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Hermès International raised its annual targets on sales and profitability after the French luxury goods company reported higher than expected first-half profits buoyed by continued strong demand in China for its Birkin bags and silk scarves.

The Paris-based group reported net profits of €335m in the first six months of the year, up from €291m in the same period last year. Excluding the capital gain last time from the sale of its stake in the Jean-Paul Gaultier designer group, this represented a rise of 28 per cent.

Patrick Thomas, chief executive of the 175-year-old company, confirmed there was no slowdown. “The trend for July and August is in line with the beginning of the year,” he said

The operating profit margin rose 0.1 percentage point to 32 per cent. Sales of €1.6bn were 22 per cent higher than last time at current exchange rates and up 15 per cent at constant rates.

“Given the sales achieved in the first half of the year,” the company raised its forecast for sales growth to 12 per cent at constant rates from 10 per cent previously.

The family-controlled group also revised up its expectations for operating profit margins, to between 2010’s figure of 27.8 per cent and the record 31.2 per cent achieved last year.

Hermès, which can keep customers waiting for a year for a bag because of production constraints, said it had opened two new leather goods factories and aimed to increase its leather production capabilities by 10 per cent a year.

In an aside to LVMH – the world’s biggest luxury goods group by sales, which has built up a 22 per cent stakeholding in Hermès – Mr Thomas reiterated that strategy was “not based on volume but on values and authenticity” to “avoid the biggest risk to our industry – that of banalisation”.

Thomas Mesmin, analyst at Cheuvreux, described the results as “good and reassuring. Fears evoked by management . . . on profitability do not seem to be justified.”

Mr Thomas warned earlier this year of a difficult year ahead despite an “easy” beginning, in which sales had risen 18 per cent in the first quarter.

“It is going to be a very difficult year. The beginning was easy . . . but the trend is not good,” he said at the time.

Asia, excluding Japan, still generated the highest demand, with sales up 25 per cent, led by China, Singapore and Hong Kong. But fears have grown of an economic slowdown in China, on which western luxury goods companies have become increasingly dependent for profits.

Earlier this week, L’Oréal, the cosmetics group, reported slower growth in Asia in the second quarter compared with the first three months of the year. The UK’s Burberry, the Swiss-based jeweller Richemont, and Hugo Boss have also reported signs of slower Asian demand recently.

However, Mr Thomas said on Friday: “We see no change in China.”

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