Refrigerator-maker Guangdong Kelon Electrical Holdings has kicked off the H-share reporting season with a 27.5 per cent rise in net profit to 560.79 million yuan (about HK$524 million). The full-year growth, which was in line with market consensus, compared with an interim profit increase of almost 38 per cent. Vice-president of finance Don Lee said growth slowed in the second half due to a technical upgrade of its manufacturing facilities in November that affected production. Kelon also substantially increased advertising expenses to solidify its market position. It spent 190 million yuan on advertising last year, 80 million yuan more than the budget. This year, the budget will rise to 250 million yuan. Kelon also shared 14.9 million yuan in losses from its 44 per cent owned Sanyo Kelon Freezer due to a delay in a product launch and higher costs of imported parts. Kelon's sales rose 23.5 per cent to 3.4 billion yuan. Weighted average earnings per share added 6 per cent to 67 fen. A final dividend of 16.05 fen was proposed, bringing the overall payout to 21.4 fen. Last year, Kelon reported a gross profit margin of 38.7 per cent, from 31 per cent, and expanded its mainland market share to 18 per cent from 17.1 per cent with sales of 1.8 million fridges. Chairman Pan Ning said: 'This is due primarily to the successful control of manufacturing and sourcing costs and an improvement in the product mix.' Half of its sales were non- chloro-fluorocarbon (CFC) models, which enjoyed a higher gross margin, at more than 40 per cent, than ordinary units, at about 36 per cent. Kelon plans to sell 2.3 million fridges this year, of which 70 per cent will be non-CFC. In order to further cost control, Kelon is discussing the acquisition of a 15 per cent stake in Huayi Compressor, a Shenzhen-listed A share, by swapping its interests in two mainland subsidiaries. Although progress had stalled, due to the complexity of acquiring a mainland firm, Mr Lee expected the deal to be concluded by mid-year. Compressors accounted for 26 per cent of Kelon's costs last year, from 41 per cent in 1993, as it sourced more domestically made products. Director Wang Guoduan said the company planned to utilise the brand by sourcing other home electrical appliances for sale and the products would be given the Kelon brand. A working group had been established for the new operation.