May 18, 2011
Reading time
2 minutes
Download the article
Click here to print
Text size
aA+ aA-

Li & Fung aims for organic growth in coming years, shares jump

May 18, 2011

May 18 - Consumer goods exporter Li & Fung Ltd said on Wednesday it would focus on internal growth in the coming years but would look for acquisition opportunities in Japan to boost its trading business.

Li & Fung
Li & Fung Group

Li & Fung, the manager of supply chains for retailers including Wal-Mart Stores Inc and Target Corp , also said it had appointed group managing director William Fung as executive deputy chairman, and president Bruce Rockowitz as group president and chief executive officer, effective immediately.

"In the next three years, we expect our organic growth will be stronger than the previous three years as the markets in the U.S. and Europe are recovering," William Fung told reporters after an annual general meeting.

"Our focus will be on organic growth in the coming three years. We will focus on digesting those acquisitions we made in the last three years," Fung said.

Fung said the company had made more acquisitions in the past three years and smaller growth organically because some of its major customers in the U.S. and Europe were hit during the financial crisis.

The company's shares jumped 4.5 percent on Wednesday afternoon to HK$37.70, its highest in two weeks. That compared with a 0.57 percent gain by the Hang Seng Index .

In March, Li & Fung posted a forecast-lagging profit for 2010 but set an ambitious plan to actively expand its sourcing network to improve profitability. [ID:nL3E7EL0XB]

Li & Fung, which missed its 2008-2010 profit target, set an ambitious plan for the next three-years, targeting a core operating profit of $1.5 billion by 2013, up from $1 billion in the previous three-year plan.

Fung said he was confident the company could meet the target despite difficulties ahead.

Li & Fung has faced challenges over recent years as consumer demand in Europe and the United States has largely remained slack, but U.S. demand started recovering late last year.

"Recovery in the U.S. continues, Europe is still a bit of a mess; we cannot say there is no difficulty in our core businesses in sourcing and trading this year as the increase in materials and labour costs are seen to have an impact," Fung said.

Fung said the company would look for investment opportunities in Asia, particularly in Japan with an aim to boost its trading business.

"It (Japan) is still a huge market, which we have very little penetration of and Li & Fung will continue its effort to penetrate into this market," he said. "Our acquisition can be lesser but our strategic acquisition will continue."

Analysts expect the exporter's $1 billion war chest for acquisitions to drive earnings growth in the next two years. But they also worry that profit margins may face pressure as costs rise, especially for raw materials.

(Reporting by Donny Kwok and Rachel Lee; Editing by Ken Wills)

© Thomson Reuters 2022 All rights reserved.