Brazil Fast Food: Announces Q4 and FY 2011 Results

Rio de Janeiro / BR. (bffc) Brazil Fast Food Corporation (BFFC), the second largest fast-food restaurant chain in Brazil with 880 points of sale, operating under (i) the Bob´s brand, (ii) KFC and Pizza Hut São Paulo as franchisee of Yum! Brands and (iii) Doggis as franchisee of Gastronomia + Negocios S.A. (former Grupo de Empresas Doggis S.A.), announced financial results for the fourth quarter and fiscal year ended December 31, 2011.

Fiscal Year 2011 Highlights

  • System-wide sales totalled 946,3 million BRL, up 18,9 percent from 2010
  • Revenue totalled 226,8 million BRL, up 9,9 percent from 2010
  • Points of sale totalled 880 at the end of 2011 (2010: 789)
  • Ebitda was 21,9 million BRL compared to 26,1 million BRL in 2010
  • Operating income was 16,4 million BRL compared to 19,2 million BRL in 2010
  • Net income was 8,9 million BRL or 1,09 BRL per basic and diluted share

    Fourth Quarter 2011 Highlights

  • System-wide sales totalled 277,8 million BRL, up 18,5 percent from Q4/2010
  • Revenue totalled 60,5 million BRL, up 7,5 percent from Q4/2010
  • Ebitda was 2,8 million BRL compared to 8,1 million BRL in Q4/2010
  • Operating income was 2,0 million BRL (Q4/2010: 6,1 million BRL)
  • Net income was 1,9 million BRL or 0,23 BRL per basic and diluted share

    «We reported strong revenue growth for the fourth quarter and fiscal year 2011 as we focused on our profitable company-owned stores and expansion of our industry leading brands through new franchise relationships in favourable markets across Brazil», said Ricardo Bomeny, President and CEO of Brazil Fast Food. «In 2011, we enhanced our customer service, increased the number of seats available and promoted KFC´s Buckets, resulting in growth in guest counts and sales at our KFC stores. We also inaugurated four new stores in Rio de Janeiro and São Paulo. In addition, we implemented changes in the menu mix, communication and operational standards at our Pizza Hut stores including a pilot project ‘Pizza Hut Express with PHD platform’ to reduce overall investment and operational costs of shopping malls stores. In 2012, we will continue to achieve operational excellence and expand our presence in Brazil».

    Fourth Quarter 2011 Results

    System-wide sales grew 18,5 percent in the fourth quarter to 277,8 million BRL, driven by an increase in the number of franchised points of sale as well as higher sales from company-owned stores.

    Total revenue for the fourth quarter 2011 increased by 7,5 percent to 60,5 million BRL compared to 56,2 million BRL in the fourth quarter 2010. Revenue growth was primarily driven by the continued expansion of Brazil Fast Food´s franchisee network as well as gains from economies of scale and the associated increase in the Company´s purchasing power.

    Net revenue for company-owned and operated outlets was up 8,4 percent year-over-year to 45,8 million BRL in the fourth quarter of 2011, reflecting an increase in net revenues across the Company´s Bob´s, KFC and Pizza Hut brands, offset somewhat by a decrease in net revenues for the Company´s Doggis brand. At the end of 2011, the Company had no own-operated Doggis´ stores.

    Net revenue from franchisees increased 27,0 percent year-over-year to 11,0 million BRL, driven primarily by an increase in number of franchised retail outlets to 813, up from 712 in the same period a year ago. Other revenue and income totalled 3,7 million BRL in the fourth quarter of 2011.

    Operating expenses grew 16,6 percent to 58,5 million BRL in the fourth quarter of 2011, primarily due to higher store costs and expenses and the significant decline in the net result of assets sold and impaired, which was a loss of 1,9 million BRL in the fourth quarter of 2011, as compared to a net gain of 1,4 million BRL in the prior year period. As a percentage of revenue, operating costs increased from 89,2 percent of total revenue in the fourth quarter of 2010 to 96,7 percent of total revenue in the fourth quarter of 2011, mainly attributable to variance in asset sales.

    Operating income for the fourth quarter of 2011 was 2,0 million BRL, compared to 6,1 million BRL in the fourth quarter of 2010, primarily due to the non-recurring items noted above. Operating margin in the fourth quarter of 2011 was 3,3 percent compared to 10,8 percent in the same period of 2010.

