Café de Coral warns of 90 per cent profit slump in warning shot to Hong Kong’s restaurant industry

Café de Coral warns profit could fall by 85 to 90 per cent in the year ended March 31, with the final quarter in the red

More listed restaurant chains are expected to issue profit warnings as pandemic adds to troubles since social unrest: Emperor Securities

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People queuing for lunch at a restaurant in Kwun Tong, Hong Kong, under the new social-distancing law. Restrictions during the coronavirus pandemic have left many businesses nursing deep operating losses. Photo: K. Y. Cheng

Published: 5:00pm, 27 Apr 2020Updated: 11:02pm, 27 Apr 2020

Café de Coral Holdings is poised to report up to 90 per cent erosion in profit for the year to March 31 amid the coronavirus pandemic, heightening distress in Hong Kong’s beleaguered food and beverage (F&B) industry.

“Business operations and consumer spending in the group’s key operating territories have been severely impacted by the outbreak of Covid-19 since January,” it said. The slide had deepened in the final quarter, resulting in a deficit, it added.

The profit warning, which came in an exchange filing late on Sunday, signals the pandemic will saddle peers with losses in the months ahead as virus containment measures, such as social distancing and closure of non-essential businesses, are extended.

The pandemic has added to an avalanche of bad news since last year when the F&B industry cracked under months of anti-government protests, triggering pay and job cuts and shop closures. The government earlier this month unveiled a record HK$137 billion (US$17.7 billion) relief package to arrest the slump.

“The first quarter has been very bad for the F&B industry, and Cafe de Coral will not be the only one issuing a profit warning,” said Stanley Chan, director of research at Emperor Securities. “Other restaurant chains are facing similar operating difficulties, so more profit warnings may be coming.”

Unemployment within Hong Kong’s food and beverages, retail and tourism-related industries rose to 6.8 per cent in the first quarter, the statistics bureau said, the highest level since the global financial crisis. Total receipts in the restaurant industry probably fell 5.9 per cent in 2019 to HK$112.5 billion, it estimated.