McDonald's Japan, the nation's biggest fast-food chain, posted a five-fold increase in annual net profit on Thursday and predicted further growth as it opens new stores and refreshes its menu.

McDonald's Holdings Co Ltd (Japan), nearly half owned by McDonald's Corp, forecast net profit would rise 28 percent in 2008 as it plans to open 130 new stores and put strength into offering low-cost menu items and promoting coffee.

Net profit soared to 7.8 billion yen in 2007, up from 1.55 billion the year before. The result was roughly in line with an average estimate of 7.7 billion yen from four brokerages surveyed by Reuters Estimates.

Among the reasons for the surge was the popularity of Mega Macs -- four meat patties layered between three slices of bun with cheese and lettuce.

That and new breakfast menus, along with expanding the number of 24-hour stores, helped the company ride out its disclosure in November that it may have sold salads and other items past their expiration dates at as many as four Tokyo outlets after employees switched product labels, although December sales took a temporary hit.

For 2008, the company forecast net profit to rise to 10 billion yen. Analysts on average are predicting a profit of 9.7 billion yen.

It wants to open a total of 300 new stores by the end of 2010.

McDonald's plans to put particular strength into promoting its coffee, which currently sells for 100 yen ($0.94) a cup -- a fraction of the cost of a Starbucks latte -- echoing the policy of the U.S. McDonald's, which is making a push into the coffee market by opening coffee bars in thousands of stores.

McDonald's Japan Chief Executive Eikoh Harada told a gathering of investors that while his company already has a strong share of the regular coffee market in Japan, it needs to improve the image of its brew.

We need to show them that McDonald's has not only the best value but also the best taste, he said.

Other efforts will include expanding the company's menu of 100-yen foods and the introduction of new premium sandwiches in what Harada acknowledged was likely to be a tough year due to worries about the economy and slowing consumption.

McDonald's Japan shares have lost 8 percent since the start of 2008. They ended down 0.4 percent on Thursday at 1,714 yen. ($1=106.27 Yen) (Editing by Mike Miller)

Japan