MILAN – JDE Peet’s, the world’s leading pure play coffee and tea company, reported today half-year results for 2023. Sales rose to EUR3.99 billion from EUR3.90 billion, a rise of 3.5% on an organic basis reflecting a price rise of 6.8% and a volume/mix effect of minus 3.3%. InHome sales increased by 2.2% and sales in Away-from-Home increased by 9.0%.
Net profit for period was EUR197 million, down 61% from EUR508 million for the comparable period a year earlier and a company compiled consensus of EUR322 million.
For the year ahead the company now expects adjusted EBIT to fall within the range of a low single-digit organic increase and a low single-digit organic decline. This compares with previous guidance for a low single-digit organic growth.
Total reported sales increased by 2.4% to EUR 3,988 million. Excluding a -1.6% effect related to foreign exchange and 0.4% related to scope and other changes, total sales increased by 3.5% on an organic basis, with 3 out of 4 segments growing between 5% and 10% organically.
Organic sales growth reflects a price effect of 6.8% and a volume/mix effect of -3.3%. In-Home sales increased organically by 2.2% and in Away-from-Home by 9.0%, resulting in a 4-yr organic CAGR of 6.7% for In-Home sales and 0.6% for Away-from-Home sales.
Total adjusted EBIT decreased organically by 3.0% to EUR 581 million as an increase in gross profit was offset by an increase in SG&A. Including the effects of foreign exchange and scope changes, adjusted EBIT decreased by 7.9%.
Underlying profit – excluding all adjusting items net of tax – decreased by 21.4% to EUR 411 million. This performance was mainly driven by an unfavourable impact from fair value changes in derivatives and forex and a lower level of operating profit, and includes an underlying effective tax rate of 23.5%.
Net leverage of 2.8x net debt to adjusted EBITDA at the end of H1 23 was kept well below 3.0x, with a net debt of EUR 4.2 billion at the end of H1 23.
Free cash flow was EUR 14 million in the first half of 2023, which was lower than the comparative period in 2022 due primarily to the normalisation of working capital as well as higher capital expenditures.
JDE Peet’s’ liquidity position remains strong, with total liquidity of EUR 2.2 billion consisting of a cash position of EUR 0.7 billion (excluding restricted cash) and available committed RCF facilities of EUR 1.5 billion.
Update on Russia
Since the start of the war, JDE Peet’s has sought to ensure that its business in Russia is operated as a stand-alone business to the greatest extent possible. The company has now taken the next step by transitioning to a local portfolio of brands, which resulted in a non-cash impairment of EUR 185 million of the Jacobs brand in H1 23 and is expected to lead to meaningfully lower contribution from Russia in H2 23.
Outlook 2023
JDE Peet’s expects the business environment to remain volatile and vulnerable for the remainder of 2023. As there is uncertainty on the impact of the transition from international brands to local brands in Russia, the company now expects to deliver the following for full-year 2023:
- Organic sales growth at the high end of its medium-term range of 3 – 5% (unchanged)
- Adjusted EBIT to fall within the range of a low single-digit organic increase and a low single-digit organic decline (updated)
- Net leverage below 3.0x, with Free Cash Flow of around EUR 400 million, post normalisation of working capital, confirming an ongoing run-rate of EUR 1 bn on a 3-yr average (additional)
- A stable dividend (unchanged).
Fabien Simon, CEO of JDE Peet’s, stated:
“In the first half of 2023, we delivered resilient financial performance in a category that is globally adjusting in the aftermath of the pandemic, and coping with persistent inflation. Against this backdrop and despite an industry volume decline in Europe, we delivered mid-single-digit top-line growth, driven by our premium product portfolio, E-commerce acceleration and strong performance in the US and in emerging markets.
We continue to be guided by our renewed strategic framework to become more global, more digital and more sustainable. We are now very pleased to witness the in-market outperformance of JDE Peet’s globally from the disciplined execution of our strategic priorities.
In a fast evolving environment, we remain focused and nimble. In the first half of 2023, we have initiated the transition of an omni-channel organisation in Europe, and towards a local portfolio in Russia. In parallel, we will increase our global consumer reach, with the intended acquisition of Maratá’s coffee & tea platform in Brazil and the launch of L’OR Barista in the US.
While anticipating an acceleration of our organic sales growth in H2, we expect the business environment to remain volatile. As there is uncertainty of the impact of the transition from international brands to local brands in Russia, we believe it is more appropriate to guide our full year organic adjusted EBIT growth in the range of a low single-digit increase and low single-digit decrease.
The tangible progress of our transformation – brand health, team engagement, gross profit and sustainability, just to name a few – is positioning us well to deliver sustained shareholder returns and societal value.“
