KFC Malaysia sees fastest growth in 10 years

 

KFC Holdings (Malaysia) Bhd, the best performer on the nation’s benchmark stock index, said it will sustain the fastest sales growth in at least 10 years as demand for deep-fried chicken defies an economic slowdown.

“People still have to eat and we’re not running a posh restaurant,” chairman Muhammad Ali Hashim said. Sales at restaurants open more than a year jumped 16 per cent in 2008, double the rate of 2007 and three times faster than the global average for KFC outlets, he added.

Muhammad is betting on expansion and new products to ride through an economic slowdown that threatens consumer spending. The company’s stock has gained 13 per cent this year, the second best-performing restaurant operator in Asia, outpacing McDonald’s Holdings Company (Japan), Ltd and the Philippines’ Jollibee Foods Corp.

“It’s the best growth in at least 10 years, they’ve done a lot of things right,” including KFC’s sustained expansion and the conversion of some branches into 24-hour restaurants, said Vincent Khoo, an analyst at Aseambbankers Malaysia Bhd.

“Obviously, there will be a slowdown next year, earnings from same-store growth could come off.”

Slowing Economic Growth

Malaysia last month cut interest rates for the first time since 2003 and announced a RM7 billion (US$1.9 billion) spending plan to bolster its economy. Finance Minister Datuk Seri Najib Razak last month said economic expansion would slow to an eight- year low of 3.5 per cent in 2009 amid the worst global financial crisis since the Great Depression.

“We’re worried about the slowdown, but my kids love the food and we go to KFC about twice a week,” said Jenny Goh, who has two kids, a 14-year-old daughter and 10 year old boy. She has no plans on cutting back on her visits to KFC restaurants.

Third-quarter profit jumped 20 per cent to RM31.5 million from a year earlier on sales that climbed 29 per cent to RM552.4 million. Net income for the nine-month period climbed 24 per cent to RM90.2 million. KFC reported a record RM104.3 million in profit in 2007.

The company is able to keep costs lower because it grows its own chickens and processes them, said Muhammad. “We still have tremendous room for expansion,” Muhammad said in an interview in Kuala Lumpur late yesterday. “We are in the right segment of the food business.” - Bloomberg