Jde Peet'S Nv

Good morning, everyone, and welcome to JDP's earnings call related to our performance of 2024. With me are Rafa Oliveira, CEO, and Scott Gray, CFO. After my introduction, Rafa will take you through the operational and financial highlights related to our business performance in 2024. After that, Scott will provide more details on the financial performance. Rafa will then share his observations and insights from his first 100 days in the role, followed by a discussion on our outlook and capital allocation priorities for 2025. After that, we will be happy to answer your questions. Our press release was published at 7 a.m. CET this morning. Both the release and the slide deck for this call are available for download in the investor section of our website. A full transcript of this conference call will be made available there as soon as possible after this call. Before handing over to Rafa, I'd like to draw your attention to the disclaimer on slide three regarding non-IFRS measures and forward-looking statements. Please take a moment to review this information carefully. With that, I'm pleased to hand over the call to you, Rafa.

Thank you, Robin, and welcome, everyone. I'm very honored to speak with you today as the new CEO of J.D.E. Peets and share our 2024 highlights, which has been a strong year. After Scott reviews our 24 financial performance, I will share my insights, opportunities, and key priorities we have identified to create and unlock value in the short and long term. Before Scott dives into the financial details, let me quickly walk you through the key highlights of 24 on slide five. As you saw in this morning's press release, we delivered strong broad-based results, outperforming our increased outlook across top line, profit, and free cash flow. On an organic basis, our sales increased by 5.3% and our adjusted EBIT grew by 10.4%. Our free cash flow is back above 1 billion euro mark, highlighting our strong cash generating capabilities in a challenging environment. This is definitely a great feat given the additional green coffee inflation we had to deal with again in 2024. The total level of inflation we faced in 2024 was about €350 million. We were able to offset this with efficiencies, productivities, and price increases across products and markets. This allowed us to protect our gross profit, enabling necessary investments for growth and profitability. Despite the short-term volume pressure we sometimes face during retailer negotiations, our market shares held up pretty well, especially in faster-growing categories such as aluminum capsules, beans, and pure incense. And where market shares were impacted in recent months, either during retailer negotiations or because other industry players lagged with their price increases, we've seen a rebound in recent weeks. 2024 also marked the consolidation of Maratar and Caribou, which we acquired in the first quarter of the year. The integration went well, and contributions are aligned with the business plans. Our strong financial performance and capital allocation allow us to restore a more conservative balance sheet by year-end. We reduced our net leverage to 2.7, bringing it back to the same level as at the end of 2023, before the acquisitions mentioned above. I firmly believe that we exit 2024 from a position of strength, with stronger foundations and good momentum. We therefore propose to increase the dividend by 4.3% and plan to initiate a share-by-back cycle of up to 1 billion euros, which I will discuss later in this call. I want to quickly mention some innovations that started last year. Driven by consumer relevance, they will lie at the heart of our strategy. enabling us to deliver on consumer preferences while elevating the value of every cup. We launched a string of new products to address evolving and expanding consumer needs and preferences, while staying true to our commitment to quality, sustainability, and adaptability. We introduced, in 17 markets, the world's first fully recyclable at-home paper refill pack for soluble coffee, with at least another five markets to follow in 2025. This paper-based refills for brands such as Jacobs, Lohr, Kenco, and Dow Egberts reduce packaging materials by a stunning 97% compared to the traditional jars and significantly cut CO2 emissions. Consumer acceptance is exceeding our expectations, with, for instance, in the UK, 20% higher volumes than regular refills. Results are really promising. To expand coffee consumption occasions in Asia, Old Town is launching hot and cold range in premium instant mixes for consumers that prefer a cold cup rather than a hot at certain occasions during the day. These new ranges include unique flavors, including classic and hazelnut, which, by the way, is Old Town's best-selling flavor. We also expanded into exciting new spaces. Pease, for instance, became the first major brand in the U.S. to launch an ultra coffee concentrate for at-home baristas, combining convenience and exceptional taste in one bottle. The product has quickly been gaining traction and is exceeding expectations. With Lorexpresso, we partnered with Ferrari to introduce the strikingly bold Passionate Rosa, including capsules, whole beans, and a Lorexpresso barista. This unique offering is being rolled out across more than 25 countries. providing a unique opportunity to activate the lower brand. It contributed to 40 base points market share increase the lower brand achieved in aluminum capsules. Those are just a few examples that show the capacity this company has to innovate. As I mentioned, this is a key pillar for FMCG, and you should expect an increasing contribution from consumer-led innovations in the future. Sustainability also plays an important role in our day-to-day activities. I'm impressed by our progress and ongoing projects of innovation, reducing costs, enhancing trust, and securing the future of coffee and tea. Here, KDP is a leader, and we are on track to reach our long-term targets and commitments. We are proud that our sustainability achievements earn us a spot in the prestigious Dow Jones Best-in-Class World Index. Building on this momentum, we will keep investing while ensuring our sustainability performance and programs are more closely connected to our brands, consumers, and customer relevance. There is room to leverage more here. I wanted to start with these highlights as they give you a good guidance on the strengths of our results and what we can leverage further for the years to come. Scott will now take us through the full-year financials in more detail. After that, I will share my initial observations and key priorities for 2025. Over to you, Scott.

