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Yum Brands upbeat about China division

Associated Press Modified: October 10, 2012 at 1:30 pm •  Published: October 10, 2012

LOUISVILLE, Ky. (AP) — The owner of the Taco Bell, Pizza Hut and KFC chains predicted Wednesday its fast-growing China business will serve up another round of strong profit growth next year despite a slowing economy in its most important overseas market.

Yum Brands Inc. executives also foreshadowed more menu rollouts in the coming year at its flourishing Taco Bell business in the U.S.

The Mexican-style chain has seen its sales grow on the popularity of its Doritos Locos Tacos, with shells made out of Nacho Cheese Doritos, followed by a rollout of more upscale food created by celebrity chef Lorena Garcia.

Yum's stock rose more than 8 percent to $71 in afternoon trading.

One day after reporting a quick profit turnaround in its China division, Yum executives said they're confident of achieving 15 percent profit growth in China next year, driven partly by a record pace of restaurant openings and new product introductions.

"Our China business is having another strong year," Yum Chairman and CEO David C. Novak told industry analysts Wednesday. "But as I've said before, China is going to have its inevitable ups and downs. ... We now face a slowing economy. But that doesn't change our long-term outlook in China one iota. Our annual performance has been pretty consistent, and I expect this to continue."

China's economic growth fell to 7.6 percent in the three months ended in June. That's robust by the standards of the United States and Japan, where growth this year is forecast in low single digits. Analysts are forecasting a rebound in China late this year or in early 2013.

"China, even with its challenges, is still growing at a reasonable pace," Novak said.

Yum said Tuesday its third-quarter operating profit in China rose 22 percent, a quick rebound from a decline the quarter before.

That turnaround in China, coupled with strong profit growth at its restaurants in the U.S. and elsewhere around the world, helped Yum post a 23 percent increase in its third-quarter net income.

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