Li & Fung profit soars as brand spin-off eyed

Global trading group Li & Fung said operating profit for 2013 soared 70 per cent to US$871 million as it announced an acquisition to change its business mix and said it is seeking to spin off its licensee brands business into a separate public company sometime this year.

The core operating profit for the year ended December beat a consensus of 15 analysts compiled by Bloomberg which forecast operating profit of US$813 million. Profit attributable to shareholders was US$725 million, a gain of 17 per cent from a year ago. Turnover increased 3 per cent to US$20.75 billion.

The group said it would acquire China Container Line, a sea-freight forwarding firm, the first major logistics acquisition since it acquired IDS in 2010. Li & Fung supplies some of the world's largest firms including Wal-Mart, Target and Inditex.

"Our focus has been in-country logistics, moving goods within Asian markets and working for major brands and retailers in this part of the world," chief executive Bruce Rockowitz said. "With the new acquisition, we will now be firmly in the freight forwarding business. If you look historically, our core business is trading.

"There's a huge synergy with freight forwarding and our trading business. Our business was 10 per cent freight forwarding and 90 per cent in-country logistics. After the acquisition we'll be 50-50." The logistics business will add more than 500,000 20-foot equivalent unit (teu) containers to the current 50,000.

If the spin-off is approved, the new company called Global Brands Group will be listed in Hong Kong. Global carries more than 300 brands such as Cole Haan, Tommy Hilfiger, and Disney. Shares will be distributed in specie, meaning no capital will be raised.