Li & Fung to have another go at doubling profit by 2013
Trading house Li & Fung aims to double its core operating profit to US$1.5 billion in three years despite having missed a similar goal last year.
The 105-year-old company said yesterday that core operating profit leapt 42 per cent to US$725 million last year, falling short of the US$1 billion target it set three years ago. Turnover rose 19 per cent to US$15.91 billion, also lagging behind the target of US$20 billion.
'It was disappointing not to have reached the target,' executive director Bruce Rockowitz (pictured) said. 'We worked very hard but the global financial crisis in 2008 almost wiped out our three-year plan.'
He said the 2011-2013 plan had not factored in the turmoil in the Middle East and the crisis in Japan, which had made the global economic outlook more uncertain.
Managing director William Fung Kwok-lun said the goals set in the next three-year plan of the company were 'achievable, but challenging'.
Li & Fung has set a target of a 62 per cent jump in the core operating profit of the trading arm to US$700 million in 2013 from last year; that of the logistics arm to leap to US$100 million from a US$5 million loss, and the core operating profit of the onshore sourcing and distribution services to more than double to US$700 million from US$298 million last year.
The company, which sources lipsticks, shoes, apparel and white goods from emerging markets to ship to the United States and Europe, would meet its goal through a two-pronged strategy of acquisitions and organic growth, Fung said. 'We will definitely have some deals this year.'
The size of the logistics division was boosted significantly after Li & Fung last year took over Integrated Distribution Services Group, a supply-chain services provider that operates 30 offices and 96 distribution centres, mostly on the mainland.
As costs jumped on all fronts on the mainland, from wages to raw materials, Rockowitz said he expected they would source more products outside the country.
'China will remain a key sourcing region, but the proportion may get smaller,' he said. 'Retailers are testing consumers how much price rises they can take.'
Li & Fung sourced 57 per cent of its products from the mainland last year - 3 percentage points less than the year before - while the proportion from Southeast Asia edged down 1 percentage point to 20 per cent.
The group's attributable profit grew 27 per cent to HK$4.27 billion, or HK$1.11 per share. The final dividend was raised 6 per cent to 52 HK cents per share, taking the full-year total up 20 per cent to 90 HK cents per share.
Shares of Li & Fung dropped 10 HK cents, or 0.23 per cent, to HK$42.95 yesterday before the results were made public.