Yum! Brands income up 7% on international strength

by Staff
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LOUISVILLE, KY. — Strong results in China and other international markets helped contribute to a 7% increase in income during the third quarter at Yum! Brands, Inc.

For the quarter ended Sept. 3, the company had income of $383 million, equal to 82c per share on the common stock, which compared with income of $357 million, or 76c per share, during the same quarter of the previous year. Total revenue for the quarter was $3,274 million, up 14% from $2,862 million.

“I’m pleased to report e.p.s. growth of 13% in the third quarter, excluding special items,” said David C. Novak, chairman and chief executive officer. “As a result of strong performance in China and other emerging markets, we confidently reaffirm our full-year e.p.s. growth forecast of at least 12%, which will make 2011 the 10th consecutive year we exceed our annual target of at least 10% e.p.s. growth.

“In China, operating profit grew 7% for the quarter as system sales jumped 29%, prior to foreign currency translation. Likewise, year-to-date operating profit increased 15% with system sales up 27%. This tremendous sales growth, combined with our expectation to open a record 600 new restaurants this year, gives us even more confidence our China business model is as strong as ever. At Yum! Restaurants International (Y.R.I.), operating profit increased 3% in the quarter and 7% year-to-date, prior to foreign currency translation. We are extremely excited about our progress in emerging markets like India, Africa and Russia, as these businesses will contribute meaningful profit growth to Yum! in the coming years. Importantly, we expect to open about 900 new restaurants this year at Y.R.I. The robust new unit growth in China and Y.R.I. not only contributes to this year’s earnings, but positions Yum! for strong growth in 2012 as well.

“Our impressive international growth was offset by a 16% decline in U.S. profits. We’re obviously disappointed in our U.S. performance. However, we have aggressively developed a pipeline of category leading innovation and have productivity initiatives planned to dramatically improve sales and profit performance in 2012. Looking ahead, the strength of our international brands and outstanding new unit development, combined with aggressive U.S. initiatives, make us confident we will continue our track record of double-digit earnings growth next year and beyond.”

During the quarter, operating profit was up 13% in the China division with revenue up 35%. The international division had a 15% increase in operating profit and a 14% increase in revenue. In comparison, the United States segment had a 16% decrease in operating profit and a 10% decrease in total revenue.

For the nine months ended Sept. 3, the company as a whole had income of $963 million, or $2.05 per share, up 9% from $884 million, or $1.87 per share, during the same period of the previous year. Revenue for the quarter was $8,515 million, up 9% from $7,781 million.

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