Li & Fung Limited which designs, develops and sources products for the world's largest consumer brands, reported sales dipped in the first half as retailers adapted to a weak macroeconomic environment and disruption to their traditional business models.
The Hong Kong-based company reported total sales slid 1 percent to $8.63 billion, as a 36.3 percent surge in revenues from its logistics business was more than offset by a 2.5 percent decline in its trading revenues.
Executives attributed the results to ongoing weak macroeconomic conditions as well as disruptions at global retail.
“Despite challenging macroeconomic conditions, turnover remained steady in the first half of 2015 and business with our core customers grew,” said William Fung, Group chairman, Li & Fung. “The foundation of our business remains solid. We are happy with the continued strong growth in our logistics business. The Vendor Support Services business announced in 2014 is ahead of plan. Hence, we are pleased to see that our investments made for this three-year plan have begun to yield benefits.”
Spencer Fung, Group CEO, said the emergence of e-commerce has created a new set of challenges for global brands and retailers.
“We believe omnichannel is the future of retailing success,” Fung said. “Consumers are no longer limited by how, when and where they buy products. They are also demanding that these products are unique and sustainable. As a result, our customers require higher degrees of product differentiation to remain competitive than ever before.
Additionally, noted William Fung, “the ongoing trend of lower value-added production moving out of China into less developed markets complicates our customers’ supply chains, disconnecting production from raw material infrastructure located in China. We are best positioned to manage this new complexity for our customers and suppliers with our new Vendor Support Services.”
Profit attributable to shareholders increased by 33.4 percent to $149 million due mainly to the impact on discontinued operations of Global Brands, which Li & Fung spun off through an initial public offering last year. Basic earnings per share was 13.8 HK cents (equivalent to 1.78 US cents), an increase from 10.4 HK cents (equivalent to 1.34 US cents) compared to the same period in 2014. Excluding the results from discontinued operations in 2014, basic earnings per share would decrease from 19.6 HK cents (equivalent to 2.51 US cents) to 13.8 HK cents (equivalent to 1.78 US cents). The board of directors resolved to declare the same interim dividend of 13 HK cents per share (the 2014 interim being 13 HK cents).
Spencer Fung concluded, “As we enter the second half of the year, our order book is solid and the pipeline of new business for both our trading and logistics businesses is strong. We are optimistic that through the remainder of the year key prospects will be converted into new business.”
“Looking at the larger picture, it is important to note that we are currently in a period of transition as a company. We continue to invest for the long term to achieve our goals of building a sustainable enterprise and helping our customers grow their business at a time when they are requiring and demanding more to help them stay competitive. We believe that by focusing on product expertise, applying innovation to design and development and continuing to build our multi-channel sourcing business model, we will be the company best positioned to help our customers succeed at a time when the global retail industry is evolving.”
