UPDATE 1-Richemont chairman says company has to be cautious with cash

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ZURICH, Aug 26 (Reuters) - Luxury goods group Richemont must manage its cash even more carefully this year in light of the ongoing COVID-19 pandemic, its chairman said on Wednesday, explaining why the Cartier owner slashed its dividend proposal.

Swiss watchmakers have seen sales collapse during the pandemic as the Chinese, their biggest customers, were no longer able to travel abroad to their favourite shopping destinations and stores around the world closed.

Richemont Chairman and controlling shareholder Johann Rupert said the crisis had badly affect the watch and jewellery maker’s cash flow, making it necessary to halve its dividend to 1 Swiss franc per share.

“Even at this stage at the end of August, we’re still not clear as to when we’ll see a therapeutic or a vaccine so we still err on the side of caution in terms of cash,” he said in a call ahead of the annual general meeting (AGM) due to take place in two weeks.

Rupert also said the company would make more changes to its board of directors - and would have launched the changes this year if it hadn’t been for the pandemic. The overhaul is designed to update the group’s business model, notably in the digital space.

Richemont decided to hold its AGM without the physical presence of shareholders this year due to rising COVID-19 infection rates in Geneva, where it usually holds the event.

Some rival watch brands are, however, gathering for an industry event in the city this week.

Richemont said last month the COVID-19 pandemic had severely disrupted its business, leading sales to almost halve in the three months to June. It had also cut its dividend for 2019/20, but plans to give warrants to shareholders under a loyalty scheme to be approved on Sept. 9.

Citi analyst Silky Agarwal said in a note last week he was cautious the Swiss watch industry’s prospects, citing the risk of production over-capacity, lack of innovation and reluctance to embrace new technology. (Editing by Thomas Seythal)