JDE Peet's, one of the world's largest coffee companies, lowered its annual earnings target, saying the impact of a decision to stop selling its international brands in Russia was uncertain, sending its shares down nearly 3%.
The group, which owns the Kenco and Jacobs coffee brands as well as Pickwick tea, is still active in Russia and has manufacturing units near Saint Petersburg and in Novosibirsk, but is working on establishing the business as a stand-alone operation.
JDE Peet's on Wednesday set a new range for its full-year organic adjusted earnings before interest and tax (EBIT) forecast of between a low single-digit decline and a low single-digit increase from last year's €1.23 billion.
It had previously guided for low single-digit growth.
The company reported €581 million in adjusted EBIT for the half year, down 3% from last year's period, but beating analysts' forecasts of €552 million.
Sales grew organically 3.5% to €3.99 billion.
"The results were better than feared and the FY23 [Full year 2023] guidance revision is (again) not significant," said Credit Suisse Research analysts in a note to clients.
'Encouraging' Business Development
Barclays analysts highlighted 'encouraging' business development in America, outside the United States, but also pointed to a 'miss' from JDE's European business.
"The transition to local brands makes sense as they don't want to damage their international brand portfolio profile," Barclays commented on the shift in JDE's Russian business.
However, they added that the move gave rivals an opportunity to take market share amidst growing competition.
JDE's rebranding of its Jacobs coffee brand in Russia resulted in an impairment of €185 million in the first half of the year, it said, adding that revenue contributions from Russia will be 'meaningfully lower' in the second half.
Sales in Ukraine grew strongly in the first half, JDE said.