The world's largest manufacturer of athletic footwear, Yue Yuen Industrial (Holdings) Limited, has posted a 3.2% rise in full-year profit, but warned that rising demand for its products is being hampered by limited capacity growth and rising labour and raw material costs.

Sales have surged in the first quarter of its new financial year, rising by around 28% year-on-year to US$1.69bn in the three months to the end of December.

But the company said uneven global economic recovery has caused major Asian currencies to rise against the US dollar to push up labour costs - with direct labour costs rising by 31%.  

It also pointed out that rising crude oil prices have hurt raw material costs, although it is "working hand in hand with customers to manage these headwinds."

Yue Yuen, which also operates 3,956 stores in China and has another 4,218 sub-distributors in the Greater China region, believes it will also benefit from the growing purchasing power of Chinese consumers.

The outlook came as the Hong Kong based firm, which makes shoes for brands like Nike and Adidas, said turnover in the year to 30 September 2010 jumped by 15.4% to US$5.788bn, up from $5.017bn the year before. Profit climbed 3.2% to $479.5m from $464.7m last time.

Total production volume in 2010 increased by 16.3% to 286.4m pairs. Sales of athletic shoes, the group's main product, rose 13.1% in the year. It also makes ladies' shoes, safety shoes, and shoe components, as well as sportswear.

During the year the group expanded its production capacity to operate 460 production lines in mainland China, Indonesia and Vietnam. It also has a manufacturing workforce of about 340,000 people.