JDE Peet’s Reports Strong Half-year 2020 Results

• Record in-home (CPG) sales growth driven by developed markets

• CPG performance largely offsets away-from-home

• Good recovery in away-from-home starting in June

• Adjusted EBIT organic growth of 10.5% to EUR 642 million

• Underlying profit increased by 12.0%; underlying EPS of EUR 0.79¹

• Leverage improved to 3.4x, from 4.2x at end of FY 19

• Successful completion of IPO

(BUSINESS WIRE) -- A message from Casey Keller, CEO of JDE Peet’s

“JDE Peet’s delivered strong performance in the first half of 2020, demonstrating the resilience of our business and brands despite the unprecedented economic and social disruption of COVID-19. Our balanced coffee and tea portfolio allowed us to quickly adapt to rapidly changing consumer habits, following the dynamic shift of cups from the away-from-home to the in-home environment. Early in the crisis, our team took proactive steps to ensure the health and safety of employees worldwide, and protect our business operations, enabling us to continue serving customers and consumers without supply disruption. Despite a volatile environment, we delivered very strong adjusted EBIT growth, reflecting our pure-play focus as well as a disciplined approach to cost management. In addition, we are well on track to meet our deleveraging goal. Starting in June, we’ve seen a good recovery in our away-from-home businesses as local markets begin to recover from lockdowns. Given our strong portfolio of products and channels, we are uniquely positioned to continue to gain market share as we pivot to meet the needs and opportunities of our customers and consumers around the world.”

Outlook

In the first half of 2020, JDE Peet’s was affected by the outbreak of the COVID-19 pandemic, which led to unprecedented circumstances for our company, employees, customers and suppliers. Throughout the crisis, our primary focus remained the same: the assurance of employees’ health and safety and maintaining business continuity. Our company and the wider coffee and tea category continued to show strong resilience during the height of the COVID-19 crisis, despite global economic uncertainty. Our global manufacturing and supply network, combined with a large portfolio of trusted brands and our strong, diversified go-to-market approach, means we are well-placed to withstand future economic uncertainties.

While uncertainty remains on the future implications COVID-19 may have on global markets, we have seen positive signs of improvement starting in June as markets began to reopen. Assuming this trend continues, we expect positive organic sales growth for FY 20. We also expect that our adjusted EBIT growth for FY 20 will be within our medium to long-term range of 5-8% with increased marketing and promotions in H2. We are well on track to reduce our leverage to below 3x net debt to adjusted EBITDA by the end of H1 21.

¹ Underlying profit (per share) excludes all adjusting items (net of tax). More information can be found in the Interim Financial Statements. Per share data are based on a pro-forma average number of shares of 499 million.

Update on COVID-19

Since the outbreak of the COVID-19 pandemic, we have taken proactive, precautionary measures to ensure the health and safety of our employees, and to protect business continuity. Through our brands, we have also donated more than 20 million cups of coffee and tea to the health care sector and foodbanks.

The measures taken by governments around the world to reduce the outbreak have resulted in a noticeable shift in coffee and tea consumption from away-from-home to in-home, and to a significant increase in sales through e-commerce. These trends supported performance in most of our CPG businesses - most notably in the developed markets - but negatively impacted performance in our away-from-home operations. Across the business, April and May were most severely impacted. Starting in June, we have seen good recovery in our away-from-home businesses.

Our teams continue to closely monitor the evolution of the pandemic - and the related changes in consumer behaviour it triggers - to ensure that we follow customer and consumer demand and adjust our operations accordingly.

Financial Review Half-Year 2020

In H1 20, total sales decreased by 1.1% on an organic basis. CPG sales continued to grow across segments, largely offsetting the impact COVID-19 has had on our away-from-home businesses, which represents ~25% of total sales. The organic sales growth reflects a volume/mix of -0.9% and -0.2% in price. Net acquisitions increased sales by 0.1% while foreign exchange had a negative impact of 1.8%. Total reported sales decreased by 2.9% to EUR 3,236 million.

Adjusted EBIT increased organically by 10.5% to EUR 642 million driven by double-digit growth in all three CPG segments and Peet’s, offset by a decline in the Out-of-Home segment. Including the effects of foreign exchange and scope changes, adjusted EBIT increased by 9.1%.

Underlying profit - excluding non-recurring items - increased by 12.0% to EUR 393 million, due to a higher operating profit, which was partly offset by higher tax charges. Free cash flow of EUR 402 million included costs related to the IPO and higher levels of inventory required to maintain supply continuity during the COVID-19 crisis.

Net leverage improved to 3.4x net debt to adjusted EBITDA from 4.2x at the end of FY 19. We continue to make significant progress on our deleveraging priority and we are well on track to reduce our leverage below 3.0x by the end of H1 21.

