Edible oils and soybean meal gained in importance as profit drivers for the group as their contribution to overall operating profit surged 10.6 percentage points to 26.9 per cent.

In contrast, the share from the company's trading business declined 5.5 percentage points to 29.8 per cent.

Cofco is seeking to cut unit costs in edible oil production to remain competitive amid excess capacity on the mainland.

'Looking ahead, China's edible oil industry still faces a number of challenges such as surplus extraction capacities as well as the fact that prices of soybean meal and oil on the mainland are not in line with international soybean prices,' managing director Qu Zhe said.

'The group is maintaining earnings by reducing unit costs and boosting sales volume.'

Soybean meal sales volume rose 10.5 per cent to 1.149 million tonnes in the first half while bulk oil surged 15.4 per cent to 417,000 tonnes.

The contribution from wineries, Cofco's main business, meanwhile, declined 6 percentage points to 38.2 per cent of its overall operating profit.

Earnings from the confectionery business, which operates under the Le Conte brand, declined with the unit recording a fall in return-on-equity to negative 1.1 per cent year on year from 2.4 per cent.

'Earnings from the confectionary business declined due to higher promotion expenses,' Mr Qu said.

The company's advertising costs increased by HK$9.8 million to HK$24.6 million.

Confectionery, which made no profit contribution during the first half of the year compared with 2.7 per cent a year earlier, was also hit by the high costs of white sugar and cocoa.

The price of white sugar increased to 5,000 yuan a tonne this year from 2,800 yuan at the end of 2004, according to the company.

Cofco declared an interim dividend of 4.5 HK cents, up from 4.35 HK cents a year ago.

The shares closed 1.24 per cent higher at HK$4.88 after the results announcement yesterday.