Swatch Group AG said Tuesday that its first-half net profit rose 17% as a result of strong demand for the company’s luxury products, The Associated Press reports.

The world’s largest watchmaker said it earned 217 million Swiss francs ($170.8 million), up from 186 million francs in the first six months of 2003.

“Despite relatively uncertain political circumstances, fears of further terrorist attacks and an uncertain outlook for the Swiss franc, consumer behavior in Europe has stabilized and improved slightly,” Swatch reportedly said, adding that still larger growth had been achieved in the United States and Asia.

The Biel, Switzerland-based company reportedly said it was optimistic that results for the rest of the year would remain good because the Olympic Games, where Swatch provides official times, were generating publicity for the brand, the AP reports. Marketing expenses tied to the Athens Olympics were 20 million francs ($15.7 million).

Earnings before interest and taxes rose to 269 million francs ($211.8 million) up from 224 million francs, on sales of 1.97 billion francs ($1.55 billion) compared with 1.82 billion francs a year earlier.

Swatch said sales of its Breguet brand posted strong growth in the luxury segment and the Swatch brand held steady despite intense competition from producers outside Switzerland.

The watch division generates about half of Swatch’s sales, while other operations such as jewelry and watch movements contribute the remainder.

Earlier this month, Swatch denied allegations that it attempted to evade up to $180 million in taxes worldwide over the past six years.

Its comments followed a complaint filed June 25 with the U.S. Labor Department by two former employees who said they had been the victims of company harassment because they accused Swatch of evading taxes and customs duties through use of transfer pricing in its Asian-Pacific operations.

Swatch said subsequently that the department dismissed the case since the alleged actions occurred outside the United States.

JCK