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Sapphire Foods India Limited Q1 FY25 Earnings Call Summary
Earnings Call Overview • Date: August 6, 2024 • Call Date: July 30, 2024 • Participants: Group CEO Sanjay Purohit, CFO Vijay Jain
Financial Performance Highlights • Consolidated Restaurant Sales: Increased by 10% to INR 717 crores • EBITDA: Rose by 1% to INR 124 crores • Store Openings: 13 KFC and 1 Pizza Hut, totaling 886 locations • KFC Revenue Growth: 11% increase, but same-store sales growth (SSSG) declined by 6% • Pizza Hut Revenue: 3% increase, aided by new product launch and marketing
Regional Performance • Sri Lanka Business: • 11% SSSG • Recognized as the most loved brand by LMD magazine • Revenue increased by 13% in LKR and 19% in INR
Strategic Focus • Emphasis on enhancing brand performance and expanding store count • Commitment to ESG initiatives, including an ESG report and Gold Certification for a KFC restaurant
Management Insights • KFC Dine-In Revenues: Decline attributed to industry trends; efforts to improve experience ongoing • Pizza Hut Expansion: Cautious approach based on SSSG and profitability metrics • Geopolitical Impact: Discussion on brand sentiment and performance of vegetarian vs. non-vegetarian segments
Market Challenges • Monthly Active Users: Increased to 1.5 million for KFC and Pizza Hut • Average Daily Sales (ADS): 12% decline noted; new stores impact overall ADS • Competitive Pricing: Concerns raised about market strategies affecting margins
Future Outlook • Management optimistic about SSSG improvements due to marketing initiatives • Acknowledgment of challenges in consumer spending and macroeconomic conditions • Focus on maintaining marketing efforts during downturns
Key Questions and Responses • Employment Growth and Demand: Broader metrics tracked; consumption lagging behind GDP growth • Impact of New Store Openings: New stores typically underperform initially • Sustainability of Margins: Prolonged negative SSSG could affect margins; current conditions stable • Shift in Consumer Behavior: Increased preference for delivery over dine-in
Conclusion • Positive outlook for future performance despite current market challenges • Alignment with Yum! on strategies for brand improvement before expanding store openings
Sapphire Foods India Limited Q4 FY24 Earnings Call Summary
Key Management and Overview • Date of Call: May 10, 2024 • Key Participants: Group CEO Sanjay Purohit, CFO Vijay Jain • Financial Performance: Discussion on Q4 and FY24 results
Financial Highlights • Revenue Growth: 37% increase since listing in December 2021 • EBITDA Growth: 92% rise since listing • Restaurant Count: Grew by 17% in FY24 • Sales Increase: 15% increase in sales, but adjusted PAT declined by 44% • Q4 Performance: • Consolidated restaurant sales: INR 630 crores (up 13%) • EBITDA: INR 110 crores (up 7%) • New KFC restaurants added: 23 (total 872)
Segment Performance • KFC: • Revenue growth: 18% • Highest annual restaurant EBITDA: 19.7% • Pizza Hut: • Revenue decline: 3% • Same-store sales growth (SSSG) decline: 15% • Negative restaurant EBITDA: -2.7% • Focus on product innovations (e.g., "Melts") and marketing efforts
Regional Insights • Sri Lanka: • Signs of recovery: 4% SSSG, 8% revenue growth in local currency • Profitability affected by operating cost inflation
Strategic Insights • Sales Trends: KFC improving sequentially; Pizza Hut recovering compared to last year • Competitive Landscape: • Growth driven by premium and luxury restaurants • KFC's scale provides competitive advantage • Pricing Strategy: Stable pricing and value offerings to drive transactions
Future Outlook • Expansion Plans: Cautious approach for Pizza Hut; focus on improving SSSG and ADS • CapEx: INR 385 crores, influenced by refurbishment and technology investments • Portfolio Correction: 3% to 5% correction involving closure of loss-making stores
Closing Remarks • Growth Aspirations: • 25% revenue growth • 30% EBITDA growth • Doubling store count over three years • Confidence in Trends: Positive outlook for revenue and EBITDA despite challenges in FY24.
Sapphire Foods India Limited Q3 FY24 Earnings Call Summary
Earnings Performance • Date of Call: February 9, 2024 • Consolidated Restaurant Sales: ₹664 crores (12% YoY increase) • EBITDA: ₹123 crores (5% growth) • New Restaurants Added: 36 (Total: 850) • KFC Performance: Strong despite QSR sector challenges; on track to double restaurant count by end of 2024.
Brand Performance • KFC vs. Pizza Hut: • KFC thriving; Pizza Hut struggling due to competition. • Medium-term strategy for Pizza Hut includes product innovation and increased marketing. • Operational improvements underway for faster delivery and better customer ratings.
