Extra IT cost weighs on Jollibee profit growth


Leading fast food chain operator Jollibee Foods Corp. (JFC) recorded a less-than-target 6.7-percent net income growth in the first nine months of 2015, weighed down by an extraordinary expense on an information technology upgrade, company officials announced on Monday.

In a statement, JFC said its January-September net income reached P3.9 billion from P3.7 billion in the same nine months in 2014.

Its revenues increased 10.9 percent to P72.9 billion from P65.75 billion a year ago.

System-wide retail sales also rose by 10.5 percent to P94.47 billion from P85.47 billion.

For the third quarter alone, the company’s net income inched up by 5.4 percent to P1.26 billion from P1.19 billion a year ago.

JFC Chief Financial Officer Ysmael V. Baysa said profits for the third quarter “would have grown by at least 14 percent if the extraordinary cost increase from the upgrade in IT were excluded.”

“We look forward to reverting to a normal growth in IT-related expenses in the years ahead, and reaping the benefits from our investments,” Baysa said. “Returns on invested capital from new stores across the brands and regions remain healthy, even as we increase the number of new stores opened, indicating a likely profitable business expansion next year and the years ahead.”

JFC has a five-year plan to grow its net income and revenues by double digits yearly in a bid to be one of the Top 5 quick service restaurants (QSR) in the world.

Meanwhile, third-quarter revenues went up 13.6 percent to P25.05 billion from P22.05 billion, and system-wide retail sales improved 13.7 percent to P32.31 billion from P28.41 billion last year.

Stronger sales came from the 6.1-percent increase in number of stores, and about 7.6-percent store sales growth in and out of the Philippines.

“Sales growth accelerated to 13.7 percent in the third quarter compared with 8.9 percent in the first half of the year,” JFC Chief Executive Officer (CEO) Ernesto Tanmantiong pointed out.

JFC sales in the Philippines grew by 13.6 percent in the third quarter versus a year ago, while sales from overseas operations also climbed by 14.2 percent.

Sales of stores in China grew by 9.7 percent; US sales, up by 19.1 percent; and Southeast Asia and Middle East sales increased by 25.2 percent.

As of end-September, JFC was operating 3,023 stores—2,393 in the Philippines and 630 abroad.

Operating expenses, on the other hand, went up by 18.3 percent, driven by IT-related expenses and advertising spending.

“We do not foresee a significant rise in our debt level despite the 40-percent acquisition of Smashburger and our increased new store investments,” Tanmantiong added.

This year, JFC has capped off two major deals, which included the joint venture to franchise 1,459 Dunkin’ Donuts stores in China by 2020, and the 40-percent bite into US-based burger joint Smashburgers for $99 million.

P10.4-B capex for 2016
Tanmantiong also announced on Monday that JFC has set a spending budget of P10.4 billion for 2016, higher than the P9.1 billion capital expenditure for this year.

“For 2016, we plan to accelerate the expansion of our store network, opening even more stores than in 2015—in the Philippines and in all regions abroad,” Tanmantiong said. “We are allocating P10.4 billion for capital expenditures, of which P7.5 billion is for new store investments and existing store renovations, and the rest will mostly be for commissary expansion.”

He added, “We also plan to enter new countries, such as Malaysia, Oman, Canada, Italy, and the United Kingdom through our Jollibee brand, and open more stores in countries, where we already have presence, such as Singapore, Vietnam, and the United States. We will continue to build our organization capability, particularly in store network expansion, supply chain, and information technology. We will also expand the coverage of our JFC University development course and other organization development programs. We have an exhilarating period of growth ahead.”

The fast food chain operator also approved a regular cash dividend of P0.97 per share on Monday, bringing its total cash dividend to P1.77 per share in 2015—a 7.9 percent increase from last year.

JFC also has 50-percent interests in joint ventures for Highlands Coffee in the Philippines and Vietnam (87 stores); Pho 24 in Vietnam, Indonesia, Cambodia, Korea, and Australia (38 stores); and 12 Sabu in China (21 stores).

The global expansion of JFC is in line with its five-year plan to grow its net income and revenues by double digits yearly in a bid to be one of the Top 5 quick service restaurants (QSR) in the world.

At present, JFC is the largest in Asia and 10th largest QSR in the world in terms of market capitalization, according to a Bloomberg data cited by the company.

Earlier, Baysa said the company’s target to reach the Top 5 QSRs is likely doable in seven years, with continued organic growth of new and existing stores, as well as acquisition of new businesses abroad.

Aside from the iconic Jollibee store, some of the company’s other well-known brands are Chowking, Greenwich, Red Ribbon, Mang Inasal, and Burger King.


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