KFC-Owner's Shares Plunge 18% On China Woes

Shares (Berlin: DI6.BE - news) in Yum Brands (Swiss: YUM.SW - news) - the company behind Pizza Hut and KFC - dived 18% on Wednesday after it cut its profit outlook on continued weakness in China.

China - a market which accounts for half the company's operating profits - has proved a struggle for restaurant chains in recent years following food safety scandals which hit local suppliers.

In its third quarter update, Yum said a slower-than-expected comeback there was the reason for the downgrade to its full-year profit forecast, with earnings per share (EPS) now expected to rise by a low single-digit percentage.

It (Other OTC: ITGL - news) had previously forecast growth of 10%.

Sales in China rose by 2% in the three months to 5 September, despite strong marketing activity.

The company has spent big to try and win customers back since the food controversies which saw KFC's local suppliers accused of pumping chicken with excessive levels of antibiotics.

A separate scandal later emerged when supply workers were filmed allegedly re-using meat that had fallen on the ground.

Chief executive Greg Creed said of the results: “The pace of recovery in our China division is below our expectations.

"Outside of China, our Taco Bell and KFC Divisions continued to sustain their positive sales momentum while Pizza Hut was relatively flat.

"Given our lower full-year expectations in China, combined with additional foreign exchange impact, we now expect 2015 EPS growth to be well below our target of at least 10%."

Shares fell by up to 18% in after-hours trading after the results were released - a decline that was matched when trading began on Wednesday.