Core Insights - Innovation is central to Nomad Foods Limited's (NOMD) management strategy, contributing to long-term growth and competitive advantage [1] - In Q1 2025, NOMD's gross margin increased by 90 basis points year-over-year to 27.8%, despite challenges such as retailer inventory destocking and modest sales [1][8] - The company is focusing on product innovation and advertising to maintain strong margins amid rising input costs [3][8] Innovation and Product Development - The relaunch of sub-brands like Fish Bar in Italy, targeting younger and higher-income consumers, has resulted in a 9% year-over-year increase in retail sales of fish products in Q1 [2] - The new Captain's Discoveries line in the UK aims to modernize traditional frozen meals, appealing to changing consumer tastes [2] - NOMD's innovation strategy is expected to increase as a percentage of sales in 2025, supporting margins despite rising input costs [2] Competitive Landscape - Competitors Conagra Brands (CAG) and The Kraft Heinz Company (KHC) are also enhancing their innovation strategies to remain competitive [4] - Conagra is modernizing its portfolio with acquisitions and focusing on consumer needs for convenience and flavor [5] - Kraft Heinz is expanding its product offerings with bold flavors and wellness-centric products [6] Financial Performance and Valuation - NOMD's shares have declined approximately 15.9% over the past three months, compared to a 6% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 7.93X, significantly below the industry's average of 15.74X [9] - The Zacks Consensus Estimate indicates year-over-year growth of 4.6% in sales and 7.3% in earnings per share for the current financial year [10]

Summary of Nomad Foods Conference Call Company Overview - **Company**: Nomad Foods - **Industry**: Frozen Food Key Messages - **Category Advantage**: Nomad Foods believes it has a competitive edge in the frozen food category, which has shown strong performance over the last decade, outperforming overall food trends [3][4][19] - **Portfolio Strength**: The company has a diverse portfolio in frozen food, including fish, vegetables, chicken, ice cream, and pizza, with two-thirds of its business focused on protein and vegetables [5][6][21][23] - **Market Share Focus**: Nomad Foods emphasizes the importance of market share, stating that it has maintained an average market share of 46% in its key categories, which represent about 37% of net sales [14][24] Financial Performance - **Sales Growth**: The company has consistently increased sales and EBITDA over the past nine years, with growth rates of 6%, 7%, and 10% in recent years despite market challenges [8][9] - **EBITDA Guidance**: For the current year, Nomad Foods expects EBITDA growth between 2% and 6%, with adjusted EPS projected between €1.82 and €1.89 [66][69] - **Free Cash Flow**: The company has generated over €2 billion in adjusted free cash flow from 2017 to 2024, with expectations of around €850 million in the coming years [69][70] Market Dynamics - **Category Growth**: The frozen food category is projected to grow at 2% in value and 1% in volume, with Nomad Foods stabilizing its market share despite some seasonal fluctuations [61][63][65] - **Competitive Landscape**: The company acknowledges the competitive pressure from private labels but remains focused on innovation and brand strength to maintain its market position [76][80] Innovation and Product Development - **Innovation Strategy**: Nomad Foods aims to increase its innovation rate, targeting 6.5% of its product offerings to be new innovations, leveraging successful products from one market to introduce in others [27][28][34] - **Product Renovation**: The company is committed to improving existing products, with a goal to enhance taste and quality, particularly in categories like pizza and fish fingers [31][33][34] Challenges and Opportunities - **Inflation Impact**: The company faced inflationary pressures, particularly in protein costs, which affected gross margins. However, it has chosen not to reopen negotiations with retailers to adjust pricing immediately [66][67] - **M&A Strategy**: Nomad Foods remains open to M&A opportunities but emphasizes a disciplined approach, focusing on synergies and avoiding high multiples [100][102] Future Outlook - **Long-term Growth Potential**: The company sees significant growth potential in frozen food, particularly in markets like Italy and Germany, where it plans to expand its product offerings [20][36][38] - **Consumer Trends**: Nomad Foods is adapting to changing consumer preferences, including a focus on health and convenience, which aligns with the growing popularity of air fryers and healthier frozen options [18][20][17] Conclusion - Nomad Foods is positioned well within the frozen food industry, leveraging its strong portfolio and market share while focusing on innovation and strategic growth opportunities. The company is navigating current challenges with a clear strategy aimed at long-term success.

