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The Honolulu Advertiser
Posted on: Wednesday, April 23, 2008

International units buoy Yum Brands

By Bruce Schreiner
Associated Press

LOUISVILLE, Ky. — A strong international appetite for the fast-food fare at Yum Brands Inc. fueled a 31 percent jump in the company's first-quarter profit.

The parent of Taco Bell, KFC and Pizza Hut yesterday reported double-digit growth in operating profit at its China and international divisions for the three months ended March 22.

The company also raised its full-year earnings forecast to $1.87 per share from $1.85 as its top executive predicted sustained expansion overseas along with a U.S. business which he said was positioning itself for sustainable growth.

Net income for the latest quarter rose to $254 million, or 50 cents per share, from $194 million, or 35 cents a share, in the year-ago period.

However, the company said operating profit was hurt by higher prices for ingredients such as cheese, wheat and chicken.

Excluding a pretax gain of $100 million from the sale of its minority interest in KFC Japan, Yum posted earnings-per-share of 42 cents for the quarter. Analysts surveyed by Thomson Financial had forecast 40 cents a share.

The company also reported $26 million in pretax losses from U.S. refranchising and another $6 million pretax charge related to U.S. restructuring.

Quarterly revenue rose 8 percent to $2.4 billion.

The company reported worldwide same-store-sales growth of 4 percent, including increases of 12 percent in mainland China, 5 percent in its international division and 3 percent in the United States.

David C. Novak, Yum's chairman and chief executive, predicted the company will open at least 1,000 new restaurants outside the United States for the eighth straight year.

As for its U.S. business, which has struggled, he said the company remains confident in the steps being taken to position its brands for sustainable growth.

Novak said the company's U.S. profit was "being challenged by significant commodity pressure."

First-quarter operating profit totaled $101 million in Yum's China division, up 33 percent from a year earlier. Yum opened 88 new restaurants in mainland China during the quarter, outpacing last year's same-period growth.

Operating profit in Yum's international division grew by 18 percent to $139 million in the latest quarter. The division added 158 new restaurants during the quarter. Franchise fees in the international division grew by 20 percent and are expected to reach about $650 million for the full year, the company said.

In the U.S., operating profit fell 5 percent to $157 million, which the company blamed largely on higher commodity prices that increased $25 million compared with the prior year.