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McDonald’s, the world’s largest restaurant company, posted a $1.19 billion (R8.99 billion) profit in the second quarter, spurred by European sales of hamburgers and chicken sandwiches.

July 24, 2008

By Chris Burritt

Greensboro, North Carolina – McDonald’s, the world’s largest restaurant company, posted a $1.19 billion (R8.99 billion) profit in the second quarter, spurred by European sales of hamburgers and chicken sandwiches.

The company’s earnings beat the average estimate of analysts, improving vastly from a loss of $711.7 million a year earlier.

Revenue rose to $6.08 billion from $5.84 billion, the company said yesterday.

Sales at European outlets open at least a year advanced 7. 4 percent as the firm sold higher-priced hamburgers in the UK and snack-sized chicken sandwiches in France. Ten analysts estimated sales of $5.93 billion in the quarter.

McDonald’s sales overseas were helped by the US dollar’s decline, which increased the value of revenue and profit in dollar terms.

“Europe is surprisingly strong,” Peter Goldman, who helps manage $500 million at Chicago Asset Management, said yesterday in an interview. The firm owns 225 000 McDonald’s shares.

McDonald’s rose 37c to $60.12 on Tuesday on the New York Stock Exchange. The stock has increased 2 percent this year, trailing only Darden Restaurants’ gain of 15 percent in the five-member Standard & Poor’s 500 Restaurant index. That index has fallen 3 percent this year.

Chief executive Jim Skinner tried to counter US declines by bolstering profit in Europe, McDonald’s biggest source of revenue. Sales in the region benefited from the falling dollar, which dropped an average of 12 percent against a basket of six foreign currencies.

US petrol prices reached a record $4.11 a gallon on July 17, 36 percent higher than a year earlier, according to the website of the Florida-based AAA motor club. The US lost 62 000 jobs last month, the sixth consecutive month of shrinking payrolls.

Faced with higher costs for ingredients and labour, McDonald’s increased prices in the US, China and other markets this year. Last month it raised prices 2.7 percent in China, the second increase this year, said regional chief Jeff Schwartz.

McDonald’s introduced new chicken sandwiches and biscuits in the US in April to boost sales. It competes with Burger King and Wendy’s International, which also sell discount burgers and breakfast foods for consumers pinched by rising fuel and grocery costs.

Prices for maize hit a record $7.99 a bushel last month due to concerns about tight supplies.

McDonald’s started selling stronger coffee in 2006 to capture sales from Starbucks. It plans to install counters selling cappuccino and lattes next year.