Rising costs eat away KFC operator Sapphire Foods India's Q1 profit

Sapphire Foods India

02/08/2023 11:05

By Navamya Ganesh Acharya
       BENGALURU, Aug 2 (Reuters) - Sapphire Foods India  SAPI.NS , the
domestic operator of KFC and Pizza Hut restaurants, reported lower-than-expected
first-quarter profit on Wednesday, as mounting costs outpaced a growth in
revenue.
    The company's net profit stood at 249.4 million rupees ($3.02 million) in
the quarter ended June 30, compared to 382.7 million rupees a year earlier, the
U.S.-based Yum Brands' franchisee said in an exchange filing.
    Analysts, on average, expected the company to report a profit of 273.8
million rupees, according to Refinitiv IBES data.
    Expenses climbed 21.6%, with cost of materials consumed jumping 17.4% to
2.06 billion rupees and employee costs increasing 24.3%.
        India is reeling under 
    rising prices of essentials as monsoon rains have disrupted supplies, with
companies including Domino's flagship inflation-buster 49-rupee pizza being
"re-engineered" by cutting price - and tomatoes - from its earlier cheapest
offering of 59 rupees.
        However, raw material prices are bottoming out and have started
reflecting in margin improvement, said Sneha Poddar, associate vice president at
Motilal Oswal Financial Services, adding she sees strong long-term opportunities
in quick service restaurants.
  
    For the quarter, same-store sales at Sapphire Foods' Pizza Hut restaurants
fell 9%, while the company's KFC business reported a flat same-store sales
growth.
    Rival Domino's Pizza  DPZ.N , run by Jubilant Foodworks  JUBI.NS , reported
a 74% fall in quarterly profit as it grappled with higher costs, while Westlife
Foodworld  WEST.NS , which runs McDonald's  MCD.N  stores in West and South
India, reported a smaller-than-expected rise in profit.
    Shares in Sapphire, which operates over 700 restaurants across India, Sri
Lanka and Maldives, fell as much as 3.5% after the results.

 

($1 = 82.5690 Indian rupees)

    

 (Reporting by Navamya Ganesh Acharya in Bengaluru; Editing by Sonia Cheema)
 ((Navamya.GaneshAcharya@thomsonreuters.com; +91 8805175330 ;))