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First-half net distinction during sourcing hulk Li & Fung beats analysts’ forecasts

Li Fung, a Hong Kong sourcing association that reserve garments and toys to abroad retailers including Wal-Mart, reported a better-than-expected distinction decrease in a initial half, interjection to reduced handling costs amid a deflationary sourroundings and reduced orders.

First-half net distinction fell to US$72 million from US$149 million a year earlier, violence an normal foresee of US$68 million, formed on a meant foresee of 13 analysts in a Bloomberg poll. Basic gain per share fell to 6.7 HK cents. The association due an halt division of 11 HK cents per share, down from 13 HK cents a year earlier.

“The initial 6 months of a year was a toughest sell and trade duration we have operated in given a tellurian financial predicament in 2008,” arch executive Spencer Fung pronounced during a lecture on Thursday. “We design a trend to continue in a second half and a volume of orders will sojourn during a turn in a initial half … we will concentration on a core customers.”

The company’s core handling distinction for a initial half declined 14.2 per cent to US$156 million, as that of trade business slid 19.1 per cent to US$129 million, notwithstanding a 20.8 per cent arise in a logistics business.

Total income forsaken 6.4 per cent to US$8.07 billion from US$8.63 billion in a initial half of 2015, compared with researcher estimates of US$8.45 billion.

Operating cost fell 2.8 per cent to US$779 million interjection to softened efficiency.

Fung pronounced Britain’s opinion to leave a European Union would not have most impact on a business given that many British clients do business globally, adding that he saw opportunities in Germany, Italy and Spain.

He pronounced Li Fung’s 2014-2016 devise is still on track. Its subsequent three-year plan, that will be announced in early 2017, will concentration on “speed, creation and digitalisation of a whole supply chain”.

The association will say a remuneration of 50 to 60 per cent of core handling distinction as dividend, Fung said.

The company’s shares have depressed 23 per cent in value so distant this year. They finished prosaic during HK$3.94 on Thursday before a outcome was announced.

“We trust income expansion for Li Fung’s European business will be challenged by Brexit and augmenting militant attacks over 2016 to 2018. Moreover, a churned US sell shred – weakening attire sales though a pick-up in hard-goods sales expansion so distant this year – has combined doubt to a trade business,” Daiwa Securities Anson Chan and Jennifer Wu wrote in a note.

Li Fung earns 60 per cent of a income from a US, with Europe and Asia accounting for about 16 per cent each.

“Global expenditure direct is weaker than expected, while Li Fung has singular bearing to a athleisure trend, that continues to cannibalise infrequent wear,” Macquarie analysts Linda Huang and Ricky Lam wrote in a note before a formula announcement.

US sell sales in Jul remained unvaried from a month earlier, blank marketplace expectations of a 0.4 per cent month-on-month increase.

However, Chan and Wu still design Li Fung to say a annual division per share during 3.6 to 3.9 US cents over 2016 to 2018, given that a money upsurge stays healthy.

In May, a association announced a ordering of a Asia consumer and health caring placement business to Dah Chong Hong Holdings for US$350 million, as it refocuses on a core sourcing and logistics businesses in Asia. The understanding was finished in June.