Earnings call transcript Q2 2023

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Operator

Good morning and welcome to the Nomad Foods' Second Quarter 2023 Earnings Call. Please note that this event is being recorded.

I would like now to turn the conference over to Anthony Bucalo, Head of Investor Relations. Please go ahead.

Anthony Bucalo

Hello and welcome to the Nomad Foods' second quarter 2023 earnings call. of Head Bucalo, Anthony Investor Relations. I'm joined CEO; and I'm on the our Descheemaeker, Stéfan by Samy call And Zekhout, CFO. our

disclaimer begin, forward-looking include we based attention our I like This on Company's the presentation. to of Slide of call statements our that Before prospects, conference X expectations, view draw would on to may your the are with this in and and uncertainties, risks in differ due our release, presentation, cautionary intentions press to which at and this language. time. Actual the our investor our filings are slide results discussed SEC, may includes which

the non-IFRS end measures read to financial be on a of our within discuss the also will and non-IFRS These be our available for website. today. replacement the together non-IFRS with We the reconciliations should considered IFRS not appendices release financial at find earnings the during IFRS should call in presentation results. and slide measures can Users

XXXX. for well adjusted acquisition-related otherwise refer figures payments, from certain FX exceptional comments presentation items, related and costs, this that financial losses. or those gains will been non-cash for here noted, have numbers. as expenses XXXX to within note and Please on information adjusted adjusted All as share-based represents Unless figures adjusted

With over that, to will you I hand Stéfan.

Stéfan Descheemaeker

and This the Nomad accelerating of sales Tony, momentum into the fifth you had you, from sales. the over thank on quarter, our today. us second. our as Thank quarter consecutive another for organic in the call joining second strong performance was first quarter carried

strategies early the commercial well of we and chain are executing our great on way set another delivered supply CAGNY fully this announced at teams results world-class Our year. and we

quarter half and our out history, EPS has stronger our by as come guidance, raising challenges our a and over second solid are of operational first buyback. boosted time, each have course many navigated we we organization. Nomad the XXXX performance, share Today,

to outbreak right inflationary to adjusted war of our COVID-XX to necessary the nimbly pricing challenges. was We our over resources long-term. worked the closely This year, we that in with And pandemic. led continue ensure the investing the to recover raw the We costs. material in Ukraine retailers last our business to have would to supply adjust Brexit

derisked and our include while sources fish of adding also our farmed supply successfully to chain, new supply adapting geographies, We high-quality fish. species new

this Our products Basa new is a farmed consumer fish our become becoming of year, exciting platform innovation cornerstone our fast with have favorites. launch

half several We have more in markets. across new second of launches year planned the

long-term sheet our to and us providing Importantly, more debt and our we maturities flexibility. XXXX balance extended further XXXX, strengthening

XXXX, strategic building savings maximize management supply plans leveraging the to A&P new volume share growth cost investments market and of to rebuild include For deploying momentum. our portfolio, chain to our our growth, value and capabilities fuel revenue

two half our have are first that to accomplished of We share we year. in pleased first this the goals

Our fund growth. savings in is supply chain program topline now full swing, helping

taken we in revenue strides manage Additionally, costs. and capabilities, great helping growth drive have mix management positive developing our

We our execution leg A&P on new are laser of third now investments program. the strategy, of focused the our

year. last increase QX time versus will the in A&P Our same significantly

with return in normalized momentum building and These of be mid-August rate the will consistent more September. to with history. this starting we schedule year, Additionally, aligned annual into back-to-school will our A&P rollouts

results and in drive quarters. A&P the in beyond, investments in will the volumes increase coming back share This year we help the and our of our market half improving in expect

on A&P probably also we our levels normalizing remain strong. we people. compensation ensure are investments, In that our Nomad’s fundamentals addition great to reward to

our is is target performance on strengthening. and flow Our balance cash sheet

that to see should and improving to and reaches Looking volume of XXXX we rest ahead year, into investments share as trends the market, carry the beyond. our the new A&P market expect

teens revenues recap like I'd grew offsetting pricing, with single-digit Quarterly metrics, high financial mixed with revenues. quarter high declines. key to beginning and volumes organic second our that, X.X%, With X.X%

margin to last and flat adjusted initiatives grew costs. million, cost flat programs. control to primarily EPS our while Adjusted at year X.X% due interest EBITDA price share by €X.XX €XXX versus per Gross rising was came held XX.X%, in at

dollar was US$X.XX our EPS per current QX rates, share. spot adjusted At

quarter Our the the that's strong revenue double-digit half performance from last in benefited increase second over the rolled from price of year.

