Nomad Foods(NOMD) - 2021 Q4 - Annual Report

Financial Performance - Revenue for the fiscal year ended December 31, 2021, was €2,606.6 million, an increase of 3.6% from €2,515.9 million in 2020[38] - Gross profit for the fiscal year ended December 31, 2021, was €744.3 million, a decrease of 2.9% from €762.5 million in 2020[38] - Operating profit for the fiscal year ended December 31, 2021, was €342.7 million, down from €359.2 million in 2020, reflecting a decline of 4.8%[38] - Profit for the period for the fiscal year ended December 31, 2021, was €181.0 million, a decrease of 19.6% compared to €225.1 million in 2020[38] - Basic earnings per share for the fiscal year ended December 31, 2021, was €1.02, down from €1.16 in 2020, representing a decline of 12.1%[38] - Total assets as of December 31, 2021, were €6,170.8 million, an increase of 10.6% from €5,580.6 million in 2020[38] - Total equity as of December 31, 2021, was €2,299.0 million, up from €2,126.1 million in 2020, reflecting an increase of 8.1%[38] Market and Competitive Landscape - Approximately 93% of the company's revenue for the year ended December 31, 2021, was derived from the EU and the UK, with 29% from the UK[63] - The company is exposed to macroeconomic trends that could adversely impact operations, particularly in key markets where 78% of revenue was generated[64] - The company relies on a limited number of large food retailers, with the top 10 customers accounting for 40% of revenue, increasing vulnerability to their performance[72] - Major multiple retailers have increased their market share and bargaining power, leading to intensified price competition that could reduce the company's margins[77] - Retail customers are prioritizing private label products, which typically have higher margins for retailers, potentially affecting the sales of the company's products[78] Risks and Challenges - The company faces significant risks including competition, changing consumer preferences, and potential impacts from the COVID-19 pandemic[44] - The COVID-19 pandemic has created significant volatility and economic disruption, adversely impacting the company's business and financial condition[57] - The company experienced lower demand for food service products due to governmental restrictions on dining out, which could negatively impact revenue[59] - The company faces challenges in passing on price increases for raw materials to customers, which could negatively impact profit margins[71] - The company faces significant credit risk from retail customers, which could negatively impact its financial condition and results of operations if credit policies prove inadequate[75] - The company may not be able to achieve its sustainability targets, which could affect demand for its products and adversely impact financial results[66] - The company is exposed to local business and tax risks in various countries, which could disrupt activities due to political instability, economic conditions, and regulatory changes[98] - The company faces international tax compliance risks, with pending tax assessments and audits in jurisdictions like Germany and Italy, which could materially reduce income and cash flow[99] Operational and Supply Chain Considerations - The company operates production facilities across Europe, and potential future closures or reduced operations due to COVID-19 could materially affect revenue and operations[60] - Distribution costs are subject to fluctuations and disruptions, which could adversely affect the company's ability to supply products affordably and on time[83] - The company relies on third-party suppliers for key business functions, and any failure by these suppliers could adversely affect operations and product availability[86] - Health concerns regarding food safety could damage the company's reputation and lead to increased operational costs and decreased demand for its products[91] - A failure in maintaining the cold chain could result in food contamination and increased costs, significantly impacting the company's financial condition[96] Strategic Initiatives and Future Outlook - The company is increasing investment in online sales to adapt to changing consumer behavior, particularly during the COVID-19 pandemic[48] - The company aims to introduce new products and extend existing product lines to counteract obsolescence and increase overall sales, but the success of these launches is uncertain[56] - The company emphasizes innovation in product development, focusing on consumer trends such as health, wellness, and convenience[205] - The company completed several strategic acquisitions, including Fortenova Group's Frozen Food Business, expanding its market presence in Central and Eastern Europe[210] - The Fortenova Acquisition allows entry into a new product category (ice cream) and new geographies (Central and Eastern Europe) where the company lacks prior experience[122] Human Resources and Labor Issues - The company employs approximately 8,002 employees, with about 70% in manufacturing operations, and may face labor disputes that could impact supply capabilities[109] - Higher labor costs due to competition for skilled employees and potential increases in minimum wage requirements could adversely affect profitability[110] Financial Management and Compliance - The company faces risks related to its indebtedness, including the ability to generate sufficient cash flow to meet debt service obligations[134] - An increase in market interest rates could significantly raise the company's interest expenses on variable rate indebtedness[138] - The company is exposed to foreign exchange risks due to its operations in multiple currencies, with potential adverse effects on financial condition[141] - The company has various equity instruments outstanding that may require the issuance of additional ordinary shares, potentially diluting existing shareholders' ownership interests[166] - The company is subject to reporting obligations under U.S. securities laws, and failure to maintain effective internal controls over financial reporting could adversely affect investor confidence[163] Market Position and Brand Strength - The company is Europe's leading frozen foods company with a market share of 17.9% in the savory frozen food market as of 2021[192] - The European savory frozen food market generated close to €20 billion in retail sales value in 2021[193] - The company maintains the number one position in sixteen European geographies, including the UK, Italy, Germany, and France[192] - The company's brands, including Birds Eye and Findus, are well-established household names with strong local heritage[200]