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Jubilant FoodWorks Earnings Miss Forecast; Stock Declines

Jubilant FoodWorks Ltd., the Indian franchisee of Domino’s Pizza Inc., posted second-quarter profit that missed analysts’ estimates. The shares fell.

Net income jumped 28 percent from a year earlier to 236.7 million rupees ($4.8 million) in the three months ended Sept. 30, the company said in an exchange filing today. That’s less than the median estimate of 249 million rupees by 14 analysts, according to data compiled by Bloomberg.

Investors have snapped up shares of consumer-goods companies like Jubilant, which has more than quadrupled since listing in February last year, amid optimism India’s young population, rising salaries and an expanding middle-class will continue to boost demand for their products.

Salaries in the world’s most populous nation after China will grow an average 12.9 percent this year, the fastest in Asia, according to a survey by Aon Hewitt LLC, raising disposable incomes. Indians living in cities eat out about six times a month, compared with 2.7 times in 2003, according to a report in 2009 by a trade body.

Revenue rose 47 percent to 2.4 billion rupees during the three-month period, while total expenses increased 46 percent to 2.06 billion rupees, led by a 48 percent jump in costs of raw material and provisions consumed.

“Rise in food costs is on account of the overall growth witnessed along with high inflation, primarily the increase in the price of milk products,” the company said in the filing.

Food Costs

India’s food inflation accelerated to the highest level in nine months, government data showed today. An index measuring wholesale prices of agricultural products gained 12.21 percent in the week ended Oct. 22 from a year earlier, the commerce ministry said in a statement. It rose 11.43 percent in the week ended Oct. 15 and 10.6 percent the week before.

Milk prices climbed 11.7 percent, while eggs, meat and fish increased 13.4 percent, according to the statement.

Jubilant slumped 2.1 percent to 814.05 rupees at close in Mumbai today, after retreating as much as 3.2 percent following the earnings announcement.

Jubilant will “probably” raise prices this month to pass on the higher costs to consumers, Chief Executive Officer Ajay Kaul told reporters on an earnings conference call. It raised prices by about 3 percent mid-August, he said.

More Stores

The company, which spent about 700 million rupees on opening 72 stores in the year ended March 31, will spend more than 1 billion rupees this financial year to open new outlets, relocate two plants and set up a facility in the northern city of Chandigarh, Kaul said.

Jubilant, which plans to open 80 stores this year, has opened 33 in the six months ended September, according to the filing. That took its total outlets to 411.

Shares of Jubilant, one of the fastest-growing franchisees for Domino’s, have rallied 30 percent this year, compared with a 20 percent slide in the 271-member BSE Mid-Cap Index in the period. The stock has more than quadrupled since Jubilant sold shares at an initial public offer price of 145 rupees apiece, valuing the company at $1.1 billion.

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