As observed see but material important some in we yet are QX reporting, to most our of deflation. moderating, have prices real raw our we

service supply and support deliver second push. and we that a should of cycle are excellent to results, continues our cost half Our chain A&P in virtual management customer

been share level the levels quarter in this in regain service high-service for XX.X%, push second market service our defending year. will the has crucial our the of to key to levels Our momentum of and basis points. half Maintaining rose in XX up be

strategic our key inputs. of the past we Additionally, few learned how are year. great XX% in materials we for of the than become have flexible and inflation acquired the covered more more for a the from remains procurement raw disciplined and raw and deal We've material much we years,

X% materials covering share process left started expectations our in with our take of raw We've We to pricing about of lost We've of developing some trends consistent uncovered XXXX. this price to just market. favorable our advantage for the quarter, the due strategy. value primarily X%

address We this our new strategy the expect A&P challenge. for to year

growth up and and expect to rest for media intensive performance us volume we return XXXX. an the the improving year, of setting share increased more in volume a With for activity, promotional

range share per allocation. rates. Finally, per challenged adjusted environment our per with two have capital pressures efficient our post-pandemic on $X.XX over the guidance €X.XX past increasing return the €X.XX represents to become EPS repurchase, future to company. more and of €X.XX to leaner current visibility from years XXXX The our potential €X.XX excludes a any share. we raising to and adjusted to to impact guidance of previous our macro This per us and share share dollar an are spots share EPS business This $X.XX at

and far supply drive efficiency been chain pleased I'm to so excellent commercial execution to year. of that plans our say the has XXXX this

how investments. of levering power example A&P successfully Goodfella's brands the about pizza Additionally, Europe. we great Continental markets A for across in the is are I'm excited upcoming

strongholds Goodfella's Ireland in of UK, Spain. in in exclusive our tradition XXXX. with we distribution end in outside Carrefour year, France Goodfella's the distribution year, and of Last launched the until October France We last successfully of and rolled specifically

is gone. exclusivity That

our are all We extending France food total distribution the distribution large reach now of to to half retailers expect in points. and

range salesforce. are We the our for promotion leveraging managed support by dedicated promotion using where freezers and possible,

And Our our another the chain challenge Adriatic high is region great shaping seasonal up summer. is of supply meeting demand. for

a end summer last good travel the bans. hot and COVID weather had of We due year to

year, high pulling seasonal demand. benefiting better build prepared this meet new we we We and And are stocks media consumers. to even from to innovation. also are to QX, that inventory ensuring now through We peaks through season. is cover product This have

in in We our systems remain Our progress the made our significant high-XXs, the XXXX building another across out company service the half. our levels pillar in of capabilities RGM strategy. revenue the growth region management core rolling is first in

playbooks, building further more are our and in reports is dedicated decisions We standardized facts-based This ensuring for portfolio supporting descriptive in robust strategic end-to-end RGM support greater enhancing analytics. resulting value. processes each market, RGM

back spend A&P half. bulk the than are We the that by with in coming of boosting XX% year-on-year, more

This level less year-end, We a helped higher is on expect by putting combination roughly promotion to by was environment, A&P a which of in being aggregate advertising closer compared of sales XXXX, when inflation of milder significantly reach to and X% pressure sales. X% margins.

of compete, new many As volume with narrow, share, frozen already are in consumer great our The market [A&P] especially of volumes within and saw the improvement where flat. we competition food our both media we green gaps at battles. QX the reaches and we markets price shoots seeing in must-win

Finally, bought first nearly share of shares the first this €XX backed year. roughly million We in flow we performance, by for total. million cash worth good since last quarter, X.X time the shares quarter repurchased of

We repurchased. opportunistic have will shares remain on been and

our about We continue beyond. outlook and to second half be optimistic

our food markets, others. is are frozen positive volumes turned half in good year-to-date food and our overall in outperforming First, shape, more the category of the category. have improving sales food sequentially most markets in across digits double than Frozen up category

messaging UK our Italy broad-based and through our Belgium quarter, strong of kept emphasizing second Spinach. Second, we advertising revamped the Peas, the up majority Fish must-win includes consumers This campaigns across superiority our battles.

