A WRITE-BACK of deferred tax helped stem a slump in profits at Johnson Electric Holdings. The mini-motor maker saw profit attributable to shareholders fall 9.29 per cent to $152.78 million, after the $20.35 million tax write-back, for the six months to the end of September. Heavy investment spending and a margin squeeze, due to rising raw material costs, were behind the profits slide. Earnings per share fell by the same margin to 40.1 cents. The dividend was flat at eight cents a share, which will be paid to shareholders on the register on December 28. The company yesterday said the high level of capital spending undertaken to cater for burgeoning sales demand continued to exert a downward pressure on profits. The rising cost of raw materials was being passed on in product prices and rationalisation at home and overseas was happening to control costs, it said. There were no further details given of the rationalisation. Group managing director Patrick Wang Shui-chung said: 'We have been investing heavily for growth. This has proved to be the correct strategy as we are now able to meet the strong sales demand that we have been anticipating.' The company said Hong Kong tax was provided at the usual rate of 16.5 per cent. The Hong Kong tax bill was down 62 per cent to $7.28 million, for the current year. Over-provisioning for tax in previous years resulted in a contribution of $20.35 million. Overseas tax was flat at $1.22 million and deferred taxation amounted to $1.33 million against a contribution of $828,000 in the previous period. The total entry in the profit and loss account showed a net contribution to profits of $10.51 million against a tax bill in the previous period of $19.83 million. Sales rose 24.3 per cent to $1.14 billion over the period. Operating profit, before the tax write-back, slumped 24.4 per cent to $142.27 million. Operating profit margin was slashed to 12.46 per cent from 20.49 per cent in the previous reporting period. The company said average prices for steel and copper rose 23 per cent and 28 per cent from the same period last year. The company said sales prices for new orders had been raised to reflect these increased material costs but the full impact of these increases was unlikely to be felt until the next financial period. 'Our three-year capacity investment programme is now nearing completion,' Mr Wang said. 'As capital expenditure falls, sales continue to grow and depreciation improves as a percentage of sales, we will be looking for increased profits.' The company saw strong sales around the globe with 26 per cent growth in Europe and 22 per cent increase in North America. Asia-Pacific sales, excluding Hong Kong and China, jumped 58 per cent. The region now makes up 13 per cent of sales. Baring Securities estimated sales from North America and Europe each accounted for about a quarter of the total and Hong Kong, along with China, took up 36 per cent. 'Sales of motors for power tools, car components and business equipment have grown,' Mr Wang said. 'An increase of 49 per cent for car components is particularly pleasing as motor applications increase.' The company said it expected another year of double-digit growth in sales for the whole financial period, which ends in March next year. 'In the years ahead, we also expect significant contribution to earnings growth as a result of cost-reduction strategies,' Mr Wang said.