Company Performance & Strategy - Nomad Foods' revenue reached €3.1 billion in 2024, demonstrating a 6% Compound Annual Growth Rate (CAGR) [11] - Adjusted Earnings Per Share (EPS) showed a 10% CAGR, reaching €1.78 in 2024 [12] - Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) exhibited a 7% CAGR, totaling €565 million in 2024 [12] - The company aims for 0-2% organic revenue growth and 2-6% adjusted EBITDA growth in 2025 [77] - Nomad Foods anticipates generating over €850 million in adjusted free cash flow over the next three years (2025-2027) [83] Market Position & Category - Nomad Foods holds the 1 brand preference in 12 out of 15 markets [19] - The company has a 46% weighted average value market share in its top 25 must-win battles [19] - European frozen retail sales amount to €55.4 billion, with food accounting for €39.2 billion and ice cream for €16.2 billion [15] - Meals made from frozen food cost €2-3 less compared to chilled equivalents [25] Innovation & Investment - Advertising and Promotion (A&P) spending increased by 14% year-over-year in 2023 and is projected to increase by 7% year-over-year in 2024 [38] - Innovation as a percentage of revenue is projected to reach near 5% in 2025 [41] - The company aims for 60% superior quality perception by 2025 and 80% by 2027 [43, 45]

Core Insights - The analyst has a strong background in equity research and investment analysis, with a focus on the U.S. equity market and consumer staples sector, indicating a belief in the resilience of defensive stocks for long-term investment opportunities [1]. Group 1: Analyst Background - The analyst holds certifications as FMVA and FPWMP, which provide skills for analyzing financial statements and building valuation models [1]. - Participation in the CFA Research Challenge has equipped the analyst with practical experience in equity analysis and industry research [1]. - The analyst graduated with a CGPA of 3.6 in Finance from Alexandria University in 2024, showcasing a solid academic foundation [1]. Group 2: Professional Experience - The analyst has worked with a confidential client, preparing investment reports across various sectors, including healthcare, consumer staples, and industrials, enhancing the ability to evaluate companies across diverse industries [1]. - In 2023, the analyst joined AIESEC, further developing leadership, communication, and teamwork skills through global exchange and project collaboration [1].

Market Overview - Volatility has returned to Wall Street, driven by tariff fears and high inflation impacting consumer sentiment [1][2] - Consumer sentiment index dropped to 50.8 in May, a 2.7% decline from April, marking one of the lowest points in 75 years [5] - Since January, consumer sentiment has decreased by nearly 30%, with short-term inflation expectations rising to 7.3% in May from 6.5% [6] Federal Reserve and Inflation - The Federal Reserve is unlikely to implement interest rate cuts in the near term, maintaining a cautious stance despite signs of easing inflation [8] - The consumer price index rose by only 0.2% in April, with a year-over-year increase of 2.3%, the smallest since February 2021 [7] Tariff Impact - President Trump's announcement of sweeping tariffs raised concerns about a potential global trade war, leading to market sell-offs [9][11] - A recent 90-day trade truce with China has temporarily calmed the situation, delaying additional tariffs [10] Investment Opportunities - Recommended focus on safe-haven stocks, particularly low-beta consumer staples with high dividend yields [3][4] - Philip Morris International Inc. (PM) has an expected earnings growth rate of 13.7% for the current year and a dividend yield of 3.09% [14] - Nomad Foods Limited (NOMD) has an expected earnings growth rate of 7.3% and a dividend yield of 3.80% [16] - Zevia PBC (ZVIA) shows a significant expected earnings growth rate of 38.7% for the current year [17]

