COFCO International, China's largest producer of edible oil, yesterday announced a net profit of HK$192.05 million (US$24.6 million) for the first half of 2003, up a modest 9.4 per cent from a year earlier figure of HK$175.6 million (US$22.5 million).

The company, the Hong Kong-listed subsidiary of State giant China National Cereals, Oils & Foodstuffs Import & Export Corporation, reported a surge of 38.8 per cent in its first-half turnover to HK$6.03 billion (US$772.4 million). Earnings per share for the first half of this year were 12.2 HK cents.

The company recommended an interim dividend of 4.5 HK cents, compared to three HK cents a year earlier.

Analysts said that the relatively modest increase in the company's first-half performance was partly because of depressed sales of some of its products because of the outbreak of SARS on the mainland and in Hong Kong between March and June.

The company said that its profit was affected by a reduced demand for consumer-pack edible oils and soyabean meal during the SARS outbreak, in addition to the increase in the costs of raw materials. But profitability has since recovered because the company has arranged to make bulk purchases of soyabeans at competitive prices and the fuller utilization of its production capabilities to lower costs, COFCO International said.

In the first six months of 2003, the company continued to expand its production capacity and improve its facilities. The expansion of the extraction and refinery facilities of its subsidiaries is expected to strengthen the company's leading position in the edible oils business. The company said it would continue to commit in further enhancing the brand awareness of "Fortune" to capture a bigger share of the edible oils market.

It also said that the outbreak of SARS on the mainland had affected the sales of wine at a time when competition was intensifying following the entry of several new brands.

But Zhou Mingchen, COFCO International's chairman, said he was confident of the continued growth of the company's wine business.

Sales of the company's chocolate and confectionery products was also hit by the SARS outbreak. The drop in sales at shops led to the piling up of stocks at various distributors, the company said. But it said that extra efforts had been made in the marketing of special confectionery, chocolate and other products with high gross profit margin.

To capture a bigger market share, the company said it had adopted the strategy to consolidate the market awareness of its "Le Conte" brand and to foster greater consumer loyalty in that brand name.

Turnover of the company's trading business in the first half of 2003 fell slightly from a year earlier period. The company said it was leveraging on its diversified trading business and rich experience in foodstuff trading, together with its international trading network to generate stable profit.

Income from the company's flour-milling business was boosted by the strategy to focus on the production and sales of middle- to high-end flour, the company said.

Looking ahead, Zhou said that the outbreak of SARS had reaffirmed the underlying strength of the company's business. "This was proven by (COFCO International's) commitment to the policy of building its own first-class brands which helped (it) weather the recession," he said.

(HK Edition 09/10/2003 page7)