Sapphire Foods slips into Q2 loss as costs rise despite KFC sales growth
Revenue was broadly flat sequentially, but higher expenses, interest and depreciation pulled profit before tax into a Rs 1.91 cr loss.
Filed 22 Oct 2026, 13:09 IST · Sapphire Foods India Ltd (SAPPHIRE)
Key takeaways
- Sapphire Foods moved to a consolidated net loss of Rs 1.51 cr in Q2FY27 from a profit of Rs 14.02 cr in Q1FY27.
- Operating margin narrowed by 1.40 percentage points as expenses grew 1.32% while revenue fell 0.33% sequentially.
- KFC reported 14% same-store sales growth, while Pizza Hut's 5% growth was its highest in seven quarters, according to management.
Price around the results
Flat revenue did not prevent a swing to loss
Sapphire Foods reported consolidated revenue of Rs 888.03 cr in Q2FY27, down 0.33% sequentially, while expenses rose 1.32%. That mismatch reduced operating profit by 9.21% and pushed net profit from Rs 14.02 cr in Q1FY27 to a loss of Rs 1.51 cr. Interest rose 3.70% and depreciation rose 4.08%, leaving profit before tax at a Rs 1.91 cr loss.
Cost inflation and marketing spending narrowed margins
Operating margin fell to 14.29%, a 1.40 percentage-point sequential decline, because costs grew faster than revenue. Management said KFC's restaurant EBITDA margin was affected by raw-material and energy-cost inflation and higher marketing investments. The company also said Sri Lanka's restaurant EBITDA faced very high wage and energy inflation.
Sales momentum was better at the brands than at the group level
Management said KFC delivered 14% same-store sales growth in Q2FY27, while Pizza Hut delivered 5%, its highest in the last seven quarters. The company also told investors that it added 15 KFC restaurants and one Pizza Hut restaurant in Sri Lanka during the quarter. Group operating margin nevertheless declined from 15.69% in Q1FY27 to 14.29%, the second-quarter direction available here.
Margin stayed above the reported peer median
Sapphire Foods' 14.29% operating margin was 2.05 percentage points above the 12.24% median for 34 Consumer Discretionary peers that had reported the same quarter. Profit quality was weak this quarter: other income of Rs 5.62 cr was recorded even as profit before tax was a Rs 1.91 cr loss, making other income 294.24% of pre-tax profit on the reported measure. The tax rate also rose 7.35 percentage points sequentially to 20.62%, although the company still reported a tax benefit of Rs 0.39 cr because of the loss.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ |
|---|---|---|---|
| Revenue | ₹888 cr | ₹891 cr | -0.33% |
| Other income | ₹6 cr | ₹6 cr | -0.88% |
| Expenses | ₹761 cr | ₹751 cr | +1.32% |
| Operating profit | ₹127 cr | ₹140 cr | -9.21% |
| Operating margin (%) | 14.29% | 15.69% | — |
| Interest | ₹33 cr | ₹32 cr | +3.70% |
| Depreciation | ₹101 cr | ₹97 cr | +4.08% |
| Profit before tax | ₹-2 cr | ₹16 cr | — |
| Tax | ₹-0 cr | ₹2 cr | — |
| Net profit | ₹-2 cr | ₹14 cr | — |
| EPS (₹) | ₹-0.05 | ₹0.44 | — |
Operating margin of 14.29% compares with a Consumer Discretionary sector median of 12.24% across 34 peers that have reported Q2FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +2.60% | +3.14% |
Volume on the results session was 3.82× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- KFC delivered 14% same-store sales growth in Q2 FY27.
- Pizza Hut delivered 5% same-store sales growth, its highest in the last seven quarters.
Expansion
- Sapphire Foods added 15 KFC restaurants and one Pizza Hut restaurant in Sri Lanka during Q2 FY27.
Problems & risks
- KFC's restaurant EBITDA margin was affected by raw-material and energy-cost inflation and higher marketing investments.
- Sri Lanka's restaurant EBITDA was affected by very high inflation in wages and energy.
What to watch
- Whether operating margin holds above 14.29% after the sequential decline of 1.40 percentage points.
- Whether revenue improves from Rs 888.03 cr while expenses are contained below the 1.32% sequential increase seen in Q2FY27.
- Whether KFC's 14% same-store sales growth and Pizza Hut's 5% growth translate into better consolidated profit.