Li & Fung's profits fell 9.4% to US$617 million

Check out what to blame.

According to a release, Li & Fung's profit attributable to shareholders was US$617 million, representing a decrease of 9.4% compared to 2011. Meanwhile, core operating profit decreased by 42.0% to US$511 million; core operating profit margin decreased from 4.4% to 2.5%.

Total margin decreased by 3.6% to US$2,964 million, decreasing as a percentage of turnover from 15.3% to 14.7%.  

The Group completed its end-to-end global supply chain with the acquisition of Integrated Distribution Services Group Limited (“IDS”) in October 2010 and the establishment of LF Asia.

Since then, the Group has been focusing on further developing its businesses across three Business Networks – Trading, Logistics and Distribution.

This strategy has been the right one for the new era of growth, with the logistics business growing healthily and the core trading business demonstrated solid performance despite challenging retail environments in the US and Europe. 

However, the Group’s performance in 2012 was significantly affected by its US wholesale Distribution Network business, LF USA, where the management has taken decisive action in restructuring its operations and introducing cost control measures across the Group.

The Group is committed to the turnaround of LF USA business, although the restructuring project is still ongoing and it will take time to see the full benefits. It is targeted that the restructuring project will be completed by 2013. The Group can look forward to returning to operating at the 2011 levels.

The Group’s businesses tend to be skewed towards the second half of the year, and this year was no exception.

For the year ended 31 December 2012, the Group's turnover increased by 1% to US$20,222 million reflecting the fundamental strengths of its core trading business and its resilience as a dominant player in the global sourcing arena while the trend for outsourcing has continued as more retailers and brands are looking for onestop-shop supply chain solutions. In addition, its business in Asia was also growing through LF Asia and LF Logistics.