Rio de Janeiro / BR. (bffc) Brazil Fast Food Corporation (BFFC), the second largest fast-food restaurant chain in Brazil with 1’085 points of sale, operating under the «Bob´s» brand, the «Yoggi» brand, KFC and Pizza Hut São Paulo as franchisee of Yum! Brands and «Doggis» as master franchisee of Gastronomia + Negocios S.A. (former Grupo de Empresas Doggis S.A.), announced financial results for the third quarter ended September 30, 2013. Highlights:
- System-wide sales totalled 335,7 million BRL, up 26 percent from 266,5 million BRL in the third quarter 2012
- Points of sale totalled 1’085, up from 983 at the end of the third quarter 2012
- Revenue totalled 69,9 million BRL, up 28 percent from 54,6 million BRL in the third quarter 2012
- Operating income increased four percent to 7,8 million BRL, from 7,5 million BRL in the third quarter 2012
- Net income was 5,2 million BRL, a decrease of twelve percent from 5,9 million BRL in the third quarter 2012
- Earnings per basic and fully diluted share was 0,64 BRL, as compared to 0,73 BRL per basic and diluted share in the comparable year-ago quarter
«Our third quarter 2013 results were positively impacted by our recently inaugurated Pizza Hut owned-and-operated restaurants in São Paulo and two major one-time events during the period, the seven-day Rock in Rio Festival that drew major international names to a very well attended event in an area where Bob´s had four points of sale, as well as the Catholic World Youth Conference that was attended by the Pope, where we pre-sold sandwiches to municipal volunteers. Nevertheless, continued countrywide civil unrest and protests caused by widespread disappointment in the economic performance and political leaders in Brazil had adverse effects on sales and forced some stores to close earlier than normal for security reasons. Our operating income and net income were negatively impacted by the rise in the purchase price of some products due to inflationary pressures and currency devaluation as well as aggressive value campaigns at Pizza Hut and KFC restaurants», said Ricardo Bomeny, President and CEO of Brazil Fast Food. All figures are presented in nominal terms, while the average inflation rate between September 30th 2012 and September 30th 2013 was 5,9 percent.
Third Quarter 2013 Results
Higher sales from company owned stores and an increase in the number of franchised points of sale, led to system-wide sales growth of 26 percent in the third quarter, up from 266,5 million BRL to 337,5 million BRL. Total revenue for the third quarter 2013 increased by 28 percent to 69,9 million BRL, compared to 54,6 million BRL in the third quarter 2012.
Net restaurant sales for Company-owned retail outlets were up 31,6 percent to 57 million BRL for the three months ended September 30, 2013, compared to 43,3 million BRL for the three months ended September 30, 2012. This increase in sales is attributed to the opening of nine new Pizza Hut restaurants in São Paulo to counterbalance Cumbica airport restaurant´s participation in IRB´s results, as well as the Rock in Rio Festival and the Catholic World Youth Conference in Rio de Janeiro.
Net revenue from franchises increased 13,9 percent year over year to 12,9 million BRL, up from 11,3 million BRL, driven by higher same store sales and an increase in franchised retail outlets to 1’007 on September 30, 2013, up from 916 in the same period a year ago.
Operating expenses grew 31,8 percent to 62,0 million BRL in the third quarter 2013 from 47,1 million BRL in the third quarter of 2012. As a percentage of revenue, operating costs increased to 88,8 percent of total revenue in the third quarter of 2013 compared to 86,3 percent of total revenue in the same period of 2012.
Operating income for the third quarter of 2013 increased by four percent to 7,8 million BRL, compared to 7,5 million BRL in the third quarter of 2012.
Ebitda in the third quarter of 2013 was 10,0 million BRL, compared to 8,9 million BRL in the third quarter of 2012. Rock in Rio Festival had a result of approximately 1,3 million BRL.
Interest income was at 0,23 million BRL in the third quarter of 2013, compared to interest expense of 0,29 million BRL in the third quarter of 2012.
Net income for the third quarter of 2013 fell to 5,2 million BRL or 0,64 BRL per basic and diluted share, down twelve percent from net income of 5,9 million BRL or 0,73 BRL per basic and diluted share, in the same period of 2012.
Nine Months 2013 Results
For the nine months ended in September 30, 2013, total net revenue was 185,1 million BRL, up 17 percent from 158,1 million BRL in the comparable period of 2012. Operating income was 24,3 million BRL, up 34,7 percent from 18,1 million BRL in the comparable period in 2012. Net income for the nine months ended September 30, 2013 was 16,4 million BRL, up from 13 million BRL in the comparable period in 2012, an increase of 26 percent. Basic and diluted earnings per share were 2,01 BRL for the nine months ended September 30, 2013 compared to 1,60 BRL for the nine months ended September 30, 2012.
The increase in sales was driven by both higher sales from the company-owned restaurants and by growth in the franchise business.
Based on the criterion of same-store sales, which only includes stores that have been open for more than one year and is a metric that is not in accordance with IFRS accounting principles but is often used in retail industry analysis, the greatest growth from the Company-owned restaurants was seen in KFC and Pizza Hut, driven primarily by aggressive value campaigns intent to increase these respective restaurants´ customer base in a moment of consumers´ reducing expenditures and fierce competition. Net franchise revenues have increased 14,9 percent to 35,6 million BRL for the nine months ended September 30, 2013 from 31,0 million BRL in the comparable year-ago period. This growth was driven by the growth of the franchise business to 1’007 as of September 30, 2013 from 916 outlets as of September 30, 2012 with the Bob´s brand accounting for most of the franchise activity.
Operating income for the first nine months of 2013 from the franchise business was 23,8 million BRL, an increase of 16,1 percent from 20,5 million BRL in the year-ago period. The Company also recorded 3,0 million BRL gain on the sale of assets.
Financial Condition
As of September 30, 2013, Brazil Fast Food had 52,9 million BRL in cash and cash equivalents, up from 32,0 million BRL in cash and cash equivalents as of December 31, 2012. Cash and cash equivalents were affected by IRB´s extension of debt and new debt financing for its expansion. Net working capital was 42,1 million BRL as of September 30, 2013, as compared to 24,2 million BRL as of December 31, 2012. Total shareholders´ equity as of September 30, 2013 was 77,4 million BRL, compared to 61,5 million BRL at the end of fiscal 2012.
Business Outlook
«As discussed, we expect to face a more challenging operating environment over the next twelve months, due to reduced expectations for GDP growth, higher inflation and interest rates and a more fierce competitive environment, due to stepped up efforts of several large and well financed brands», said Bomeny. «The company plans to make appropriate levels of investment in store renovations of the Bob´s outlets and branding that could have the potential of suppressing profitability in the near term. Despite these uncertainties, we remain committed to our business plan to build a strong consumer franchise that is well suited to the tastes of the Brazilian market».
