YUM! BRANDS - the parent company of KFC and Pizza Hut - has warned it expects a drop in profits as it continues to reel from a controversy over its chicken suppliers in China.
A fall in profits would snap an 11-year run of profit growth of at least 13 per cent.
The US company, based in Kentucky, gave the grim forecast after profits in the fourth quarter fell 5 per cent, with a key sales figure in China dropping.
The company expects sales at restaurants in China to plummet 25 per cent for January and February.
Since an investigation aired on Chinese television on December 18, Yum! has been dealing with an ''onslaught of negative media attention'' over its chicken suppliers.
The TV station reported that Yum!'s suppliers were ignoring regulations and giving chickens unapproved levels of antibiotics.
A government investigation was concluded on January 25 and Yum! has agreed to adopt measures to strengthen its oversight of suppliers. But the company says it will take time to recover.
''Our primary emphasis now is to rebuild consumer confidence and sales in China,'' the company said.
Even though Yum! has far more locations in the US, its restaurants in China are more profitable because the cost of doing business there is lower and there is more room for growth.
China's economic growth has been a boon for Yum!, helping it register a streak of growth for more than a decade.
Although the investigation into chicken suppliers did not focus solely on KFC, the chain was hit hard because it is the biggest chain in the country.
Yum! said net income fell to $US337 million ($324 million) in the fourth quarter, from $US356 million a year ago, on revenue up 1 per cent at $US4.15 billion.
Yum! said it opened 1976 fast food restaurants for the year, including 889 new outlets in China.