Release Date: May 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Restaurant Brands Asia Ltd (BOM:543248, Financial) achieved a 22% revenue growth for the year, reaching INR 1,760 crores in India.
- The company doubled its company-level EBITDA despite a tough environment, demonstrating strong profitability focus.
- Restaurant Brands Asia Ltd (BOM:543248) opened 75 new restaurants with a net restaurant growth of 64, showing robust expansion.
- The company maintained positive same-store sales growth (SSSG) every quarter, ending the year at 2.9% SSSG.
- Digital initiatives, including table ordering and kiosk ordering, are being implemented in around 100 restaurants, enhancing customer experience.
Negative Points
- The company faced significant headwinds in Indonesia due to geopolitical issues, impacting sales and delaying cash breakeven to FY25.
- Despite positive traffic growth, the company’s SSSG was below initial guidance of 8-10%, ending at 2.9%.
- Restaurant-level EBITDA in India saw a decline in Q4, attributed to seasonality and increased marketing expenses.
- The company had to close 26 non-performing restaurants in Indonesia, indicating challenges in that market.
- There is a notable drop in Average Daily Sales (ADS) from INR 126 million in September to INR 105 million in the latest quarter, reflecting potential demand issues.
Q & A Highlights
Q: What measures are you taking to improve profitability in the delivery channel?
A: We are focusing on product mix and have recently taken price hikes on our delivery offerings to ensure profitability while still offering great value to our guests. (Kapil Grover, Chief Marketing Officer - India)
Q: How should we look forward to profitability now that you are focusing more on it?
A: Our focus will continue to be on generating cash and improving company-level EBITDA. The difference between pre- and post-India margins will remain due to rentals, but we aim to improve overall profitability. (Sumit Zaveri, Group Chief Financial Officer, Chief Business Officer)
Q: What is the current demand environment, and are you witnessing the usual increase in average sales?
A: We have been positive on traffic and sales throughout the year and continue to see positive trends into the next quarter. We are cautious but optimistic about maintaining this growth. (Rajeev Varman, Group Chief Executive Officer, Whole-Time Director)
Q: What is the margin difference between delivery and dining channels post-price hike?
A: We do not break up the P&L for competitive reasons, but we are optimizing delivery traffic with profitable margins through product mix and pricing strategies. (Rajeev Varman, Group Chief Executive Officer, Whole-Time Director)
Q: Do you foresee the addition of 80 stores per annum continuing in FY25?
A: We are targeting 700 restaurants by FY27 and will continue to grow responsibly. If moderation is needed, we will adjust accordingly. (Rajeev Varman, Group Chief Executive Officer, Whole-Time Director)
Q: Will you need to raise capital to pursue growth?
A: We plan to use internal accruals and cash on the balance sheet for growth. If needed, we may consider short-term debt but have no plans for a capital raise at the moment. (Sumit Zaveri, Group Chief Financial Officer, Chief Business Officer)
Q: What has led to the major drop in occupancy and other expenses in Indonesia this quarter?
A: The drop is due to the closure of 26 non-performing restaurants and realignment of leases, which has positively impacted profitability. (Sumit Zaveri, Group Chief Financial Officer, Chief Business Officer)
Q: Are there any more store closures expected in Indonesia?
A: No further closures are planned. We have taken a hard look and believe the current scale of business is appropriate. (Rajeev Varman, Group Chief Executive Officer, Whole-Time Director)
Q: Why has the ADS in India fallen significantly, and how do you see this going ahead?
A: The drop is due to seasonality. We expect improvements in the coming months as seasonality kicks in with school holidays and mall events. (Kapil Grover, Chief Marketing Officer - India)
Q: Have you considered focusing on EBITDA margin improvement over store openings in India?
A: We consistently take feedback from investors and make decisions based on long-term planning. We have paused growth in Indonesia for this year to focus on profitability and will continue to make prudent decisions. (Rajeev Varman, Group Chief Executive Officer, Whole-Time Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
