Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sapphire Foods India Ltd (BOM:543397, Financial) achieved a 10% increase in the number of restaurants, adding 91 new locations to reach a total of 963.
- The company reported an 11% growth in sales for the year, demonstrating resilience in a challenging market environment.
- Sapphire Foods India Ltd was recognized as the number one QSR in India for the second consecutive year on the Dow Jones Sustainability Index.
- The Sri Lanka segment experienced a strong turnaround with a 14% revenue growth in LKR terms and improved restaurant EBITDA margins of 15.4%.
- The company was acknowledged as the world's top 4 Pizza Hut franchisee and the world's best KFC franchisee, highlighting its strong operational capabilities.
Negative Points
- Adjusted EBITDA for the year declined by 4%, indicating challenges in maintaining profitability.
- Pizza Hut's performance declined in the fourth quarter, resulting in a negative 1% SSSG for the year.
- The company faced a decline in consolidated restaurant EBITDA by 1% year-on-year, with margins dropping to 12%.
- There was a reported 7% decline in adjusted EBITDA for the fourth quarter, reflecting operational challenges.
- The company experienced a drop in gross margins, particularly in the Pizza Hut segment, due to increased value and promotional offerings.
Q & A Highlights
Q: Can you provide some insights into the broader demand scenario, specifically for KFC, and whether SSSG will turn positive in the first half of FY26?
A: The demand situation remains neutral, with no significant improvement or deterioration over the last few quarters. We expect a more stable SSSG moving forward, although it is on the back of previously low SSSG quarters. (Sanjay Purohit, Group CEO)
Q: Regarding Pizza Hut, what is the visibility on achieving double-digit margins, and how should we think about margins in the medium term?
A: Achieving double-digit margins is linked to reaching a 55,000 ADS threshold. We expect this to take longer than initially anticipated, with margins likely remaining in the low single-digit range in the near term. (Vijay Jain, CFO)
Q: What is the guidance for network additions for KFC and Pizza Hut given the current environment?
A: We maintain our guidance of adding 60 to 80 KFC stores annually. For Pizza Hut, we will be cautious, with additions not exceeding 20 to 25 stores per year. This guidance is for net additions. (Vijay Jain, CFO)
Q: What are the challenges faced by KFC, and what factors are impacting its recovery?
A: The challenges are a combination of macroeconomic factors and competitive intensity. We expect discretionary spending to increase as inflation reduces, which should help drive demand improvement. (Sanjay Purohit, Group CEO)
Q: Can you elaborate on the strategy for resolving the differences in opinion regarding Pizza Hut's marketing strategy?
A: The difference stems from whether mass media advertising increases transactions. We are investing in Tamil Nadu to showcase differential performance, which should demonstrate the effectiveness of this strategy. (Sanjay Purohit, Group CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