Competitive Landscape • Cloud Kitchens: Acknowledged as a rising competitive factor for KFC. • Same-Store Sales Growth (SSSG): Decline noted; cost efficiency measures in place to maintain margins.
Stakeholder Alignment • Commitment to Improvement: All stakeholders aligned for Pizza Hut's turnaround. • Focus on Profitability: Emphasis on maintaining margins while investing in growth.
Expansion Strategy • KFC Expansion Goals: Aim to double from 550 to 1,100 restaurants in 3-4 years. • Pizza Hut Expansion: Slower due to performance challenges; reassessment of strategy based on metrics.
Strategic Importance of Brands • Pizza Hut: Key component of portfolio; opportunities in underserved areas. • KFC: Strong dine-in performance; stable gross margins despite challenges.
Market Trends • Pizza Consumption: Positive overall growth trend in India despite short-term fluctuations and competition. • Brand Trust: Established brands like Pizza Hut have advantages over cloud kitchens.
Conclusion • Management's Optimism: Confidence in recovery and growth potential through operational excellence and strategic initiatives.
Sapphire Foods India Limited Q2 FY24 Earnings Call Summary
Key Financial Highlights • Date of Call: November 2, 2023 • Consolidated Restaurant Sales: Increased by 14% to INR 641 crores • EBITDA: Rose by 13% to INR 117 crores • New Restaurants Opened: 36, totaling 814 locations • KFC Performance: • Restaurant EBITDA margin: 19.2% for Q2, 20% for H1 (highest ever for KFC Sapphire)
Challenges and Strategies • Pizza Hut Performance: • Negative same-store sales growth (SSSG): 20% • Overall brand sales decline: 6% • Challenges attributed to macroeconomic conditions and competition • Revitalization Initiatives: • Enhanced marketing and product innovation • Improved customer experience in dine-in and delivery • Implementation of Dragontail technology for optimized delivery
Future Outlook • Medium-Term Recovery for Pizza Hut: Confidence expressed despite current challenges • Sri Lanka Market: Positive revenue growth and restaurant EBITDA due to economic recovery • Dragontail Technology: Expected to improve delivery metrics over time
Store Strategy and Adjustments • Store Closures: Cautious approach to expansion; underperforming locations to be closed • Store Size Reduction: Gradual reduction to around 1,200 square feet to optimize operations • Omnichannel Strategy: Balancing dining, takeaway, and delivery services
Competitive Landscape • Focus on Brand Strengthening: Emphasis on improving own brand rather than direct competition • Customer Satisfaction: Prioritizing food quality over strict delivery times
Additional Insights • Investment in Dragontail: Operates on a per-transaction basis, minimal capital expenditure • Loyalty Rewards Program: Plans for future implementation • Market Conditions: Ongoing challenges in personal consumption and competitive pressures
Conclusion • Overall Performance: Strong financial results from KFC, ongoing challenges for Pizza Hut, and strategic adjustments planned for recovery. The call concluded with festive wishes for Diwali.
Sapphire Foods India Limited Q1 FY24 Earnings Call Summary
Key Highlights • Date of Call: August 2, 2023 • Participants: Group CEO Sanjay Purohit, CFO Vijay Jain • Financial Performance: • 20% growth in consolidated restaurant sales (INR 652 crores) • Improved gross margins due to reduced raw material inflation • 35 new restaurants opened, total now 778 • Consolidated EBITDA: INR 122 crores (18.8% margin) • Profit Before Tax (PBT): INR 33.6 crores (down 6% YoY) • KFC brand EBITDA margin: 20.8%
Brand Performance • Pizza Hut: • Decline in Average Daily Sales (ADS) from 62 to 51-52 • 12% revenue growth but challenges in performance improvement • Recognized as top franchisee globally by Yum! Brands • 50% year-on-year increase in delivery sales • Stable ADS around INR 50,000-52,000; Same Store Sales Growth (SSSG) decline noted
• KFC: • Strong revenue growth despite seasonal challenges • Focus on operational improvements and customer experience • New INR99 price point aimed at enhancing accessibility
Strategic Focus • Operational Excellence: • Emphasis on product innovation and advertising investments • Recalibration of store expansion strategy for Pizza Hut due to negative SSSG • Long-term growth outlook maintained despite current challenges
Consumer Behavior Insights • Average Check Size: • 9% drop attributed to menu changes, "flavour fun" initiative, and consumer downtrading • Stable promotional discounts
• Competitive Landscape: • Increased competition in the pizza segment from local players • Established brands like Pizza Hut expected to benefit from consistent quality
Future Outlook • Growth Strategy: • Balancing SSSG with aggressive new store growth (20-25% increase in store count) • Confidence in long-term prospects for both KFC and Pizza Hut despite macroeconomic challenges • Management's Confidence: • Projecting strong long-term growth despite current economic conditions and competitive pressures.