Our liquidity position remains strong, with total liquidity of EUR 1,222 million consisting of a cash position of EUR 504 million and available committed RCF facilities of EUR 718 million.

Financial Review Half-Year 2020 - By Segment

CPG – Europe

Organic growth consisted of 5.2% volume/mix growth which was partly offset by a price effect of -0.5%. This positive volume/mix effect was largely driven by the continued success of our Beans and Single Serve offerings, as well as increased in-home consumption because of changing consumer behaviour during the COVID-19 lockdowns. Reported sales increased by 3.7% to EUR 1,652 million, including a foreign exchange impact of -1.0% mainly due to the depreciation of the Norwegian krone and the Polish zloty. Adjusted EBIT increased organically by 16.3% to EUR 558 million in H1 20, driven by higher sales and lower expenses during the COVID-19 crisis.

CPG – LARMEA

Organic growth was driven by volume/mix growth of 7.0%, which was slightly offset by a price effect of -0.8%. The volume/mix effect was driven by continued strong growth in the Single Serve and Freeze-dried instants offerings. Reported sales decreased by 3.1% to EUR 492 million, including a foreign exchange impact of -9.4% driven by the depreciation of the Brazilian real, the Russian ruble, the Turkish lira and the South African rand. Adjusted EBIT increased organically by 34.4% to EUR 109 million in H1 20, mainly driven by higher sales and lower expenses.

CPG – APAC

Organic growth consisted of a volume/mix effect of -0.2%, offset by a positive price effect of 0.3%. Australia, New Zealand and China experienced strong in-home growth during the COVID-19 crisis. The away-from-home businesses were challenged during the COVID-19 lockdowns. Reported sales decreased by 1.1% to EUR 308 million, which included a foreign exchange impact of -1.2% related to depreciation of the Australian dollar, New Zealand dollar and Singapore dollar. Adjusted EBIT increased organically by 74.4% to EUR 69 million in H1 20 largely reflecting lower operating expenses and a soft comparable basis.

Peet’s

Organic growth consisted of a volume/mix effect of -4.1% and a price effect of 3.4%. Peet’s CPG business delivered strong double-digit organic sales growth, driven by the shift to in-home consumption and the popularity of Peet’s premium Beans, Ground and Single Serve offerings. Sales in the coffee stores and away-from-home business were significantly impacted by the COVID-19 lockdowns. By the end of June, most coffee stores were open with pick-up, delivery and limited inside service. Adjusted EBIT increased organically by 18.2% to EUR 50 million in H1 20, largely driven by the growth in CPG and the transition of the ready-to-drink coffee business to a licensing partnership with Keurig Dr. Pepper.

Out-of-Home

The organic sales decline was driven by volume/mix of -27.3% and a price effect of -2.1%. The Out-of-Home segment was significantly impacted by the COVID-19. Many customer channels were closed - including offices, education, BaReCa (Bars, Restaurants, Cafes), travel and tourism. Limited service was maintained where possible in our coffee stores with pick-up and delivery. Across the business, April and May were most severely impacted by the lockdown restrictions. However, starting in June when restrictions were gradually lifted across markets, we saw good recovery. Reported sales decreased by 29.8% to EUR 336 million, including a foreign exchange impact of -1.0% and 0.7% related to scope changes. Adjusted EBIT decreased from EUR 89 million in H1 19 to EUR (8) million in H1 20 due to declining sales. We implemented furloughs and temporary lay-offs to reduce labour and operating costs. Savings in operating expenses were offset by bad debt provisions.

Other Information

Successful completion of the IPO

On 29 May 2020, the company was successfully listed on the Euronext Amsterdam stock exchange.

Underlying profit for the period

Conference call & audio webcast

Casey Keller (CEO) and Scott Gray (CFO) will host a conference call for analysts and institutional investors at 10:00 AM CET today to discuss the half-year results 2020. A live and on-demand audio webcast of the conference call will be available via JDE Peet’s’ Investor Relations website.

About JDE Peet’s

JDE Peet’s is the world's largest pure-play coffee and tea group by revenue, serving approximately 130 billion cups of coffee and tea in the financial year ended 31 December 2019 (“FY”) in more than 100 developed and emerging countries. With a portfolio of more than 50 leading global, regional and local coffee and tea brands, JDE Peet’s offers an extensive range of high-quality and innovative coffee and tea products and solutions to serve consumer needs across markets, consumer preferences and price levels. In FY 2019, JDE Peet’s generated total sales of EUR 6.9 billion and had on average 21,255 employees worldwide. The JDE Peet’s global portfolio includes: Jacobs, Peet’s, L’OR, Senseo, Tassimo and Ti Ora. For more information please visit www.JDEPeets.com.

