Profit was driven by an 18% lift in sales to HK$55.62 billion, and the company says that its 3 year plan to achieve US$10 billion (HK$77.5 billion) in turnover by 2007 is still on track. The Group’s operating profit rose 21% to HK$1,885 million during 2005, and it expects the strong momentum to continue over fiscal 2006. The US remains Li & Fung’s major market and represents 69% of its turnover. It is here that Li & Fung is looking to use a $100 million reserve for acquisitions to boost turnover.Mr Bruce Rockowitz, President of Li & Fung (Trading) Limited, said, “The removal of the textile quota system during the year created great changes in the sourcing markets, particularly with the subsequent textile safeguards placed on China by the US and the EU. The Group was well prepared for these developments.During 2005, the Group launched two more labels under the brand strategy, namely Levis RedTab tops and Royal Velvet. Despite some start-up teething problems during the initial phase, the brands enjoyed positive response from retailers and consumers. The acquisition of Briefly Stated Holdings, Inc., an apparel company in the US for US$124 million, with a portfolio of more than 40 character brand licenses, also greatly strengthened its capabilities and portfolio of brand licenses.In the second half of 2005, the company also acquired Young Stuff Apparel Inc, an apparel company focused on supplying private label products to mass-market retailers such as Wal-Mart and Target Shares of Li & Fung, which have fallen over the past six months as investors remained concerned about the impact of US and EU safeguard measures imposed on Chinese-made products. But Li & Fung Executive Director Bruce Rockowitz said the company only sources 25% of its apparel from ChinaThe company also said that manufacturing costs in China are rising, raw material prices are increasing, power costs have surged and there are fears that the yuan will gain further strength .Source: apparelanalyst.com.

Date:3/30/2006

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