Jollibee to hike capital spending by 10% annually

MANILA, Philippines - Fastfood giant Jollibee Foods Corp. (JFC) is increasing its capital spending and branch network by 10 percent annually in the next five years in line with the target of doubling its profits in the long term.

The two-fold surge in net income in the next five-years will be driven by increasing sales of existing branches and new stores here and abroad, an executive said.

“Usually it will be a 10-percent growth every year,” JFC chief finance officer Ysmael V. Baysa said in an interview, when asked about the annual expansion program.

Baysa said capital spending will continuously grow by a tenth on a compounding basis.

For 2014, JFC allotted P6.3 billion in capital expenditures to open 300 new stores and renovate existing branches, both in the Philippines and abroad. The target is to start operations of 200 new stores in the Philippines and 100 new branches overseas.

At the end of the five-year expansion program in 2019, the fastfood giant will likely reach around 4,800 branches and close to P10 billion in capital expenditures.

JFC operates the largest fastfood service network in the Philippines with 2,244 branches composed of 839 Jollibee branches, 406 Chowking, 207 Greenwich, 298 Red Ribbon, 456 Mang Inasal and 38 Burger King.

The foreign operations of JFC is composed of 589 stores: Yonghe King with 311 stores, Hong Zhuang Yuan with 43 and San Pin Wang with 44, all in China; 111 Jollibee, 31 Red Ribbon, 46 Chowking and three Jinja Bar in the US, Southeast Asia and the Middle East. It also has a 50-percent stake in Highlands Coffee branches in the Philippines and Vietnam; Pho 24 outlets in Vietnam, Indonesia, the Philippines and Japan; and Sabu stores in China.

Doubling the net income “is a combination of same-store sales growth and the new store expansion. You have to build new stores,” Baysa said.

JFC plans to double its net income in five years through expansion program in China and the US. It also targets to source half of its sales from the overseas business from the current 20 percent.

Net income of JFC jumped nearly a quarter to P4.64 billion in 2013 from P3.72 billion in 2012, marking the fastest earnings growth in seven years. In the first half, net income attributable to equity holders of the parent firm improved 17.2 percent to P2.46 billion from P2.1 billion a year ago amid strong sales both in new and existing stores.

Operations of the JFC Group yesterday returned to normalcy. Although some outlets operated on a limited menu, JFC ensured the availability three most popular and bestselling Chickenjoy, Jolly Spaghetti and Yumburger.

Constraints in the sales order taking due to a new information technology system have prompted the fastfood giant to close 72 several stores across its different brands.