Jollibee’s net profit declines to P1.31B in first semester

MANILA, Philippines — Local fast-food giant Jollibee Foods Corp. (JFC) posted an 8.3 percent year-on-year decline in its first semester net profit to P1.31 billion as higher input costs gnawed at operating margins while debt servicing cost increased.

For the second quarter alone, JFC’s net profit attributable to equity holders of parent was also 6.8 percent less at P693 million compared to 2010 in the same period.

System-wide sales, a measure of sales to consumer from company-owned and franchised stores, expanded by 16.5 percent in the second quarter and by 15.6 percent for the six-month period to hit P20.46 billion and P39.21 billion, respectively.

Domestic sales grew by 16 percent from a year ago driven by the growth of the flagship Jollibee brand and by the acquisition of grilled chicken chain Mang Inasal.  Overseas sales grew at a faster pace of 18.8 percent led by China, the Middle East and Vietnam where business expanded by 26 percent, 34 percent and 29 percent, respectively.

“We believe that the increase in inflation rate had negatively affected consumer spending in the first quarter of this year. It continued to affect the consumer spending in the second quarter but to a lesser degree as the inflation rate stabilized,” JFC chair and chief executive officer Tony Tan Caktiong said in a press statement.

“As importantly, our brands had taken steps to improve the value of their products to our customers through continued product quality improvement and through price adjustments in some cases,” he said.

Tan Caktiong said the company was looking to improve sales growth in the Philippines in the second half of 2011 through continued product quality improvement and better in-store experience brought about by store renovations.

Operating income for the second quarter and the first half of the year stood flat despite the 15.3 percent growth in revenues as higher raw materials trimmed profit margins, JFC chief finance officer Ysmael Baysa said.  He added that raw materials in the first semester increased by about 7 percent compared to the level a year ago.

“Our price adjustments and cost improvement were not yet sufficient to cover the increase in the prices of raw materials and other cost of operations,” Baysa said.

“We project a stabilization of prices and some profit margin improvement in the second half of 2011,” Baysa said.

He added that higher financing charges arising from additional debt incurred from its recent acquisitions had also reduced the net income attributable to equity holders of parent by 8.3 percent in the first six months compared with the same period in 2010.