Sportswear maker ANTA persists with overseas push

Chinese sportswear maker ANTA Sports Products Ltd said on Tuesday it will persist with its push into international markets, as domestic profits decline.

Chief Executive Officer Ding Shizhong said Eastern Europe and the Middle East will be the Jinjiang, Fujian-based company's focus this year. ANTA opened its first store in Dubai in the first half.

But ANTA's priority is still the domestic market, and its global push will be based on regions, not any single country, said Ding.

The CEO reported that first-half profit dropped 18.7 percent year-on-year to 625.7 million yuan ($102 million).

Free cash flow contracted 34.6 percent to 540.6 million yuan.

"ANTA will stick closely to its established plan to expand internationally," Ding said during a news conference in Hong Kong.

In a forum earlier this year, Ding said Chinese companies such as ANTA face uphill challenges in expanding internationally. He also said he prefers acquisitions to organic growth when it comes to entering new markets.

ANTA's global expansion started in 2001, when it set up a branch in Russia. It then entered other markets including Hungary, the Philippines and Singapore. It operates in more than 20 countries at the moment.

But ANTA failed to wring any extra revenue out of its expansion in the first half, after a major decline in 2012. Sales dropped 14.4 percent to 3.367 billion yuan.

China's sportswear makers have been having a hard time since 2011, with high inventories and fierce competition hurting almost every industry player.

Most domestic sportswear makers compete in the middle and lower ends of the market, with the high-end market dominated by foreign companies including Nike Inc and Adidas AG.

Besides ANTA, other Chinese sportswear makers including Li Ning Co Ltd, Xtep International Holdings Ltd and Peak Sport Products Co Ltd are all expected to report disappointing first-half earnings in coming weeks.

But analysts believe the industry's fortunes are turning as companies approach the end of the de-stocking process.

"China's sportswear industry still faces uncertainty associated with the unresolved excess inventory problem in the near term," said Ding in an earnings statement.

"However, its mid- to long-term outlook will be promising, because the Chinese government is generally believed to be putting more effort into expanding domestic demand, boosting urbanization and increasing people's participation in sports."

He added ANTA has been among the first to bounce back. Inventory dropped to 576 million yuan at the end of June, from 687 million yuan at the end of 2012. The inventory-to-sales ratio has dropped to a healthy level of 4.5 to 5.

ANTA shares jumped about 5 percent after the results were announced. The stock closed at HK$9.35 ($1.21), a gain of 3.54 percent.

Its share price has risen 34 percent so far this year, while Li Ning has gained 1.2 percent, amid a 3.4 percent fall in the benchmark Hang Seng Index.