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Taco Bell, KFC parent Yum still bullish on China

LOS ANGELES, Oct 8 (Reuters) - Yum Brands Inc YUM.N, the parent of fast-food chains including KFC, Taco Bell and Pizza Hut, on Wednesday said it continues to view China as a major growth driver, despite mounting worries about the now-global financial crisis.

Economists expect China’s growth to dip into the single digits this year for the first time since 2002, with the world’s fastest-growing economy seen slowing further in 2009 as the U.S.-led credit crisis chokes global economies.

Yum Chief Executive David Novak said in a conference call with analysts that he agreed with estimates suggesting that China’s economy could grow about 8 percent next year.

“Frankly we think our business can thrive in any economy growing at 8 percent, and especially with an economy that’s growing consumer spending like China,” Novak said a day after Yum posted a 4 percent rise in net profit fueled by growth in China, lower-than-expected taxes, beneficial foreign exchange rates and share buybacks.

Still, Yum’s China business is already showing signs of strain.

Sales at restaurants in mainland China open at least one year were up 5 percent in the most recent quarters, compared with year-earlier growth of 11 percent.

Yum has long depended on its international businesses for growth and Novak said the company continues to be bullish on China, where the middle class is growing and consumer incomes are increasing 8 to 9 percent per year.

Analysts and restaurant executives expect commodity inflation, which has pressured profits in China and around the world, to moderate going forward.

“China is still a rapid growth, high-return business,” said Novak, who reiterated Yum’s forecast for 20 percent profit growth for 2009.

“I think it’s safe to say we’re glad to be in China,” he said. (Reporting by Lisa Baertlein, editing by Brad Dorfman)

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