Tingyi (Cayman Islands) Holding Corporation, a leading mainland instant noodle and beverage producer reported a 47 per cent surge in net profit to US$383.2 million last year but says soaring prices for raw materials will put pressure on costs and sales this year. Chief financial officer Frank Lin said prices of the four major materials used by the company - flour, palm oil, PET resin and sugar - are likely to continue to climb during this year. But he said raising product prices would be a last resort in dealing with the problem. Tingyi will primarily control production costs through enhancing operating efficiency, adjusting the product mix, enlarging its economic scale and better controlling expenses. Shares of Tingyi fell 78 HK cents, or 3.82 per cent, to close at HK$19.62 yesterday. The company, which sells its product under the brand 'Master Kong', said its gross profit margin reached a record 34.6 per cent compared with 32.18 per cent the previous year. The gain was mainly driven by better sales on high-end instant noodles and beverage products. Turnover was US$5.08 billion, up 18.94 per cent from US$4.27 billion in 2008. Half of the company's turnover came from beverages, including bottled tea, water and diluted juice drinks, which replaced noodles last year as the number one revenue contributor. Turnover from instant noodles grew 10.7 per cent to US$2.3 billion last year, while beverages surged as much as 32.1 per cent to US$2.5 billion. In addition, baked goods earned US$155 million during the period. Lin said capital expenditure for this year would be around US$500 million. More than half of that would be used for the introduction of advanced equipment for beverage production. 'We understand that many large international beverage groups plan to make big investments, enlarge bases or develop new products in the mainland. The competition is getting highly intensive,' he said. 'We will get ourselves well prepared to keep our number one position in the domestic market.' A survey by ACNielsen shows that Tingyi ranked number one in China's instant noodle, ready-to-drink tea and bottled water markets, accounting for 54.6 per cent, 48.4 per cent and 19.6 per cent respectively in the markets in December. The company is also the second-biggest diluted fruit juice and sandwich cracker producer on the mainland with market shares of 14.2 per cent and 25.5 per cent respectively. As of the end of 2009, Tingyi operated 492 sales offices and 79 warehouses across the country. The company proposed a final dividend of 3.43 US cents per share for the period.