Nomad Foods(US:NOMD)2024-05-09 18:57Financial Data and Key Metrics Changes - First quarter net sales increased by 1.1% to €784 million, with organic sales growth of 0.3% and favorable foreign exchange effects contributing 0.8% [33][6] - Adjusted EBITDA decreased by 16.4% to €122 million due to lower gross profits and higher operating expenses [37] - Adjusted net income declined by 25%, and adjusted earnings per share decreased by €0.09 to €0.37 [38] - First quarter gross margins declined by 200 basis points to 26.9% due to inventory revaluation impacts [9][35] Business Line Data and Key Metrics Changes - Quarterly volume declined by 2.2%, an improvement from a decline of 8% in the previous quarter, indicating a return to volume growth in key markets [34][4] - The top 25 must-win battles accounted for nearly two-thirds of sales, with positive volume growth in 15 of these battles [15][80] Market Data and Key Metrics Changes - Volume trends improved significantly in key markets, including the UK and Austria, with positive momentum driven by strategic promotions and media activation [11][18][19] - The company reported a strong rebound in its fish finger business in Italy, with improved market share and sales metrics [17] Company Strategy and Development Direction - The company is focused on deploying its growth flywheel, which includes winning with consumers, brands, and customers, supported by increased advertising and promotional spending [12][20] - The strategy emphasizes targeted investments in high-potential areas, particularly in the top must-win battles, to drive growth and profitability [15][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory of volume recovery, reiterating guidance for net sales growth of 3% to 4% and adjusted EBITDA growth of 4% to 6% for 2024 [6][41] - The company anticipates continued improvements in gross margins and volume growth as the year progresses, supported by a favorable cost environment [42][44] Other Important Information - The company paid its first quarterly cash dividend during the quarter and remains committed to share repurchases, with $492 million left under its current buyback authorization [6][38] - Adjusted free cash flow for the first quarter was €49 million, a significant improvement from €25 million in the prior year [10][39] Q&A Session Summary Question: Positive volume growth expectations - Management confirmed that the trajectory of volume is improving, with expectations for positive growth in the second half of the year, driven by brand-building initiatives and promotional activities [50][51] Question: Gross margin expectations - Management indicated that gross margins are expected to improve sequentially throughout the year, with a step-up anticipated in Q2 and Q3 due to seasonal dynamics and productivity improvements [57][59] Question: Volume trends in March - Management acknowledged that while March showed some fluctuations, the overall trajectory remains positive, and they are confident in continued improvements moving into Q2 [64][66] Question: Must-win battles performance - Management noted that while 15 out of 25 must-win battles showed growth, the remaining 10 are being activated and will see increased focus and investment [79][81] Question: Commodity price trends - Management reported that approximately 80% of full-year commodities have been secured, allowing for flexibility in managing costs and promotional strategies [84][85] Question: Non-price promotions and seasonal demand - Management stated that non-price promotions will continue to be structured and effective, with adjustments made based on regional performance and market conditions [93][95]