Jollibee says election spending to boost 2012 sales

MANILA, Philippines - The country's biggest fast-food company, Jollibee Foods Corp, expects record sales and profit in 2012 owing in part to the anticipated election spending later in the year.  

However, company chairman and CEO Tony Tan Caktiong remained cautious about the forecast given the possibility of "surprises" in the global economy that could dampen consumer confidence and spending.

A bright spot on the horizon is spending for the 2013 mid-term elections that should help swell local sales. Local sales make up the bulk, or about 80%, of the company's system-wide sales, explained Caktiong on the sidelines of an annual stockholders' meeting on June 21.

"Because of the campaign there's a lot of funds going into the society so I think that's basically the reason that boosts consumption," said the CEO.

"Especially they need printing, plus they need advertising, there's a lot of expenses," he said.

"There's a lot of money being released," added company Chief Financial Officer Ysmael Baysa. "Also the government spends more money… because they need to get the support of the constituents."

The company's net income barely rose last year at P3.25 billion, against P3.21 billion in 2010, as profit margins decreased from 6% to 5.2%. Still system-wide sales grew by 17% last year, and 15% in the first quarter of 2012.

"What's important for us is our long-term growth that we keep on growing at 12-15% systemwide sales growth. If you look at our records we're almost always in that range, that's part of our strategy," said Baysa.

He added, "If there are no surprises 2012 should be definitely better than 2011."

Global uncertainties

"On the Philippine side we're very optimistic. But if something happens in Europe in a major scale, we might be affected," Caktiong said however.

The company leaders are closely tracking events in Greece and the development of the euro debt crisis. While Caktiong thinks the Philippine economy will be somewhat sheltered from Europe's debt woes, he is worried about the effect on Filipino workers there and the morale and spending of their families in the Philippines.

"When OFWs (overseas Filipino workers) suddenly start fearing for their jobs, they will tell their families here to start saving. And that will lead to lower sales for us,” he said.

Still the local arena looks positive to Caktiong, who is even encouraged by the economic direction the Aquino administration is taking. "We were lucky that the economic team of the government is doing quite a good job. In spite of this crisis, I think the Philippines is one of the darlings of investments now. In spite of this crisis I think people are still looking at the Philippines. I think we were lucky we had this economic team," he said.

The company is targeting more overseas investments and profits, so not surprisingly the CEO said, "We're optimistic about our prospects but we're also guarded."

In 2011, the company spent P7.4 billion on long term investments. Some P3.7 billion of that went towards acquisition related activities, while the other P3.7 billion were capital expenditures for new stores, supply chain facilities and distribution centers. JFC plans to open 300 new stores this year, of which half will be in the Philippines and half abroad.


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