Yum Brands' results show recovery on mainland China

PUBLISHED : Tuesday, 04 February, 2014, 3:33pm
UPDATED : Wednesday, 05 February, 2014, 1:57am

Yum Brands' fourth-quarter profit fell 5 per cent because of costs related to refinancing some debt, but its adjusted results beat expectations as its KFC chain recovers from a series of setbacks on the mainland.

The company, which also owns Pizza Hut and Taco Bell, said it was still confident its earnings per share would grow 20 per cent this year.

Yum has been trying to get its performance on the mainland back on track since it was hit by a controversy over its poultry supply a little more than a year ago. It seemed to be making progress when an outbreak of bird flu upended its efforts a few months later. It has since launched a marketing campaign assuring customers on the mainland of the safety of its food.

Just last month, the authorities in eastern China announced a ban on live poultry sales following an increase in the number of people infected with a strain of bird flu.

Although Yum has more than 40,000 restaurants around the world, the mainland accounts for more than half its total revenue. The company is the biggest Western fast-food chain operator on the mainland, and sees it as a growth market. In the year ahead, it plans to focus on building in secondary cities where rents and labour costs tend to be lower.

"In China, we strengthened our poultry supply chain, made significant progress rebuilding consumer trust in the KFC brand and made substantial gains in restaurant productivity," chief executive David Novak said.

For the quarter, Yum's net income fell to US$321 million, or 70 US cents per share, from US$337 million, or 72 US cents per share, in the same period a year earlier. Excluding a one-time cost related to buying back some debt, net income was 86 US cents per share. Analysts had expected 79 US cents.

Revenue edged up 1 per cent to US$4.18 billion, short of the US$4.26 billion forecast by analysts.

For the year, net income dived 32 per cent to US$1.09 billion, or US$2.36 per share.

Revenue fell 4 per cent to US$13.08 billion from US$13.63 billion in 2012.