Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q2 2022 Earnings Presentation
27 slides from Yum China's earnings presentation, Jul 29, 2022
Slide 1: Second Quarter 2022 Results
Second Quarter 2022 Results 29 July 2022 NYSE: YUMC and HKEX: 9987
Slide 2: Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures
Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covere
Slide 3: Demonstrated Exemplary Resilience and Delivered Profitable Second Quarter
Demonstrated Exemplary Resilience and Delivered Profitable Second Quarter Q2 2020 2021 2022 Total stores 9,954 11,023 12,170 Focus on Gross new stores 169 404 246 Resilience Net new stores 6591 298 53 Revenue $1.90bn $2.45bn $2.13bn Growth Operating profit $128mn $233mn $81mn Revenue growth2 (11)% 2
Slide 4: Capturing Off-Premise Demand; Launched Community Purchasing During Lockdown
Capturing Off-Premise Demand; Launched Community Purchasing During Lockdown 2020 2021 2022 Delivery Off-premise % of Company sales1 Delivery sales growth2 % of Company sales1 Community Purchasing3 65%+ ~37% ~60% 55%+ ~27% ~29% +7% vs Q2’21 Any Q2 Q2 newer picture? ~52% ~46% ~43% ~41% ~35% ~35% +7% v
Slide 5: Building Packaged Food as a New Sales Driver
Building Packaged Food as a New Sales Driver Packaged Food Sales KFC Pizza Hut ¥ mn ~450 >2x vs 1H 21 ~ 200 1H 21 1H 22 Microwaveable fried rice and dumplings Ready-to-cook pasta and ¥99 for 5 items marinated steak 5
Slide 6: Driving Digital Ordering and Member Sales
Driving Digital Ordering and Member Sales KFC Super-App Digital Orders Members1 Member sales2 Senior-friendly interface % of Company sales3 Million % of System sales 355+ ~66% ~64% ~86% ~86% ~88% 305+ ~62% 240+ 2020 Q2 2021 Q2 2022 Q2 ~92% ~84% 115+ ~63% ~100 ~61% 75+ ~53% ~61% 1 Cumulative as of pe
Slide 7: Opening Healthy New Stores for Long-Term Growth
Opening Healthy New Stores for Long-Term Growth Accelerating Store Growth Penetrating into Lower-tier Cities Maintained New Unit Payback1 Gross New Stores 1H 22 New Stores Total Stores By Year of Opening 768 ~2 yrs ~2 yrs ~2 yrs 719 40 43 348 % % 60 57 % % 1H 20 1H 21 1H 22 Apr'18-Mar'19 Apr'19-Mar'
Slide 8: KFC Remains Resilient
KFC Remains Resilient Q2 2020 2021 2022 Total stores 6,749 7,609 8,510 Net new stores 88 236 69 System sales growth1 (6)% 14% (15)% Same-store sales growth1 (10)% 4% (16)% Restaurant margin 14.6% 16.8% 13.4% Operating profit ($ mn)2 159 240 122 Delivery sales3 ~27% ~29% ~37% Off-premise sales3 ~60%
Slide 9: Offering Strong Value for Money
Offering Strong Value for Money Juicy Whole Chicken Beef Burgers 35th Anniversary Campaign ¥29.9 on weekends Entry price and premium choices Original Recipe at ¥2.5 (1987 price) Family bucket (13 items) Dessert kiosk – 50% off 2nd item Price back to ¥59 9
Slide 10: Bringing Joy to Customers
Bringing Joy to Customers Pokemon – Psyduck Traditional “Victory” Cake Steamed Chicken Dumpling New Late-Night Products Music Box with Red Beans (ShaoMai) 10
Slide 11: Pizza Hut Also Remains Profitable
Pizza Hut Also Remains Profitable Q2 2020 2021 2022 Total stores 2,258 2,425 2,711 Net new stores (13) 43 32 System sales growth1 (12)% 16% (14)% Same-store sales growth1 (12)% 11% (15)% Restaurant margin 11.2% 13.1% 8.6% Operating profit ($ mn)2 15 39 11 Delivery sales3 ~35% ~35% ~43% Off-premise s
Slide 12: Innovative New Menu Launched in April
Innovative New Menu Launched in April Deep fried cereal prawn Stuffed crust pizza with sausage, cheese or meat floss Baked spinach & mushroom with cream cheese Spaghetti with chicken & bacon in creamy sauce Deep fried crayfish Waxberry/Pink lemon with salted yolk sparkling drink Slow cooked beef rib
Slide 13: Innovative New Products Address Diverse Needs
Innovative New Products Address Diverse Needs Pastas with Dahongpao Traditional Oolong Chinese Flavors Tea Drinks • 600ml great satisfaction from ¥17 Wagyu beef with • Oolong tea with Hairy crab caviar scallion oil milk foam, milk (Suzhou flavor) (Shanghai flavor) tea and lemon tea Beef stir fry wit
Slide 14: Attractive Offers with Abundant Choices and Value
Attractive Offers with Abundant Choices and Value Buffet – Only 5 Days in a Year Buy More Save More Combo Discount for Delivery • ¥158 per person • Pre-sale from June 1 • All-you-can eat in 90 minutes • 40 items include steak, pizza, snacks, drinks and dessert • 20% off – 6 items • 23% off – 7 items
