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Christine Chan

INCREASED sales and a rise in product prices saw shoemaker Yue Yuen Industrial (Holdings) increase profits by 40 per cent to $616.59 million for the year ended September 30.

    Turnover swelled by 31.3 per cent to $4.15 billion, from $3.16 billion for the previous year.

    Earnings per share rose to 24.3 cents from 18 cents a year ago. A final dividend of six cents a share will be paid.

   The company also announced yesterday it would diversify its manufacturing base to Vietnam in an apparent bid to avoid possible losses because of the trade dispute between China and the United States.

     Punitive tariffs on China-made product exported to the US are expected if the two sides fail in their talks over copyright and intellectual property issues.

  The tariffs on footwear could be as much as 100 per cent of its value.

  Yue Yuen said it would put up US$60 million over the next two years for the diversification of manufacturing base and its plant in Dongguan, Guangdong province.

   The company manufactures athletic and athletic-style leisure footwear. Its clients include Adidas, New Balance, Nike and Reebok.

    Nike and Reebok, which are now the top two brands in the US market in terms of sales, reported strong growth earlier.

     The US accounts for half of the world's athletic shoe sales as well as the group's sales.

       Analysts said a trade war between the US and China might affect the group performance next year, although they did not think such a war was likely to break out because of the substantial costs to both sides.

  Analyst Lawrence Chan of Sun Hung Kai Research said that even if trade sanctions were imposed, there would be only short-term impact on the group because Yue Yuen had started to explore other markets, such as those in Asia, and to move its production base outside the mainland.

  The group had already benefited from the diversification of its market base and production base and was expected to continue doing so, he said.

  This would help cushion the adverse effect of a poor Sino-US trade relationship, he said.

  Looking ahead, Mr Chan said the profit growth this year would have to rely on cost control measures and the increase in sales volume.

  Indy Nanayakkara of Jardine Fleming Securities said the market in the US was very competitive and any extra boost in profit would depend on invention of a 'potential hit' such as Nike Air.

  So far no company had come up with such a 'potential hit' recently, he said.



Better sales and prices lift Yue Yuen