Poultry scandal in China hits Yum’s profits

Yum Brands (KFC parent company) has reported a 5% fall in its fourth quarter profit and announced that they expect 2013 earnings to fall rather than grow, as they pick up the pieces of a food safety scare in China where they earn more than 50% of the overall revenue.

In December 2012 KFC in China was under investigation after state television claimed its chicken suppliers injected banned substances and growth hormones in to its poultry. While the company was not fined by food safety authorities, the adverse publicity has taken its toll.

January 2013 sales have dropped 37% including 41% fall for KFC and a 15% decline for Pizza Hut Casual Dining.

Yum has nearly 5,300 restaurants in China, mostly KFC. Its strong reputation for high food quality helped it grow briskly in a country where there have been some serious food safety scandals.

Following the release of the results Yum shares fell 5%

Despite the setbacks, Yum expects to open 700 new restaurants in China, where it looks to expand aggressively.