Li & Fung rules out big buyouts amid sluggish consumer spending growth

Global sourcing and distribution giant Li & Fung plans to make no major acquisitions in the coming three years, focusing instead on making more money from existing assets in the face of sluggish growth in worldwide consumer spending, chairman William Fung Kwok-lun said.

Early indications from the firm's most recent efforts to consolidate a slew of acquisitions made in the past six years could deliver profits for the second half of last year that beat analysts' expectations, Fung told the South China Morning Post.

"The plan we will be sharing in March with people will basically be saying that it is really without any huge thinking about acquisitions," he said ahead of a blackout period that begins later this month before the release of the company's annual results in March and the publication of its next three-year business plan to 2016.

"There will always be some good pop-up opportunities here and there, but if there is something that is really good coming along, we will tell investors. Say there is something big coming along and we want to raise money, but then you be the judge at that time whether you like it or don't like it. But we are not making it an integral part of the plan."

Investors are clearly cautious on Li & Fung, the world's largest supplier of goods to global retailers including Wal-Mart, after being badly disappointed in 2012.

Operating profits sank 42 per cent year on year after the management stuck to ambitious targets in the face of a deteriorating backdrop for the global economy and negligible growth in the consumer spending on which the firm's business depends.

"A lot of people criticise us for our acquisitions strategy. They say we are just acquiring earnings," Fung said. "But I know that if I buy a company for earnings but I can't make that company grow, it will be a drag on my earnings."