China Yurun Food Group, the mainland's largest pork product producer, said underlying first-half profit rose 25 per cent as improved margins helped to offset falling revenue. The company, which listed last October, said net profit rose to 254 million yuan or 17.5 fen a share from 171 million yuan or 18.7 fen per share a year earlier, helped by lower finance costs. Turnover fell 5.2 per cent to 2.08 billion yuan from 2.19 billion yuan. Excluding negative goodwill arising from an acquisition, net profit was 214 million yuan, as gross profit margin increased 3.1 percentage points to 17 per cent from 13.9 per cent. A sharp reduction in hog prices hit the retail price of high value-added chilled pork and low temperature meat products (LTMP), dragging down revenue, the company said. 'The hog price has decreased 28 per cent from 8.18 yuan per kilogram in the first half of last year to 5.9 yuan per kilogram in the first half of this year,' said chairman Zhu Yicai. 'I believe this is the bottom already.' Yurun aims to benefit from increased capacity and new government rules that will allow sales across provincial borders. The company is building a 170 million yuan plant in Heilongjiang province, which will increase its hog butchery capacity about 10 per cent to 10 million heads at the end of this year, with a 2007 target of 15.7 million heads. Under a new certification programme, 'slaughterhouses with four stars can sell pork meat products to other provinces', Mr Zhu said. 'I think this will be a good system for our expansion in the next five years.' The company may also move into the Russian market. 'The selling price of hog products in Russia is three times higher than in China. However, its market is still undergoing a lot of modification, so we tend to be cautious at the moment,' Mr Zhu said. Yurun this year formed a joint-venture factory in Beijing with one of the top three Japanese meat producers, Itoham. Yurun holds 25 per cent of the factory. Gross profit rose 16.3 per cent to 354 million.