(Yicai Global) March 29 -- Shares of the owner of Master Kong fell after China’s biggest instant noodles maker reported its first annual profit decline in five years because of higher raw material costs.

Tingyi Cayman Islands Holding [HKG: 0322] finished 5.2 percent lower today at HKD12.88 (USD1.64), after earlier plunging as much as 10 percent.

Net profit fell 6.4 percent to CNY3.8 billion (USD596.6 million) in the year ended Dec. 31, according to Master Kong’s 2021 earnings report released late yesterday, after its gross profit margin shrank 2.8 points to 30.4 percent due to rising raw material costs. Revenue rose 9.6 percent to CNY74.1 billion.

Income from instant noodles fell 3.6 percent to CNY28.4 billion due to an industry downturn, marking the first decline in five years. Revenue from beverages rose 20 percent to CNY44.8 billion. Distribution costs climbed 11 percent to CNY15.7 billion.

Master Kong’s lower annual profit report comes just weeks after the Shanghai- and Tianjin-based company was embroiled in a food safety scandal.

On March 15, China Central Television exposed food safety problems at one of Master Kong’s suppliers of suan cai, or Chinese sauerkraut, during its annual consumer rights day show, prompting the firm’s shares to plunge as much as 15 percent the next day.

Master Kong told Yicai Global the same day that it had ended all cooperation with that supplier.

Master Kong’s main competitor, Uni-President China Holdings, has also been hit by rising raw material costs. According to its annual report released on March 7, revenue rose 11 percent to CNY2.52 billion last year, while net profit fell 7.7 percent to CNY1.5 billion.

Master Kong did not issue any forward earnings guidance.

Editor: Peter Thomas