China Foods, the edible oil and beverage unit of the mainland's largest food importer and exporter, said first-quarter gross profit margin at its edible oil unit slipped as it remained unable to raise selling prices to offset increasing costs. Without giving margin figures, managing director Qu Zhe said he hoped the government would relax restrictions on selling prices so the company's packaged edible oil business could turn around in the second half. China Foods' parent, China National Cereals, Oils & Foodstuffs Import & Export Corp, is the largest state-owned food trading company on the mainland. Beijing imposed price limits on China Foods and other food-related firms in January to combat rising inflation. China Foods' packaged edible oil division, which accounted for 42 per cent of total revenue, booked an operating loss of HK$19.8 million and net loss of HK$21.5 million last year. The gross margin for consumer edible oil shrank to 7.1 per cent from 8.8 per cent in 2006. Chief financial officer Jacky Man said gross margin continued to be squeezed by the high price of soyabean oil, the raw material for edible oil, and government price ceilings. Tiffany Feng, an analyst with Guotai Junan Securities (Hong Kong), forecasts a tougher year ahead with Beijing likely to maintain price curbs amid concerns that the earthquake in Sichuan may fuel inflation. She said the company's packaged soyabean oil recorded negative gross profit margin for the first time in the first quarter of this year. Packaged soyabean oil accounts for about 70 per cent of revenue from edible oil division. 'The division relies on the high-end peanut oil and corn oil products to maintain its margins,' Ms Feng said. The company also produces and distributes wine, beverages and confectionery.