Yue Yuen, one of the world's largest makers of athletic and casual footwear, has reported an unexpected 1.6 per cent drop in full-year net profit, saying margins were squeezed by a rise in raw-material prices.

Net profit for the year ended 30 September fell to $303.3 million from $308.2 million a year earlier, although sales rose to $2.72 billion from $2.51 billion.

Yue Yuen produces shoes for a number of major international brands, including Nike and Reebok International, in facilities in China, Vietnam and Indonesia.

Yue Yuen said surging crude oil and commodity prices put pressure on the cost of petrochemical derivatives, the key components in making the midsole and outsole of shoes.
 
Yue Yuen hopes to slash costs by shifting more production from China to Vietnam, where wage levels are lower.