Burger King Holdings reported a higher quarterly profit as a lower tax rate and cost controls offset a sharp decline in customer visits to company-owned eateries in Germany and Mexico in March.

After doing well in January and February, Burger King experienced an unexpected drop in March traffic, particularly in Germany and Mexico, Chief Executive John Chidsey said in a statement on Wednesday.

The March slide came as fast-food companies stepped up competitive advertising. The company also may have miscalculated the impact of the Easter holiday shifting into April after falling in March last year, analysts said.

The March weakness appeared to be a little bit of a mixed bag of both of those things, Oppenheimer & Co analyst Matthew DiFrisco said.

Burger King, the world's No. 2 hamburger chain, trimmed its fiscal 2009 outlook, citing concerns about ongoing economic weakness, competition and swine flu, and said it had taken steps to woo customers in both Germany and Mexico. Its shares closed down 3.3 percent on Wednesday.

PROFIT RISES

The Miami-based company said net income rose to $47 million, or 34 cents per share, in the third quarter, ended on March 31, from $41 million, or 30 cents per share, a year earlier. Analysts on average had expected 33 cents, according to Reuters Estimates.

Burger King, which reduced general and administrative costs by 11 percent in the latest quarter, said currency exchange rate fluctuations hurt earnings by 3 cents a share.

Revenue at the chain, which offers a variety of burgers, chicken sandwiches, salads and breakfast items, rose 1 percent to $600 million.

Burger King, which has nearly 12,000 restaurants, has been sprucing up older eateries, rolling out premium sandwiches, extending hours and adding value-menu items like the Cheesy Bacon BK Wrapper sandwich to catch up with rivals.

Worldwide, sales at Burger King's restaurants open at least one year rose 1 percent. In North America, same-store sales rose 1.6 percent.

Worldwide company restaurant margins for the quarter were 11.7 percent, down from 13.2 percent a year earlier.

Burger King blamed customer traffic declines in March, higher labor costs in Germany and increases in food, paper and product costs worldwide for the fall in restaurant margins.

Germany was the real problem child during the quarter, executives said. Bigger rival McDonald's Corp recently said it has seen sales soften in Germany.

Elsewhere, the Mexican government has ordered restaurants to limit operations in Mexico City. Burger King's 118 stores there are offering only take-out and drive-through service, Chidsey said on a conference call.

As a result, Burger King expects double-digit sales declines at established Mexico restaurants in May and June.

Burger King now expects to earn $1.39 to $1.42 a share this year, excluding items, down from its prior outlook of $1.44 to $1.49. The forecast includes an estimated hit of 10 cents from movements in currency exchange rates and is in line with analysts' consensus estimate of $1.41 per share.

Burger King shares fell 56 cents to close at $16.55 on the New York Stock Exchange on Wednesday. Shares in McDonald's, the world's largest hamburger chain, are down 12.5 percent so far this year while shares in Burger King have fallen 31 percent.

(Reporting by Lisa Baertlein and Dhanya Skariachan in Bangalore; Editing by Steve Orlofsky and Tim Dobbyn)

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