August 24, 2017 / 9:24 AM / a year ago

Hong Kong's Li & Fung H1 net profit rises 6.1 pct, beats forecast

HONG KONG, Aug 24 (Reuters) - Li & Fung Ltd, which supplies clothing and other products to retailers worldwide, on Thursday reported a 6.1 percent rise in first-half adjusted net profit and said it expected headwinds from store closures to continue in the second half of the year.

The company, which made its name by making clothes and toys for Western retailers, is battling a difficult economic climate as well as competition from online rivals. Its market value has plunged from around $25 billion in 2011 to $3 billion today.

Li & Fung said its adjusted net profit for January-June, which excluded the Asia consumer and healthcare distribution business divested in June 2016, and other non-cash M&A items, rose to $91 million, from $86 million a year earlier. That beat analyst expectations for a profit of $62.6 million, according to Reuters SmartEstimate.

Including the business and items listed above, net profit would be up 39.6 percent to $101 million, from $72 million a year earlier.

Reported revenue fell 9 percent to $7.3 billion, while core operating profit rose 8.7 percent to $170 million.

“Headwinds from store closures will continue in the second half of the year as retailers adjust their sales strategies. We expect on-going promotional activities to continue putting pressure on margin,” group chairman William Fung said in a filing to the Hong Kong stock exchange.

The group said it aims to achieve low double-digit growth in revenue and core operating profit by 2019, while its immediate first step to improve performance was to reorganise the company into two parts, one focused on services and the other on products.

Li & Fung’s shares closed 0.7 percent higher ahead of the earnings announcement, compared to a 0.4 percent rise in the benchmark Hang Seng Index. (Reporting by Donny Kwok; Editing by Sunil Nair)

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