The growth of the Logistics business continued to be driven by strong growth momentum in China with e-logistics growth, accelerating growth in ASEAN across all services; and rapid expansion in the newer geographies of Japan, Korea and India. 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.
The group turnover decreased 6.2 per cent to $12.7 billion, mainly due to customers’ ongoing destocking, customer turnover and bankruptcies. Total margin percentage improved by 0.4 per cent to 10.6 per cent, primarily a result of the increased contribution from the higher-margin Logistics business.
In 2018, the company was affected by the rapidly changing retail landscape, with record store closures and customer bankruptcies. Owing to the company’s investments in a speed-enabled supply chain, its customers have been able to reduce their inventory levels, although this produced short-term negative impacts on the company’s turnover. The ongoing US-China trade war had a minimal impact on Li & Fung’s business due to the company’s diversified sourcing network outside of China.
"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. This includes a new Group President, a new Chief Operating Officer and an entirely new Chief Digital Officer position. We have the right strategy, and now the right structure and people in place. With all three elements in place we have built the right foundation for the future. I am confident that we are on the right track," Spencer Fung, Group CEO of Li & Fung, said.
"The strong organic growth of LF Logistics is due to active engagement with our people and close collaboration with our customers. At Li & Fung, we are well positioned to integrate logistics with our traditional sourcing and supply chain solutions offering. This provides a faster and more digital supply chain, enabling us to cultivate closer and longer-lasting customer partnerships. We are pursuing market share gain and pipeline conversion as the twin drivers for our growth," Joseph Phi, group president of Li & Fung, said.
"Phi has a strong track record having organically grown LF Logistics over the past decade. In his new role, Joseph will focus on account management and business development. As a team, we are focused on driving greater productivity in our global production platform by truly leveraging the scale of Li & Fung for our customers, capitalizing on our clear leadership in 3D design, and accelerating the build-out of our end-to-end digital platform. These initiatives are already helping to strengthen relationships with core customers and to convert new customers," Fung continued.
"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 defense against fluctuations in trade policy and mitigates any negative impact from tariff increases. I am confident that our new leadership team and organisational structure will help us drive productivity, strengthen customer relationships and, in turn, grow market share," group chairman, William Fung said. (RR)
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