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Investment Doesn't Click as Hermes Sheds Leica
The International Herald Tribune

Hermes International, the French maker of silk ties and expensive handbags, retreated Thursday from a six-year investment in Leica Camera after the German company had failed to produce a profit for three straight years.

Hermes, based in Paris, will gain $15 million, or $19 million, from the sale of its 31.5 percent stake in Leica to ACM Projektentwicklung of Austria, according to a statement. ACM already holds about 36 percent of Leica's stock and sits on the supervisory board.

Hermes, which reported a 7.7 percent rise in its first-half profit Thursday, bought the stake for $17 million in November 2000.

Leica, whose compact cameras introduced in the 1920s revolutionized photography, stumbled after failing to keep up with the advance of digital photography and as consumers sought compact, less-expensive cameras by manufacturers like Nikon or Canon. Leica has lost more than $30 million since 2003.

''The positive surprise came from the divestment of Hermes's stake in Leica,'' said Scilla Huang Sun, an equities manager for Clariden Bank in Zurich. ''It really was a noncore business.''

Hermes will retain half its holding in a convertible bond Leica sold in 2004, as well as a seat on the supervisory board, the companies said. Hermes joins luxury goods companies including Financiere Richemont in parting with holdings that are related to its main business.

''We will still be involved,'' the Hermes, chief executive, Patrick Thomas, said. ''I, as a board member, and the company, by taking care of distribution in countries such as Japan.''

In its earnings report, Hermes said that net income had risen to ?117.5 million, or $149 million, from $109.1 million a year earlier. Revenue rose 7.9 percent to $700.5 million.

Hermes opened its first store in the Netherlands and refurbished shops to take advantage of revived spending in Europe. ''Demand for luxury is good,'' said Scilla Huang Sun, an equities manager at Clariden Bank in Zurich.

Sales increased 12 percent in Europe and 7 percent in the Americas during the first half, Hermes said. Sales rose 4.5 percent in Asia, led by a 6 percent gain in Japan.

The company said that it planned to open or renovate 20 stores in the second half in cities including Seoul, Tokyo and Hong Kong. More openings are slated for New York and China in 2007.

Hermes shares rose $2.15, or 3.3 percent, to close at $67.70 in Paris.

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