Hengan International Group, a mainland maker of personal hygiene products, posted a net profit of HK$469.55 million for the first half, up 42.1 per cent from a year earlier, on strong demand for tissue paper and sanitary napkins. Turnover rose 34.6 per cent to HK$2.74 billion. Despite the earnings gain, the firm's gross profit margin contracted to 39.1 per cent from 41.5 per cent due to the rising cost of wood pulp. Chief executive Hui Lin-chit said he expected the price of wood pulp to drop by the first quarter of next year, though he did not provide a specific projection. Wood pulp accounts for 51 per cent of the raw materials used by the company. Hengan said sales of tissue paper and sanitary napkins would be 'huge' because both products still have much more room to grow in the market. As educational levels in the mainland improve, consumers are becoming more aware of high-quality personal hygiene products, the company said. To maintain its market share, Hengan will continue to focus on developing high-end products to boost profitability, a strategy it adopted in 2005. Mr Hui said such products represent 73.1 per cent of total sales. Last year, the company spent HK$650 million on tissue paper production equipment to boost capacity. The company said the second phase of its tissue paper production base in Shandong began operations in July with an annual production capacity of 60,000 tonnes. Mr Hui said the company is considering whether to acquire small personal-hygiene product companies, but so far no deals have been struck. The board of directors announced an interim dividend of 28 HK cents per share, an increase of 55.55 per cent from last year. Shares of the company closed 5.37 per cent higher yesterday at HK$26.50 after the announcement of interim results. The company's stock has risen 147.9 per cent in the past 12 months.