Growth Costs Eat Into Rosinter Profit

MTDiners at T.G.I. Friday's, one of the eatery chains that Rosinter Restaurants Holding runs as the local franchisee.
Rosinter Restaurants Holding said Wednesday that it saw a 75 percent decline in first-half profit on higher expansion costs.

Net income totaled $1.3 million under international financial reporting standards, the company said in a statement without giving a year-earlier figure. This figure is down from $5.3 million in the first half of 2007. Sales rose 36 percent to $164.9 million.

Rosinter, which opened its 300th property in St. Petersburg last week, is adding restaurants as energy exports drive a 10th straight year of economic growth, spurring more people to dine out. The company, the local franchisee for the T.G.I. Friday's and Benihana chains, plans to add 90 outlets this year, more than the 58 that started doing business in 2007.

The company, Russia's only publicly traded restaurant company, also owns the Il Patio and Planeta Sushi chains.

"Higher startup expenses for new restaurants and incremental selling, general and administrative expenses" stemming from a plan to set up a so-called hub city structure in the regions hurt profit, chairman and majority owner Rostislav Ordovsky-Tanaevsky Blanco said in the statement. Increased labor costs also cut profitability, he added.

Sales will gain 39 percent this year at Rosinter's casual-dining unit, which accounts for most of sales, chief executive Lori Daytner said in the statement. The company has forecast a gain of 46 percent to 49 percent in total annual revenue.

Nine-month sales climbed 35 percent to $254.7 million, the company said. They gained 26 percent in dollar terms at restaurants open at least two years, as the number of visitors increased 6 percent. EBITDA margin fell to 9.4 percent from 15.3 percent, and gross margin decreased to 37.4 percent from 38.7 percent.

(Bloomberg, Reuters, MT)