HONG KONG: Li & Fung reports "solid" H1 but warns on US
- Q2 profit up 11.4%
- Gross margin narrows to 11.4%
- Total sales up 3%
The US continues to be Li & Fung's key export market
Global sourcing firm Li & Fung reported "solid" results in the first half, against a mixed economic landscape, with growth in both sales and earnings.
Profit attributable to shareholders increased by 45% to US$210m in the six month period. This included a non-cash gain of $98m on the write-backs of contingent considerations.
Gross margin narrowed to 11.4% from 11.6% a year earlier, but sales were up 3% to $8.71bn, driven by growth in the firm's trading business and a 44% sales increase in the logistics business.
Geographically, the US continued to be the group's key export market, representing 60% of total turnover and up slightly from 59.6% in the same period last year. US turnover grew by 3.5%, driven by the strong growth in retail sales of key customers in home furniture and kids wear. In Europe, sales were up 4.2%.
Rest of world accounted for 21.8% of total turnover, versus 22.4% in first half 2013. Asia accounted for 13.6% of total sales, slightly down from 14.3% in the same period last year. China alone accounted for 7.8% against 8.2% last year. This was mainly due slower growth in the wholesale business in the first half, but was offset by new customer wins in its trading business and the contribution of it freight-forwarding acquisition.
"The first half of 2014 was characterised by a general weakness in retail sales and uncertain political and macroeconomic conditions," the company said. "The outlook of our key markets, US and Europe, continues to be uncertain and we expect market conditions to remain challenging."
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