Pizza Hut operator Sapphire Foods Q1 profit tanks 68% amid weak demand

Sapphire Foods India Q1 Profit: Sapphire Foods India (SAPI.NS), the operator of Pizza Hut and KFC chains in India, reported a larger-than-expected decline in its first-quarter profit on Tuesday, citing increased costs and challenges in attracting budget-conscious customers.

The Yum Brands franchisee saw its consolidated net profit plummet 68 per cent to Rs 8.52 crore for the quarter ended June 30. This was significantly below analysts' average expectation of Rs 17.39 crore, according to LSEG data.

India's quick-service restaurants have been struggling to draw customers amid persistent inflation, which hovered around 5 per cent during the quarter. Fast-food franchises, in particular, are feeling the pinch as consumers, facing financial strain, cut back on dining out and ordering in.

Key raw material costs, including cheese, chicken, and tomatoes, have surged, exacerbating the financial strain on these businesses. Despite these challenges, Sapphire Foods' revenue from operations increased by 10 per cent to Rs 718 crore in the June quarter, though this fell short of analysts' estimate of Rs 723 crore.

The company reported a nearly 10 per cent rise in ingredient prices, which contributed to a 13 per cent increase in total expenses, reaching Rs 712 crore.

Other fast-food operators in India are also feeling the effects of weak demand. Westlife Foodworld, the operator of McDonald's in India, reported a sharp decline in first-quarter profit, while Restaurant Brands Asia (RESR.NS), which operates Burger King in India, recorded a narrower first-quarter loss due to promotional offers and discounts.

Rivals such as Devyani International, which also operates KFC outlets in India, and Domino's India-franchisee Jubilant FoodWorks have yet to report their quarterly results.

(With Reuters inputs.)