Brazil Fast Food: announces Q1/2010 results

Rio de Janeiro / BR. (bw) Brazil Fast Food Corporation (BFFC), the second largest restaurant chain with 737 points of sale, operating under the Bob´s brand, KFC and Pizza Hut Sao Paulo as franchisee of Yum! Brands, and Doggis as franchisee of Chilean owner of this brand, all of them in Brazil, announced financial results for the first quarter ended on March 31, 2010. Highlights:

  • System-wide sales totaled 191,6 million BRL; up 16,1 percent from the first quarter 2009
  • Revenue totaled 50,1 million BRL; up 13,4 percent from the first quarter 2009
  • Ebitda was 4,6 million BRL; up 19,8 percent from the first quarter 2009
  • Operating income was 2,3 million BRL; up 24,8 percent from the first quarter 2009
  • Net income was 1,9 million BRL, or 0,23 BRL per basic and diluted share
Exchange rate on May 23th, 2010 (Interbank):
1’000’000,000 Brazilian Real = 424’286,139 Euro (EUR)
1’000’000,000 Euro (EUR) = 2’356’900,000 Brazilian Real

Gross Domestic Product (PPP) estimated for 2009:
8’220 USD = 15’402,861 BRL per capita and annum.
(Source: International Monetary Fund. Retrieved 2010-04-21)

«Our results for the first quarter represent a good start for the year, and put us ahead of schedule to achieve our goal for 2010. In addition to delivering healthy top- and bottom-line growth, we were also pleased with the improvement in the operating margins of our owned stores», said Ricardo Bomeny, President and CEO of Brazil Fast Food. «The outlook for our business in 2010 remains positive, and we will continue to make planned investments to grow our brands in the quarters ahead».

First Quarter 2010 Results

System-wide sales grew 16,1 percent in the first quarter to 191,6 million BRL, driven by an increase in owned stores as well as franchised points of sale.

Total revenue for the first quarter 2010 increased by 13,4 percent to 50,1 million BRL from 44,2 million BRL in the first quarter 2009. Revenue growth was driven by the continued expansion of the Company´s Bob´s and KFC restaurant network as well as the launch of Doggis in the fourth quarter of 2009. The Company ended the first quarter of 2010 with 735 points of sale, compared to 667 in the comparable period in 2009.

Net revenue for company-owned and operated outlets was up 9,4 percent to 38,3 million BRL over the same period in 2009 due to the increase in the number of stores the Company owns and operates to 89, up from 85 in the first quarter of 2009. Same own-store sales, which measure the performance of stores open for more than a year, were up 4,8 percent year over year for Bob´s, 2,8 percent for KFC and 14,5 percent for Pizza Hut.

Net revenue from franchisees increased 8,2 percent year-over-year to 6,6 million BRL driven by an increase in number of franchised retail outlets to 647, up from 580 in the same period a year ago. Other revenue and income totaled 5,2 million BRL.

Operating expenses were up 12,9 percent to 47,8 million BRL driven by higher owned-store costs associated with increases in store rent and wages, higher franchisee costs associated with the growth in the number of franchised network stores, higher administrative costs driven by new staff hires, outsourcing services transition costs, legal expenses to adapt franchisee agreements and, in general, structure expenses to keep on preparing the group for the expansion of the stores of the operating brands.

Operating income for the first quarter of 2010 was 2,3 million BRL, compared to an operating income of 1,8 million BRL in the first quarter of 2009. Operating margin in the first quarter of 2010 was 4,6 percent compared to 4,1 percent in the comparable period of 2009.

Ebitda in the first quarter of 2010 was 4,0 million BRL, compared to 3,4 million BRL in the first quarter of 2009. Ebitda margin was 8,1 percent in the first quarter of 2010, compared to 7,6 percent in the comparable period of 2009. A table reconciling Ebitda to its nearest GAAP equivalent is provided elsewhere in this press release.

Interest expense was 340 thousand in the first quarter of 2010, compared to 808 thousand in the first quarter of 2009. The reduction in interest expense is attributable to lower interest rates as well as a reduction in the Company´s debt.

Net income for the first quarter of 2010 was 1,9 million BRL or 0,23 BRL per basic and diluted share, compared to net income and earnings per share of 1,1 million BRL and 0,14 BRL in the same period of 2009, respectively.

Financial Condition

As of the balance sheet date on March 31, 2010 the Company had 13,8 million BRL in cash. Shareholders´ equity was 27,0 million BRL at the end of the first quarter of 2010, compared to 25,1 million BRL at the end of 2009.

Business Outlook

During the first quarter, the macro-economic environment in Brazil was favorable for retail activities in general, but to a lesser extent for the food segment. Notwithstanding the Company delivered solid results driven by the strength of its industry leading brands. The outlook for the Brazilian economy remains positive, despite recent uncertainty associated with the European debt crisis. As a result the Company maintains its goal to end 2010 with 830 points of sale up from 673 in 2009.

«Our primary goal is to grow our existing brands organically. In addition to growing our own stores network as well as the Bob´s franchise, following the agreements with Yum! Brands and Chilean GED owner of Doggis brand, during 2010 we plan to initiate the development of the KFC and Doggis franchisee network. Nonetheless we will also continue to evaluate the acquisition or development of new brands opportunistically», said Ricardo Bomeny, President and CEO of Brazil Fast Food. «On the operating front we remain committed to improving our managerial procedures to improve our efficiency and effectiveness with the goal of strengthening our competitive position and expanding our margins».

About: Brazil Fast Food Corporation (BFFC owns and operates, both directly and through franchisees, the second largest fast-food restaurant chain in Brazil. The Bob´s trade name is used by Venbo Comercio de Alimentos, a subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participacoes (formerly 22N Participacoes). The «KFC» trade name is used by CFK Comercio de Alimentos (formerly Clematis Industria e Comercio de alimentos e Participacoes), also a holding company subsidiary. The «Pizza Hut» trade name is used by Internacional Restaurantes do Brasil («IRB»), also a 60 percent subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participacoes. Recently, the Company entered into an agreement with Grupo de Empresas Doggis S.A. («GED») to cross-franchise the Bob´s and Doggis brands in Chile and Brazil, respectively. Brazil Fast Food will control the Doggis master franchise in Brazil and GED will control the Bob´s master franchise in Chile.
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