Jollibee earnings slow in third quarter on lower spending due to typhoon

MANILA, Philippines - Fastfood giant Jollibee Foods Corp. said its net earnings in the third quarter this year grew at a much slower pace of five percent due to financing charges related to the acquisition of Hong Zhuang Yuan restaurant chain in China and dampened consumer spending owing to the onslaught of tropical storm “Ondoy.”

In a financial report filed with securities regulators, Jollibee said its net income from July to September this year amounted P537 million compared with P513 million the previous level. But system-wide sales, a measure of all sales to consumers both from company-owned and franchised stores, rose 11.2 percent to P15.33 billion.

Tony Tan Caktiong, Jollibee chairman and chief executive officer, said domestic sales growth slowed down to 2.3 percent on crimped consumer spending aggravated by the strong typhoon in September. “Based on our data, consumers slowed down on their spending and increased their savings rate after going through a period of high inflation in 2008,” he said.

Tan Caktiong, however, said he believes this slowdown in spending would be temporary, saying it may take a year or less for customers to adjust to the new price levels. “We believe that our sales in the Philippines will grow more robustly as soon as spending on consumer goods rise with the economic recovery,” he said.

Tan Caktiong pointed out that Jollibee’s overall sales growth remained strong, driven by businesses overseas particularly those in China where sales for the quarter surged 76 percent. Excluding the effect of the acquisition of Hong Zhuang Yuan in October last year, sales in China grew 35.5 percent.

“Our China business now accounts for 10.4 percent of the Jollibee Group’s worldwide sales. Our total foreign business grew 52.8 percent over last year and now contributes 18.6 percent of Jollibee’s total sales versus only three percent just a few years ago,” Tan Caktiong said.

In the nine months ending September this year, Jollibee’s net income rose 12.6 percent to P1.84 billion on the back of a 11 percent rise in revenues from P31.65 billion to P35.16 billion. System-wide sales increased 11.2 percent to P46.29 billion.

Jollibee chief finance officer Ysmael Baysa said third quarter gross profit margins improved 1.2 percent as the cost of raw materials continued to decline. This improvement was partly offset by significantly higher general and administrative expenses caused largely by the building of the corporate organization in China to support its rapidly expanding business.