Zhejiang NHU Co, one of the largest producers of Vitamin E and A supplements in the world, Monday posted a sixteen-fold surge in net profit in 2008, driven by soaring prices, robust demand and tax reductions.

Net income rose 1,683 percent to 1.37 billion yuan, or 4.02 yuan per share, while revenue jumped 90 percent from a year earlier to 3.31 billion yuan, the Shenzhen-listed company said in its earnings report.

But analysts said they did not expect the company to maintain such growth this year as sales in overseas markets, which accounted for 80 percent of the company's total, could be hit by the worsening financial crisis. The company's shares yesterday declined 1.56 percent to close at 31.48 yuan at the Shenzhen bourse.

"The eye-popping profit surge is generally within our expectations as prices of its main products, especially the prices of Vitamin E, have witnessed huge increases last year and a tax reduction has also helped," TX Investment Consulting Co said in a research note.

Prices of Vitamin E jumped from 105 yuan per kg at the beginning of last year to 240 yuan per kg, with annual average prices at 150 yuan in 2008.

"It is very unlikely for the company to maintain such high-speed growth momentum this year given the high 2008 base and the global financial crisis," TX Investment said.

"The profits this year may even post negative growth if the prices of its mainstream products tumble and exports decrease," the Shanghai-based research house said.

The company said it would consider acquiring "quality assets" this year and would beef up its food additives and aromatizers segments while maintaining its Vitamin supplements' market share.

Zhejiang NHU said it would issue up to 732 million yuan in convertible corporate bonds to raise capital to expand its production capacity and repay bank loans.

The company, based in Zhejiang province, will use almost 40 percent of the bond sale proceeds, or 275 million yuan, to set up a methyl dihydrojasmonate (used in manufacturing fragrance or flavor concentrates) production line with an annual capacity of 3,000 tons.

The company will earmark 165 million yuan for raspberry keton and leaf alcohol plants projects, it said in the earnings report. It will also invest 193 million yuan to establish a glucosamine food additive project with an annual production capacity of 6,000 tons, the company said.

(China Daily March 24, 2009)