Li & Fung reports 20 percent drop in 2018 operating profit

For the year ended 31 December 2018, Li & Fung Limited said, on a like-for-like basis and excluding the impact of the strategic divestment of the three product verticals in April 2018, which triggered a one-off disposal loss of 114 million dollars, core operating profit decreased by 20 percent to 285 million dollars due to decreases in turnover and total margin in the supply chain solutions business, as well as continued investment in digitalization in line with the company’s long-term strategic plan. Turnover decreased by 6.2 percent to 12.7 billion dollars.

Commenting on the full year trading, Spencer Fung, Group CEO of Li & Fung, said in a statement: “2018 was a demanding year and we’ve made a fundamental reorganization of our business in line with our Three-Year Plan to build the supply chain of the Future. We initiated a structural change with a new management team to focus on our core customers and operational excellence.”

Total margin percentage improved by 0.4 percent to 10.6 percent for the year. The company added that adjusted profit attributable to shareholders decreased 15.9 percent to 117 million dollars, while profit attributable to shareholders for continuing operations decreased by 26.2 percent to 126 million dollars.

The logistics business continued to grow organically with double-digit increases. With strong demand for in-country logistics services, turnover and COP increased 10.2 percent and 14.6 percent to 1.13 billion dollars and 86 million dollars respectively. Li & Fung said, to further accelerate the pace of its growth, preparation is underway for the potential spin off and separate listing of LF Logistics to take place in 2019 depending on market conditions and other factors.

In addition, onshore wholesale business in the Americas, Europe and Asia turnover increased by 7.4 percent to 1.7 billion dollars with recovery at major US customers and growth in the Asia onshore wholesale business. The company further said that operating costs as a percentage of turnover improved by 80 basis points.

“With ongoing trade uncertainties, we continue to help existing and new customers optimize their production across over 50 countries of export. This provides the best defence against fluctuations in trade policy and mitigates any negative impact from tariff increases. I am confident that our new leadership team and organizational structure will help us drive productivity, strengthen customer relationships and, in turn, grow market share,” added Li & Fung Group Chairman, William Fung.