(Yicai Global) Aug. 25 -- Shares in Nongfu Spring advanced as much as 2.3 percent today despite the Chinese bottled water giant reporting a significant shrinking of profit growth in the first half from the same period last year as surging raw material costs eat into its profit margin.

Nongfu Spring’s share price [HKG:9633] was trading up 1.4 percent at HKD46.75 (USD6) as of 2.30 p.m. China time. Earlier in the day it hit HKD47.20.

Nongfu Spring, which is owned by tycoon Zhong Shanshan, logged a 14.8 percent jump in net profit in the six months ended June 30 from a year earlier to CNY4.6 billion (USD672 million), according to its latest earnings report released yesterday. Revenue soared 9.4 percent to CNY16.6 billion (USD2.4 billion).

However, both expanded at a much slower clip from a year earlier when profit surged 40 percent year on year and revenue swelled over 30 percent.

The cost of polyethylene terephthalate (PET), an important chemical used in packaging, has shot up due to the surge in international crude oil prices, driving up the Hangzhou-based firm’s expenses in the first half to CNY6.7 billion (USD990 million), and pushing down the gross profit margin to 59.3 percent.

The price of PET has soared by as much as 40 percent since 2021, Executive Director and Head of Finance Zhou Zhenhua said in March. Nongfu Spring will strive to keep price increases to within 30 percent, and the firm’s gross profit margin could fall back to 2019 levels of 55.4 percent.

Nongfu Spring’s sales of bottled water climbed 4.8 percent in the first half year on year to CNY9.3 billion (USD1.3 billion), accounting for 56.3 percent of total revenue, according to the report. Sales of its flavored tea drinks surged 51.6 percent to CNY3.3 billion (USD480 million), making up nearly 20 percent of all earnings.

However, sales of other beverages such as soda waters and aerated flavored drinks slumped 23.8 percent to CNY645 million (USD94 million).

Editors: Shi Yi, Kim Taylor