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The yin and yang of family business profits

Dramatic profit rises or falls are relatively uncommon in family businesses thanks to their long-term approach, but two family-controlled businesses have gone against the grain this week, reporting results at the opposite ends of the spectrum.
The ups and downs of family business profits

Dramatic profit rises or falls are relatively uncommon in family businesses thanks to their long-term approach, but two family-controlled companies have gone against the grain this week, reporting results at the opposite ends of the spectrum.

In Europe, watchmaker Swatch Group, controlled by the Hayek family, said on 10 January that sales reached a record high of CHF7.14 billion (€5.89 billion) last year, up 21.7% at constant rates compared to 2010 figures.

Overall, revenues increased 26.1% in its watches and jewellery division, with nearly all brands in this segment reporting double-digit growth.

And although the overvaluation of the Swiss franc hit final figures, “sales in CHF increased by an impressive +10.9% over the previous record year 2010”, said the Swiss business in a statement.

In stark contrast, American agricultural commodities trader Cargill, one of CampdenFB’s top 100 North American family businesses, reported its third consecutive drop in quarterly earnings on 10 January and its worse quarter since 2001.

The agribusiness, controlled by members of the Cargill and MacMillan families, had earnings of $100 million (€78.1 billion) from continuing operations for its second quarter, ended 30 November. This was a fall of 88% on the same three-month period in 2010, when it reported earnings of $832 million.

"The second quarter was significantly below expectations, especially in contrast to last year when we posted our strongest quarter ever," said Cargill chief executive Greg Page in a statement.

The business, which saw revenues increase to $33.3 billion from $28.5 billion, has been hit by weak performance in the sugar trading segment and a recent recall of its turkey products, as well as volatility in financial markets.

Although the two sets of results were poles apart, this is not necessarily a trend that will be seen across the family business sector.

Joachim Schwass, a professor in family business at Swiss-based IMD, told CampdenFB that you “cannot draw conclusions” as the results of both companies were "industry driven and geographically driven".  

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