WITH keen competition and limited growth potential in Hong Kong's soft drinks market, Vitasoy International's medium-term earnings performance is expected to be moderate, equity analysts said. Vitasoy, which was described by some analysts as a company with steady but strong growth when it went public in March, is now predicted to see slow growth in the next two years because of limited profit contribution from the China market in the short term. 'The soft drinks market in Hong Kong is becoming saturated - there is limited room for growth in the future,' said Samantha Mak Hau-sum, an analyst at Seapower Securities. This has already been reflected in the company's latest interim results, with net profit dropping 12.9 per cent to $62.5 million. However, some analysts said the drop did not entirely reflect the company's sales performance because it had undertaken a group restructuring earlier this year to satisfy flotation requirements. The reorganisation involved the transfer of certain properties of Vitasoy and its wholly owned subsidiary to the company's majority shareholder, while rental from certain properties has been eliminated in arriving at the group's operating profit because of the restructuring. Moreover, the estimated start-up cost of $10 million for its Shenzhen manufacturing plant also hit the company's earnings, said Stephen Leung Siu-hung, an analyst at Daiwa Securities. The seasonal reason - a long period of rainy weather in Hong Kong during the second quarter - was cited by Vitasoy as contributing to a drop in beverage consumption and retail activities. Senior Vitasoy executives did not anticipate a drastic improvement in the full-year earnings, saying that '. . . with improved profitability expected at the Shenzhen plant, the directors believe the performance for the remainder of the financial year will return to normal'. Value-added tax is also expected by analysts to dampen the company's growth on the mainland. Compared with the result in 1995, equity analysts anticipate a better performance in the next two years, with average operating profit growth of around 10 per cent.