BUSINESS

Pizza Hut, Taco Bell owner Yum's 3Q profit up 23 pct as China unit recovers, US demand grows

10/09/2012 04:41 EDT | Updated 12/09/2012 05:12 EST
LOUISVILLE, Ky. - The owner of the Taco Bell, Pizza Hut and KFC chains, Yum Brands Inc., said Tuesday that its fiscal third-quarter net income rose by 23 per cent on a turnaround in its fast-growing China division and higher demand in the U.S.

The Louisville, Kentucky, company raised its earnings guidance for the year. Shares rose nearly 4 per cent in after-market trading.

Operating profit in China rose 22 per cent, when adjusted for currency fluctuations. Its costs for ingredients and workers didn't rise as fast as it had in the second quarter, when operating profit dropped. The profit decline had been a rare event for Yum's key China division.

The company also upped its record pace of restaurant openings in China, opening 192 locations. It expects to open at least 750 stores this year, up from its prior forecast of at least 700 new restaurants.

In the U.S., operating profit rose 13 per cent in the quarter. A new, upscale menu at Taco Bell created by celebrity chef Lorena Garcia helped lift revenue in restaurants open at least a year 7 per cent for the Mexican chain.

The same figure, which is key for retailers because it excludes new and closing stores, rose 6 per cent at Pizza Hut and 4 per cent at KFC.

Operating profit in Yum's international division, which excludes China and India, rose 14 per cent when stripping out changes in currency values. Companies that do business overseas take a hit when the dollar increases against foreign currencies.

Overall, Yum reported net income of $471 million, or $1 per share, in the three months ended Sept. 8, up from $383 million, or 80 cents per share, a year ago.

Excluding one-time items, Yum's earnings were 99 cents per share for the quarter. Revenue rose 9 per cent to $3.57 billion from $3.27 billion.

Analysts polled by FactSet expected earnings of 97 cents per share on revenue of $3.66 billion.

The company now expects profit of at least $3.24 per share, excluding special items, from its prior forecast of at least $3.22 per share. Analysts polled by FactSet predict profit of $3.27 per share.

Shares rose $2.60, or 3.9 per cent, to $68.64 after earnings were released. In regular trading, shares closed down 90 cents at $66.04.