FAST NEWS: Yum China Soars as Quarterly Profit Doubles

The latest: Yum China Holdings, Inc. (YUMC.US; 9987.HK), operator of the KFC and Pizza Hut chains in China, on Tuesday reported its net profit rose 98% to $206 million in the third quarter, with adjusted profit up 117% to $208 million.

Looking up: The company captured growing demand for delivery and takeaway during the period, which offset subdued volume for dine-in service at its restaurants. As a result, its total revenues increased 5% year-over-year to $2.68 billion in the quarter, outpacing the 2% average growth in the Chinese restaurant industry.

Take Note: CFO Andy Yang said he expected the Covid-19 pandemic to create uncertainty in the fourth quarter, with the situation in October more severe than September. That, coupled with downward pressure on China’s economy, is leading to cautious consumer behavior that will likely have a negative impact Yum China’s revenue.

Digging Deeper: Yum China is the China master franchisee for U.S. fast food giant Yum Brands Inc. (YUM.US), owner of the KFC and Pizza Hut brands. The company’s revenue rebounded more than 20% last year as the country emerged from a difficult first year of the pandemic in 2020. But the company’s operations have been affected this year by strict measures to control the spread of the highly contagious Omicron Covid variant in many places, resulting in a 4.2% drop in first-half revenue to $4.8 billion and a 55.5% drop in net profit to $183 million. A return to relative stability in July and August, coupled with cost structure adjustments and improved efficiencies, helped the company get its business back on track in the third quarter.

Market Reaction: Yum China’s Hong Kong shares rose sharply on Wednesday, closing up 15.3% to HK$395 at the midday break. The stock now trades at the higher end of its 52-week price range.

Translation by Jony Ho

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