Distressed Chinese sportswear maker Li Ning Co Ltd is on track for a turnaround as a three-year makeover plan initiated last year starts to pay off, company officials said.

Cash flow has improved, inventories have been pared and accounts receivable have fallen, amid a restructuring that focuses on improving distribution efficiency and brightening the company's brand image.

Li Ning Co Ltd's inventory turnover ratio fell to less than seven months from nine months at the end of 2011. Same-store sales at its direct-sale stores grew 9 percent in the first half.Provided to China Daily

Li Ning, which is backed by US private equity firm TPG Capital LP, expects its annual loss to narrow this year.

Kim Jin Goon, a partner at TPG who was hired as Li Ning's executive director and vice-chairman last year, said on Monday that the worst is behind the company and further benefits will emerge from money invested during the makeover.

"For the full year of 2013, we expect the company's operating cash flow will continue to improve, along with our distributors'profitability," Chairman Li Ning, an Olympic gymnastics legend, said in a statement.

Li Ning shares fell victim to profit-taking on Monday, sliding about 5.9 percent to HK$4.92 (63 US cents). The price was less than one-sixth of its 2010 peak of about HK$32.

Li said the company has no imminent need to raise funds to finance its transformation. In January 2012, TPG bought 561 million yuan ($91.8 million) of Li Ning's convertible debt. The bonds, if converted, would give TPG a stake of about 12 percent in the sportswear maker.