Brazil Fast Food's Q2 net income down to about 300,000 reais, from about 400,000 a year ago, but revenue up 13% to 47.4M reais and system-wide sales up 15.1% to 173.4M
RIO DE JANEIRO
August 17, 2010
– Brazil Fast Food Corp. (OTC Bulletin Board: BOBS) ("Brazil Fast Food", or the "the Company") the second largest restaurant chain with 735 points of sale, operating in Brazil under the Bob's brand, KFC and Pizza Hut São Paulo as franchisee of Yum! Brands, and Doggis as franchisee of GED, today announced financial results for the second quarter ended on June 30, 2010.
Second Quarter 2010 Highlights
* System-wide sales totaled R$ 173.4 million, up 15.1% from the second quarter 2009
* Revenue totaled R$ 47.4 million, up 13.0% from the second quarter 2009
* EBITDA was R$ 2.8 million, up 40.2% from the second quarter 2009
* Operating income was R$1.4 million, down 17.2% from the second quarter 2009
* Net income was R$0.3 million, or R$0.03 per basic and diluted share
* Declared dividend of R$0.25 per share
"In a seasonally weak quarter we delivered healthy year-over-year revenue growth, despite a more subdued economic environment in Brazil. All of our brands delivered positive contribution to revenue growth in the period as we continued to expand our network footprint. We are particularly pleased with the results contributed by our Pizza Hut brand, which delivered 18.9% growth in revenue as well as 12.7% growth in same store sales in the period" said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. "In addition, during the quarter our Board approved a R$0.25 per share dividend distribution, underlying our commitment to creating shareholder value and our confidence in the outlook for our business."
Second Quarter 2010 Results
System-wide sales grew 15.1% in the second quarter to R$ 173.4 million, driven by an increase in owned stores as well as franchised points of sale.
Total revenue for the second quarter 2010 increased by 13.0% to R$47.4 million from R$42.0 million in the second quarter 2009. Revenue growth was driven by the continued expansion of the Company's Bob's, Pizza Hut and KFC restaurant network as well as the launch of Doggis in the fourth quarter of 2009. The Company ended the second quarter of 2010 with 735 points of sale, compared to 678 in the comparable period in 2009.
Net revenue for company-owned and operated outlets was up 5.4% to R$35.2 million over the same period in 2009 due to the launch of Doggis brand in the fourth quarter of 2009, implementation of delivery sales at KFC as well as increase in number of Pizza Hut stores to 16 in the second quarter of 2010, compared to 14 in the second quarter of 2009. In the same period, the number of Bob's stores that are owned and operated by the Company was reduced to 55, compared to 61 in the second quarter of 2009, as the Company decided to focus its efforts on highly profitable stores. Same own-store sales, which measure the performance of stores open for more than a year, were up 3.6% year over year for Bob's, down 2.7% for KFC and up 12.7% for Pizza Hut.
Net revenue from franchisees increased 22.6% year-over-year to R$6.1 million driven by an increase in number of franchised retail outlets to 650, up from 591 in the same period a year ago. Other revenue and income totaled R$6.2 million.
Operating expenses were up 14.2% to R$46.0 million driven by higher owned-store costs associated with increases in store rent, wages, depreciation charges associated with store equipment modernization, higher franchisee costs associated with the growth in the number of franchised stores, higher contracted service costs driven by launch of delivery service at KFC stores, and higher administrative expenses to support the overall growth of the business.
Operating income for the second quarter of 2010 was R$1.4 million, compared to an operating income of R$1.7 million in the second quarter of 2009. Operating margin in the second quarter of 2010 was 2.9% compared to 4.0% in the comparable period of 2009.
EBITDA in the second quarter of 2010 was up 40.2% to R$2.8 million, compared to R$2.0 million in the second quarter of 2009. EBITDA margin was 6.0% in the second quarter of 2010, compared to 4.8% in the comparable period of 2009. A table reconciling EBITDA to its nearest GAAP equivalent is provided elsewhere in this press release.
The reduction in interest expense is attributable to lower interest rates as well as a reduction in the Company's debt.
Net income for the second quarter of 2010 was R$0.3 million or R$0.03 per basic and diluted share, compared to net income and earnings per share of R$0.4 million and R$0.04 in the same period of 2009, respectively.
Six Months 2010 Results
For the six months ended in June 30, 2010, net revenue was R$97.5 million, up 13.2% from R$86.1 million in the comparable period of 2009. Operating income was R$3.7 million, up 4.8% from R$3.5 million in the comparable period in 2009. Operating margin was 3.8% for the six months ended June 30, 2010 compared to 4.1% in the comparable period in 2009. Net Income for the six months ended June 30, 2010 was $2.1 million, up 44.9% from $1.5 million in the comparable period in 2009. Basic and diluted earnings per share were R$0.26 for the six months ended in June 30, 2010 compared to R$0.18 for six months ended in June of 2008.
As of the balance sheet date on June 30, 2010 the Company had R$15.4 million in cash. Shareholders' equity was R$23.6 million at the end of the second quarter of 2010, compared to R$25.1 million at the end of 2009.
Despite a more subdued macro-economic environment in the second quarter of 2010, the outlook for the Brazilian economy remains positive. Analysts expect Gross Domestic Product in Brazil to grow 6.8% in 2010 and 5.1% in 2011. As a result the Company maintains its goal
to end 2010 with 830 points of sale up from 711 in 2009. Looking beyond the short-term horizon, over the next five to seven years, the preparations to host the FIFA World Cup and the Olympics in Brazil will offer excellent opportunities for the Company to continue its steady, profitable growth.
"We will continue our focus on growing our existing brands organically, while at the same time looking for opportunities to acquire or develop new brands to strengthen our business," said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. "On the operating front we are committed to improve our managerial procedures to increase our efficiency and effectiveness and expand our margins while enhancing the competitiveness of our brands," concluded Mr. Bomeny.
About Brazil Fast Food Corp.
Brazil Fast Food Corp. 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 Ltda., a subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participações Ltda (formerly 22N Participações Ltda.). The "KFC" trade name is used by CFK Comércio de Alimentos Ltda. (formerly Clematis Indústria e Comércio de alimentos e Participações Ltda.), also a holding company subsidiary. The "Pizza Hut" trade name is used by Internacional Restaurantes do Brasil ("IRB"), also a 60% subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participações Ltda. Recently, the Company entered into an agreement with Grupo de Empresas Doggis S.A ("GED") 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.