Beijing Tongrentang Co, a traditional Chinese medicine producer and retailer, has posted an 11 percent increase in 2008 net profit despite falling overseas sales, chiefly in Hong Kong.

The Hong Kong-listed Tongrentang reported yesterday that profits had risen to 416 million yuan, on sales of 2.94 billion yuan, up 8.69 percent from 2007. In comparison, the company's profits for 2007 rose 29 percent over the previous year.

Analysts said the company would see "sustainable growth" in profit this year, boosted by a government commitment to strengthen the domestic healthcare industry and a potential market opportunity in the newly-developed supplementary drugs category of medicines.

Although Tongrentang was the largest exporter of Chinese medicine by sales revenue last year, its overseas sales dropped 18.64 percent to 167.07 million yuan, largely due to a fall in demand and price increases arising from the appreciation of the renminbi.

"The corporate business growth is mainly due to the higher profit margin in supplementary medicines that Tongrentang developed," Peng Haizhu, medical analyst at Huatai Securities, told China Daily.

Second- and third-tier medicine categories saw 15 percent growth last year, and its best selling product, Liuweidihuangwan, posted sales worth 326 million yuan, or 11.08 percent of the total.

Cost savings efforts, coupled with the decline in raw material costs, combined to increase net profitability by 1.06 percentage points from 2007's 41 percent.

The company also enhanced its supervision and management of distributors last year to ensure timely payments.

Tongrentang said sales growth this year would be higher than 5 percent. Huatai Securities said the company's profit growth is likely to be 20 percent.

(China Daily March 25, 2009)