improving sales region, by pistachio have protein the your initiatives With for half won been Germany quarter campaign a king or two in our new Macho innovation like the summer great of source boosted of new this this are our seeing media. brands ice and we our plant we remains Cuisine projects markets. innovation awards share with for and flatten In trend in place, a Adriatic value in Green new cream.

expect the to in pick half. We up back this

results will more I that, review call to detail. Samy? and now hand financial Samy over in With to our guidance the

Samy Zekhout

your participation for Thank thank today. you, the and all you Stéfan, on call

million, key metrics X. revenues, increased more volume Stéfan pricing X.X% Turning details discussed with beginning losses, provide to offsetting to on operating Slide I our €XXX organically, as quarter up reported with will earlier. which second X.X%

Second In environment, quarter pricing, gross XX.X%, delivered reflected and effects. a performance solid gross This a QX. costs. of impacted unfavorable but We cost moderating performance challenging margin strong RGM were margin negatively steep an flat delivered margin execution higher improving, we by X.X% year. revenues of versus in last

of increases, flat As deliver we and RGM we cost margin the price look the out discipline supported half year, by back to to gross expect execution.

P&L. rest Moving to of the the

increased with grew landed Adjusted margin. EBITDA decrease basis €XXX up of X% million, margin X%, more €XXX year. last the Cost million of grew versus year. X% a EBITDA an of versus XX €XX last a to quarter goods profit gross XX.X%, Our in to of sold million €XXX points. at than second stable Adjusted increase million

per translates flat QX. per Finally, to adjusted terms in in S. share at rates. €X.XX spot EPS current U. dollar $X.XX of share This was

for remains for on capital us a beyond. expect free line for XX% the materially more track roughly Cash priority our Slide cash as keep quarter, help This to conversion, million we this first our X. to should the and This of improved year. with and Turning from cash year annual second XX% of flow guidance consider our performance historical €XXX and crucial generation averages. in allocation and we adjusted flow on is top target

in working to from generated first expected XXXX. of conversion of versus And a €XX of it of unfavorable a XX%, million half up was XX% reversed free for the QX. cash in conversion QX half, first the some significant our ratio saving adjusted capital benefit In that we rate flow step

result, a decreased first €XX working half. As the million million €XX in capital to

year. CapEx million versus up was million €XX of €X last

€X support million. investments increased business. while We in at was Changes €XX €XX million, strategic cash in to the continue tax million to million €XX to interest cash

in November XXXX now seeing of higher As earnings QX from impact we charges refinancing our interest we full QX. the planned report, our are in

August of our X let's is as guidance which review turn Slide X, are based we XXXX to XXXX. exchange to on With foreign This today. guidance, updating that, rates

organic XXXX. we our digits First, first for mid-single for are maintaining the revenue projection

expect will than pricing offset declines. We more volume

we As less more develop in topline. of the approach volume historical XXXX, balanced line better volumes we expect and traditional pricing and and significantly to driving a are averages. our project we flow, With with cash price with mix

XX%. our cash ratio of to XX% conversion the range in be We expect to

We million expect of overall adjusted free cash year. for the €XXX flow roughly

excludes at given range impact EPS EPS XXXX adjusted rates. future per €X.XX share Stéfan per allocation. our updated increased potential our to visibility of $X.XX report. and are QX share earlier, This spot additional repurchase, share in U.S. of to dollar current to As share mentioned the €X.XX now our in the return guidance per capital expect $X.XX or any we adjusted last on We business raising

turn to now over session back will Q&A. I the to you. Operator,

Operator

Thank you.

The begin question Please now question-and-answer will go with comes with Instructions] John Mizuho. session. Baumgartner first [Operator We the ahead.

