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Cafe De Coral Net Drops 15% as Food Costs, Rents Erode Margins

Cafe de Coral
Cafe de Coral restaurant in Hong Kong. Photographer: Antony Dickson/AFP/Getty Images

Nov. 29 (Bloomberg) -- Cafe de Coral Holdings Ltd., Hong Kong’s largest listed restaurant chain, posted a 15 percent drop in first-half profit as margins were eroded by rising food costs and rents as well as higher wages.

Net income fell to HK$191 million ($25 million) in the six months ended Sept. 30 from HK$224 million a year earlier, according to a statement to Hong Kong’s stock exchange. Sales climbed 10 percent to HK$2.9 billion.

Cafe de Coral opened 10 outlets under its name and the Super Super Congee and Noodles brand during the period to take advantage of rising demand for fast, inexpensive meals, it said. The Hong Kong-based company said it also added four catering contracts in the period and is “heading firmly towards the goal of 200 outlets by 2014” in mainland China.

About half of the chain’s 7,800 workers received a 19 percent salary increase as the Hong Kong government raised the city’s minimum wage, according to the statement. Cafe de Coral estimated its annual payroll will be about HK$120 million within the year.

Cafe De Carol rose 1.3 percent to HK$18.28 at the 4 p.m. close of trading in Hong Kong. It had gained as much as 2.55 percent in the morning session, before reporting earnings.

The stock has dropped 4.9 percent this year, compared with a 21 percent slump in the benchmark Hang Seng index.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Stephanie Wong at swong139@bloomberg.net

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