Slide 15: Our Emerging Brands Also Offering Great Products and Value
Our Emerging Brands Also Offering Great Products and Value Taco Bell Lavazza Little Sheep Wrist burrito combo from ¥39.9 KAFA coffee x4 + coffee mug at ¥128 2 plates of lamb at ¥49.9 15
Slide 16: Continuing to Invest in Building our World Class Supply Chain Network
Continuing to Invest in Building our World Class Supply Chain Network Groundbreaking of New Supply Chain Management Center in Shanghai Chengdu First two greenfield logistics centers in Chengdu and Huai’an, Jiangsu are now complete and operational Huai’an, Jiangsu 16
Slide 17: Capital Allocation Balances Operation Needs, Long-term Growth and Return to Shareholders
Capital Allocation Balances Operation Needs, Long-term Growth and Return to Shareholders First Half Disciplined Capital Allocation $ million 2020 2021 2022 • Maintain sufficient cash for operations and Cash and short-term investment 1,708 4,348 3,653 contingencies Cash flow from operating activities
Slide 18: Maintaining Net New Unit and Capex Targets for 2022
Maintaining Net New Unit and Capex Targets for 2022 • Approximately 1,000 to • Capital expenditure in the 1,200 net new stores range of $800 mn to $1 bn • Continue with our • Make significant capex disciplined approach of investments in store network opening high-quality new expansion, supply chain
Slide 19: Appendix
YumChina Appendix
Slide 20: Published 2021 Sustainability Report & TCFD Report; Submitted Near-term Science-based Targets
Published 2021 Sustainability Report & TCFD Report; Submitted Near-term Science-based Targets • Food Safety & Quality • Climate Action • People First • Common Prosperity ‒ Food safety and quality ‒ Commit to reaching net-zero ‒ Share of women in the total ‒ One Yuan Donation raised training covers 1
Slide 21: Well Recognized Sustainability Efforts
Well Recognized Sustainability Efforts 1 2 3 4 Member of DJSI: MSCI Environmental, Top Employer in China Bloomberg World Index and Social and Governance by Emerging Market Index (ESG) Ratings: Top Employers Institute Gender-Equality Index 2020 and 2021 “AA” rating in 2022 2019-2022 2019-2022 21
Slide 22: Yum China Key Financials
Yum China Key Financials Q2’20 Q2’21 Q2’22 Q2 YoY YTD’20 YTD’21 YTD’22 YTD YoY Same-store sales growth1 (11)% +5% (16)% / (13)% +8% (12)% / System sales growth1 (4)% +14% (16)% / (13)% +24% (10)% / Total revenue ($bn) 1.90 2.45 2.13 (13)% 3.66 5.01 4.80 (4)% Restaurant margin 13.7% 15.8% 12.1% (3.7)
Slide 23: Key Factors of Year-over-year Change
Key Factors of Year-over-year Change 5.01 4.80 Total 3.66 Operating 575 Revenue 1.90 2.45 2.13 Profit 233 225 272 ($bn) ($mn) 128 81 Q2 YTD Q2 YTD Key factors for Q2 year-over-year decline Key factors for Q2 year-over-year decline + New unit contribution + New unit contribution + Consolidation of Ha
Slide 24: KFC Key Financials
KFC Key Financials Sales Growth (%) Restaurant Margin (%) Operating Profit 2 ($ mn) System sales growth 1 18.4% 19% 16.8% 14% 14.6% 14.1% 14.4% 13.4% 567 -6% -10% -10% -15% 342 Q2 YTD Q2 YTD 312 240 Same-store sales growth 1 159 5% 2022 vs 2021 Q2 122 4% Same-store sales (16)% - Transactions (25)% -
Slide 25: Pizza Hut Key Financials
Pizza Hut Key Financials Sales Growth (%) Restaurant Margin (%) Operating Profit 2 ($ mn) System sales growth 1 14.2% 13.1% 33% 11.2% 9.8% 16% 8.6% 99 6.4% -12% -8% -14% -25% Q2 YTD Q2 YTD 39 41 Same-store sales growth 1 15 23% 11 2022 vs 2021 Q2 11% Same-store sales (15)% - Transactions (20)% (13)
Slide 26: Reconciliation of Reported Results to Non-GAAP Measures
Reconciliation of Reported Results to Non-GAAP Measures Quarter Ended Year to Date Ended 6/30/2022 6/30/2021 6/30/2022 6/30/2021 Non-GAAP Reconciliations Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 81 $ 233 $ 272 $ 575 Special Items, Operating Profit (1) (4) (3
Slide 27: About Yum China
About Yum China Yum China Holdings, Inc. is a licensee of Yum! Brands in mainland China. It has exclusive rights in mainland China to KFC, China's leading quick-service restaurant brand, Pizza Hut, the leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chai