Hermes boosts dividend as luxury industry thrives

A couple walk with Hermes shopping bags as they leave a store in Paris. The luxury goods maker has reported a bumper year, buoyed by demand from China. (REUTERS)
Updated 22 March 2018
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Hermes boosts dividend as luxury industry thrives

PARIS: French luxury goods maker Hermes, known for $10,000-plus leather handbags such as the Birkin, rewarded shareholders on Wednesday with a higher dividend and a one-off payout after a bumper year for sales and profits.
The company, originally a saddle and harness maker founded in 1837, joined luxury rivals such as Louis Vuitton-owner LVMH and Gucci-parent Kering in benefiting from a rebound in demand from Asian shoppers in 2017.
Hermes shares rose 3.2 percent in early trade after the firm proposed a dividend of €4.10 ($5.03) per share, up 9 percent on a year earlier, and said it also planned a special dividend of €5 per share.
It last made a one-off payout in 2015.
Hermes also reported a record operating margin for last year, reaching 34.6 percent of sales and helped by high productivity at its workshops and the positive impact of currency hedges in the first half of 2017.
“We had an exceptional year in 2017,” CEO Axel Dumas told a briefing with analysts.
Dumas said that hedging against foreign exchange swings would have a slightly negative effect on margins this year, adding these would likely “normalize.” European-based luxury goods firms are grappling with the effects of a stronger euro.
Stocks of Hermes products ran very low at the end of 2017 as items sold out, a situation that was also atypical and which boosted margins, the company said, without detailing a forecast for 2018.
Hermes’ operating margin was 32.6 percent in 2016.
Sales trends in early 2018 had continued the positive momentum of last year, Dumas added.
Hermes, which has long waiting lists for some of its most coveted handbags, is expanding production to keep up with demand, and plans two more leather goods workshops by 2020 in France.
Like peers, it is looking to boost online sales, though it declined to detail how much revenue came from the web. Hermes is rolling out a revamped version of its website, due shortly in Europe after launching in the US and Canada.
By the end of the year, it also plans to set up its first e-commerce site in China, the biggest market for luxury players. Italy’s Gucci and France’s Louis Vuitton launched web sales platforms in China last year.
Hermes’ 2017 operating income was €1.92 billion ($2.36 billion), up 13 percent from a year earlier and in line with analyst forecasts, while net profit rose 11 percent to €1.22 billion.


Potential SABIC deal would affect Saudi Aramco IPO time frame, says CEO Nasser

Updated 20 July 2018
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Potential SABIC deal would affect Saudi Aramco IPO time frame, says CEO Nasser

JEDDAH: A potential deal to buy a stake in petrochemical maker SABIC would affect the time frame of Saudi Aramco's initial public offering (IPO), the oil firm's president and CEO Amin H. Nasser said Friday. 

The IPO of around 5 percent of Aramco, which was initially to take place this year but is now more likely to happen later, would be the world's biggest listing, raising up to $100 billion.

Nasser said that buying a stake in a chemical company like SABIC would positively affect Aramco's revenue, Al Arabiya reported.

“We are still in the very early stages of the discussion to buy a stake in SABIC,” the Aramco CEO said.

“Aramco is ready for the initial offer and the timing remains subject to the state's decision.”

Saudi Aramco said on Thursday it is looking at the possibility of buying a stake in SABIC, a move that could boost the state oil giant’s market valuation ahead of the planned IPO.
Aramco said in a statement that it was in “very early-stage discussions” with the Kingdom’s Public Investment Fund (PIF) to acquire the stake in SABIC via a private transaction. It has no plans to acquire any publicly held shares, it said.
In a separate statement, PIF also said talks about a sale were in early stages. “There is a possibility that no agreement will be reached in relation to this potential transaction,” it said.