Thank you, Rafa, and good morning to all of you. We delivered very well against our full-year outlook, which we increased at the time of the publication of our half-year results. Organically, our sales increased by 5.3%, our adjusted gross profit increased by 6.1%, and our adjusted EBIT by 10.4%. reflecting a strong delivery and a healthy improvement of the P&L. When including the net effect of Forex and the consolidation of Marata and Caribou, our sales increased by 7.9% to 8.8 billion. Our adjusted EBIT increased to 1.3 billion, while our free cash flow exceeded 1 billion euros. This is the strongest set of results we have delivered since the IPO. I will now walk you through the drivers of our results, starting with sales. Our organic sales growth was driven by pricing of 4.5% as we continue to pass through the necessary pricing to offset incremental inflation, and a solid volume mix of 0.7%, which was driven by Larmia and Peets. Our categories contributed to the organic growth with, for instance, double-digit growth in beans, high single-digit growth in capsules and instance, and mid-single-digit growth in roasting ground. Organic sales growth was also broad-based across geographies, brands, and channels, as you will see in a minute on the next slide. The negative foreign exchange impact of 2.1% was mainly driven by the depreciation of the Brazilian Rai, the Turkish Lira, and various other emerging market currencies. The 4.7% contribution from Scope reflects this year's first-time consolidation of Maratá and Caribou. Let's now flip to slide 11 to have a look at our sales performance by brand, channel, and geography. Our global brands, Jacobs, Lohr, and Peetz, together grew by 3.9%, while our regional and local jewels, such as Kenco, Dow Egberts, Marcia, and Palau, together delivered 6.1% growth organically. Channel-wise, our in-home channels grew sales organically by 5.6%. while our away-from-home business, excluding the coffee stores, grew by 3.1%, and the coffee stores increased sales by 5.7% organically. From a geographical perspective, developed markets in aggregate delivered 1.1%, while emerging markets grew by 18.3% organically. Let's now go to slide 12 to look in more detail at our EBIT performance. Our organic adjusted EBIT increased by 10.4%. What you can see in this bridge is that during the year, we continue to focus on protecting our absolute gross profit. We increased prices to offset higher green coffee prices, but we also drove productivities to offset inflation and SG&A. Our AMP spend was slightly down organically, reflecting a relatively high comparable base due to the launch of Lord Barista in the U.S. in 2023, which required less investments in its second year. In Europe, APAC and PEATS, the level of AMP spend was actually stable or up. On the next slide, slide 13, you see an overview of the organic sales and adjusted EBIT performance by segment. Looking at the performances by segment, you can see that all four segments contributed to both top line and profitability. In Europe, pricing was slightly up, while volumes in various European markets, such as Germany and the Netherlands, were impacted during the price negotiations with retailers that took place in the first as well as in the second half of 2024. Markets such as France, the UK, Ireland, and in the Nordics, and brands including Lohr, Dow Egberts, and Kimco drove organic sales growth. The adjusted EBIT increased organically by 4.3%, reflecting an increase in gross profit and a stable level of A&P. In Larmia, organic sales growth was driven by 3.3% volume mix and 17.9% price growth. Most markets delivered positive volume mix, while Brazil experienced soft market conditions. The strong price growth reflected the required additional price increases to offset the additional increase in green coffee prices. Organic sales growth was driven by brands such as Palau in Brazil and Jakobs in Eastern Europe and South Africa. Adjusted EBIT increased organically by 25.3%, which mainly reflects an increase in gross profit, lower AMP requirements following the initial rollout of lower barista in the U.S., and