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JDE Peet's Posts 2% Rise In Core Profit, Says It Will Cope With Inflation In 2022

DE Peet's, one of the world's largest coffee companies, on Wednesday reported a 2% rise in full-year core profit that beat analysts' expectations, and forecast "stable" gross profit for 2022 despite strong inflation.

Shares surged 8.6% to €28.56 euros by 0919 GMT.

Full-year earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at €1.30 billion ($1.47 billion).

Analysts in a company-compiled poll had expected EBITDA to be unchanged from 2020, at €1.28 billion.

Fabien Simon, chief executive officer, JDE Peet said he was confident that the company, which owns a range of coffee and tea brands including Pickwick, Senseo, Tassimo, TiOra and L'OR, would "successfully navigate an unprecedented year of inflation in 2022."

Earnings 'Better Than Expected' 

In a note on the earnings Jefferies analyst Martin Deboo said both earnings and sales were better than expected in 2021.

However he noted the company had forecast stable gross profit in 2022 rather than its usual metric, operating profit, which "implies presumably material uncertainty" around marketing and wage costs.

Deboo said Jefferies expects operating profit will decline in 2022 and rates shares "underperform".

Coffee Demand

Demand for coffee is inelastic, and JDE Peet's has some pricing power due to its strong brand names.

But it must strike a balancing act in passing on higher green coffee costs on to consumers to prevent them from defecting to other brands.

Most of its coffee is sold at supermarkets, though it also has a smaller business in coffee shops led by Peet's, a prominent brand in the United States, which got a boost after markets reopened in the second half of 2021.

The company forecast double-digit sales growth in 2022 but 'stable' gross profit.

It kept medium term targets of 3-5% sales growth and single digit operating profit growth in place.

News by Reuters, edited by Donna Ahern, Checkout. For more A-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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