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Jollibee’s intangibles now exceed its retained earnings

At the end of the first quarter of 2021 Jollibee Foods Corporation (JFC) reported intangibles in its balance sheet of 50 Billion Pesos. The intangibles can mostly be attributed to trademarks and goodwill of its most recent acquisitions CBTL and Smashburger.

JFC’s 50 Billion intangibles has exceeded its retained earnings which stood at only 30 Billion Pesos at the end of the first quarter of 2021. Smashburger and CBTL were loss-making when they were acquired by JFC. In its 2020 annual report, JFC commented that Smashburger, Coffee Beant & Tea Leaf, and parts of SuperFoods were not yet generating positive operating income. If the Smashburger and CBTL will not work, it could wipe out the retained earnings of JFC that it had nurtured and accumulated over the years.

Retained earnings has been materially reduced in 2020 as JFC suffered a 12.6 Billion-Peso net loss.

Short-term debts and current portion of long-term debts totaled to 20.5 Billion Pesos at the end of first quarter. That would not be a problem as JFC was quick to raise 60 Billion Pesos of capital through senior perpetual securities and senior debt securities in 2020. Cash as of the end of the first quarter stood at 21.8 Billion Pesos while short-term financial assets stood at 32.6 Billion Pesos.

Just recently, JFC applied for a registration of 20 Billion-Peso worth of perpetual preferred shares. And it might issue 12 Billion worth of perpetual preferred shares as first tranche to buy back a portion of the perpetual securities it had issued in 2020. The perpetual securities cost 3.9% per annum while the senior debts securities cost 4.125% for the 5.5-year securities and 4.75% for the 10-year securities. It is interesting how JFC will price its perpetual preferred shares.

Despite JFC barely making a profit these days, its share price is up 44.70% year-to-date.

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