Yue Yuen Industrial (Holdings), the world's largest maker of sports footwear, yesterday conceded it faced a challenging year after posting lower than expected interim results. The company blamed rising raw material prices and declining sales to the United States and Europe for a 4.4 per cent rise in net profit to US$158 million for the six months to March. Turnover rose just 1.3 per cent to $1.25 billion. The disappointing result is far below the 12 to 15 per cent growth for the full year predicted by analysts. 'This will be a challenging year in light of rising raw material costs and continued expansion through mergers and acquisitions,' chairman Tsai Chi-neng said. 'Yue Yuen will strive to enhance its return to shareholders through improvements in production efficiency and by exploring new product categories.' The result would have been smaller if the company excluded the disposal of investment securities, which contributed US$26.3 million to the bottom line. The company said a surge in the price of crude oil led to increased costs in petrochemical products, such as rubber, fabric and synthetic leather - materials used in shoe manufacturing. Sales to the US declined 2.2 per cent to US$508 million, while European sales fell 3.2 per cent to $360 million. Europe and the US account for 69 per cent of Yue Yuen's revenue. Sales of sports shoes, which account for 63 per cent of revenue, fell 4.1 per cent to $792 million, against a 12.3 per cent rise in the previous six months. However, Yue Yuen's wholesale and retail operations in China grew 170 per cent to US$29.8 million in the interim period.