Li Ning H2 profit up 11.5 percent, meets forecast

* Says competition a challenge for growth
* Shares down 2.2 pct before results, vs gain in main index

HONG KONG, March 16 - Chinese sporting goods brand Li Ning Group <2331.HK> met forecasts with an 11.5 percent rise in second-half net profit, after sales benefited from a brand renewal and better distribution.

Li Ning said, looking ahead, the sporting goods sector was set to benefit from growth in the sporting population in the mainland, rising income, and a shift in China's economy to a consumption-driven model from an investment-driven approach.

"Consumer confidence is not strong enough and the growth in income levels has not quite translated into a sustainable increase in purchasing power for sporting goods," chairman Li Ning said on Wednesday.

Competition from casual brands will also affect growth this year, and the sporting goods industry will maintain a low double-digit growth in the coming years, Li said.

The rising cost of raw materials, labour and retail space will put pressure on all operators, the company said. It operated 7,915 Li-Ning brand stores at end-2010.

EARNINGS MEET FORECAST

Li Ning, competing with rivals Anta Sports Products <2020.HK>, Peak Sport Products <1968.HK>, and 361 Degrees International <1361.HK>, reported a second-half net profit of 526 million yuan ($80 million), based on Reuters calculations using the company's full-year figures.

That was in line with a forecast for 521.4 million yuan in a Thomson Reuters I/B/E/S poll, and compared with a 472 million profit in the 2009 period.

"It faces very tough competition from foreign brands (in the mid to high-end market segment), while it also faces fierce competition from local rivals in the lower-end market," said Patrick Yiu, a director at CASH Asset Management. "It has to better reposition itself in order to stay competitive."

For the full year, Li Ning posted net profit of 1.11 billion yuan, compared with a forecast for 1.10 billion yuan and up from 944.5 million in 2009.

Facing competition from foreign brands such as Adidas <ADSGn.DE> and Nike <NKE.N>, Li Ning had said in January that same-store sales growth of Li-Ning brand products rose 3.6 percent in the fourth quarter and about 3.9 percent over the full year. [ID:nTOE70F015]

Li Ning shares ended down 2.2 percent on Wednesday, against a 0.1 percent gain in the Hang Seng Index <.HSI>. (US$1 = HK$7.78) (Editing by Dan Lalor)