August 9, 2017 / 6:53 AM / a year ago

UPDATE 2-McDonald's Japan raises annual profit forecast as consumer appetite recovers

* Upgrades FY op forecast to Y16.5 bln from Y15 bln previously

* H1 profit Y9.4 bln vs Y47 mln year earlier

* 19 months of double digit same store sales growth

* H1 monthly per restaurant sales highest since 2001 listing (Adds executive comment, share price)

By Sam Nussey

TOKYO, Aug 9 (Reuters) - McDonald's Holdings Co Japan Ltd upgraded its full year profit outlook on Wednesday as the fast-food chain extended a recovery from a series of food scandals that hit consumer appetites.

The company, an affiliate of U.S. fast-food giant McDonald's Corp, forecast full year operating profit to be 16.5 billion yen ($150.05 million) for the year ending December, compared to an earlier forecast of 15 billion yen and up 138 percent on the previous year.

"We now believe the business has firmly entered a steady growth stage," chief executive Sarah Casanova told reporters, though she cautioned that "from a financial perspective we are not completely recovered yet."

The fast food chain was rocked by a series of safety scandals dating back to July 2014, when a major Chinese supplier of chicken was accused of food-safety violations, sparking a slump in sales and earnings.

In an effort to lure back customers McDonald's Japan has undertaken and accelerated a wide ranging store modernization programme, with around 85 percent of stores set to complete renovation by year-end.

Consumers have also been encouraged into stores by a revolving array of time limited items including Hawaiian-themed loco moco burgers, the chocolate banana flavoured Pikachu McFlurry and Pokemon-themed Happy Meals.

Same store sales have grown in double digits for the last 19 straight months, with first half per restaurant sales higher than at any time since the company was listed in 2001.

The company has not been directly affected by Japan's temporary increase in tariff on frozen beef from the United States and some other countries that came into force in this month as it sources almost all its beef from Australia.

"Whether or not we'll see a secondary impact... it's too early to tell," Casanova said. "At this stage we have no intention to adjust pricing."

While the company has also raised its full year net profit forecast to 20 billion yen, which would be the highest ever since listing, this includes around 9 billion yen of special income and the effects of tax accounting, the CEO said.

Operating profit in the six months through June was 9.4 billion yen. That compared with a 47 million yen operating profit a year earlier.

The safety scandals triggered two years of operating losses for the company before a return to profit in the year ending last December.

McDonald's Japan shares closed up 0.9 percent before the earnings announcement. That compares with a 1.3 fall in the benchmark Nikkei 225 index. The share price has risen more than 50 percent this year.

$1 = 109.9600 yen Reporting by Sam Nussey; Editing by Muralikumar Anantharaman & Shri Navaratnam

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