Jollibee’s Smashburger and Red Ribbon business units significantly dragged down the restaurant-operator’s first-half profits.

Jollibee Foods Corporation says the company’s net income attributable to shareholders was P1.1 billion (US$21.1 million) in the second quarter – half that of the preceding three months. First-half profit was down 34 per cent on the same period last year. 

The company blamed the decline on losses relating to the Smashburger chain and lower sales by its Red Ribbon bakery business. 

“On Smashburger, we introduced major changes that created short-term disruption in sales and profit but will drive sustainable sales growth and strengthen the brand health,” said Jollibee CFO Ysmael Baysa. 

While Smashburger, a relatively recent acquisition for the company, was not yet performing, Baysa says Jollibee has considerable experience restructuring businesses it buys into more profitable operations, namely Yonghe King and Hong Zhuang Yuan in China, and the Highlands Coffee business in Vietnam. 

The poor performance of Red Ribbon during the quarter was attributed to shortage of supplies relating to the transfer of the company’s commissary kitchen to new premises south of Metro Manila. 

Last month, Jollibee announced the purchase of California cafe chain The Coffee Bean & Tea Leaf for US$350 million. It expects that business to contribute to Jollibee’s bottom line within 12 to 18 months. 

Global sales by Jollibee rose 13.8 per cent in the first half, to P113.8 billion (US$2.11 billion) . Most of that growth came from its international operations, which grew by 24.9 per cent, far faster than the 13.8 per cent of its domestic business. 

Between January and June the company opened 170 stores, 111 of those in its home market.