Nomad Foods(US:NOMD)2020-03-01 03:22Financial Data and Key Metrics Changes - The company reported fourth quarter organic revenue growth of 1.7%, driven by a 3.2% increase in price, offset by a 1.5% decline in volume and mix [7][8] - Adjusted gross margin remained unchanged at 29.9% compared to the previous year [7][22] - Adjusted EBITDA for the fourth quarter was €116 million, representing a growth of 15% [7][23] - Adjusted EPS for the quarter was €0.32, an increase of 10% [23][25] - For the full year 2019, revenue increased by 7%, driven by 2.1% organic revenue growth and 4.9 percentage points from acquisitions [24][25] Business Line Data and Key Metrics Changes - The core business, representing 70% of sales, continued to generate low-single-digit organic revenue growth, while the remaining 30% declined in a controlled manner [8][9] - Germany achieved organic revenue growth of 9% in the fourth quarter, driven by strong execution and strategic expansion [9] - The U.K. saw a 1% decline in organic revenues during the quarter, attributed to prioritizing gross margins, particularly affecting the Aunt Bessie's brand [10][42] - Sweden experienced a significant decline of 15% in the fourth quarter, with management acknowledging executional issues [11][12] Market Data and Key Metrics Changes - Nine out of 13 core markets experienced growth in the fourth quarter, with Germany, Italy, and France leading the way [8] - The U.K. and Sweden were noted as declining markets, with expectations for recovery in the U.K. in Q2 [10][11] - Sweden's market challenges were attributed to executional issues rather than market demand, with plans for a turnaround in place [12][46] Company Strategy and Development Direction - The company is focused on pan-European expansion of its Green Cuisine brand, which has shown strong market performance in the U.K. [15][16] - Plans for 2020 include launching Green Cuisine in at least six new countries, with expectations of generating over €100 million in revenues by 2022 [17][18] - The company aims to maintain gross margins despite anticipated inflation and is committed to reinvesting profits from Green Cuisine into marketing and promotions [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges and maintain growth, despite a projected decline in Q1 [20][28] - The company anticipates a balanced revenue growth between price and volume in 2020, with a focus on strategic acquisitions in the frozen food sector [14][27] - Management acknowledged the need for operational improvements in Sweden and emphasized the importance of execution and strategic focus [12][46] Other Important Information - The company generated over €200 million in free cash flow during the year, with a strong cash position of over €800 million [14][26] - Adjusted free cash flow for 2019 was €228 million, with a conversion rate of 97% of adjusted EBITDA into free cash flow [26] Q&A Session Summary Question: Insights on expected cadence for organic sales and EBITDA - Management highlighted confidence in Q2 due to successful negotiations and the launch of Green Cuisine in new markets [32][34] Question: Consideration of share buybacks given current equity valuation - Management stated that while share buybacks are evaluated, the focus remains on M&A opportunities that add more value [39] Question: Operational challenges in the U.K. and Sweden - Management clarified that the U.K. business is generally performing well, with specific challenges related to Aunt Bessie's brand due to competitive promotions [42] - Sweden's issues were attributed to executional focus, with a new management team in place to drive improvements [46] Question: Green Cuisine's market positioning and competition - Management confirmed that Green Cuisine is expected to take market share from traditional meat products, with a focus on maintaining gross margins [52][87] Question: Impact of potential coronavirus on operations - Management reported no significant supply chain disruptions and noted increased consumer demand for frozen food in Italy [90][91]