(Yicai Global) July 15 -- China's largest donkey-hide glue producer Dong-E-E-Jiao predicts a dramatic drop in net profit of around 75 percent in the first half. This will be the first time in 12 years that its earnings have contracted, the company announced today.

As a result, the Liaocheng, Shandong province-based firm's share price [SHE:000423] fell by the daily limit of 10 percent to CNY35.42 (USD5.15) since markets opened today.

Dong-E-E-Jiao is China's biggest producer of donkey-hide gelatin. Ejiao, or e-gelatin, is a nourishing tonic made from donkey hide that is considered to be one of the three treasures of traditional Chinese medicine together with ginseng and young deer antlers.

For the past 12 years, the e-jiao maker has maintained a compound annual net profit growth rate of more than 20 percent. However, this year, the company predicts its net profit in the first half will drop sharply year on year by between 75 and 79 percent to between CNY 181 million (USD26.3 million) and CNY216 million.

As an industry leader, it has always had a strong say in price setting and has lifted the price of e-gelatin dozens of time since 2010. The traditional medicine manufacturer is seeking new distribution channels and product lines to cope with the sales slump, the company said today in its first half performance forecast. It did not give any specific reasons for the drop in sales.

However, the macro environment has become more complex and customers have actively reduced their inventories leading to a sales slump in the first half of the year. In the first quarter the company's operating income was down 23.83 percent year on year to CNY1.3 billion (USD189.2 million) and net profit was down 35.48 percent to CNY393 million, the company said in its first quarter financial report.

The donkey-hide maker's share price started to drop in late April and by early July had fallen by over 20 percent.