Company Overview - As of June 30, 2023, Yum China operates over 13,000 restaurants across more than 1,900 cities in China, making it the largest restaurant company in the country by system sales[10]. - KFC is the leading fast-food brand in China, with over 9,500 restaurants in more than 1,900 cities as of June 30, 2023[10]. - Pizza Hut is the largest casual dining brand in China, operating over 3,000 restaurants in more than 650 cities as of June 30, 2023[10]. - The company has established a joint venture with Lavazza Group to explore and develop the Lavazza coffee brand concept in China[10]. - The company has accumulated over 35 years of operational experience in the Chinese market since KFC's entry in 1987[10]. Financial Performance - Total revenue for the company reached $5,571 million, a 16% increase compared to $4,796 million in the same period of 2022[16]. - The net profit attributable to Yum China Holdings, Inc. was $486 million, representing a 166% increase from $183 million in the same period of 2022[16]. - Operating profit for the six months ended June 30, 2023, was $673 million, a significant increase from $272 million in the same period of 2022[16]. - The company's restaurant profit margin improved to 18.3%, up from 13.0% in the previous year, reflecting a 5.3 percentage point increase[16]. - System sales increased by 24% for KFC and 23% for Pizza Hut, with same-store sales growth of 11% and 10% respectively for the six months ended June 30, 2023[14]. Expansion Plans - The company believes there are significant expansion opportunities within existing and new cities in China[10]. - The company plans to open approximately 1,100 to 1,300 new stores in fiscal year 2023[18]. - Capital expenditures are projected to be between $700 million and $900 million for the fiscal year 2023[18]. Tax and Regulatory Matters - The company continues to defend its transfer pricing arrangements amid ongoing tax audits by Chinese and U.S. tax authorities, with potential significant impacts on financial condition and cash flow if additional taxes are assessed[51]. - The actual tax rate for the company was 27.0%, down from 30.4% in the previous year[21]. - The company anticipates continued macroeconomic uncertainty, with potential wage increases and the gradual removal of VAT offset policies, prompting a cautious approach to growth opportunities and risk management[49]. Shareholder Information - The company declared a cash dividend of $0.26 per ordinary share, totaling $108 million[132]. - The company repurchased 2.1 million shares for $124 million and 9.0 million shares for $400 million in the first half of 2023[59]. - As of June 30, 2023, the total number of issued shares is 267,052,046, with 屈翠容 holding 1,000,000 shares, representing 0.37% ownership[82]. Employee and Compensation - The company employs over 430,000 employees, with approximately 90% being restaurant staff, and about 72% of restaurant employees working part-time[71]. - Non-employee directors receive an annual retention fee of $315,000, payable in common stock or up to half in cash[93]. - The total stock awards granted to non-employee directors during the reporting period amounted to $2,362,500, with a total of 40,253 shares issued[95]. Market and Economic Conditions - Significant sales recovery was observed in the first half of 2023, attributed to the easing of COVID-19 restrictions in China, leading to strong growth in restaurant revenue driven by same-store sales increases and improved profit margins[49]. - The company expects to see significant progress in tax audits within the next 12 months, including expert reviews by the State Taxation Administration[50]. - The company continues to monitor regulatory developments regarding the new Corporate Alternative Minimum Tax (CAMT) and its potential impact on financial statements[183]. Investment and Acquisitions - The company completed the acquisition of 28% equity in Hangzhou Beverage for $255 million, gaining control of Hangzhou KFC with approximately 60% ownership[141]. - The company acquired an additional 25% equity in Suzhou KFC for $149 million, increasing its ownership to 72% and gaining control of Suzhou KFC[142]. - The company has recognized VAT offsets of $19 million and $9 million in Q1 and Q2 of 2023, respectively, as reductions in related expense items[54]. Risk Management - The company has a significant foreign currency exchange risk due to most of its assets being located in China[74]. - The company manages commodity price risks through pricing agreements with suppliers[75]. - If the RMB depreciates by 10% against the USD, the company's operating profit would decrease by approximately $64 million[74].
百胜中国(09987) - 2023 - 中期财报