Hong Kong-based trading company Li & Fung sees no turnaround in sight after being hit by restructuring costs.

Li & Fung booked a net profit of US$617 million, a decrease of 9.4 per cent, for the year to December 31. The company’s core operating profit was down by 42 per cent to US$511 million.

It says the decline was mainly due to costs of restructuring LF USA’s business and a reduction in the number of brands distributed in the US.

“We recognised that our biggest management challenge was the restructuring of LF USA, which became more costly than originally envisioned,” said CEO Bruce Rockowitz.

He observed that the global economic environment in 2012 had been more demanding than expected and the retail business was impacted by lacklustre consumer sentiment in the US and Europe.

“The distribution business performed weakly in 2012, which was the main factor taking the group as a whole off its profit growth trend-line,” said chairman William Fung.

Li & Fung will miss its three-year profit target this year, Rockowitz told reporters in Hong Kong. However, the company said it remains resolute about the strengths of its trading business.

“We believe the trend for outsourcing will continue as more and more retailers and fashion brands appreciate the competitive advantages offered by one-stop-shop supply chain solutions.”