Jollibee swings to profitability, moves to cut debt

JOLLIBEE Foods Corp. (JFC) generated P153 million in net attributable income despite lower sales in the first quarter, it said on Wednesday, as it bounced back from the P1.68-billion loss recorded in the same period last year.

The fast-food giant recorded a 12% revenue fall to P34.68 billion from P39.43 billion. It finished the quarter with an operating income of P1.49 billion, a reversal of last year’s P1.17-billion loss.

“Our profit and cash flows recovered strongly versus a year ago reflecting the successful execution of our business transformation program,” Jollibee Chief Executive Officer Ernesto Tanmantiong said in a statement on Wednesday.

The company launched a business transformation program in May last year to rationalize the company’s operations, which resulted in the permanent closure of 486 nonprofitable stores worldwide and four commissaries in the Philippines on top of other cost-saving initiatives.

Jollibee also said it implemented selling price adjustments in the fourth quarter last year and in the first quarter this year to offset the impact of higher inflation.

System-wide sales for the quarter went down by 13.4% to P47.78 billion from P55.15 million year on year.

“While we still face significant challenges in the Philippines due to continued restrictions related to the pandemic, our Philippine business provided the most profit contribution among all our regions in the world,” Mr. Tanmantiong said.

The company’s international business accounted for 41.1% of the first-quarter’s global system-wide sales for the quarter, while sales at home contributed 58.9%.

However, sales from the Philippines declined by 21.3%, while sales from the company’s international business improved by 1.3%.

“In the month of March 2021, our sales in China, North America (Philippine brands), EMEAA (Europe, Middle East and Asia) and SuperFoods mainly in Vietnam were already equal to or slightly higher than those in March 2019,” Mr. Tanmantiong added.

Global same-store sales in the January-to-March period decreased by 14.7%, with same-store sales at home declining by 26.1% as businesses abroad improved by 7.5%.

“Lower sales per store in the Philippines were caused by continued high level of restrictions to control the coronavirus [disease 2019] (COVID-19) pandemic particularly in Metro Manila and nearby provinces,” Jollibee said.

The company permanently closed 76 stores during the January-to-March period: 18 stores were shuttered in the Philippines and 58 abroad.

Despite this, it launched 19 new stores in the Philippines in the first quarter. It also added 12 new stores in China, eight in North America, and one in the EMEAA region.

In a separate statement, Jollibee said it is planning to issue preferred shares and is eyeing to buy back up to $250 million of its US-dollar perpetual bonds via a cash tender offer within this year.

The issuance of the peso preferred shares is still subject to the approval of the company’s shareholders and the approval of the Securities and Exchange Commission. 

“JFC’s objective in this plan is to restructure its financial obligations in order to strengthen its balance sheet, spread the maturity of its financial obligations and reduce its foreign exchange risks,” the company said. 

“This is also part of its action steps to reduce its debt and financing cost as its businesses in different parts of the world recover from the severe impact of the pandemic,” it added.

Jollibee said it will apply for the shelf registration of up to P20 billion cumulative, non-voting, non-participating perpetual preferred shares this year.

It will be sourced from a reclassification of existing authorized and unissued common shares. The company said this will not adjust the total number of its authorized shares in its equity and neither will it affect its current cash dividend policy and implementation.

The first issuance will consist of eight million preferred shares to be issued this year worth P8 billion, with an oversubscription option of four million preferred shares worth P4 billion.

It said the initial tranche will be issued in up to two subseries “and may have [stepped] up dividend rates if they are not redeemed within three years or five years.”

Aside from buying back some of its US-dollar perpetual bonds, the company said it is also eyeing to reduce other financial obligations through bank loans this year.

On Wednesday, Jollibee shares at the local bourse shaved off 2.63% or P4.60 to close at P170.40 each. — Keren Concepcion G. Valmonte