Yum Brands profit hurt by food safety scare in China

Yum Brands is the largest foreign restaurant chain operator in China

Yum Brands, owner of KFC and Pizza Hut restaurant chains, has reported a drop in profits as a food safety scare continued to hurt its sales in China.

It made a net profit of $281m (£185m) in the three months to 15 June, a 15% drop from a year earlier.

Sales in China fell 20% during the period amid fears of bird flu outbreak.

The fears over the flu came as Yum was trying to recover from allegations that its suppliers were giving chickens with unapproved levels of antibiotics.

Yum said that the "residual effect" of those allegations, first raised in December, had also impacted sales during the period.

However, it added that its sales in China were showing signs of a recovery as the extensive media coverage surrounding Avian flu had subsided.

The firm said sales in China declined 10% in June, from a year earlier, compared with a 19% drop in May. It said that it expects sales in the country to start rising by the fourth quarter.

China is a key market for Yum, generating more than half the company's revenue, and the firm said it was committed to expanding its presence in the country.

"For the total China Division, we remain on track to open at least 700 new units this year. This means we will have opened about 1,600 units over a two-year period," David Novak, chief executive of Yum said in a statement.

"As KFC sales continue to recover, we expect to have solid momentum in China heading into 2014," he added.

The company confirmed that is expects a sharp drop in profits this year, but added that it expected a "big bounce-back" in 2014.