 people working for me.
In fact, one thought crossed my mind: why not just move 2 kilometres into Germany and continue business as usual in the EU? I’ll even beat that other restriction on permits for workers from the EU that came up in February 2014 – around 20% of my employees are German.
Let me make my appeal clear to you, on behalf of the many small and mid-size businesses that employ so many Swiss people: I trust you have a strong plan that will help all of us make it through with you over the long term. Because otherwise, along with many other wonderful Swiss creations, H. Moser watches may just have become very, very, very rare.
Sincerely,
Edouard Meylan
It’s been awhile since I read up on Swiss Franc exchange rate. Great article and point on the exchange rate, an often overlooked point