Nomad Foods(NOMD) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues decreased by 1% to EUR 596 million, with organic revenues declining by 4.5% due to the anniversary of peak COVID-related demand, offset by the acquisition of Findus Switzerland and favorable currency translation contributing 4 percentage points to revenue growth [21][22] - Adjusted EBITDA grew to EUR 123 million, representing a 4% increase year-over-year and an 11% CAGR compared to 2019 [8][24] - Adjusted EPS increased by 18% to EUR 0.40 per share, with a 10% reduction in the weighted average share count contributing to this growth [8][24] Business Line Data and Key Metrics Changes - The branded retail business experienced an expected decline, while the non-branded business saw growth, particularly in foodservice, which grew over 40% compared to the prior year [21][22] - Green Cuisine emerged as a key growth driver, achieving nearly 14% market share in the frozen meat-free category across Western Europe [13][14] Market Data and Key Metrics Changes - Market share trends improved sequentially in May and June, with market share increasing compared to the prior year period [10] - The frozen food category's growth normalized compared to the first quarter, but remained elevated on a two-year basis [9] Company Strategy and Development Direction - The company is focused on achieving organic revenue growth and double-digit adjusted EPS growth for 2021, supported by the pending acquisition of Fortenova's Frozen Business, which is expected to create a new baseline for growth [6][19] - The acquisition of Fortenova will expand geographic reach into eight Central and Eastern European countries and introduce a new high-margin ice cream category [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2021 guidance despite a dynamic operating environment, citing strong underlying fundamentals and improved capacity leading to normal promotional activity [11][20] - The company is managing inflation effectively, expecting to keep inflation in the low single-digit percentage range despite rising commodity costs [15][16] Other Important Information - The company generated EUR 103 million of adjusted free cash flow in the first half of the year, equating to a 66% cash conversion rate [25] - A new buyback authorization of up to $500 million was approved by the Board of Directors, maintaining a focus on enhancing shareholder value while preparing for the Fortenova acquisition [34][72] Q&A Session Summary Question: Market share progress and organic growth target - Management acknowledged the importance of market share for growth and noted improvements in May and June, with positive trends expected to continue [39] Question: Guidance prudence despite strong EBITDA - Management reiterated that the full-year guidance remains unchanged due to a dynamic environment, emphasizing the need for prudence [42] Question: Share gains and capacity constraints - Management confirmed that capacity constraints have been lifted, allowing for more aggressive promotional activities and improved market share [44] Question: Inflation expectations - Management indicated that inflation is manageable due to the company's portfolio mix and scale, with no significant impact on gross margins expected [60][61] Question: Category decline expectations - Management expects the category to decline in low single digits, while branded business is anticipated to grow modestly [64] Question: Trends in the UK market amid COVID-19 - Management noted improvements in market share in July and indicated that the situation remains dynamic, with no expected lockdowns [71] Question: Capital allocation strategy - Management emphasized a focus on enhancing shareholder value while prioritizing the Fortenova acquisition and maintaining flexibility for share repurchases [72]