Pizza firm DP Eurasia’s profit rises as it passes on Turkish inflation

The sign of a Domino’s Pizza restaurant is seen in Paris, France, October 27, 2016. (Reuters pic)

AMSTERDAM: DP Eurasia, which runs the Domino’s Pizza brand in Turkey and Russia, reported an 8% rise in first-half core profit on Tuesday and said it had not seen a slowdown in demand despite raising prices to keep pace with Turkish inflation.

The company’s shares, which have plunged around 60% so far this year on concerns about economic challenges in its main markets, jumped 6% in early trading.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 8% to 40.3 million liras (US$6.2 million) in the six months ended June 30, down from an adjusted 20% increase a year earlier as corporate expenses rose.

The company kept its full-year outlook unchanged.

“With respect to the macroeconomic headwinds that we are experiencing in Turkey, we are offsetting the impact of higher inflation by increasing our prices more frequently without any discernible negative impact on volumes”, chief executive Aslan Saranga said in a statement.

The Turkish lira has slumped more than 40% this year, while inflation in Turkey jumped to an almost 15-year high in August.

DP Eurasia said its Dutch corporate expenses rose to 3.5 million liras from 0.1 million a year earlier, and there were also costs related to its planned expansion in Russia.

The chain, the biggest pizza delivery firm in Turkey and third-largest in Russia, has added 79 new stores over the last year, bringing the total number to 672.

Peel Hunt analysts expect DP to continue to grow its estate as smaller competitors are likely to struggle more if Turkey suffers prolonged economic disruption, they said, keeping their “buy” recommendation on the stock.