YumChina (NYSE:YUMC)

[Snoopy]

PS I think my logic and maths is right. But as to whether the base constant currency figure used was 1USD = 6.7518Rmb, that is the bit I am not sure about.

There is another way to produce constant currency earnings results. You could start with the exchange rate on the first day of the financial year and assume that remains constant throughout the year.

	SOCY/SOFY2018	CY/FY2018
Average Exchange Rate		USD1- = 6.6174Rmb
Daily Exchange Rate	USD1- = 6.488Rmb

This would mean that, on average, comparing 'constant exchange rate earnings based on the opening day exchange rate' and 'actual earnings over all of FY2018', that we shareholders would have shared in more "Rmb revenue per US dollar reported" in FY2018 compared to the unadjusted case where earnings were translated at different exchange rates throughout the year.

It also would mean that:

1/ IF we use a constant currency based on the first day of FY2018 exchange rate as a base rate, THEN
2/ The 'constant currency' FY2018 earnings results, based on the representative opening day in FY2018 exchange rate (reported in USD), means the USD earnings reported in this way are more than actually occurred. AND
3/ To return these earnings to actual USD levels, we must multiply the earnings given in 'constant currency terms' by a factor of: 6.488/6.6174 =0.9804

Note: The above assumes that YUMC earnings translated back to a US reference currency were actually cross currency valued at that average exchange rate.

By changing the reference point, our adjustment has gone the other way! I don't know which of 'Aspect1' or 'Aspect 2' is the more correct way of making a constant exchange rate correction. But given we are looking at a 2% change from the quoted figures either way, I might just forget about doing any corrections and stick with the quoted figures that I know are wrong, but not by much.

SNOOPY