Group 1: Trade Deal Impact - The stock market experienced a historic rebound following President Trump's announcement of a new trade deal with the United Kingdom, aimed at reducing trade barriers [1] - Several British ADRs are highlighted as potential investment opportunities due to the trade deal [1] Group 2: Nomad Foods (NOMD) - Nomad Foods is the largest frozen food company in Europe and has been identified as a strong buy with a Zacks Rank 1, having increased by 16% in 2025 [2] - EPS estimates for Nomad Foods have been trending higher, with an expected rise of 11% this year and a projected increase of 7% in fiscal 2026 to $2.31 [3][4] - The stock trades under $20 at a forward earnings multiple of 8.9X, indicating a favorable valuation [3] Group 3: Rolls-Royce (RYCEY) - Rolls-Royce is positioned favorably with a Zacks Rank 2, as U.K. car tariffs will be reduced from 25% to 10% on the first 100,000 imported vehicles [4][5] - The stock is currently priced around $10, presenting a favorable risk-to-reward scenario [5] Group 4: BP (BP) - BP, formerly British Petroleum, is trading under $30 and offers a 6.75% annual dividend yield, making it a potential buy-the-dip candidate [6][7] - The elimination of higher tariffs on steel and aluminum is expected to benefit BP significantly, as it faced issues related to infrastructure projects [7][8]

Financial Data and Key Metrics Changes - Reported net revenues decreased by 3% to €760 million, with organic sales declining by 3.6% and volume declining by 3.7% [23][24] - Gross margin increased by 90 basis points year on year to 27.8% [24] - Adjusted EBITDA decreased by 1.8% year on year to €120 million, while adjusted EPS fell by 5.4% to €0.35 due to net sales contraction [26][30] Business Line Data and Key Metrics Changes - Net sales for growth platforms rose by 36% year over year in the first quarter, with chicken performing particularly well [15] - Retail sell-through was slightly positive at +0.2%, indicating that sell-in led sell-through by nearly four percentage points [23] Market Data and Key Metrics Changes - The frozen category in Europe remains healthy, with growth recently accelerating, driven by improved volume and value gains [12][13] - The category has outgrown the overall food industry by nearly one percentage point over the past decade [12] Company Strategy and Development Direction - The company is focused on long-term health by continuing to invest in brands and products despite current headwinds [11] - A new master brand advertising campaign is set to launch, emphasizing the taste appeal and nutritional profile of frozen food brands, particularly in the fish category [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds from retailer inventory destocking and increased consumer value-seeking behavior, leading to a revised outlook for organic revenue growth [10][29] - The company expects organic sales to return to growth beginning in the second quarter, with profitable growth anticipated for the remainder of the year [23][31] Other Important Information - The company repurchased €49 million of shares and paid €25 million in dividends in the first quarter, marking a 152% increase in total cash returned to shareholders compared to the previous year [9][28] - Adjusted free cash flow conversion ratio fell to 24% due to higher working capital pressures [26] Q&A Session Summary Question: Impact of retailer destocking - Management noted that destocking was broad-based across 12 to 13 countries, with greater than expected impacts [36][37] Question: Outlook for category growth - Management confirmed that the category remains healthy, with expectations for market share growth despite some softness in the UK [40][41] Question: New product innovation and consumer shifts - Management indicated that new consumers are shifting from both smaller brands and private labels, with a focus on snacking occasions [48][51] Question: Input cost increases - Input costs are primarily rising in proteins, particularly chicken and red meat, due to demand and external factors like avian flu [58] Question: Pricing strategy amidst consumer trading down - Management acknowledged that consumers are seeking value, and pricing strategies will be a combination of various factors, including advertising and product innovation [64][66]

