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LEGO Expects 50% Profit Growth in 2009: LEGO CEO
Published: Thursday, 29 Oct 2009
By: Reuters
Danish toy company LEGO expects to post a 50% profit growth in 2009, CEO Jorgen
Vig Knudstorp told CNBC, and he expects the growth momentum to continue in the
near term.
“I think we can continue this low double-digit growth for the foreseeable
future,” he said, which is a commendable feat considering the company was deep
in the red when Knudstorp came on board five years ago.
Then, LEGO was losing nearly $350 million a year. Knudstorp has since embarked
on a massive restructuring, closing down plants and whittling down packaging.
LEGO still makes 7000 different pieces, but only half of what it used to.
While many multi-national firms are outsourcing production to more
cost-effective countries like China, LEGO prefers to ‘in-source’ its operations.
“The real economic profits are much less (when you outcome) because you lose
sales, you have too much inventory, you’ve got too much working capital,”
Knudstorp said, adding that the protection of intellectual property rights is
also a major concern for us.
“So we found that for a number of reasons (it’s) economically unattractive to
manufacture in China to serve our major markets. China to us today is 40 times
smaller than the U.S. market. I think it’s going to be another 15 to 20 years
before China is a major market in the context of LEGO.”
Knudstorp said he may be manufacturing in Asia in 10 years. For now, LEGO says
it plans to increase capacity in Mexico - its hub for U.S. sales.
LEGO is also warming up to Hollywood. Knudstorp said the Star Wars series has
been a blockbuster in the U.S., but licensing costs and keeping up with trends
could be a gamble.
On CNBC site there is a short Interview with
LEGO Group CEO Jorgen Vig Knudstorp video over 5 minutes (5:34) long.
-end of report-
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