Jollibee’s Q4 2022 Net Income Plunged on High Rates Amidst High Debt Levels; BSP Rate Hikes Start to Bite! JFC’s Bet on Global Consumers

Jollibee’s Q4 2022 Net Income Plunged on High Rates Amidst High Debt Levels; BSP Rate Hikes Start to Bite! JFC’s Bet on Global Consumers 

Jollibee Food Corporation's 2022 figures look remarkable.  But beneath the headlines, it shows how rising rates have gnawed at the bottom line while JFC's global thrust increases many internal risks. 

 

Businessworld, March 17: In its disclosure to the stock exchange, JFC said its 2022 revenues grew by 38% to P211.9 billion from the P153.58 billion it saw in 2021. System wide-sales, which measures all sales to consumers, rose by 40.2% to P296.82 billion the P211.72 billion previously. The company’s net sales increased by 37.9% to P196.66 billion from P142.59 billion in the previous year. The company’s expenses also increased by 36.7% to P27.01 billion from P19.8 billion in the previous year. For the fourth quarter of 2022, attributable net income plummeted by 90.3% to P320 million from P3.28 billion in the same quarter in 2021. The company also reported a 99% fall in net income to P31 million from the P3.25 billion previously recorded. The lower profit came despite a 38.5% increase in system-wide sales to P85.94 billion from P62.03 billion previously. Revenues increased by 36.8% to P61.55 billion from P45 billion, while EBITDA grew by 3% to P8.21 billion from P7.97 billion. 

 

Inflation and Base Effects Powered JFC’s Topline Boom! 

 

Big annual numbers for Jollibee Food Corporation [PSE: JFC] in 2022. 

 

But the devil lies in the details. 

Figure 1 

 

Thanks to international sales and inflation, 2022 was a breakthrough for nominal Peso and YoY % sales. (Figure 1, topmost window) 

 

Why attribute JFC's financial performance to inflation? 

 

Because the boost in JFC topline performance came from debt expansion, BSP's record liquidity injections and money supply-funded election spending—mostly alluded to reopening. (Figure 1 middle chart) 

 

That's not all.   

 

Profit margins have benefited JFC immensely during the inflationary period of 2015-2017 and 2021 to 2022.  But the 2022 margins run short of the 2016 and 2017 highs. (Figure 1, lowest pane) 

 

High Debt Levels: Interest Rate Hikes Bite on JFC’s Bottom Line! 

 

And there's more.  

Figure 2 

 

The deficit from interest rate expenses boomed in 2022.   The recent surge in debt and higher BSP rates signified a drag on nominal net income, which despite the splendid %, remained marginally off from the 2018 and 2019 levels. (Figure 2) 

Figure 3 

 

It was in Q4 2022 when interest rate expenditures swelled to a record, which likely was pushed by the BSP's panic rate hikes along with the US Federal Reserve.  (Figure 3, upper chart) 

 

As such, Q4 net income plummeted to Php 30.8 million—a Q1 2020 low! (Figure 3, lower chart) 

 

Despite the big numbers, rising rates and high debt levels have started to gnaw at JFC's bottom line. 

 

So, up to a certain extent, elite companies benefit from inflation, but when rates start to rise, it masticates on the bottom line because of the scale of debt.  

 

Jollibee: An Enormous Bet on Global Consumers 

 

Yet, a bet on Jollibee is a bet on global consumers. 

Figure 4  

 

In Q4, JFC domestic sales marginally topped the Q4 2019 high (up by 7.8%).  Again, monetary and street inflation contributed substantially to the gains. (Figure 4) 

 

Meanwhile, international sales catapulted by 40.8% over the same period.  

 

JFC has been backing up its truck in the international arena.  

 

Though sales remain tilted toward the domestic market, its contribution to the overall has been a downtrend.   It was 62.09% in 2022, its third year of 60%+ share.   

 

Assets and Capex have been lopsided towards international exposure. (Figure 4) 

 

Global assets accounted for 62.9% in 2022, while Capex represented 64%.

At any rate, the cost of leveraging for aggressive expansion may have come home to roost.   A global recession may not be kind to JFC.