Tingyi (Cayman Islands) Holding Corp, the mainland's largest producer of packaged food, said profit rose 20.56 per cent last year, fuelled by a surge in beverage sales. The company, which sells products under the 'Master Kong' brand, said net profit rose to US$148.92 million from US$123.52 million a year ago, while turnover increased 26.3 per cent to US$2.33 billion. Beverage sales jumped 55.67 per cent to US$1.09 billion, surpassing instant noodle sales, which rose 7.14 per cent to US$1.05 billion. Chairman Wei Ing Chou yesterday said that the sharp growth spilled over into the first quarter of this year, lifting sales 23.16 per cent. 'The management is confident that 2007 will be another year of new highs,' he said. '2007 is a great challenge that manifests both risks and opportunities.' He said materials costs would remain high this year, especially for flour, palm oil, sugar and plastic resin but these would be cushioned by better production efficiency. To meet intense competition and maintain momentum, Tingyi earmarked US$343 million for capacity expansion in drinks and instant noodles this year, Mr Wei said. Last year, it improved its gross margin by 0.9 percentage point to 32.3 per cent even as distribution costs rose 32.06 per cent to US$445.81 million and finance costs increased 26.3 per cent to US$10.85 million. Advertising and promotion costs rose 32.67 per cent to US$249.49 million last year. Tingyi booked impairment losses of US$7 million for instant noodle equipment and US$9.57 million for beverage equipment. The final dividend was raised 10.4 per cent to 1.38 US cents a share, taking the full-year payout to 2.45 US cents. The stock slipped 10 HK cents, or 1.18 per cent, to HK$8.35 yesterday.