* Intends to achieve over 2 times 2013 core operating profit
* Full-year profit $725 mln vs $577.1 million estimate
* Core operating profit margin rises to 4.2 percent
(Add management comment, spin-off plan)
By Donny Kwok
HONG KONG, March 20 Global exporter Li & Fung
Ltd said on Thursday it plans to spin off its global
brands and licensing business under its Global Brands Group and
list it in Hong Kong this year as part of the company's
Chief executive Bruce Rockowitz was speaking after Li & Fung
reported a 17 percent rise in full-year net profit, boosted by a
strengthened foothold in Asia as it moves to capture increasing
consumer spending in the region.
"Li & Fung will be going back to its core of taking other
people's brands. It is less volatile," Rockowitz told a news
conference. "On the other side of the coin, the brands business
has gone through a difficult time and it is on its way up."
Shareholders with a stake in Li & Fung will automatically
get one share each in the spin-off, he added.
Chairman William Fung said the company's earnings were back
on track and the spin-off would not raise cash. "It's probably
the simplest way to do a spin-off. We are not raising any money
and it's not an IPO in the traditional sense," Fung said, adding
that Global Brands is a $3 billion business.
Global Brands' licensing business is focused mainly on
American brands, Rockowitz said, and the U.S. market is "slowly
getting better but it is still not robust".
Rockowitz would become chief executive of Global Brands
Group, while Li & Fung chief operating officer Spencer Fung
would take over his post at the global exporter.
The pro-forma 2013 net sales of Global Brands amounted to
$3.3 billion, with core operating profit at $134 million.
For its three-year plan ending in 2016, Li & Fung hopes to
see the core operating profit of its global brands and licensing
division more than double from the 2013 level.
The consumer goods exporter, which supplies retailers like
Kohl's Corp and Wal-Mart Stores Inc with
clothing, toys and other products, posted a net profit of $725
million for 2013, beating forecasts of $577.1 million, according
to Thomson Reuters' Starmine SmartEstimate. That compared to a
net profit of $617 million in 2012.
The Hong Kong-based group switched its strategy three years
ago to become less of a middleman and more of a brand-management
business as major clients sourced more goods directly from
manufacturers. It also embarked on a string on mostly minor
As part of the new three-year plan, Li & Fung in January
announced the establishment of a dedicated Vendor Support
Services business unit to enhance factory and worker safety,
raise standards and improve operational efficiencies in its
global supply chain.
The company said core operating profit increased by 70
percent to $871 million and its core operating profit margin
increased to 4.2 percent from 2.5 percent.
Li & Fung appears attractive with an estimated dividend
yield of 4.7 compared with the peer average of 2.3, according to
The company's shares, which have plunged about 60 percent
from an all-time high hit in 2011, are the eighth
best-performing stock on the benchmark Hang Seng index so
far this year. The shares closed up 1 percent on Thursday ahead
of the results announcement, outpacing 1.8 percent fall in
benchmark Hang Seng Index.
(Additional reporting by Patturaja Murugaboopathy; Editing by
Michael Urquhart and Mark Heinrich)