JDE Peet’s Q2 2023 sales rise 2.4% to EUR €3.988M

JDE Peet’s reported that Q2 2023 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 three out of four 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 four-year 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.

Commenting on the results, Fabien Simon, CEO of JDE Peet’s, said, “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.”

In the first half of 2023, JDE Peet’s initiated the transition of an omni-channel organisation in Europe, and towards a local portfolio in Russia. Simon said the company will increase its global consumer reach, with the intended acquisition of Maratá’s coffee and 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,” he said. “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.”

In the first half of 2023, JDE Peet’s said it has made good progress against its strategic sustainability roadmap and multi-year objectives, with its long-term sustainability agenda is now deeply embedded across the entire organisation and in its strategic decision making. The carbon accounting system has been rolled out and enables the company to track its carbon footprint up to the individual SKU level and allows to have a full view of its carbon reduction performance alongside financial performance.

During the first half of 2023, JDE Peet’s announced its intention to launch a new, fully compostable coffee capsule and a new paper pack for our soluble coffee ranges, which is recyclable and is the first of its kind in the coffee market. The company said the coffee from this new paper pack will generate the lowest carbon footprint within its existing range of products.

In addition, JDE Peet’s has become a member of the ILO Child Labour Platform, to tackle the root causes of child labour in the coffee supply chain, and it published its Water Stewardship Policy and its Nutrition Policy.

Since the start of the war in Ukraine, 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.

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)

Total reported H2 2023 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%.

H2 2023 Financial Review by Segment
Europe delivered a sequential improvement versus H2 22, although slower than originally anticipated. Organic sales growth of 0.3% was driven by an increase in price of 8.9% and a decrease in volume/mix of 8.6%, as positive volume/mix performance in the Away-from-Home business was more than offset by a volume/mix decline in the CPG business.

Notable strong performance was delivered by countries such as France, Switzerland and most Eastern European markets and brands including L’OR, Kenco and Pickwick. Reported sales decreased by 0.2% to EUR €2.268 million, including a net effect of -0.4% from foreign exchange and changes in scope/other. Adjusted EBIT decreased organically by 8.4% to EUR €476 million in H1 23, due to lower volumes, inflationary pressure, and due to an increase in advertising spend. Based on a 4-yr CAGR, the organic adjusted EBIT growth was -4.4%.

LARMEA: Organic sales growth of 10.0% was driven by an increase of 7.0% in volume/mix and 3.0% price. Volume/mix performance continued to be broad-based across most geographies, product portfolio and price points, with notable strong performance delivered by countries such as Ukraine, Morocco and Mexico. Reported sales increased by 5.6% to EUR €734 million, including a net effect of -4.5% from foreign exchange and changes in scope/other. Adjusted EBIT increased organically by 17.4% to EUR €125 million in H1 23. Based on a 4-yr CAGR, the organic adjusted EBIT growth was 19.1%.

Peet’s Organic sales growth of 8.6% was driven by an increase of 5.0% in price and 3.5% in volume/mix. Same stores sales and ticket size were up in Peet’s’ US coffee retail stores, and Peet’s CPG business continued to deliver competitive growth. Reported sales increased by 9.8% to EUR €576 million, which included a positive foreign exchange effect of 1.3%. Adjusted EBIT increased organically by 10.1% to EUR €67 million. Based on a 4-yr CAGR, the organic adjusted EBIT growth was 10.3%.

APAC: Organic sales growth of 4.7% was driven by an increase of 4.5% in price and 0.3% in volume/mix. Positive volume/mix and organic sales growth performance in most CPG businesses was partly offset by relatively soft performance in select Away-from-Home businesses. Sales performance was geographically broad-based and supported by strong brand performance from brands including Campos, Moccona and Super. Reported sales increased by 1.8% to EUR €397 million, including a foreign exchange effect of -2.9%. Adjusted EBIT decreased organically by 21.6% to EUR €51 million in H1 23, primarily impacted by one-off costs related to a temporary supply chain disruption connected to one of our main manufacturing facilities in the region. Based on a 4-yr CAGR, the organic adjusted EBIT growth was 4.7%.

Summing up JDE Peet’s H2 2023 and looking ahead, Simon said, “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.”

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