Demand from Shandong province was particularly strong, leading to higher than expected sales from the Xuzhou plant at Jiangsu province.

The plant has an annual production capacity of 7.5 million square feet of sheep and cow hide.

The company produced about 36 million sq ft of cattle and sheep hide last year, compared with 26 million sq ft in 1995.

The counter rode on the recent rally of red chips, surging 128 per cent to close at $2.35 yesterday from its issue price of $1.03.

It was spun off from Guangdong Investment and began trading on the exchange on December 16 last year.

Mr Yu said a key plan this year was the introduction of two production lines using an Italian imported water transfer system to produce high quality cow split leather.

Installation of the first line should be completed this month with a trial run next month. The second line was expected to start operation in the second half of this year.

Other expansion plans included raising the annual production capacity of cow leather for shoe uppers from 23 million sq ft to 38 million sq ft and that of sheep skin and double-face lamb leather from three million sq ft to five million sq ft.

Mr Yu said the company would focus on the flourishing China market with tanning as its core business.

'Having fine-tuned our tannery business, we may vertically expand downstream by acquiring leather-related business such as makers of leather bags, leather garments and leather shoes.'