HONG KONG — International sourcing powerhouse Li & Fung Ltd. is expecting strong sales increases through the rest of the year and is on the acquisitions trail, group managing director William Fung said at the company’s annual meeting here Tuesday.
“We have some visibility to our business,” Fung said. “We can see three to six months ahead because we are exporters and there is some lag time. So far, touch wood, we’re confident.”
In 2003, Li & Fung reported profits of $156.7 million on sales of $5.5 billion. At the meeting, shareholders approved a motion to issue a dividend of about 3 cents a share. (All figures have been converted from the Hong Kong dollar at average exchange rates.)
Fung said he was pleased to have the SARS epidemic, which last spring brought travel through Asia to a near standstill, behind him.
“We’ve been looking hard at acquisitions since last year,” Fung said. “The process was somewhat delayed by SARS, but we certainly haven’t been sitting still in this area.”
Fung said purchasing companies, creating brands or licensing existing lines will factor largely in Li & Fung’s next three-year plan, details of which will be announced at the end of this year.
“You can build a brand, buy a brand or license a brand, which is pay as you go,” said Fung, noting that Li & Fung has, so far, preferred the latter. “It’s not as capital-intensive, but I don’t preclude buying a brand if the time is right and the brand is right.”
Last year, Li & Fung signed a licensing agreement with Levi’s to make Levi’s Signature tops for women and is in negotiations with Levi’s to make Red Tab tops for men. It also has a licensing deal with Royal Velvet, the maker of towels, sheets and other home goods and is close to an agreement with The Walt Disney Co. that would allow Li & Fung to sell plush toys to mass merchandisers, Fung said.
In January, Li & Fung became the first wholly owned foreign trading company in China to be issued a license granting direct export rights. The license enables the group to directly export goods it sources from China. It also is allowed to import raw materials and components for its exports.
Fung said one event that could take a toll on his company’s sales would be an increase in U.S. interest rates.
“We all know that American consumer patterns have been affected positively by the low interest rates for the past two years,” he said. “A rise in rates will probably have an impact, but maybe not until next year. We already have orders for back-to-school and we’re finalizing orders for Christmas. We don’t see an effect so far.”
Fung said any rise in raw material costs is likely to be offset by savings in 2005 because the company will not have to pay for access to quota rights, since the nations of the World Trade Organization will be dropping their quotas on textiles and apparel.