Jollibee first quarter profit down 8.8% due to higher costs

MANILA, Philippines - Jollibee Foods Corp. (JFC), the Filipino-owned fastfood chain owned by Tony Tan Caktiong, reported a lower net income in the first quarter of the year due to higher costs of raw materials and lower consumption spending during the period.

In a disclosure to the Philippine Stock Exchange yesterday, JFC said its net income dropped 8.8 percent in the first three months of the year despite higher sales. Net income amounted to P631 million in the first quarter of the year from P691 million in the same period last year.

Tan Caktiong, Jollibee chairman and chief executive officer, said that because of higher transport and fuel costs, Filipinos slashed some of their food spending outside their homes.

“The rising consumer prices and household expenses’ affected consumers’ spending outside of home,” he said.

Higher costs of food raw materials and manufacturing expenses also cut profit margins, he added.

In its disclosure, Jollibee however, said system-wide retail sales increased 14.7 percent to P18.743 billion from P16.340 billion recorded in the same quarter last year.

System-wide sales measure the sales of all company-owned and franchised stores.

With the lower first quarter income, JFC chief financial officer Ysmael Baysa said that profit in the first half of the year will likely be weaker compared to previous years because of the rise in raw material and operating expenses.

“The Jollibee Group’s net income as a percent of its revenues decreased by 1.1 percentage points from 5.6 percent in the first quarter of the year to 4.5 percent in the first quarter of 2011 mainly on account of a 1.3 percentage points increase in the cost of sales as a percent of revenues, partly offset by improvement in operating expenses by 0.4 percentage points.

The slight price adjustments we implemented in the latter part of 2010 and first quarter of 2011 and our cost improvement effort were not sufficient to cover the increase in the cost of raw materials and store and manufacturing expenses,” Baysa said.