• Thu
  • Jul 10, 2014
  • Updated: 11:38am

Yue Yuen stock falls as costs hit earnings

PUBLISHED : Saturday, 31 December, 2011, 12:00am
UPDATED : Saturday, 31 December, 2011, 12:00am

Footwear maker Yue Yuen Industrial has posted a 6.2 per cent fall in full-year net earnings despite a significant rise in revenue, as costs buffeted margins.

Shares of Yue Yuen, which makes shoes for Nike and adidas, closed down 1.8 per cent at HK$24.55 yesterday after posting the worse-than-expected results for the fiscal year ending in September.

Revenue surged 21.7 per cent to US$7.04 billion from a year earlier. But net profit declined to US$449.8 million, hit by a 24 per cent rise in raw material costs and a 38.5 per cent surge in wages.

Kenny Tang Sing-hing, general manager of AMTD Financial Planning, expects Yue Yuen's profit margins to improve next year because prices of raw materials - such as rubber and plastic - have begun declining from their highs this month.

Sales volumes should also remain stable because demand for athletics shoes is less vulnerable to economic downturns than that for other consumer goods, says Tang.

The Guangdong-based firm made 326.6 million pairs of shoes during its fiscal year, up 14 per cent from the previous year.

Sales of athletics shoes accounted for more than half of total revenue, while casual and outdoor shoes accounted for 17 per cent. Yue Yuen's retail business contributed 20 per cent of revenue.

Asia is now Yue Yuen's largest market, followed by the United States and Europe. As of the end of September, Yue Yuan had 3,055 directly-operated outlets on the mainland and 3,357 sub-distributors across the North Asia region.

During its fiscal year, Yue Yuen increased the number of production lines by 16 per cent to 537, with most of them located in China, Vietnam and Indonesia.

The firm said it expected the European soccer finals in June next year and the London Olympics in August to lift sales of its products.

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Yue Yuen's proposed final dividend, in Hong Kong cents, for its full 2011 fiscal year, which ended in September

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