Yue Yuen Industrial Holdings Ltd. said profits rose 24.4% on a 21.8% rise in turnover for the six months ended March 31 thanks to consolidation in the footwear manufacturing industry and solid performance by its wholesale and retail operations, which include nearly 1,700 stores and counters across China.


The total volume of shoes produced rose by 15.1% year-on-year to 27.8 million pairs and the Group has added 32 new production lines over the last six months bringing the total number of lines to 430 by the end of March 2008.


Sales in the United States rise 6.3%

 

Sales in the United States climbed just 6.3% to $724.5 million, generating $76.2 million in operating results, down 10% from the same period a year ago. By contrast sales to Europe rose 20%, sales in China by 61% and sales to the rest of Asia by 19.2 percent. Operating results were up slightly in Europe and more than doubled in China.

Yue Yuen is the largest maker of brand athletic and casual footwear in the world and the United States is its largest market outside of Asia. The company’s customers include Nike, adidas, Reebok, Asics, New Balance, Puma, Timerland and Rockport.


However, the company’s growth increasingly is tied to the growing wealth of Chinese consumers. Yue Yuen’s consolidated retail sales grew 81.5% in the six months ended March 31 to $370 million.


Consolidated turnover reaches $2.32 billion


On a consolidated basis, Yue Yuen’s total turnover, or sales, rose $416 million to $2.32 billion. Profits rose $42.3 million to $215.7 millon. Basic earnings per share rose 9.7% to 34 cents.  Gross profits rose 32% to $576.8 million, outpacing an 18.6% increase in the cost of sales, which reaced $1.74 billion. That lead to gross margins of 24.8%, up 200 basis points. 

Selling, distribution and administrative expenses rose 260 basis points to 15.1% of turnover. Inventory levels climbed 21% over March 31, 2007, or by $105 million to $603.7 million.


Company spins off stock in wholesale and retail operations


In the first two months of the third quarter of FY2008 (April and May of 2008), the Group’s total urnover amounted to approximately $875.2 million, an increase of 22.6% year-on-year. Sales growth for the footwear manufacturing and China retail operations should continue to benefit from consolidation in manufacturing activities and consumer spending in China.

Given this sales growth, the Group will continue to expand production facilities in its three existing production bases, China, Vietnam and Indonesia.


On June 6, 2008, the Group listed its Greater China wholesale and retail operations under the name of Pou Sheng International (Holdings) Limited on The Stock Exchange of Hong Kong Limited. These operations are expected to perform well given the strength of consumption in China.

Helping Vietnamese workers cope with inflation


On the social responsibility front, Yue Yuen invested RMB15 million to upgrade existing fire safety equipment; and built a new 4,000-square-meter, fully-equipped employee recreation centre as part of its ongoing labour relations program.

In Vietnam, where 20,000 workers went on strike in April at a plant that makes shoes for Nike, the Group has remained vigilant of the macro economic factors affecting the well being of employees. In certain instances, measures have been taken to assist employees in avoiding the price volatility observed with basic food staples. The Group has also been involved in various activities to enhance relations with employees such as participating in labour union elections, establishing an insurance scheme and provided transportation assistance during peak times of congestion.


In Indonesia, the Group has assisted with the hosting of religious festivals and in certain occasions senior management have also had a direct participation. The Group has also established on a scholarship plan for the children of selected employees. During certain peak congestion times it has also provided transportation assistance to workers.