HK's Li & Fung 2017 profit from continuing operations up, logistics grows

Hong Kong’s Li & Fung Ltd , which supplies clothing and other products to retailers worldwide, said on Thursday its 2017 profit from continuing operations rose 6.5 percent amid growth in its supply chain solutions and logistics businesses.

Li & Fung, which made its name by making clothing and toys for Western retailers, said profit from continuing operations rose to $170 million, from a restated $160 million in 2016.

The company also said it recorded $375 million net loss for 2017, versus a $221 million profit in 2016, due to a one-time non-cash loss for discontinued operations.

The accounting losses have no impact on the company’s future cash flow, or operational and financial performance, it added.

In December, Li & Fung said it would divest its struggling furniture, beauty and sweater businesses for $1.1 billion, streamlining its operations while providing it with financial firepower to build its digital supply chain and logistics businesses.

It said the deal would lead to a $610 million loss because of related writedowns, but it would also provide the company with financial firepower as it implements its strategic plan.

“Our strategy to further simplify the business and focus on our core supply chain solutions business is in turn helping our customers to revamp their business model and counter disruptions in other markets,” said group chairman William Fung in a statement.

“We are on track to deliver a fully integrated digital platform that connects our suppliers and customers with end-to-end visibility to enhance decision making,” Fung added.

The company, battling a difficult economic climate as well as competition from online rivals, saw reported revenue fall 8.3 percent from a year earlier to $13.53 billion as brand and retail customers continued destocking.

Core operating profit grew 11.8 percent to $356 million.

Li & Fung had said it aimed to achieve low double-digit growth in revenue and core operating profit by 2019.

“Our new Three-Year Plan had a strong start in its first year and we are on track to meet our financial targets and strategic goals,” Chief Executive Officer Spencer Fung said.

Li & Fung has refocused on its core supply chain business following the sale of its money-losing brand-licensing and distribution business in 2014, which helped to increase its cash flow and control operating costs.

The company’s shares closed 1.4 percent higher ahead of the earnings announcement, beating a 1.1 percent fall in the benchmark Hang Seng Index.

($1 = 7.8461 Hong Kong dollars)