Financial Data and Key Metrics Changes - Reported net revenues decreased by 3% to €760 million, with organic sales declining by 3.6% and volume declining by 3.7% [23][24] - Gross margin increased by 90 basis points year on year to 27.8% [24] - Adjusted EBITDA decreased by 1.8% year on year to €120 million, while adjusted EPS fell by 5.4% to €0.35 due to net sales contraction [26][29] Business Line Data and Key Metrics Changes - Net sales for growth platforms rose by 36% year over year in the first quarter, with chicken performing particularly well [14] - Retail sell-through was slightly positive at +0.2%, indicating that sell-in led sell-through by nearly four percentage points [23] Market Data and Key Metrics Changes - The frozen category in Europe remains healthy, with growth recently accelerating driven by improved volume and value gains [11][12] - The UK market is experiencing some softness, particularly in the ice cream segment, which is expected to impact margins [41][68] Company Strategy and Development Direction - The company is focused on long-term health by continuing to invest in brands and products despite current headwinds [10][30] - A new master brand advertising campaign is set to launch, emphasizing the taste appeal and nutritional profile of frozen food brands, particularly in the fish category [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by retailer inventory destocking and increased consumer value-seeking behavior [9][10] - The full-year organic revenue, adjusted EBITDA, and adjusted EPS growth ranges have been lowered due to these challenges [10][29] Other Important Information - The company repurchased €49 million of shares and paid €25 million in dividends in the first quarter, marking a 152% increase in total cash returned to shareholders compared to the previous year [8][28] - The company expects to achieve profitable growth for the remainder of the year despite the current headwinds [23][31] Q&A Session Summary Question: Impact of retailer destocking - Management noted that destocking was broad-based across 12 to 13 countries and various segments, with greater than expected impacts [35][37] Question: Expectations for category growth and market share - Management indicated that the category remains healthy, with expectations for growth in the next quarters and a slight recovery in market share [39][40] Question: Insights on new product innovation and consumer shifts - Management highlighted that innovations are increasingly catering to snacking occasions, attracting new consumers from both frozen and fresh categories [47][50] Question: Input cost increases - Management clarified that input cost increases are primarily related to proteins, with no significant tariff impacts currently observed [58] Question: Pricing strategy amidst consumer trading down - Management acknowledged the volatility in consumer behavior and emphasized a balanced approach to pricing, innovation, and advertising [64][66] Question: Outlook for organic growth - Management expects a combination of volume and price growth, with volume growth anticipated in the second quarter and pricing strategies to kick in later [67][69]

Financial Performance - Total revenue was €760 million, a decrease of 3% year-over-year[22,25] - Organic revenue declined by 3.6%, lagging behind retail sell-through which grew by 0.2%[12,22] - Adjusted EBITDA decreased by 2% year-over-year to €120 million[12,25] - Adjusted EPS decreased by 5% year-over-year to €0.35[12,24,25] - Gross margin expanded by 90 bps year-over-year to 27.8%[12,22,25] Cash Flow and Capital Allocation - Share repurchases amounted to €48.9 million and dividend payments were €25.3 million, collectively up 152% year-over-year[12] - Adjusted free cash flow was €13 million, representing 24% of adjusted profit for the period[29] Guidance - The company tempered full year expectations given 1Q destocking, evolving macro environment and commitment to preserve brand and product investment[12] - Organic revenue growth guidance updated to 0-2% (previously +1-3%)[31] - Adjusted EBITDA growth guidance updated to 0-2% (previously +2-4%)[31] - Adjusted EPS guidance updated to €1.82 - €1.89 (previously €1.85-€1.89)[31]