    Ebitda in the fourth quarter of 2011 was 2,8 million BRL, compared to 8,1 million BRL in the fourth quarter of 2010. Ebitda margin was 4,7 percent in the fourth quarter of 2011, compared to 14,4 percent in the comparable period of 2010.

    Interest income was 0,7 million BRL in the fourth quarter of 2011, compared to interest expense of 0,3 million BRL in the fourth quarter of 2010. The higher interest income is attributable to lower debt and improved working capital.

    Net income for the fourth quarter of 2011 was 1,9 million BRL or 0,23 BRL per basic and diluted share, compared to net income of 4,2 million BRL or 0,52 BRL per basic and diluted share in the same period of 2010.

    Fiscal Year 2011 Results

    For the twelve months ended in December 31, 2011, net revenue was 226,8 million BRL, up 9,9 percent from 206,3 million BRL in 2010. Same own-store sales, which measure the performance of stores open for more than a year, were up 5,7 percent for Bob´s, 8,0 percent for KFC and 15,7 percent for Pizza Hut for the twelve months ended on December 31, 2011, compared to the same period in 2010, driven by the Company´s successful marketing campaigns. Operating income for fiscal year 2011 was 16,4 million BRL, down 14,5 percent from 19,2 million BRL in 2010. Operating margin was 7,2 percent for 2011 compared to 9,3 percent in 2010. Ebitda for 2011 was 21,9 million BRL compared to 26,1 million BRL in 2010. Net income for 2011 was 8,9 million BRL compared to net income of 11,6 million BRL in 2010. Basic and diluted net income per share was 1,09 BRL for 2011 compared to basic and diluted loss per share of 1,43 BRL for 2010.

    Financial Condition

    As of December 31, 2011 the Company had 21,4 million BRL in cash, up from 16,7 million BRL as of December 31, 2010. Working capital was 16,9 million BRL, as compared to a negative 6,4 million BRL as of the end of 2010. Total shareholders´ equity was 41,9 million BRL at the end of the fourth quarter of 2011, compared to 33,2 million BRL at the end of 2010.

    Subsequent Events

    On May 03, 2012, Brazil Fast Food and Yum! Restaurants International (YRI) announced the satisfactory completion of the first phase of their efforts to expand the KFC brand in Brazil, pursuant to which the Company was engaged to provide franchise support services to KFC franchisees and to develop the KFC brand, upon its re-entry into Brazil. Brazil Fast Food and YRI will remain close partners as the Company will continue to contribute to the development of YRI´s brands as a KFC franchisee focused in Rio de Janeiro and São Paulo and as a Pizza Hut franchisee with operations in the São Paulo metropolitan area.

    Business Outlook

    Over the last few years, Brazil Fast Food has developed a multi-brand strategy through agreements with leading brands to expand in Brazil the KFC and Pizza Hut business through own stores and the Doggis business through franchises. At the end of year 2012, the Company expects Bobs´ brand to reach a total of 1’000 points of sale, a 20,5 percent increase from 830 points of sale at the end of 2011.

    «In 2012, we aim to consolidate our market position and improve our consumer perception. We are working towards increasing sales and guest count at our KFC stores by improving our operations and promoting KFC´s Buckets at dinner party and weekends. Moreover, our Pizza Hut stores and delivery operations outperformed this year and in 2012, we plan to enhance our own-operated Pizza Hut stores results, consolidate ‘Pizza Hut Express with PHD platform’ and expand our Pizza Hut stores», said Bomeny.

    «We are expanding our Doggis´ brand exclusively through franchisees. We plan to initiate a pilot project to reduce overall investment and operational costs by simplifying the store layout and product offering. Hot dogs are popular among all social classes in Brazil and with this pilot project, we will be able to expand the brand by setting up small stores in high pedestrian areas. Our revenue growth in 2012 will largely be driven by our expansion of Pizza Hut chain in Brazil through own-operated stores, improvement of our KFC store margins and our efforts to expand the number of our franchisees and franchised retail outlets under the Bob´s and Doggis brands», concluded Bomeny.

    About Brazil Fast Food Corporation

    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 Comércio de Alimentos, a subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participa?§ões (formerly 22N Participa?§ões). The «KFC» trade name is used by CFK Comércio de Alimentos (formerly Clematis Indústria e Comércio de alimentos e Participa?§ões), 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 Participa?§ões. Recently, Company entered into an agreement with Grupo de Empresas Doggis SA 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.