Nomad Foods(US:NOMD)2023-02-25 18:57Financial Data and Key Metrics Changes - In 2022, the company achieved record sales, adjusted EBITDA, and adjusted EPS for the sixth consecutive year, with adjusted EPS of $1.68, reflecting a 60% increase since 2016 [3][15] - Full-year adjusted EBITDA grew 8% to $524 million, with an adjusted EBITDA margin of 17.8%, down 90 basis points from the previous year [17][35] - Fourth quarter adjusted EPS was flat at $0.33, translating to $0.35 at current US dollar spot rates [17][35] Business Line Data and Key Metrics Changes - The company reported a 7.7% organic revenue growth in Q4, with total revenues increasing by 6.6% to $750 million [35] - Full-year organic revenues grew 1.8%, driven by price increases that offset volume declines [35] - Adjusted gross profit for Q4 grew 3% to $193 million, while adjusted COGS increased by 7.7% to $558 million due to raw material inflation [17][35] Market Data and Key Metrics Changes - The company experienced mid-single-digit declines in full-year volume and mix, but value share increased by about 0.5 points for the year [15][35] - The company expects market share to improve sequentially in 2023 due to innovation efforts and increased advertising and promotion investments [35] Company Strategy and Development Direction - The company plans to strengthen its brand through increased investment in advertising and promotion, particularly as market conditions normalize [4][33] - The strategy includes broadening affordable choices to address inflationary pressures on consumers while managing supply chain efficiency [4][33] - The company aims to maximize portfolio value through prudent pricing and improved revenue growth management strategies [33] Management's Comments on Operating Environment and Future Outlook - Management indicated that 2023 is expected to be a transitional year towards a more normalized consumer environment, with plans in place to meet financial objectives and maintain growth [4][5] - The company anticipates lower inflation levels in 2023 compared to 2022, but still plans to take pricing actions to protect its cost structure [21][39] - Management expressed confidence in achieving 2025 targets, emphasizing operational strength and investment plans funded by cost savings [53] Other Important Information - The company successfully refinanced its debt portfolio, extending maturities to mid-2028 and 2029, which provides greater flexibility for cash allocation strategies [5][36] - Adjusted free cash flow for the year was $189 million, with a cash flow conversion of 65%, impacted by working capital increases [17][36] Q&A Session Summary Question: What drove the decline in gross margins year-over-year? - Management noted that while pricing was in line with expectations, the margins were impacted by higher raw material costs, which they are addressing through pricing strategies [8][19] Question: What is the cost inflation estimate for 2023? - Management indicated that inflation is expected to be lower than in 2022, but pricing actions will still be necessary to protect the cost structure [21][39] Question: What are the expectations for Fortenova in 2023? - Management confirmed that Fortenova's revenue growth should be accretive to overall company guidance, with ongoing integration efforts expected to accelerate [22] Question: How is the brand investment strategy evolving? - Management emphasized a balanced approach, focusing on both advertising investments and competitive pricing to maintain market share against private labels [45][47] Question: How does the company view its volume compared to pre-COVID levels? - Management reported a slight decline in volume compared to pre-COVID but noted an increase in consumer reach, indicating a stronger consumer base [51] Question: How confident is the company in achieving its 2025 targets? - Management expressed confidence in meeting 2025 targets, highlighting operational strength and a commitment to delivering superior shareholder returns [53]