Jollibee Q1 profits up; sees slowdown ahead

Jollibee Foods Corp. (JFC) reported a 17.2 percent rise in earnings during the first three months of 2009, but it warned that sales growth for the full year may fall below target due to slowing consumer demand.

In a financial filing with the Philippine Stock Exchange, the fast food chain operator said its net income rose to P562 million in the first quarter of 2009 from P480 million in the same period last year, with system-wide sales--from both company-owned and franchised stores--growing 13.8 percent to P15.1 billion.

Total revenues jumped 13.5 percent to P11.3 billion from P9.99 billion while net operating income went up 17 percent to P779 million from P666 million.

JFC chairman and chief executive officer Tony Tan Caktiong said that demand for their products remained strong especially in foreign markets, which have grown their share of total revenues to 16 percent from the previous 13 percent.

According to him, JFC's overseas sales surged by 64.2 percent, boosted by the purchase of Hongzhuangyuan Congee food chain in Beijing. Excluding this acquisition, the international business still grew sales by a robust 41.7 percent.

In the Philippines, Tan said system-wide sales registered a 7.7 percent increase.

Tan noted, however, that while JFC managed to post strong sales early this year, slowing economic growth in the Philippines and abroad may dampen the company's sales growth in the next quarters.

"In the short term, our operating plan calls for at least sustaining our most recent sales and profit growth rates. The economic situations in the markets, however, may continue to exert pressure on consumer demand and decrease our sales growth to below our target," the company chairman said.

JFC chief finance officer Ysmael Baysa echoed Tan's remarks, saying, "we are watching consumer demand very closely."

Despite the worldwide recession, JFC is not revising its long-term goals and plans, with its capital expenditures expected to reach P4 billion this year, 37 percent higher than in 2008.

JFC is investing in new stores, renovation of existing outlets, commissary facilities and a logistics center.

It plans to match last year's expansion of 186 new stores and intends to continue pursuing acquisition of businesses as part of its long-term growth strategy.

Baysa stated, however, that under fast changing economic conditions, JFC will invest "with a higher degree of diligence."

"We have to ensure that our investments would generate healthy returns even if demand volume weakens. This means that if some planned investments do not pass this stress test, we would postpone or avoid them," he said.

Given softening demand and the economic downturn, Baysa said they are banking on the decline in prices of raw materials, more efficient marketing expenditures and lower corporate income taxes to buoy JFC's bottomline in the coming months.

These factors, he added, helped improve JFC's net income margin in the first quarter to 5 percent of revenues from the previous 4.8 percent.

"We look forward to the further improvement in our profit margins...made possible by decreasing prices of raw materials."

JFC is the country's largest fast food service company, competing against McDonald's and KFC.

Last year, the company reported a 13 percent growth in system-wide sales, which it was hoping to match this year, Tan said earlier.

As of March 31, it operated a total of 1,515 stores nationwide and 306 stores abroad. Among its popular brands are Jollibee, Chowking, Greenwhich, Red Ribbon and Delifrance.