Li & Fung Pushes to Diversify Revenues as US, Europe Slow
With flagging consumer demand in the U.S. and Europe hurting Li & Fung's profits, the company says it's still seeing strong growth in Asia and that will help it weather the current storm.
“We have head winds, I must say, in America and Europe, but certainly the winds are behind our sails in Asia,” the company's Executive Deputy Chairman William Fung told CNBC on Friday.
With the company heavily reliant on the consumer markets in the U.S. and Europe, which account for 80 percent of revenues, Fung says the supplier has been seeking to boost growth in Asia via acquisitions.
“In the old days if you look at a simple model of Li & Fung, we're a company that sources (from) developing parts of the world especially Asia and we sell to America and Europe,” Fung says.
“However now with this new world we're coming up to — Asia and China especially (are) going to be important markets.”
For now though, the world's largest supplier of goods to retailers such as Wal-Mart and Target , says just 12 percent of its revenues came from China and the rest of Asia in the first half of the year.
The company posted a 15 percent decline in net profit for the first half of 2011 — the first year-on-year decline in 14 years. But the Hong Kong listed shares jumped over 8 percent on Friday morning because profits were slightly stronger than analysts had expected.
Li & Fung acquired 10 firms globally in the first six months of the year and Fung says they are in the process of integrating them.
“There's obviously a lot of overlapping overheads and jobs, and I think we're in the process of rationalizing that and streamlining our operation costs,” Fung says.
Li & Fung shares have fallen about 43 percent so far this year.