improved efficiency, as well as a low base of comparison. At feats, the in-home and away-from-home businesses contributed quite evenly to its organic sales growth of 5.7%, driven by a 2.1% increase in volume mix, and a 1.8% increase in price. Peet's in-home business continued to deliver competitive growth across its Peet's, Stumptown, and Intelligentsia brands. In Peet's U.S. coffee stores, same-store sales and ticket size were up. In China, Peet's continued to deliver strong double-digit organic sales growth. Adjusted EBIT increased organically by close to 24%, driven by strong operational performance, cost efficiencies, and a favorable 16 million euro insurance payout in H-124, partially offset by a step-up in AMP investments. In APAC, organic sales growth of 1.5% was driven by an increase of 3.8% in price, which was partially offset by a decline of 2.3% in volume mix, as solid in-home performance was partially offset by soft performance in APACs away from home business. Sales performance was geographically mixed with solid performances in countries such as China, Australia, and the Philippines, partially offset by softer performances in countries such as New Zealand and Malaysia. Brand-wise, organic sales growth was driven by brands such as Makona, Maxwell House, and Campos. The adjusted EBIT for APAC increased organically by 2.3% with a stable level of A&P spend. Let's now take a look at our net profit development in absolute terms and per share on the next slide, slide 14. As you can see on this slide, our underlying earnings per share benefited from strong organic operational performance in 2024, which was partly offset by higher taxes and higher net financing costs due to the temporary increase in gross debt related to the early refinancing of selective maturities. driven by the timing of the closing of the M&A transactions. In addition, the underlying profit was impacted by a non-cash change in the fair value of our equity derivatives related to the share price decline during the year. As a result, the underlying EPS of €1.50 was €1 lower than last year. Excluding the mark-to-market of equity derivatives, the underlying effective tax rate would have been around 25%, and underlying earnings per share would have been 11.7% higher than in 2023. Let me now share a bit more detail on our free cash flow and net debt developments on slide 15. Our strong free cash flow generation of over $1 billion in 2024 reflects strong operational performance and thus higher EBITDA while absorbing slightly higher CapEx. Movements in working capital had a net positive contribution to cash as the increase in inventory values as a result of green coffee inflation was more than offset by the positive effect of inflation on our payables. Overall, our free cash flow conversion was 67% in 2024. The net debt bridge on the right-hand side shows that our net debt position increased by 439 million euro, which reflects the transaction considerations related to Maruta and Caribou. On the next slide, slide 16, you can see the evolution of our debt leverage. As you can see in this historical chart, we have had a strong track record in terms of reducing leverage following capital allocation decisions. While our leverage temporarily increased due to the two acquisitions in 2024, our strong free cash flow generation enabled us to quickly trend backwards towards our optimal leverage with a net leverage of 2.73 times as of year end. And as shown on slide 17, our debt continues to have a strong maturity profile with an average maturity of 4.4 years with all future maturities well below our three-year average free cash flow level. After redeeming our January bond, we have no further maturities in 2025. Our average cost of debt is 1.32%, which remains one of the most attractive costs of debt in the broader consumer sector. Our total liquidity remained high at 2.7 billion euro at the end of 2024, comprising of a cash position of 1.2 billion euro and fully undrawn revolving credit facilities of 1.5 billion euro, which do not mature until 2028. That concludes my part, and I will now turn it back over to Rafa.