Yum China falls as profit disappoints

Shares of Yum China (9987), the owner of the KFC, Pizza Hut and Taco Bell chains in Mainland China, fell 2.9 percent yesterday after its profits failed to meet estimates and the company warned of challenges ahead.

Net profit in 2021 increased 26 percent to US$990 million (HK$7.72 billion) from US$784 million the prior year, mainly due to a non-cash gain of US$618 million from equity interest in Hangzhou KFC. However, its annual adjusted profit fell 15 percent to US$525 million from US$615 million in the prior year.

Its revenue rose 19 percent year-on-year in 2021, from US$8.26 billion to US$9.85 billion, while same-store sales decreased 1 percent year over year, with a drop of 3 percent at KFC and an increase of 7 percent at Pizza Hut.

Also, Yum China declared a cash dividend of US$0.12 per common share.

"The Covid-19 situation presented tremendous volatility to our operations," said chief financial officer Andy Yeung, adding that stringent anti-pandemic measures in China may continue to take effect in the future, coupled with the triple pressure of shrinking demand, supply bottlenecks and weakening expectations in the mainland economy, which will bring uncertainty for businesses this year.

Meanwhile, despite the double-digit rise in the prices of international commodities including chicken, beef, cheese and energy, the group is taking a "cautious approach" to mark-up, said chief executive Joey Wat.

With more than 11,000 restaurants across China, Yum China plans to add about 1,000 to 1,200 stores this year.