Revenue and Profit - Revenue for the three months ended March 31, 2025, was €760.1 million, a decrease of 3.3% compared to €783.7 million in the same period of 2024[10] - Profit for the period was €32.7 million, compared to €34.5 million in the prior year, reflecting a decline of 5.2%[10] - Total comprehensive income for the period was €30.0 million, down from €49.3 million in the same quarter of 2024[12] - Profit for the period decreased to €32.7 million in Q1 2025 from €34.5 million in Q1 2024, representing a decline of 5.2%[18] - Adjusted EBITDA for the three months ended March 31, 2025, was €120.1 million, a decrease of 1.8% from €122.3 million in 2024[50] - Total external revenue for the three months ended March 31, 2025, was €760.1 million, down 3.0% from €783.7 million in 2024[52] - Profit for the period attributable to equity owners of the parent was €32.7 million for Q1 2025, compared to €34.5 million in Q1 2024, reflecting a decline of 5.2%[65] Cash Flow and Financing Activities - Net cash generated from operating activities decreased by €48.4 million to €50.6 million, primarily due to changes in working capital[5] - Net cash used in financing activities increased by €23.0 million to €110.5 million, driven by higher interest and dividend payments[7] - The company reported a net decrease in cash and cash equivalents of €77.4 million during the three months ended March 31, 2025[4] - Operating cash flow before changes in working capital, provisions, and exceptional items was €119.3 million in Q1 2025, down from €122.1 million in Q1 2024, a decrease of 2.3%[18] - Net cash generated from operating activities fell to €50.6 million in Q1 2025 compared to €99.0 million in Q1 2024, a decline of 48.9%[18] - Net cash used in investing activities was €17.5 million in Q1 2025, slightly higher than €16.8 million in Q1 2024[18] - Net cash used in financing activities increased to €110.5 million in Q1 2025 from €87.5 million in Q1 2024, an increase of 26.3%[18] - Cash and cash equivalents at the end of the period decreased to €329.8 million in Q1 2025 from €390.7 million in Q1 2024, a decrease of 15.6%[18] Assets and Liabilities - Total assets as of March 31, 2025, were €6,400.7 million, down from €6,431.6 million at the end of 2024[9] - Cash and cash equivalents at the end of the period were €329.8 million, a decrease from €403.3 million at the end of 2024[9] - Total provisions increased to €31.0 million as of March 31, 2025, up from €29.8 million at December 31, 2024, primarily due to restructuring activities[81] - The total net employee benefit obligations decreased to €146.5 million as of March 31, 2025, from €152.1 million at January 1, 2025[83] - The fair value of the Senior EUR/USD loans as of March 31, 2025, was €1,319.1 million, down from €1,353.6 million at December 31, 2024[79] Shareholder Activities - Basic and diluted earnings per share remained stable at €0.21 for both periods[10] - The company repurchased ordinary shares amounting to €48.9 million in Q1 2025, compared to €7.1 million in Q1 2024[18] - Dividends paid increased to €25.3 million in Q1 2025 from €22.3 million in Q1 2024, an increase of 13.5%[18] - A dividend of $0.17 per share for the quarter ended March 31, 2025, was approved, amounting to $26.2 million, payable on May 28, 2025[102] - The company authorized a share repurchase program on November 6, 2023, to buy back up to $500 million of ordinary shares, with 7,415,614 shares repurchased at an average price of $17.50, totaling $129.9 million by December 31, 2024[98] - An additional 2,874,471 ordinary shares were repurchased in the three months ended March 31, 2025, at an average price of $17.38, costing $50.0 million[98] Organizational Changes and Future Plans - The company is executing a business transformation program aimed at optimizing processes, with expenses incurred to date including restructuring and transformational project costs[54][55] - The organizational streamlining program initiated in 2025 aims to reduce operational expenses significantly, with completion expected in 2026[56] - The company plans to close its pea processing operations in Sweden by December 2025, with the financial impact expected to be immaterial[109] Other Financial Information - The company incurred €14.4 million in cash outflows related to exceptional items for the three months ended March 31, 2025, down from €24.0 million in 2024[59] - The income tax expense for the three months ended March 31, 2025, was €7.0 million, slightly lower than €7.4 million in 2024[62] - The fair value of derivative financial instruments held by the company was estimated using discounted cash flow calculations, with a total of €4.0 million recognized as assets[48][73] - The share-based payment expense for the three months ended March 31, 2025, was €3.5 million, compared to €3.0 million for the same period in 2024[92] - As of March 31, 2025, the total number of Management Share Awards outstanding was 3,377,951, an increase from 3,128,416 at January 1, 2025[87] - The Company granted 1,024,922 performance share awards and 114,669 restricted share awards as part of the 2025 Management Share Award[91] - As of March 31, 2025, the share-based compensation reserve decreased to €25.6 million from €34.5 million as of December 31, 2024, reflecting a reduction of approximately 25.5%[97]