Yum Profit Up, Raises 2004 View

Expansion of overseas restaurants in countries like China and Britain helped boost its international unit's operating profit by 28 percent, it said.

But Yum said an outbreak of deadly bird flu had impacted sales at KFC in several Asian markets, though it said the effect was expected to be short-lived and was reflected in its full-year and first-quarter earnings estimates.

The company had said last month it did not expect the deadly bird flu to hurt overall sales, profits or supplies of chicken.

Yum's U.S. operations, which have been hampered by poor performance at its KFC chain in the last year, were bolstered in the quarter by a 4 percent rise in Taco Bell restaurants open at least a year. Taco Bell's strength helped offset lower margins at U.S. restaurants due to higher beef, cheese and occupancy costs.

Yum said last year it did not expect to see a "significant turnaround" at KFC until the summer of 2004 while it works to rebuild its marketing plans and pipeline of new products.

The Louisville, Kentucky, company said fourth-quarter net income rose 24 percent to $214 million, or 70 cents per share, compared with $172 million, or 56 cents per share, a year ago.

Excluding a one-time gain, the company earned 65 cents per share for the quarter.

On that basis, Wall Street analysts had expected the company to report earnings of between 62 cents and 63 cents per share, with an average view of 62 cents per share, according to Reuters Research, a unit of Reuters Group Plc.

Total revenue for the quarter rose 8 percent to $2.65 billion.

Looking ahead, Yum said it expects to earn at least $2.27 a share in 2004, raising its prior estimate by 4 cents a share. The Reuters Research estimate is $2.24 per share. Including one-time items, the company expects to earn at least $2.29 per share.

For the first quarter, the company said it is comfortable with analysts' average estimate of 43 cents a share.

Yum's international business, particularly in Asia, has flourished in recent years.

But the concerns surrounding the bird flu have reduced poultry consumption in the region and even forced some KFC restaurants in Vietnam to switch to an all-fish menu.

On a hypothetical basis, the company said that if sales declined at KFC restaurants in China by 20 percent for one or two months, full-year earnings would likely be hurt by 1 cent to 2 cents per share.

Shares of Yum rose 53 cents, or 1.6 percent, to close at $33.71 Wednesday on the New York Stock Exchange.