Li & Fung, the Hong Kong-based manufacturer of hardgoods and apparel is continuing to grow its sales in higher margin areas, providing low double-digit top-line growth and increasing net income by 25% in 2004. The company continues to manufacture in Hong Kong and mainland China and it exports a large majority of its goods to the U.S.
However, the share of goods shipped to the U.S. is falling while exports to Canada, Europe, and Australasia all increased year-on-year.
Total sales at Li & Fung increased 10.1% to HK$47.17 billion ($6.05 bn) compared to HK$42.63 billion ($5.48 bn) last year. The companys gross margin was 9.2%, up 30 basis points over the 8.9% reported last year. Selling, Merchandising, and Administrative costs climbed 10 basis points to 6.3% of sales. This brought core operating income up 20.8% to HK$1.60 billion ($204.8 mm) and a slight reduction in taxes and minority interest brought net income up 25.1% to HK$ 1.53 billion ($196.5 mm).
Mr. William Fung, group managing director of Li & Fung Limited, said, “The groups recurring net profit increased by 61% over the three years and (the) core operating margin has increased from 2.8% to 3.4%. However, owing to a slow start at the beginning of the (three year) plan, the group did not meet its target of doubling its profit from the level achieved in 2001.”
Of significance during the last Three-Year Plan was the groups successful move into higher-margin business models, including the establishment of a brand business through licensing.
Looking forward, the target of Li & Fungs new Three-Year Plan is to reach over US$10 billion in sales by 2007. In a prepared statement Mr. Fung also stated that changes in the sourcing markets, such as the removal of the quota system, have created new opportunities for the group.
