Jollibee reports profit drop due to higher costs

MANILA, Philippines—Fast-food giant Jollibee Foods Corp. (JFC) posted a 9.9-percent decline in net profit attributable to parent equity holders to P622 million in the first quarter from a year ago, as high input costs gnawed at its margins.

System-wide sales, a measure of sales to consumers from both company-owned and franchised stores, rose by 14.7 percent in the first three months to P18.74 billion year on year.

Sales from restaurant chains in the Philippines grew by 13.1 percent driven by the Jollibee and Mang Inasal brands.

But other domestic businesses posted a decline in same store sales during the quarter due to inflation pressure on consumer spending, JFC reported.

Meanwhile, the company’s foreign businesses grew by 22.9 percent during the period, led by the Jollibee overseas branches and the China businesses, which expanded by 30.6 percent and 29 percent, respectively.

JFC chairman and CEO Tony Tan Caktiong said it had been quite challenging to grow consumer demand in the first quarter due to higher food, transportation and fuel prices.

“Rising consumer prices and household expenses affected consumers’ food spending outside of home,” Tan Caktiong said.

Ysmael Baysa, JFC chief finance officer, had earlier said the first-semester performance would not likely be strong due to the rise in raw material and operating costs and higher interest expenses.

Including minority interest, JFC’s net income declined by 8.8 percent to P631 million from a year ago as the rapid increase in the cost of food raw materials as well as store and manufacturing expenses reduced profit margin.

“The Jollibee group’s net income as a percent of its revenue decreased by 1.1 percentage points from 5.6 percent in the first quarter of 2010 to 4.5 percent in the first quarter of 2011 mainly on account of a 1.3-percentage point increase in the cost of sales as a percent of revenue, partly offset by improvement in operating expenses by 0.4 percentage point,” Baysa explained. “The slight price adjustments we implemented in the latter part of 2010 and first quarter of 2011 and our cost improvement effort were not sufficient to cover the increase in the cost of raw materials and store and manufacturing expenses.

The JFC group operates the Philippines’ largest quick-service restaurant network with a total of 1,931 stores in the country under the Jollibee, Chowking, Greenwich, Red Ribbon, Caffe Ti-amo, Mang Inasal and Manong Pepe, which recently shut down.

It also has 407 stores abroad: the YongHe King brand in mainland China; Jollibee in the United States, Vietnam and Brunei; Red Ribbon in the US; Chowking, mostly in the US and Dubai; and Hong Zhuang Yuan, also in mainland China. Total worldwide stores thus stood at 2,338.