(The following statement was released by the rating agency)
Nov 02 -
-- In our view, Li & Fung's operations and financial performance are
unlikely to improve in 2012 over 2011 due to a weak first half year and
sustained weak market sentiment.
-- We believe the Hong Kong-based sourcing, logistics, and distribution
company is likely to need more funding, including debt funding, for
acquisitions to meet its three-year target in 2013.
-- We view the company's business risk profile as "strong" and its
financial risk profile as "intermediate."
-- We are revising the rating outlook to negative to reflect the
challenging operating conditions and uncertain recovery prospects in 2013.
-- We are affirming the 'A-' rating on Li & Fung and the 'A-' issue
rating on its outstanding senior unsecured notes. We are also lowering our
Greater China regional scale rating on the company and the notes to 'cnAA-'
On Nov. 1, 2012, Standard & Poor's Ratings Services revised the rating outlook
on Hong Kong-based sourcing, logistics, and distribution company Li & Fung
Ltd. to negative from stable. At the same time, we affirmed the 'A-' long-term
corporate credit rating on Li & Fung and the 'A-' issue rating on the
company's outstanding senior unsecured notes. As a result of the outlook
revision, we lowered our Greater China regional scale rating on Li & Fung and
its notes to 'cnAA-' from 'cnAA'.
We revised the outlook to reflect our view that Li & Fung's operations and
financial performance are unlikely to improve in 2012 over 2011, when the
company's credit ratios were already weak for the rating. The
weaker-than-expected performance is due to challenging operating conditions in
Li & Fung's key markets, including Europe and the U.S. The U.S. and Europe
accounted for 80% of the company's turnover in the first six months of 2012.
In our view, recovery prospects remain uncertain for the next 12 months. At
the same time, the company has an aggressive growth target for 2013. We
believe Li & Fung may need additional funding to support accelerated
acquisitions to try and meet its three-year target. A negative outlook
suggests more than one in three chance of a rating downgrade in the next two