Knitted fabrics specialist Pacific Textiles Holdings Ltd has booked a 16.5% rise in first-half profit, but says it continues to face a difficult economic environment as well as rising labour and raw material costs.

The company, whose customised finished fabrics are used in men's, women's and children's clothing, sportswear, swimwear and inner-wear, said net profit rose to HK$453m (US$58m) in the six months to 30 September. But overall gross profit margin dropped from 20.3% a year ago to 18.2%.

Revenues were up 21.4% to HK$3,680.7m, driven by an increase in production capacity and a higher average selling price.

Pacific Textiles says it is managing to offset higher yarn and commodity prices by expanding capacity and investing in new technologies to help improve operational efficiency, and focusing on high-end value-added products.

It also says it is focusing on " promising opportunities" in the Chinese domestic market, while faced with slow economic recovery in the US, Europe and Japan.

A joint venture set up with Crystal International Limited and GSI Trading Hong Kong Limited to make knitted fabrics in Vietnam is also seen as enhancing the group's position in Japan. Not only does it enjoy tariff and quota-free access to Japan, but low operating costs make it a cost-effective production base.