Spencer Fung, CEO
Li & Fung Overview
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Investor Day 2019 LI & FUNG Spencer Fung
Highlights
1Spencer Fung
• New management with strong track record in place to restructure SCS
• 3D virtual design disrupting traditional supply chain and generating revenue
• Logistics continues strong momentum with multiple growth drivers
• Trade war leads to diversification out of China
• Opportunity for LF to leverage network of 50+ countries to gainmarket share
• Solid capital structure and strong operating cash flow
Investor Day 2019 LI & FUNG Spencer Fung
Our goal is to create the supply chain of the future to help our
customers navigate the digital economy and to improve the lives of
one billion people in the supply chain.
Three-Year Plan 2017-2019
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Investor Day 2019 LI & FUNG Spencer Fung
Business SimplificationUS$
6.4B Divestment+ Spin off
2013
20.7B
3.3B 3.3B1.2B
3.3B1.2B1.9B
12.7B
201820162014
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Investor Day 2019 LI & FUNG Spencer Fung
Our 3YP Core Themes
Speed Innovation Digitalization
Data Analytics Productivity Supply Chain
SolutionsGlobal Business
Development LF Ecosystem
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Investor Day 2019 LI & FUNG Spencer Fung
SCS Restructuring
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Investor Day 2019 LI & FUNG Spencer Fung
Aggressive Plan to Respond to Changing Environment
Challenges What’s Needed Responses
Customer needs are changing
Production base shifting
End-to-EndDigital Supply Chain
Chief Digital Officer to accelerate digitalization
Chief Operating Officer to lead global sourcing & production platform
Reorganized account management teams
Bring greater focus on core customers
Improve global KPIs& productivity
Speed up development
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Investor Day 2019 LI & FUNG Spencer Fung
Structure - Focused Reorganization
Focused Teams
Account Management
BusinessDevelopment
Sourcing & Production Platform
DigitalPlatform
Siloed Teams
Business Leader
Account Management
-Business
Development-
Production-
Digitalization
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Investor Day 2019 LI & FUNG Spencer Fung
People - New Management Team
Joseph Phi, Group President
Darren Palfrey, CDODigital Platform
Wilson Zhu, COOSourcing & Production Platform
• 20 years with the Fung Group
• 9 years with Li & Fung and Executive Board
• 10+ years of high double-digit organic growth &
strong track record
• 32 years of experience
• Deep knowledge of China and the US
• 15 years as a Li & Fung customer
• Strong track record on execution
• 20 years of experience in retail and logistics
• Previously started digital supply chain
software company
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Investor Day 2019 LI & FUNG Spencer Fung
• Change of culture
• Bridging of the siloes
• Leverage scale of LF and leverage cost
• Harmonize KPIs and improve customer service & vendor performance
• Enable faster shift of production between countries
• New team with a proven track record
Impact of Restructuring
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Investor Day 2019 LI & FUNG Spencer Fung
LF Ecosystem
Speed Innovation Digitalization Data Analytics Productivity Supply ChainSolutions
Global Business Development
LF Ecosystem
• Our ecosystem of partners reaches more than US$2 Trillion of retail sales
• End-to-end sourcing and logistics services augmented by digital services
Areas of focus• 3D Virtual Design• Automation• Blockchain• Supply Chain Solutions
Types of partnership• Licenses• Strategic Alliances• Joint Ventures• Investments
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AM BD
SPPDP
Investor Day 2019 LI & FUNG Spencer Fung 11
1. Intermediary Disruption
2. Margin Disruption
SUPPLIER
3. Digital Disruption
CUSTOMER
BUYINGOFFICESUPPLIER CUSTOMER
SUPPLIER CUSTOMERLF
