Nomad Foods(NOMD) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Quarterly revenues grew by 6.9% to €745 million, with an organic growth of 8.6%, driven by high teens pricing that offset high single-digit volume declines [12][52] - Adjusted EPS for Q2 was flat at €0.40 per share, translating to $0.44 per share at current dollar spot rates [13][53] - Gross margin remained stable at 28.2%, supported by pricing initiatives and cost control programs [23][42] - Adjusted EBITDA grew by 4.5% to €133 million, with an adjusted EBITDA margin of 17.8%, a decrease of 40 basis points [42][53] - The company raised its 2023 adjusted EPS guidance to a range of €1.54 to €1.57 per share, up from the previous guidance of €1.52 to €1.55 per share [45][56] Business Line Data and Key Metrics Changes - The company successfully derisked its supply chain by adapting fish supply to include new species and geographies, with new farmed fish products becoming a cornerstone of its innovation platform [10] - A&P (Advertising and Promotion) investments are expected to increase by more than 20% year-on-year, reaching roughly 4% of sales by year-end [19][41] - The company reported a loss of about 1% in value share this quarter, consistent with expectations due to its pricing strategy [44] Market Data and Key Metrics Changes - The frozen food category across markets is performing well, with sales up double digits year-to-date and category volumes turning positive in more than half of the markets [50] - The company is seeing improvements in volume and market share, particularly in must-win battles, as new media reaches consumers and price gaps with competition narrow [49][70] Company Strategy and Development Direction - The strategic plans for 2023 include leveraging supply chain cost savings for growth, enhancing revenue growth management capabilities, and deploying new A&P investments to rebuild volume and market share momentum [4][5] - The company is focused on executing its A&P investments program, with significant increases expected in Q3 aligned with back-to-school schedules [11][75] - The company aims to develop a more balanced mix of price and volume moving into 2024, with less reliance on pricing and improved volumes driving topline growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, expecting improving market share and volume trends as A&P investments take effect [5][50] - The company has adapted to various challenges, including Brexit, the COVID-19 pandemic, and raw material supply issues due to the Ukraine war, emerging stronger each time [3][9] - Management highlighted the importance of maintaining high service levels, which are currently at 97.8%, to defend market share [43] Other Important Information - The company repurchased nearly €53 million worth of shares in Q2, marking the first buyback since Q1 of the previous year [20] - Cash generation improved significantly, with adjusted free cash flow expected to be around €250 million for the year, reflecting a conversion ratio of 90% to 95% [24][26] Q&A Session Summary Question: Timing of A&P investments - Management indicated that A&P investments are set to begin shortly, with maximum impact expected around back-to-school season [29][60] Question: A&P investment strategy - Management confirmed that the amount of A&P investment remains unchanged, focusing on must-win battles and aligning campaigns with in-store activities [80] Question: Performance in the Adriatic region - Management reported strong service levels at 99.5% and expressed confidence in meeting high seasonal demand due to prior inventory building [71] Question: Pricing differential versus private labels - The pricing differential has narrowed from 10% to around 5%, with expectations for further adjustments in the future [82]