John Baumgartner

for the back increase first to more can if the Stéfan, have a you speak up Maybe you lined half. A&P bit wondering off,

trying half? more increase pure the I the it in fresh? this addressing Are the anything consumers frozen you actual, you that sort of Is back campaign? more spending Captain of convert is else Captain communications, from to from the Aside year? guess, How you're are sort in amount, about there differently thinking refreshing to messaging

Stéfan Descheemaeker

Yes, excellent John. you, it's question. Thank an

back-to-school. timing, QX, really the like is a with Starting preparation by thing first of something timing, the way. The it's

less to going maximum actually, than the say, really start, it's impact. have to let's So a in week,

piece first the that's where go. to we're So independently from going

value be going and UK, of Birds than really, speaking, The rate in for we it the in going Italy, obviously your UK Italy, of us, terms an have figure terms the for Captain obviously, second already right the while or in the investments. something especially highest like aggressive is it's first more with quality, hero now. think seasonal piece example, Then for in going claims, in never. Fingers is Eye. return is where with on to must-win iconic We're of a be is more like countries to we're point, Then superiority which Captain also we to qualitatively I Captain, battles, which doing us, countries to start

to going and to like pattern obviously a to for let's that's then and then more impact XXXX. So have big increase; come for be, messages, going it's really the key say, on But global XXXX investments. battles start to the week return in must-win something maximum best second, also and

John Baumgartner

momentum, And space, to innovation and follow-up, single for pipeline. the Thanks had the the back meals, Okay. on emphasis that that. just veggie inflationary now, a frozen of increasing some environment to on. coming innovation have Prior serve pretty good we and sort you so premium meals

serve assessing are enhanced here? on going forward? and think single margin opportunities I and of from mix innovation? accretion Given of the that How that attractive premium Does environment do about sort as remain you focus how price sort that from in guess, opening consumer, point the we now

Stéfan Descheemaeker

Well, have That's first to think good piece. the the your thing point, a I is, we momentum.

Basa, things You the to, things. fish, also and let's remember do facing fish doing opportunity also farmed farmed that last taken from is we've two really same say, two to at with the is fish, is with go which in which a question time, this really Asia, something but innovation supply which about year, the high-quality step chain in coming in fish up high-level, we're

only. say, away is quarter a and up as fish; fish obviously innovation from, stepping in white First let's we second, are – we diversifying a

big this year. a us piece for that's So

Second we're let's opportunistic past. also to more, a is approach the say, piece taking compared

when focus it's on remember and with basically, must-win as UK – which Goodfellas, may the in battles. we going acquired mantra, business said, it's well, Well, the You mostly is we because to Ireland.

role. for was we is dislocation that's retailers. exclusivity in with France, been category that what really But this can of And we with believe in then [Cafu] basically last that like year, a develop other starting a starting to Goodfellas. to see when we pizza pizza a there the even with we've you're example, play all And do,

for to is because also innovation move. basically, ability So the us,

can move fantastic We we richness country is amazing. have our What such of do the portfolio to is one of number to a from then SKUs, another. obviously

right of of in terms is So need how be don't the then another pizza, we example are to now. the moving lifting In great you during just that's things and can by affordability, kind a to country. kind more we way price doing And of of affordable crisis environment.

the of So algorithm in piece innovation as doing, the – to moving is the but and well things that's the we're really months kind for obviously more because, future weeks for and are well. opportunity is coming we key yes, – come future our all

John Baumgartner

Thanks, Stéfan. Okay.

Stéfan Descheemaeker

You’re welcome.

Operator

BTIG. The Please next with Saleh comes with question go Peter ahead.

Peter Saleh

Thanks. Great.

start going changed And a little It a this of it missed if I the little out that guys I Sorry that? the sounds A&P just bit curious has Can to you thought on amount there? than thinking on, comment you. was Thank pushed anticipated. is investment your earlier. I comment but investment. on further like bit

Samy Zekhout

of amount and on focusing Peter. we hi, are absolutely not the we year. a the do activity sync remain has we've must-win in substantially would [indiscernible] What changed. amount We of is relating investment some campaigns preparing to the No, simply our the in-store the done to in committed of The – battle investment the intervention on. clearly with what activity

us, want is the regain We share to an for intent up So there game. the to momentum. clearly

now. going momentum a great have on We right

the forward. with about the in-store intervention in let's be pattern is expect improvement QX, with moving category and that some would second as going share there we come, a of which level, which together forward to so move incremental be in half substantial our is at A&P to QX, And that of say, sequential we

Peter Saleh

Great. kind seeing this kind Or any Green this is Cuisine are And you category? meat. can just it of improvement? I same just you. days and of growth Thank What seeing on the category? ask more lackluster these on plant-based you Are in of in

