Restaurant Brands half-year profit plunges to $2.2m

The operator of KFC, Carl’s Jr, Pizza Hut and Taco Bell says its first-half result was significantly impacted by rising ingredient and wage costs on the back of global inflationary pressures.

In the six months to June 30, Restaurant Brands posted a profit after tax of $2.2 million, compared with $15.3m in the same period last year.

Sales were up a record $55.3m or 9.4% to $640m.

While sales had grown across its four markets including Australia, Hawaii and California, Restaurant Brands chairman, José Parés said the group continued to face global inflationary pressures, particularly rising ingredient and wage costs.

“Performance in the first half of the year was impacted significantly due to continued input cost increases in the New Zealand business which exceeded earlier expectations of scope and quantum, lower than expected sales growth in California and Hawaii; and higher interest rates leading to increased funding costs,” Parés said.

Staffing shortages meant many stores had reduced opening hours or operated with reduced capacity, he said.

Parés said a strategic programme of price increases and cost control measures” had been implemented to relieve margin pressures.

However, the company had not been able to raise prices to fully offset the cost increases without significantly affecting sales.

“It is critical that price increases are made at a pace and level that is cognisant of sales volumes, customer loyalty and our relativity to competitors. We remain firmly focused on these factors as we seek improved profitability in the second half of 2023.”

Despite the inflationary impacts on performance, Parés said Restaurant Brands remained well-positioned to deliver on long-term shareholder value.

Restaurant Brands expects its profit after tax to between $12m to 16m for the full year.

The group said it continued to closely monitor the trading and economic environment across its markets, including weighing up its price increases against macroeconomic factors and transaction volumes.

“We continue to fine-tune operations across the business to ensure our systems and processes are fit for purpose to meet the challenges of the volatile economic environment and our growing store network. This includes improvements to several of our internal systems, which will streamline and enhance end-to-end processes over contracting, procurement, pricing, hiring and inventory management, improving margin controls.

“Additionally, the alignment of environmental, social, and corporate strategies continues to see increased efforts on general waste diversion, energy efficiency initiatives, and food waste reduction programs with a positive result.”

Restaurant Brands has opened 10 new stores in the past 12 months.