Asian crisis sends LVMH profits down 6.4%

Luxury goods group Moet Hennessy Louis Vuitton (LVMH) said yesterday its net profit fell 6.4 per cent in the first half of the year and the second half would also suffer as the Asia crisis effect worsened.

Net profit in the six months to June fell to 1.48 billion francs (£176 million) from 1.58 billion a year earlier, with sales down 5.4 per cent at 20.4 billion francs from 21.58 billion.

Full-year results will be lower than those of 1997, the company warned, as the group, which does much of its business in Asia, continues to suffer the effects of the regional financial crisis, plus new turmoil in Latin America and Russia.

"Caution is the watchword for the second half, as the economic environment is worsening," the company said.

"Even if sales in volume terms continue to be good in Japan, the situation in the rest of Asia has deteriorated further with the movement of the yen.

"In addition, new economic uncertainties have appeared in the world recently and the weaker dollar is beginning to weigh on European economies."

Operating profit fell by 6.96 per cent in the first half of the year to 3.12 billion francs from 3.36 billion a year earlier, largely due to the poor performance of its Duty-Free Shopping (DFS) shops, most of which are in Asia. DFS made an operating loss of 236 million francs.

Operating profit in the wines and spirits division, however, rose 24 per cent in the first half, while that of fashion and leather goods was "virtually the same" as in the first half of 1997, when it totalled 2.1 billion francs.

The Christian Dior subsidiary said its net profit rose by 6.7 per cent in the six-month period to 746 million francs, but warned that full-year results would be lower than last year due to the Asian crisis and turbulence elsewhere.

LVMH said it remained confident for the medium term. "Whatever the ups and downs of the economy, demand for the group's products is increasing over the long term and we have adopted an aggressive strategy to cope with the Asian slowdown, which should produce results in the shorter term," the group said.