Fast food giant Yum Brands suffers ahead of China spin-off
Yum Brands, the company behind KFC, Pizza Hut and Taco Bell, has seen disappointing quarterly results in its China business just before spinning it off into a separate company.
Sales in the country slipped partly due to protests against western restaurant brands in the wake of the South China Sea dispute.
The firm plans to spin off its China restaurants at the end of October.
Overall global revenue fell 3% to $3.32bn (£2.5bn) for the third quarter.
Shares in Yum were down 2.2% in after-hours trading.
The largest Western restaurant operator in China said that sales at Yum China restaurants open at least one year fell by 1% in the three months ending 3 September.
Analysts had expected a 4% sales gain for Yum's China business which is the US company's biggest profit driver.
South China Sea backlash
According to Yum, the disappointing result was in part due to protests against Western companies following international criticism over Beijing's territorial claims in the South China Sea.
In July, an international court in The Hague ruled against those claims, backing a case brought by the Philippines.
"If not for this event, we believe the China Division would have delivered its fifth consecutive quarter of positive same-store sales growth," Yum said.
The company will separate its operations in China into a separate company which will start trading on 1 November at the New York Stock Exchange.
The decision to sell the China unit means that any setbacks in the country will have less impact on the US stock.
Yum had come under mounting pressure from investors to split the units, after it had suffered a number of setbacks and food safety scandals.
In September, Yum announced Chinese firms Primavera Capital and Ant Financial, an affiliate of Alibaba, as major investors in its new China unit.