Corona Capital: Food prices, Cannabis, Yum China

Cupani Metals

04/02/2021 10:48

(The authors are Reuters Breakingviews columnists.  The
opinions expressed are their own.)
    By Breakingviews columnists
    LONDON/HONG KONG, Feb 4 (Reuters Breakingviews) - Corona
Capital is a daily column updated throughout the day by
Breakingviews columnists around the world with short, sharp
pandemic-related insights.
    
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    BEN & SCARY. Food makers are about to feel the pinch
 urn:newsml:reuters.com:*:nL1N2JP1DX. Unilever  ULVR.L  on Thursday predicted prices of
commodities like tea and palm oil would rise at mid to high
single digit percentage rates this year. The pandemic’s economic
fallout makes it harder for Chief Executive Alan Jope to pass on
those costs to shoppers  urn:newsml:reuters.com:*:nL4N2IO1KR. Higher prices added just
1% to the Anglo-Dutch group’s food and refreshment sales growth
in the fourth https://www.unilever.com/Images/ir-q4-2020-full-announcement_tcm244-558959_en.pdf
 quarter, down from 1.8% in the previous three months.
    That’s bad news for the 114 billion pound consumer goods
giant’s profitability, which is already under pressure. The
maker of Hellmann’s mayonnaise and Ben & Jerry’s ice cream
reported an underlying operating margin of 18.5% in 2020, 60
basis points lower than in the previous year. Jope’s medium-term
goal is to lift sales between 3% and 5% a year, and boost
underlying operating profit at a faster rate. Luckily, he
doesn’t have to hit that goal this year. (By Dasha Afanasieva)
    
    FIRST TOKE. London’s stock market is warming to marijuana.
Australia’s MGC Pharmaceuticals  MXC.AX , which makes medicinal
products out of cannabis plants, will make its debut https://wcsecure.weblink.com.au/pdf/MXC/02337790.pdf
 on Feb. 9. The company which is already listed at home is
raising 6.5 million pounds, equivalent to 25% of its Australian
market value. The company is also working on an
anti-inflammatory treatment that could prevent patients from
being overwhelmed by Covid-19.
    Investors are feeling the buzz. Britain, which legalised
medicinal marijuana in 2018, last September  urn:newsml:reuters.com:*:nL8N2H666P gave
companies the green light to list on AIM, London’s junior stock
exchange. Cellular Goods, a medicinal marijuana company backed
by soccer icon David Beckham, is also expected https://news.sky.com/story/beckham-backed-cannabis-venture-becomes-first-to-score-with-london-float-12207613
 to float this week, according to Sky News. MGC priced its
shares at 1.475 pence, 3% above the closing price in Australia
on Feb. 1. The debut looks far from a downer. (By Aimee
Donnellan)
    
    DROP IN THE BUCKET. Despite a patchy recovery caused by
regional virus outbreaks, Yum China  YUMC.N ,  9987.HK 
investors are hungry for more. The $24 billion operator of KFC
and Pizza Hut restaurants said https://ir.yumchina.com/news-releases/news-release-details/yum-china-reports-fourth-quarter-and-full-year-2020-results
 on Wednesday that fourth-quarter revenue grew 11% from a year
earlier, while sales at stores open since before its fiscal year
started, excluding temporary closures, declined 4%. Higher
delivery and mobile orders helped, but a quieter Chinese New
Year holiday season with fewer travellers is going to take a
toll.
    Boss Joey Wat remains optimistic, however. Yum China plans
to open another 1,000 locations this year, 14% fewer than in
2020. More concerning maybe the lack of a boost following the
company’s secondary listing in Hong Kong in September. The
shares are trading near an all-time high, but at 28 times
expected earnings for the next year the valuation remains
stubbornly lower than at Starbucks  SBUX.O  and Chinese hotpot
chain Haidilao International  6862.HK . (By Sharon Lam)    
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 (Editing by Peter Thal Larsen, Jeffrey Goldfarb and Karen Kwok)