Li & Fung expects 2012 core operating profit to drop 40pc
Analysts say earnings forecast is worse than expected while the sourcing company blames it on restructuring costs and provisions in the US
Li & Fung says net profit for last year will not exceed that of the previous year and core operating profit will in fact drop 40 per cent, worse than analysts' estimates.
"This is worse than I expected. Obviously it's a negative for the company," said Nomura analyst Tanuj Shori.
Although the net profit of Hong Kong's largest supply chain firm grew 33 per cent in the first half of last year, it would not increase for the whole year, the company said yesterday. "The company's efforts to improve the second-half results will not achieve an improvement in core operating profit, and core operating profit is expected to be lower by approximately 40 per cent."
A JP Morgan report in November forecast Li & Fung's net profit to grow 16.3 per cent last year. However, a Bloomberg consensus estimate said it would fall 9 per cent to US$619.5 million.
There is no way Li & Fung will meet its target of a core operating profit of US$1.5 billion this year, more than double its core profit in 2010, Credit Suisse analyst Gabriel Chan said.
In September last year, Li & Fung chief executive Bruce Rockowitz said: "We remain committed to our three-year plan's core operating profit target of US$1.5 billion."