Inflation takes bite out of Restaurant Brands’ profit

Restaurant Brands reported a lift in sales locally, but inflation ate into its profits. Graphic / NZME

Multinational fast-food operator Restaurant Brands said inflation impacted its full-year net profit despite lifting sales revenue.

Restaurant Brands, which owns KFC, Pizza Hut and Taco Bell in New Zealand, Australia and two states in the US, reported a 38 per cent drop in net profit to $32.1 million due to “high inflationary times”.

Sales revenue in New Zealand rose 14.8 per cent to $529.2m.

NZ chief executive Russel Creedy said its results were severely impacted by inflation and Covid-19.

“Inflation had a substantial impact on margins with ingredient and labour input costs rising significantly and well above the level of CPI [consumers price index],” Creedy said.

He said isolation requirements for Covid-19 and ongoing tightness in the New Zealand labour market had led to lower trading hours across all stores.

Creedy attributed the rise in revenue largely to strong sales in the KFC brand, along with growing store numbers in the KFC and Taco Bell networks.

“The New Zealand KFC and Pizza Hut businesses both delivered some of the strongest sales in their respective brands’ histories,” he said.

Russel Creedy, group chief executive of Restaurant Brands. Photo / Dean Purcell

He added that despite lower store numbers, Carl’s Jr sales were up, while Taco Bell sales doubled in 2022 on the previous year. The company has also launched an online store for Taco Bell.

Three more Taco Bell outlets were opened in the past year - in Wellington, Auckland and Christchurch Airport.

Creedy said an extended lockdown in the major Auckland region in 2021 resulted in lost sales of approximately $26m.

The company still reported a 16 per cent jump in global sales revenue, coming in at $1.2 billion across its global divisions.

Creedy said the company’s total revenue was up only $170.8m on the previous year because of reduced NZ sales and the opening of 17 new stores opened in the last year.

“Sales growth was assisted by a significant turnaround in the New Zealand business, and a strong result in the Hawaii division,” he said.

Earnings before interest, tax, depreciation and amortisation (ebitda) for NZ operations was up 7.4 per cent from the previous year at $89.5m.

Ebitda margins reduced from 16.2 per cent to 14.5 per cent across global operations “due to continued cost pressures across all divisions”, Creedy said.

Creedy said directors have declared a fully imputed final dividend of $0.16 cents per share payable on April 20 to all shareholders on the register on April 6, 2023.

Restaurant Brands’ store numbers at the end of December 2022 totalled 376, comprising 143 in New Zealand, 83 stores in Australia, 75 in Hawaii and 75 stores in California.

Creedy, who leaves the firm next month, was paid a special one-time award of $1.3m on retirement on top of his annual salary of $1.013m and short-term incentive of $616,000.

Restaurant Brands shares, which are 88.7 per cent held by Mexican investor Finaccess Capital, gained slightly on the result and recently traded at $5.95. The stock has more than halved over the past 12 months.