Earnings Call Overview • Date: May 12, 2023 • Submitted transcript to National Stock Exchange and BSE on May 17, 2023. • Key representatives: Group CEO Sanjay Purohit, CFO Vijay Jain.
Financial Performance Highlights • Annual Revenue: Record of INR 22.6 billion. • Adjusted EBITDA: INR 2.6 billion (11.7% margin). • New Restaurants: 164 added, best year for KFC and Pizza Hut in India. • Q4 Sales: INR 5.59 billion (13% YoY increase), with India restaurant sales up 23%.
Brand Performance
KFC
• Same-Store Sales Growth (SSSG): 2% in Q4. • Revenue: 24% increase to INR 369 crores; annual revenue growth of 40% (~INR 1,450 crores). • EBITDA: 19.1%, supported by cost efficiencies and 78 new store openings. • Challenges: Soft demand post-Diwali and Navratra festival timing.
Pizza Hut
• SSSG: Negative 4% in Q4, but positive same-store transaction growth. • Revenue: Grew by 18% to INR 122 crores; EBITDA fell to 8.6%. • Focus: Enhancing brand awareness through marketing and new product launches.
Regional Performance
Sri Lanka
• Operational Conditions: Improved but still facing transaction drops. • SSSG: Down 3%, with 10% revenue growth in local currency but 27% decline in INR.
Market Insights • KFC vs. Pizza Hut: KFC performing better; overall slowdown attributed to secular trends. • Delivery Metrics: 85% of Pizza Hut orders delivered within 30 minutes.
Future Plans • Store Openings: Aim to open 130 to 160 stores annually. • Capex: Elevated refurbishment costs expected due to older stores needing upgrades. • Marketing Initiatives: Anticipated impact in the next 3 to 4 months.
Product Innovations • KFC: Introduction of INR 99 chicken roll, exceeding expectations. • Pizza Hut: New product launches including 10 new pizzas.
Challenges and Strategies • Gross Margin: Declines attributed to high inflation in key commodities. • Price Adjustments: 3.5% price increase for KFC to manage costs. • Store Size Adjustments: New Pizza Hut stores reduced from 1,200 to 1,000 square feet.
Conclusion • Outlook: Cautious optimism about future performance despite macroeconomic challenges, with a focus on marketing and product innovation strategies.
Earnings Overview • Date of Call: February 9, 2023 • Key Participants: Group CEO Sanjay Purohit, CFO Vijay Jain • Financial Results: • Consolidated revenue: INR 594 crores (17% growth) • India business revenue: 24% increase • Sri Lanka revenue: 15% decline in INR terms • Consolidated EBITDA: 8% growth, down 190 basis points YoY • New restaurants added: 57 in Q3, total of 136 for FY23
Brand Performance • KFC: • Delivery contributed 36% to sales • Same-store sales growth (SSSG): 3% • Revenue: INR 381 crores (26% growth) • Gross margins: down 150 basis points YoY • Pizza Hut: • SSSG: -4% • Revenue: INR 136 crores (20% growth) • Gross margins: down 100 basis points • Sri Lanka Operations: • Local currency SSSG: 18% • Revenue growth in Lankan rupees: 39%, but 15% decline in INR terms
Strategic Initiatives • ESG Report: Launch of first ESG report aligning with sustainability standards. • Store Expansion: Aim to double store count in 3-4 years. • Cost Management: • Corporate overheads reduced to 5.7% of sales. • Anticipated reduction of ESOP costs to 0.5% of revenue in two years.
Market Challenges • Demand Softening: Noted across the industry, affecting performance. • Inflation Impact: Price hikes affecting consumer demand; ongoing inflationary pressures on gross margins. • Sri Lanka Situation: Stabilized operating conditions but high inflation and taxes affecting consumer demand.
Future Outlook • Store Count Guidance: On track to add 130-160 restaurants annually over the next 3-4 years. • Same-Store Sales Growth: Targeting 5-7% growth despite inflation challenges. • Product Innovation: Focus on new product launches and customer engagement strategies.
Additional Insights • Capital Expenditure: KFC capex estimated at INR 1.9 to 2 crores per store; Pizza Hut at INR 1.5 crores. • Breakfast Offerings: No immediate plans for breakfast items; focus on lunch and snack offerings. • Management Confidence: Optimistic about navigating challenges through improved customer experience and product innovation.