* H1 profit slows on soft consumer markets
* Company sees H2 profit stronger than H1
* Company sees more acquisitions, outsourcing opportunities
* Committed to three-year 2008-2010 targets
(Add details and comment)
By Donny Kwok
HONG KONG, Aug 13 Consumer goods exporter Li &
Fung Ltd (0494.HK) on Thursday said profit would improve in the
second half of the year after a weak first half amid early signs
of an improving global economy, giving it confidence to reaffirm
targets in its three-year plan.
"Although the external operating environment is undoubtedly
challenging, we remain committed to our current three-year plan
2008-2010 targets," Chairman Victor Fung said in a statement.
The targets -- which some analysts have said the company
might have difficulty meeting -- include annual turnover of $20
billion, and a core operating profit of $1 billion. Turnover in
the first half of 2009 totaled HK$46.3 billion ($6 billion).
President and executive director Bruce Rockowitz told a media
briefing that he expected Li & Fung's profit to improve in the
second half of the year from the first, and that 2009 Christmas
sales so far had improved from last year's weak showing.
The company, whose customers include U.S. retail giants
Wal-Mart (WMT.N) and Target (TGT.N), is relying on acquisitions
and new outsourcing deals to meet its targets. It said it is also
well on track to cost cutting initiative in 2009.
Li & Fung has completed three small roll-up acquisitions in
China and the U.K. so far this year.
"We see more acquisition and outsoucring opportunities and
are looking at many," group managing director William Fung told a
news conference. "Big acquisitions are expected to come later
this year or early next year."
Li & Fung posted a net profit of HK$1.4 billion (US$179
million) for the year to June against HK$1.24 billion a year
earlier. Its HK$46.3 billion in revenue was down slightly from
HK$47.4 billion a year earlier.
The profit matched analysts expectations and represented 12.9
percent growth from a year earlier, but down from the 18 percent
growth in the same period of 2008, as the company's customers
struggled with weak demand.
Analysts said the first half of 2009 was one of the most
challenging times in Li & Fung's recent business history, as it
grappled with a contraction in U.S. consumer demand and the
insolvency of a major client, Arcandor (AROG.DE), one of
Germany's top retailers.
Li & Fung said in June that Arcandor's insolvency would
impact the company's three-year plan to boost sales to $20
billion. [ID:nHKG187021], and it is expected to see more
bankruptcy provisions for its customers.
William Fung told the news conference that he expected flat
growth from existing customers in 2009.
Analysts projected Li & Fung's business outlook would remain
cloudy despite recent signs that the global downturn is easing.
In February, Li & Fung agreed to pay $83 million to become
Liz Claiborne's LIZ.N primary sourcing agent for apparel and
accessories. It has also entered into an outsourcing deal with
money-losing U.S. retailer Talbots Inc TLB.N.
William Fung said he expected the agreement to take effect in
September, with sourcing volume from Talbots this year expected
to be $300 million-$400 million.
In May, Li & Fung said it planned to expand its health,
beauty and cosmetics (HBC) business through acquisitions, and was
looking at HBC-related acqusitions in the cosmetics business in
the U.S. and Europe.
The Hong Kong-listed exporter, which in May raised $350
million in a share sale, had said it expected to sign more
outsourcing deals as cash-strapped retailers in the United States
looked to cut costs in the economic downturn.
Shares of Li & Fung surged 56.6 percent in first half period,
outperforming a 27.7 percent rise in the broader market .HSI.
Its shares closed up 3.46 percent on Thursday before the results
(Additional reporting by Fion Li; Editing by Chris Lewis)