May 29 (Bloomberg) -- Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit rose 61 percent as it booked gains from its alliance with PepsiCo Inc. on a provisional basis.
Net income increased to $198 million in the first quarter ended March 31 from $123 million a year earlier, Tingyi said in a statement yesterday. Revenue other than from its operations, which includes gains from a deal Tingyi signed with PepsiCo, surged to $211 million from $25 million a year earlier.
Tingyi, which through a venture forged a partnership with PepsiCo to make and sell its non-carbonated beverage products, is also collaborating with other companies including for snack foods, and plans to widen its portfolio of products. The company expects steps by the government including an increase in wages and reduction in some taxes will have “a stimulating effect” on consumption.
This will “facilitate the flourishing development of the instant food and beverage market,” Tingyi said in the statement. “Through forming strategic alliances with its partners, actively developing new markets, optimizing the product mix and enhancing product research and development and innovation, the group will create more healthy food products that meet the demand of consumers.”
Sales of the Tianjin, China-based company fell 5.2 percent to $1.9 billion. Gross profit margin of the maker of Master Kong noodles and ready-to-drink tea widened to 29.11 percent in the quarter from 26.67 percent a year earlier, according to the statement.
Shares of Tingyi fell 1.4 percent to HK$19.18 in Hong Kong yesterday, before the earnings announcement. The stock has declined 19 percent in 2012, compared with a 18 percent gain for Want Want China Holdings Ltd., the nation’s largest maker of rice crackers.
Tingyi said in November it will swap a stake in its beverage business for PepsiCo’s bottling operations in China. Under the agreement, PepsiCo will transfer equity interests in its bottling operations in China to Tingyi-Asahi Beverages Holding Co. in exchange for a 5 percent stake in Tingyi-Asahi. China’s Ministry of Commerce approved the transaction, Tingyi Chief Financial Officer Frank Lin said March 29.
In April, a subsidiary of the company agreed to form a joint venture with Itochu Corp. to make and sell snack foods, according to the statement. This month its unit agreed with Prima Meat Packers Ltd. to set up a joint venture to process poultry and meat products.
Sales at its instant noodle business, which accounts for 53.4 percent of total, rose 11 percent to $1.03 billion, the company said. The gross margin of the business increased by 3.8 percentage points to 29.85 percent from a year earlier as raw material prices declined, it said.
Revenue of its beverage business, which contributes 42.4 percent of total, declined by 22 percent to $817.5 million.
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