Consumer demand is stronger than estimated but the European market remains weak, the trading powerhouse Li & Fung said yesterday, revealing a 26 per cent lift in earnings.
Even as the purchasing manager index compiled by HSBC released yesterday pointed to a fifth straight month of contraction in the mainland's manufacturing activity in March, Li & Fung's deputy chairman, William Fung Kwok-lun, said orders from the US for manufacturing in the mainland has been good.
'Based on our orders so far this year, I think US consumer spending may exceed the 1 to 2 per cent growth anticipated by economists,' he said. 'Europe is at the bottom, about one to two years behind the US [in the recovery].'
The company, a global consumer goods procurer and logistics service provider, sourced 58 per cent of its wares from the mainland, last year, up marginally from 57 per cent in 2010.
Although labour costs on the mainland rose over 14 per cent last year, Fung said prices of some materials, such as cotton, have come down, helping to ease the cost pressure.
However, Li & Fung has still been shifting its procurement of lower-margin products from the mainland to more cost-efficient locations such as Bangladesh, and concentrating on more value-added products when procuring from the mainland. Procurement from the mainland grew 24 per cent last year, against a 41 per cent rise in procurement from Bangladesh.Yesterday the company reported a 24 per cent rise in net profit to US$681 million for last year, with revenues rising 26 per cent to US$20 billion.