Stéfan Descheemaeker

what the stabilization Well, the more of we is Board. across sales see

protein, where to in quite present slightly are all share we substantially. off increasing market believe UK Green there's past, and always of the Cuisine is expectations the plant great of a dreamed believe remains never increasing We Well, going with kind something somewhat that is stay a is, that Germany to bit but still We in we category. we is while. decreasing a that are after

we're us for is meat. difference ourselves to The also limiting not

players some fish, from that protein, very a we vegetable, have that category. talking protein, terms and plant-based us about chicken, makes have plant the of different have makes We in us, we I'm in of the

it's us, and still the we this but keep believe We back, investing for present. overall, to it's at than And be going category. some come So in else, will anything category. we investing stable stage, more in in

Peter Saleh

Thank much. you very

Operator

next Tanwanteng Please The ahead. go Jon with Instructions] [Operator question comes with CJS Securities.

Jon Tanwanteng

good I pricing talk Hi, remarks, in taking trend it you the my Thank in how morning. or to and did so? of don't versus know how you but if this your and you differential that's prepared QX labels your private the expect quarters about over questions. you evolving couple next mentioned for

Samy Zekhout

to me as No, we I question, but have let come don't fact. with think responded we such, the that

about say, terms of was see And it we difference we And You difference. in very I X%. of in then inflation, The that region region me XX% a be pre, now were of may mentioned in we time mean, right X%. remember let's is pricing that just compared latest more price last the specific. talking let the more to

we will what terms of in substantial a it's it is to A&P, want We the also to and but That where a things only us future. starting help think change increase that needed. which the surgical may mind we for believe the I the know, part that that you But because very not some with volatile are again, something reduce coming, promotion HX pricing And is also obviously together September, as in in environment bit of moving. gap. game as do see

Jon Tanwanteng

very Thank it. Got you much.

so the Is so you of as to go pricing gap get in improvement say? But the of closer. to that far action from label gap far targeting that own some maybe private you gap the fair closing forward, price. So increasing that been your or is has

Samy Zekhout

there's has growing to I And been was been fair. closing super the reducing that just with gap and to gap to with of to always widened. good our has has is There increased. the That's one, correct. want that again I a that be gap news Stéfan we've gap clearly and gap think together rest it's confusion. model the narrow the just clear, interpretation sure It's on make And exactly And gap. share which but regulation, point gap a now no operating your is is it's that business there that and down. that starting

Jon Tanwanteng

severe. Got year regions those in in the or year, maybe obviously, it. the We're And over last this are seeing that this given inventories you've underlying changed exceptional and heat was due mentioned even performance years? businesses again, year differences there then an more geographies waves. the for similar how you second, the year, you've especially Adriatic Are seeing and you, and to specifics

Stéfan Descheemaeker

inventory learned than you a year, bit caught we building pleased I remember still mean, lesson. To acquisition were we've I and terms sales, and ever despite by pleased this by point, we and the some well, performance. last missed obviously great and surprise your of That's more a in a season the mean, obviously, we're Well, headline. very

at service QX level perfect. will XX.X%. that year inventory, last our So so in we already stage to started be this is level service The build

I would fantastic that So doing be team is job. a that's the bad. way and not

great whether, And the countries say, lower. temperature weather are So what substantially. QX let's and see a bit was was QX, a like, The let's the we QX time, say, right And sales-wise. Since – bit job was say, is at has not great it's then, obviously, I which the great. something let's mid-June. came the it's doing mean, weather was operationally a really, not increased

So we're very very, another year. expecting good

Jon Tanwanteng

Great. Thanks, guys.

Operator

question-and-answer I ahead. any session. like remarks. turn to conference over the back our for This Stéfan would Descheemaeker concludes Please go closing to

Stéfan Descheemaeker

year. for strong protected you XXXX, challenging After on have Thank of our first sales delivered your and organic participation we a the half the margins in growth today's call.

provide the half have continue second we We service of to excellent our the retailers, a and innovations for to year. compelling pipeline

into we category and performance proud expect we share A&P the and and remains our deploy new market, are customers Frozen we to food volume value great market improve a our leaders. As sequentially. for consumers,

are to beyond. deliver ambitious financial on and XXXX our you all. We for Thank objectives track

back Operator, you. to

Operator

has sir. This Thank today's Thank presentation. for now concluded. conference attending you, you

may disconnect. You ahead. great now Have day a

Nomad Foods Limited (NOMD) 9 Aug 232023 Q2 Earnings call transcript