Shandong Xinhua Pharmaceutical might expand by buying assets from its parent, chairman He Duanshi said. Mr He said parent Shandong Xinhua Pharmaceutical Group was one of the eight state enterprises the provincial government supported. He said the strategy would be for the parent to acquire other pharmaceutical enterprises in the province before they were sold to the listed firm. Last year, Xinhua group merged with Zibo Dongfeng Chemicals Factory and Zibo Acid Manufacturing Plant which had been supplying raw materials to Shandong Xinhua. However, Mr He said Shandong Xinhua had no plan to acquire the two factories. Director Li Qihui said the company was selecting its own takeover targets, which were mainly finished pharmaceutical product manufacturers. It might buy distribution firms to pave the way for the opening of the over-the-counter pharmaceutical market. Last year, bulk pharmaceuticals accounted for 64.6 per cent of its sales. Medical preparations made up a further 31.5 per cent. Shandong Xinhua's net profit dropped 16 per cent to 81.13 million yuan (about HK$75.49 million) last year. The decrease was because of a lower than average selling price for bulk pharmaceutical products amid keen domestic and overseas competition, higher depreciation charges and selling expenses for new product launches and a rise in general labour and staff-related expenses. Mr He said exports had not been affected by the regional crisis as the Southeast Asian market accounted for 2.25 per cent of gross sales. Total exports made up 37 per cent of sales. In the first quarter, sales rose 18 per cent and exports 13 per cent. Shandong Xinhua aimed to have sales of more than one billion yuan this year compared with 915.63 million yuan last year. Mr Li said that, to maintain market share, it had lowered prices for certain products 2 per cent last year. But it would not do so this year, as it wanted to consolidate market share.