14 Aug Yue Yuen Reports 1H Loss After Setting Aside $90 Million for Worker Benefits
Yue Yuen Industrial Limited reported a loss for the first half of the year after setting aside $90 million to provide social insurance and housing to settle a strike by its workers in China.
The company, which is the largest producers of athletic and other footwear in the world, reported revenues rose 6.8 percent to approximately $ 3.95 billion for the six months ended June 30, compared with the first half of 2013. Recurring operating profit was up 14.5 percent to $218.1 million compared to the same period last year.
The company reported a non-recurring loss for the half year of approximately $116.7 million, which mainly consists of $90 million of provision for contributions to social insurance benefit and housing provident fund for employees in China and $ 25.2 million of losses due to fair value changes on derivative financial instruments. Yue Yuen agreed to pay the additional benefits to settle a strike last spring by 45,000 workers that reduced its sales by $27 milion.
For the same period last year, the non-recurring amount was a profit of $ 3.9 million. The net profit attributable to Owners of the company for the first half 2014 amounted to approximately $ 101.4 million.
Yue Yuen reported sales of athletic shoes and casual/outdoor shoes were up by 1.1 percent and 14.2 percent respectively. Total shoe manufacturing volume was almost unchanged at 158.0 million pairs produced for the period.
With regards to the retail and wholesale business of sportswear in the Greater China Region, sales increased by 12.4 percent to $ 963.2 million in the six months period compared to $856.9 million recorded in the same period last year, due to factors such as strategies to improve sales efficiency per shop and selectively using discount pricing to reduce inventory. Those results were also reported separately and in greater detail by its publically traded subsidiary Pou Sheng International Holdings Lmtd.
Gross Profit
During the period, the company’s gross profit increased by 13.7 percent to $885.5 million. When looking at the underlying business units, gross profit for the manufacturing operations involving international performance brands increased primarily due to total direct labor and production overhead costs remained almost unchanged compared to the same period last year though total material costs increased 8.4 percent year on year. Pou Sheng had a gross profit increase of 15.4 percent to $287.9 million on account of the greater focus on the retail business and less severe discounting activities compared to the same period last year.
Selling & distribution expenses and Administrative expenses
For the company, the sum of Selling & distribution expenses and Administrative expenses increased by 8.0 percent compared to the same period last year. For the manufacturing operations, the sum of these items increased by 5.6 percent compared to the same period last year, whereas for Pou Sheng the sum of these items increased by 9.8 percent when compared with the same period last year.
Other expenses
For the company, Other expenses increased by 95.2 percent compared to the same period last year. Most of this difference was due to the $90 million provision for contributions to the Employee Benefit Payments for employees of the company’s China factories: please refer to the announcements dated April 17, 2014, April 25, 2014, May 20, 2014 and August 5, 2014, for details.
Yue Yuen declared an interim dividend of HK$0.35 per share for the period: no change compared to the first six months of fiscal 2013 ending June 30, 2013.