Li & Fung with more sales but less operating profit
Hong Kong’s Li & Fung (worldwide Trading, Logistics and Distribution) reports 4 % more sales or totally USD 9128 (USD 8798) million in the first half year of 2012. However core operating profit sank to USD 211 (USD 282) million or 22 % less than in the same period of 2010
The increase in turnover reflects market share gains in the U.S.A. and difficult market conditions in Europe. The management predicts that cross-selling momentum of the three business units will be reflected in the second half of 2012 and into 2013. The lower operating profit is based upon a slower than expected turnaround of the USA business and the investment into Li & Fongs Asia’s Fashion & Home platform. The company has continued to make inroads in capturing growing Asian markets.
A challenge is also the middleman’s business which forces Li & Fung to up-step its services to continue to please its customers such as Target Australia and Wal-Mart. There lures the danger that some of these large customers are subscribing to fast-retailing and direct relationships with their suppliers, a growing fact that could influence at least part of Li & Fung’s business. 62 % of the company’s revenue stems from the U.S., 18 % from Europe and the reminder from Canada, Asia, Central and Latin America, South Africa and the Middle East.
TextileFuture expresses confidence that in countries with difficult market access Li & Fung is the key for many customers and will take some time before they have gained enough experience to go on their own. Finally, the fact of local knowledge and logistics will decide upon the future and Li & Fung has the capabilities to change and adapt to new market conditions.
In 2013 the company expects a core operating profit to increase to USD 1.5 billion, benefitting from lower expected raw material prices and job shtifting to China and Bangladesh from higher cost countries.