FAST-FOOD chain Fairwood Holdings has posted a stunning 84 per cent fall in attributable profits, confirming market fears that the sector is nearing saturation and losing profitability. Fairwood said attributable profit fell to $5.75 million in the six months to September 30, from $37.05 million in the same period last year. Earnings a share fell to a fully diluted 1.2 cents, from 7.8 cents last year, despite a 25 per cent rise in turnover to $694.1 million from $555.4 million previously. The company said it would not pay an interim dividend, after paying 11.849 cents a share previously. W I Carr's Alan Wong said the result reflected rising rents and wages and depreciation from new outlets opened in the 1993-94 financial year. Mr Wong said profit margins had fallen to 0.94 per cent in the six-month period, from 7.7 per cent in the same period last year. He said he was lowering his profit forecast for Fairwood for the whole of 1994-95. Another analyst said the bad result confirmed market fears that operating costs in the sector were rising, margins were imploding, and that chains like McDonald's, Wendy's and Hardees were increasing the pressure. He said Fairwood was pushing to meet the competition by trying to increase its market share despite the competition. 'Cafe de Coral has responded with Spaghetti House, but Fairwood seems to be responding by expanding into a fairly saturated market,' he said. Fairwood has 101 Fairwood restaurants and 30 Mario Italian restaurants in Hong Kong as well as two Fairwood outlets in Singapore, which are running at a slight loss. It has a total of 25 Fairwood outlets in southern China and Macau, after adding five new outlets in the past six months. Fast-food rival Cafe de Coral earlier reported interim profit attributable to shareholders of $56.51 million, down from $78.68 million in the same period last year despite a 15 per cent rise in turnover to $964.67 million. Fairwood said that average per capita income in southern China, which was still relatively low, had hindered demand for Hong Kong-style fast food. This and the cooling of the mainland economy was a major obstacle in achieving a substantial sales increase, it said. A recent Salomon Brothers report warned that profit margins in the fast-food sector were narrowing and that the market was nearing saturation.