LI & FUNG TO EMBARK ON ACQUISITIONS AS US CONSUMER DEMAND REMAINS WEAK

       Li&Fung, the biggest supplier of clothes and toys to Wal-Mart Stores and Target, says it can spend about US$1 billion (Bt34 billion) on acquisitions to boost growth because the "marky" US economy is prompting some company owners to sell.
       "We're sitting with about $1 billion of firepower," president Bruce rockowitz said a in a televised interview yearterday. "I see this as a huge window of opportunities, like a kid in candy store and you want to eat everything."
       Li&Fung's first-half profit growth of 13 per cent beat anlaysts estimates, largely on cost cutting as revenue fell.
       The Hong Kong-based company also a supplier to Inditex's Zara and Marks & Spencer, seeks to spur sales through outsourcing deals and buying smaller rivals because it expects little or no growth from existing customers, managing director William Fung said on Thursday.
       "Acquisitions are not a bad thing in a bad year," Nicholas Yeo, head of China and Hong Kong equities at Aberdeen asset Management Group, said in an interview yesterday. "It's a good chance to move people around, cut staff and assets are cheap-but ther's always that integration risk."
       Shares of Li&Fung rose about 7 per cent yesterday. The company postecd earnings on Thursday after the market closed. The stock had doubled this year, beating the 44-per-cent gain of the benchmark Hang Seng Index.
       The company is also seeking potential acquisitions in the US and Europe in teh beauty, health and cosmetics businesses, Fung told reporters yearterday, without identifying any targets.
       There are "no clear signs of a rebound in US consumption" because consumers in the world's biggest economy continue to "face tight credit-card lines", he said.
       Because of the murky outlook of the global economy, the consumer goods supplier, which earns 61 per cent of its sales in the US and 30 per cent in Europe, will continue to cut costs, Fung said.
       Li & Fung will meet its target of cutting costs by 10 per cent, according to Fung. It's reducing business travel and freezing hiring in "highcost countries", he said.
       The company has more than 14,000 workers in more than 80 sourcing offices in at least 40 markets.
       "Li & Fung is clearly gaining market share in a shrinking pie," Denise Chai, an analyst at Bank of America's Merrill Lynch wrote in a note to clients yesterday.
       "We expect continued cost savings in 2010 to mostly offset weak revenue," said Chai, who recommends buying the stock.
       Li & Fung last September said Temasek Holdings, Singapore's government-owned investment company, will boost its stake to 4.6 per cent through the purchase of 3.88 billion Hong Kong dollars (Bt 17 billion of shares.
       In May, it announced a HK$2.7-billion share sales. Fung on Thursday said the company has US$200 million lion of bank credit lines to fund acquisitions.
       The company only "goes to the market" for cash when it plans to make purchases, and the "financial crisis has provided a lot of acquisition opportunities", Fung said.
       The managing director sai some clients have told the company that business is down as much as 15 per cent. Orders for the Christmas season "were not good", Fund added.
       The company announced an outsourcing agreement with Talbots and expects to generate as much as US$400 million in volume with them this year. The pipeline of potential purchases is "very strong" and Li & Fung is securing "some very interesting and very large acquisitions" that may take place by year's end, Fung said.
       Li & Fung's first-half net income rose to HK$1.2 billion by three analysts surveyed by Bloomberg. Sales fell 2 per cent to HK$46.3 billion.