BEIJING (Reuters) - Profits earned by Chinese industrial companies rose 11.1 percent in March from a year earlier, adding to signs that the country’s economic slowdown may be bottoming out.

A worker operates a furnace at a steel plant in Hefei, Anhui province August 18, 2013. REUTERS/Stringer

Industrial profits rose to 561.24 billion yuan ($86.50 billion) in March, the National Bureau of Statistics(NBS) said on its website on Wednesday.

That brought total first-quarter profits to 1.34 trillion yuan, up 7.4 percent from a year earlier and improving from a 4.8 percent rise in the January-February period.

The data covers large enterprises with annual revenue of more than 20 million yuan from their main operations.

The first-quarter gains were largely led by chemical companies and agricultural and food processing companies, which posted 20.8 percent and 12.1 percent growth compared with the same period a year earlier.

But heavy industry and mining continued to struggle, with ferrous metal smelting and rolling firms seeing profits fall 15.8 percent in the quarter and profits for coal miners slumping 92.6 percent. Oil and gas producers posted a loss.

Debt at Chinese industrial companies increased 5.2 percent on a yearly basis to 55.22 trillion yuan as of end-March, the bureau said.

China’s economy grew 6.7 percent in the first quarter this year from a year earlier, its slowest pace in seven years, but beter-than-expected consumer, investment and factory data have fueled hopes that the economy’s prolonged downturn may be easing.

Still, analysts are worried that the improvement may be largely driven by companies taking on more debt, raising questions about whether the seeming pick-up in the broader economy can be sustained.

Adding to that caution, the statistics bureau warned that profits from investment and non-core activities “increased dramatically”, and that the rise in profits was not seen across the industrial spectrum.

The bureau said that 30.5 percent of industrial profits in March stemmed from investments and non-core activities.

“The pickup in March industrial profits was partly due to an improving economy, but it was not a balanced and stable recovery,” NBS official He Ping said in a statement accompanying the data.

Slowing demand, high inventories and financing difficulties still trouble the sector, he added, and it remains to be seen whether the increase in profits is sustainable.

Producer prices in March fell 4.3 percent from a year earlier, extending their decline to a full four years, but at a slower rate than a median forecast in a Reuters poll of a 4.6 percent decline.

Economists said the slower fall in producer prices was driven by recovering global commodity prices and also an uptick in construction activity at home.

Premier Li Keqiang said at a State Council meeting last week that China will take steps to boost exports, including encouraging banks to boost lending, expanding export credit insurance and raise tax rebates for some firms.

Profits at China’s state-owned firms fell 13.8 percent in the first quarter from a year earlier, though the rate of decline eased slightly from the first two months of the year, the Ministry of Finance said on Tuesday.