HK's Li & Fung net profit halves to lowest in over a decade

* Li & Fung H1 revenue down 6.4 pct to $8.07 bln

* Analysts concerned that profitability threatened (Adds context)

By Donny Kwok

HONG KONG, Aug 25 (Reuters) - Global exporter Li & Fung Ltd's first-half net profit halved as price deflation and competition affected its main U.S. market, while the weak Chinese currency continued to hit its trading business.

The Hong Kong-based company, which grew to prominence by making clothing and toys for Western retailers, said on Thursday its net profit for January-June plunged 51 percent to $72 million from $149 million a year earlier, its lowest half-yearly profit since 2004.

The exporter, which supplies to firms such as Kohl's Corp and Wal-Mart Stores Inc, said core operating profit fell 14 percent to $156 million from $182 million. Revenue shrank to $8.07 billion from $8.63 billion a year ago.

Li & Fung has refocused on its core asset-light supply-chain business following the sale of its loss-making brand-licensing and distribution business in 2014, helping it to boost cash flow and control operating costs.

In May, the company said it was selling its Asia consumer and healthcare distribution business to motor vehicle distributor Dah Chong Hong Holdings for $350 million in cash.

Analysts have expressed concern that management might have limited capacity to sustain profitability by further cost cutting if prices deflated materially in 2016.

The $4.3 billion company by market valuation had said in March that it expected deflationary pressure to worsen this year and expected to see a declining order book volume.

Daiwa Capital earlier this month downgraded Li & Fung to a "hold" from "outperform" on concern that its European business will be challenged by Britain's vote to leave the European Union, and increasing terrorist attacks.

(Reporting by Donny Kwok; Additional reporting by Paul Carsten; Editing by Sherry Jacob-Phillips and Muralikumar Anantharaman)