The peso’s recent decline presents both benefits and drawbacks for Jollibee Foods Corp., but its main concern is how much further it might fall, said chief financial officer Richard Shin.
Shin said the weakening peso and associated inflationary pressures could raise costs, but the fast food giant also benefits due to the purchasing boost for overseas Filipino worker (OFW) families.
“On the flip side, we are seeing consumers with higher purchasing power because of the strong dollar,” Shin told reporters in a media briefing last week.
Monitoring costs
While profit margins improved during the first quarter, Shin said they remain wary of volatile currency movements that caused the peso to trade near a multiyear low at the P59 level versus the dollar.
“It is a concern in the sense that how weak is the peso going to go? How strong is the dollar going to go? So, those are questions that are still out there,” he said.
Volatile peso
Jonathan Ravelas, veteran forecaster and senior adviser at Reyes Tacandong & Co., said the Philippine peso could potentially test lower levels given its recent trajectory. But his yearend forecast places the peso at around P56.50 against the dollar.
Shin explained 60 percent of their inputs are imported, although these are shielded by using forward contracts to lock in prices and other hedging tools.
Local sourcing
Their local input costs are also vulnerable to inflation, but Jollibee mitigates this risk by working with larger vendors to negotiate bulk purchases and secure better pricing.
This is the case with their chicken supply, used for best-selling products like Chicken Joy.
“We are 100 percent locally sourced for chicken. What that means is the currency risk is taken away because we price at peso and we also lock in prices by guaranteeing good and high volumes,” Shin said.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
