• H1 profit up 13% to HK$1.397bn

• Turnover down 2% to HK$46.292bn

• Insists three-year growth plan on track

Consumer goods powerhouse Li & Fung posted a 13% rise in first-half profit to HK$1.397bn (US$180m), but saw turnover decline on weak markets and customer insolvencies.

The Hong Kong-based company said success in controlling costs was responsible for the profit increase, which also saw core operating profit up 11% to HK1.697bn.

Earnings per share increased 6% to HK$0.38.

"We are very pleased that the group's focus on delivering operating leverage has started to bear fruit," said group MD William K Fung.

"While overall consumer sentiment is still weak, we have been able to grow our bottom line at a healthy rate, and this reflects that the group's cost control initiatives have been very successful, particularly in the areas of selling expenses and travelling costs."

Most regions delivered declines in turnover, with revenues in the US down 0.6% to HK$28.386bn, Europe falling 5.3% to HK$13.678bn and Canada declining 3.7% to HK$1.484bn.

Only Australasia grew revenues - up 1.5% to HK$1.237bn - while Central/Latin America fell back 9% to HK$610m and the rest of the world was down 7.6% to HK$897m.

Most regions showed slight declines in operating profit, with Europe worst affected, down 13% to HK$304m.

However, operating profit in the US was up 21% to HK$1.252bn.

Li & Fung's softgoods turnover was flat.

Weak business trends and customer insolvencies were offset by positive contributions from new customer Liz Claiborne.

The company provided a strong indication that it will look to secure more large-scale acquisitions and outsourcing deals in the second half of 2009 to continue to drive growth.

INSIGHT

The plight of the global retail sector is currently pulling Li & Fung's business in two different directions simultaneously.

On the one hand, the insolvencies of key customers like Arcandor in Germany are bad news for turnover and operating profit alike.

On the other, beleaguered retailers like The Talbots and Liz Claiborne are rethinking their sourcing policies to cut costs - yielding lucrative deals like that announced with The Talbots today (13 August).

More of those outsourcing deals - and more large-scale acquisitions too - will be crucial if Li & Fung is to accomplish the targets of its current three-year plan (2008-2010).

These include achieving annual turnover of US$20bn and a core operating profit of US$1bn - but both could be in jeopardy if the global economic downturn continues for much longer.