Yue Yuen Industrial (Holdings) Limited said total revenues rose 2% in its year ended Sept. 30, to $5.01 billion. Net profit attributable to equity holders of the company decreased by 0.9% year on year to approximately $464.7 million, or 28 cents a share.
Directors have recommended paying a final dividend of HK$0.55 per share, the same as in FY2008. (Interim dividend in FY2009: HK$0.34 per share vs FY2008: HK$0.34 per share). The total dividend for the year will be HK$0.89 per share, the same as in FY2008.
Footwear manufacturing activity for the Group was similar to last year's level, with turnover from the key product category, athletic shoes declining slightly by 2.6%. There was a moderate reduction in the total number of shoes produced by the Group to 246.2 million pairs, representing a minus decline of 3.5% compared with the previous year.
This drop was principally due to more cautious batch order sizes from existing customers. During the year under review, the Group reduced the number of production lines by a small number, with the allocation of lines among the three production bases (mainland China, Vietnam and Indonesia), leaving the total number of lines at 423.
Retail sales of the Group grew by 19.6% year-on-year to US$1,015.5 million, supported by the continuing strength of consumer spending in the Greater China Region. The total number of directly operated counters/stores in China under the Group stood at about 4,583 by the end of September 2009. In addition, there were approximately 1,245 distributors in the Greater China region for the Group's wholesale operations for the two licensee brands.
From a geographic view, sales to the U.S.A. were surprisingly resilient given the drastic slowdown in economic activity for that region. Regions that in previous years exhibited high sales growth were also affected by the global economic slowdown. The sluggish sales growth rate for the Asia region also encompasses the moderation of retail sales growth for the Greater China Region. The sales growth rate for South America fell to mid-single digit compared to the rate in previous years of high double digits.
Although the slowdown in the global economy has affected demand at all levels, the Group has continued to maintain its standing on the back of: 1) its strength in manufacturing activities; 2) the ongoing consolidation in the manufacturing industry; and 3) its broad based retail and wholesale operations in the Greater China region. Many of the associate companies and jointly controlled entities have been successful in their efforts to restructure their operations so that their profit contributions were higher this period compared to last year.
Turnover declined in the first quarter of fiscal 2010 due to the exceptionally strong order flow for the same period last year. For the three months ended December 2009, the Group turnover declined by 3.4% year-on-year to approximately US$1,312.8 million.
On the manufacturing side, the Group expects order flow from its brand name customers to be stable for the rest of the financial year. When looking at research on consumer spending, it appears that consumers still have a strong desire to purchase athletic or casual shoes. With World Cup South Africa taking place in June and July of this year, consumers of athletic footwear and apparel may be reinvigorated. Historically leading athletic brand names have been able to attract attention to their apparel and footwear goods during major sports competitions.
Input cost pressures continue to exist as commodity prices and minimum wages for factory workers across Asia, trend upwards. Governments in the developed world want the PRC government to allow its currency, the Renminbi, to appreciate further. Since July 2005, the Renminbi has appreciated by 21%. Further appreciation of the currency will hurt export related manufacturing in the PRC.
Turnover from the China wholesale and retail sales operations will grow at a steady rate, as management has spent the past year fine tuning operating efficiency and refining its relationships with the various regional joint venture partners operating throughout China. The Group owns one of largest distribution networks of athletic apparel and footwear in the mainland, selling both international athletic brands as well as local brands. The Group's network encompasses around 10,000 points of sale across China and is also a valuable platform that can help other international brand names sell their apparel or footwear to consumers in China.
Global demand for athletic footwear is likely to strengthen in the coming year given the improving economic outlook and sports events like World Cup South Africa. Sales of sportswear products in China will continue to benefit from the strong economic growth in China and the trend of growing consumer interest in athletic apparel and footwear.
Being a manufacturer in the shoe manufacturing industry is challenging. Major brand name customers prefer to give their orders to factories that have a sound financial position. Major brand name customers also require these factories to make a commitment to recycle, reuse or reduce waste emissions to protect the environment. These factories are also expected to meet Corporate Social Responsibility (“CSR”) needs. The Group has a dedicated department of experienced individuals to address CSR and environment issues with its brand name customers at all the different factory locations across Asia. With respect to banking activities, it is observed that banks prefer to lend to large factories instead of small and medium size ones.
“We will continue to play a leading role in the global supply chain for the athletic and casual footwear industry. The Group will continue to be a leader in the Greater China Region for the retail distribution of athletic footwear and apparel,” said Mr. Tsai Chi Neng, Chairman of the Group.
Consolidated Income Statement
For the year ended 30th September, 2009 
