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Safilo Profits Fall

In the first six months of the year the group reported a 31.2 percent decrease in net profit.

MILAN — Despite a solid performance of its licensed business and growth in Asia and the U.S., Safilo Group SpA in the first six months of the year reported a 31.2 percent decrease in net profit, which totaled 21.5 million euros, or $27.7 million, compared with 31.3 million euros, or $45.3 million, in the same period last year.

In the period ended June 30, revenues gained 1.7 percent to 613.3 million euros, or $791.1 million, compared with 603.3 million euros, or $874.8 million, in the same period last year.

Dollar amounts have been converted at average exchange for the periods to which they refer.

The consolidation of the newly acquired Polaroid Eyewear business in the second quarter helped performance, said the company, explaining that this a key element in the Italian eyewear maker’s development strategy in the specialist and value-for-money segments.

The quarter was also impacted by the appreciation of the U.S . dollar and the effect of the phasing out of the Giorgio Armani group’s licenses. (The designer has inked a 10-year agreement with Luxottica).

Safilo continues to produce and distribute eyewear for luxury labels including Balenciaga, Dior, Gucci, Marc Jacobs and Yves Saint Laurent, in addition to its own Safilo and Carrera brands.

Chief executive officer Roberto Vedovotto said the second quarter represented “a further step forward. The results achieved are in line with our expectations and consistent with our plan. Safilo improved operating performance, compared to the first quarter of the year. The net financial position is at the lowest level in the last ten years, notwithstanding the acquisition of Polaroid Eyewear.”

In the second quarter, net profit was down 25.9 percent to 9.6 million euros, or $12.3 million, on sales that were up 7.3 percent to 324.6 million euros, or $415.5 million.

In the period, wholesale revenues grew 6.7 percent to 301.2 million euros, or $385.5 million,  while the retail business, represented by the Solstice stores in the U.S., gained 15.3 percent to 23.4 million euros, or $30 million.

At the end of June, the group counted 137 stores.

Safilo noted the good performance of the Gucci, Dior, the Hugo Boss Group brands, the Marc Jacobs licenses and Tommy Hilfiger.

On the Safilo brands front, the company highlighted the “promising debut” in the second quarter of “Carrera 6000,” a new vintage model characterized by the wavy temples and entirely made in Optyl, a Safilo registered trademark material.

The U.S. gained momentum in the second quarter, achieving significant growth in the prescription frames business, as well as in the sunglass business. In the quarter, sales in the area were up 14.3 percent to130.6 million euros, or $167.2 million.

In the second quarter, sales in Asia gained 8.7 percent to 57.2 million  euros, or $73.2 million.

Europe remained the most difficult region, posting a 0.6 percent growth to 132.5 million euros , or $169.6 million.

In the first half, operating profit stood at 51.2 million euros, or $66 million, down 17.3 percent and earnings before interest, taxes, depreciation and amortization dropped 11.9 percent to 70.7 million euros, or $91.2 million.

Among the first half investments, the group raised its shares in its Chinese subsidiary, one of Safilo’s most strategic regions, to a 90 percent stake up from a 51 percent holding.

As of June 30, net debt stood at 231 million euros, or $298 million, compared with 240.3 million euros, or $348.4 million, at the end of June 2011.

In July, Safilo signed a solidarity agreement with labor unions as part of its plan to manage layoffs related to the nonrenewal of its license agreement with Armani, lasting  24 months and involving modified working hours, employee requalification training and a selective investment program.

This “will allows the group to continue to operate in a competitive market with an efficient, lean and flexible manufacturing footprint,” said Vedovotto.

Also in July, Safilo and the Hugo Boss Group revealed the early renewal of their licensing agreement for the production and worldwide distribution of Boss Black, Boss Orange and Hugo eyewear collections until 2020. The license was first inked in 2005, followed in 2006 by the launch of the products, and was due to end in 2013.