Important Information

Market Abuse Regulation

This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

Presentation

The annual accounts of JDE Peet’s N.V. (the Company) and its consolidated subsidiaries (the Group) are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). In preparing the financial information in these materials, except as otherwise described, the same accounting principles are applied as in the combined carve-out financial statements of the Group as of, and for, the year ended 31 December 2019 and the related notes thereto. All figures in these materials are unaudited. In preparing the financial information included in these materials, most numerical figures are presented in millions of euro. Certain figures in these materials, including financial data, have been rounded. In tables, negative amounts are shown in parentheses. Otherwise, negative amounts are shown by "-" or "negative" before the amount.

Non-IFRS Measures

These materials contain non-IFRS financial measures (Non-IFRS Measures), which are not liquidity or performance measures under IFRS. These Non-IFRS Measures are presented in addition to the figures that are prepared in accordance with IFRS. The Group's use of Non-IFRS Measures may vary significantly from the use of other companies in its industry. The measures used should not be considered as an alternative to profit (loss), revenue or any other performance measure derived in accordance with IFRS or to net cash provided by operating activities as a measure of liquidity. For further information on Non-IFRS Measures, see "Non-IFRS Measures" in the Group’s financial statements as of, and for, the six months ended 30 June 2020.

Forward-looking Statements

These materials contain forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995 concerning the financial condition, results of operations and businesses of the Group. These forward-looking statements and other statements contained in these materials regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved. Actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. There are a number of factors that could affect the Group’s future operations and could cause those results to differ materially from those expressed in the forward-looking statements including (without limitation): (a) competitive pressures and changes in consumer trends and preferences as well as consumer perceptions of its brands; (b) fluctuations in the cost of green coffee, including premium Arabica coffee beans, tea or other commodities, and its ability to secure an adequate supply of quality or sustainable coffee and tea; (c) global and regional economic and financial conditions, as well as political and business conditions or other developments; (d) interruption in the Group's manufacturing and distribution facilities; (e) its ability to successfully innovate, develop and launch new products and product extensions and on effectively marketing its existing products; (f) actual or alleged non-compliance with applicable laws or regulations and any legal claims or government investigations in respect of the Group's businesses; (g) difficulties associated with successfully completing acquisitions and integrating acquired businesses; (h) the loss of senior management and other key personnel; and (i) changes in applicable environmental laws or regulations. The forward-looking statements contained in these materials speak only as of the date of these materials. The Group is not under any obligation to (and expressly disclaim any such obligation to) revise or update any forward-looking statements to reflect events or circumstances after the date of these materials or to reflect the occurrence of unanticipated events. The Group cannot give any assurance that forward-looking statements will prove correct and investors are cautioned not to place undue reliance on any forward-looking statements. Further details of potential risks and uncertainties affecting the Group are described in the Company’s filings with the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten).

Market and Industry Data

All references to industry forecasts, industry statistics, market data and market share in these materials comprise estimates compiled by analysts, competitors, industry professionals and organisations, of publicly available information or of the Group's own assessment of its markets and sales. Rankings are based on revenue, unless otherwise stated.

No Offer

These materials do not constitute an offer to sell or issue, or a solicitation of an offer to purchase or subscribe for, any securities in any jurisdiction.

Non-IFRS Measures

This press release contains Non-IFRS financial measures (Non-IFRS Measures), which are not liquidity or performance measures under IFRS, and which the Group considers to be alternative performance measures. These Non-IFRS Measures are presented in addition to the figures that are prepared in accordance with IFRS.

Adjusted EBITDA

Adjusted EBITDA are defined as operating profit before depreciation and amortisation, adjusted for the same factors as listed under Adjusted EBIT.

Adjusted taxes

Adjusted taxes are defined as taxes adjusted for the effect of the non-recurring items mainly related to non-deductible expenses and changes in tax reserves and recognised deferred tax assets.

Net leverage ratio

Net leverage ratio is defined as net debt divided by Adjusted EBITDA of the last twelve months.

Organic Adjusted EBIT

Organic Adjusted EBIT are defined as Adjusted EBIT translated at the prior year average foreign exchange rate and adjusted for scope changes (a.o. M&A and divestures). To determine organic Adjusted EBIT in a given year, Adjusted EBIT in that year is translated at the average foreign exchange rate of the comparable year and excludes Adjusted EBIT from acquired/divested companies until 12 months following the transaction date.

Organic sales

Organic sales are defined as revenue translated at the prior year average foreign exchange rate and adjusted for scope changes (a.o. M&A and divestures). To determine organic sales in a given year, revenue in that year is translated at the average foreign exchange rate of the comparable year and excludes revenue from acquired/divested companies until 12 months following the transaction date.

Organic sales growth

Organic sales growth is defined as the growth in organic sales between the given and comparable year.

Underlying profit

Underlying Profit is defined as Adjusted EBIT for the period including Financial Income and Expenses, Adjusted Taxes and Adjusted Income from associates and joint ventures.

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