Analog Tasks Digital TasksDisrupting Traditional Supply Chains
Investor Day 2019 LI & FUNG Spencer Fung 12
1. Intermediary Disruption
2. Margin Disruption
SUPPLIER
3. Digital Disruption
CUSTOMER
BUYINGOFFICESUPPLIER CUSTOMER
SUPPLIER CUSTOMERLF
Analog Tasks Digital TasksDisrupting Traditional Supply Chains
Investor Day 2019 LI & FUNG Spencer Fung
Evolution of Global Trade
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1974
• Multi Fibre Agreement created quota system that made global sourcing complex
2004 2005 2018
• China became factory of the world and simplified sourcing landscape
• US Sino relationship calls for diversification away from China
Macau
Taiwan
SingaporeKorea
Thailand
Indonesia
Malaysia
Shanghai
Honduras
Philippines
Shenzhen
Sri Lanka
Vietnam
Mauritius
Pakistan
Portugal
India
Bangladesh
Turkey
Cambodia
South Africa
Egypt
United Kingdom
Guatemala
United States
Mexico
Dominican Republic
Madagascar
Romania
Hanoi
Brunei
Germany
Nicaragua
France
Netherlands
Spain
Jordan
Bulgaria
Lithuania
Switzerland
Morocco
Italy
Dongguan
Panyu
Argentina
Brazil
Peru
Myanmar
Chile
2019+
Investor Day 2019 LI & FUNG Spencer Fung
Diversified Sourcing Strategy
Investor Day 2019 LI & FUNG 14Spencer Fung
China
Australia
Canada
United States
Mexico
GuatemalaNicaragua
BrazilIndonesia
Singapore
Madagascar
Vietnam
Hong Kong
Taiwan
Philippines
Japan
Korea
Thailand
Cambodia
Bangladesh
Chile
Egypt
FranceGermany
India
Italy
Malaysia
Mauritius
Netherlands
Pakistan
Portugal
Spain
Sri Lanka
Turkey
United Kingdom
Jordan
AM BD
SPPDP
Largest network in the industry helping retailers mitigate risks with increased tariffs
Global network about 50+production countries
20-30 years of deep relationships withlocal vendors, regulators and business communities
Proven ability to move quickly among countries of production
Total Sourcing Business from China: 2016: 54%
2017: 53%2018: 51%
Dominican Republic
Honduras
Kenya
Ethiopia
Lesotho
TunisiaMyanmar
Bulgaria
Lithuania
Romania
El Salvador
Haiti
Ukraine
Peru
Macau
Paraguay
Investor Day 2019 LI & FUNG Spencer Fung
Sizable Production Volume Outside China
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Vietnam India Bangladesh Cambodia Philippines
Latin America Turkey Sri-Lanka
Hard Goods
Soft Goods
Indonesia
$1 – 2 Bn $250M – 1Bn $100 – 250M
FOB volume (US$)
(1): include Guatemala, Mexico, Nicaragua, Haiti
(1)
Investor Day 2019 LI & FUNG Spencer Fung 16
India
Office opening since 1995
Vendor A 157M (16%) since 2005
Vendor B 123M (12%) since 2008
Vendor C 54M (5%) since 2005
Vendor D 53M (5%) since 2006
Vendor E 50M (5%) since 2006
Key Vendors Business Volume Years withLi & Fung
No. of Staff: 454
No. of Vendor: 416
No. of Factory: 484
Key Product Categories:
Bottoms(Pants / Shorts / ... )
Dress / Overall-Dresses
10%
11%
21%Home Textile(Bath Towels / Bedding...)
38%
Tops(T-shirt / Shirts... )
Others
19%
Investor Day 2019 LI & FUNG Spencer Fung 17
• Production will diversify out of China regardless of a trade deal
• Non-China vendors will have opportunity to absorb a large volumeof new orders
• China vendors will have opportunity to absorb orders fromsmaller vendors
• European customers will likely start looking at China more
• LF working with Chinese and Offshore governments toassist new factories to be set up
• LF can help with raw material sourcing and LF Logisticscan help with freight
2019 and Beyond
Spencer Fung
Investor Day 2019 LI & FUNG Spencer Fung
Summary
18Spencer Fung
• New management with strong track record in place to restructure SCS
• 3D virtual design disrupting traditional supply chain and generating revenue
• Logistics continues strong momentum with multiple growth drivers
• Trade war leads to diversification out of China
• Opportunity for LF to leverage network of 50+ countries to gainmarket share
• Solid capital structure and strong operating cash flow
Investor Day 2019 LI & FUNG Spencer Fung 19
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