Nomad Foods Limited

Thank you for standing by. This is the conference operator. Welcome to the Nomad Foods first quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Anthony Bucallo, Head of Investor Relations. Please go ahead.

Hello, and welcome to the NOAA Foods First Quarter 2022 Earnings Call. I am Anthony Bucallo, Head of Investor Relations, and I am joined on the call by Stéphane Deschirméker, our CEO, and Sami Zikout, our CFO. Before we begin, I would like to draw your attention to the disclaimer on slide two of our presentation. This conference call may include certain forward-looking statements that are based on our view of the company's prospects, expectations, and intentions at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC, and this slide in our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for and should be read together with our IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represent adjusted figures for 2021 in 2022. All adjusted figures have been adjusted for exceptional items, acquisition-related, share-based payment, and related expenses, as well as non-cash FX gains or losses. Unless otherwise noted, all comments from here on will refer to those adjusted numbers. With that, I will hand you over to Stephane.

Thank you, Tony, and welcome to the team for your first quarterly earnings. Good afternoon, everyone, and thank you all for joining us on the call today. We plead to review our results for the first quarter and to report that we are executing well and remain on track to deliver the 2022 guidance we set back in February. Our business has been significantly disrupted by a difficult macro backdrop, and we see these results as a great achievement for our team. We're not entirely satisfied with our performance, but we are encouraged by the resilience of our business model, the strength of our brands, and our ability to navigate difficult waters. With the war in Ukraine, we faced an unprecedented geopolitical challenge starting the first quarter of 2022. Our input costs have risen sharply year on year, while our consumers are coming under increasing pressure from high inflation across Europe. It is with this backdrop that we're focusing on performance and delivery, driving world-class retail execution and strengthening our consumer proposition, while further refining our supply chain through targeted investments and process improvements. Looking ahead to the rest of the year, we are well ahead on input costs, and we expect at least one more round of price increases to help offset a significant portion of our cost inflation. Supported by our strong free cash flows, We plan to maintain our investment in brand and supply chain improvements, supporting us in 2022 and beyond. We are also investing in our latest acquisition in the athletics. We are well positioned for the future. With that, I'd like to recap our first quarter key financial metrics, beginning with reported revenues of 733 million euros, which increased by 3.6%, driven by the first year of inclusion of our newly acquired business. Organic revenue declined by 4.5%, reflecting difficult volume comparisons against the COVID lockdown that were still in place this time last year. We delivered an adjusted gross margin of 27.9%, 250 basis points lower year-on-year, reflecting the impact of acquisition, lower organic sales, and higher raw material costs. Adjusted EBITDA of €132 million represents a 4% decline compared to last year, as higher input costs before pricing waste on the results. And finally, adjusted EPS was €0.43 per share. Although this represents a 9% decline versus last year, we are still on track to deliver a 2022 adjusted EPS guidance of 1.71%. to 1.75 euros. Turning to slide four. In the first quarter, positive revenue growth was driven by the first-time inclusion of our Adriatic frozen business and a small boost from currency. Our organic sales declined 4.5% as we lapped last year's strong volume results driven by COVID's lockdowns. We lost sales in the UK due to a poultry shortage and lost sales in another large market due to a pricing dispute with a major retail customer. Stripping out these one-off items or organic revenues would have been down low single digits for the period. We have since successfully resolved both issues. We did not get the full benefit of our pricing actions during the quarter, as our pricing was phased across the period with many of our increases waited to march. We expect our second quarter sales trends, to improve as we get the full benefit of our first quarter pricing and begin lapping post-COVID lockdowns comparison. However, we do not expect our margin recovery to gain momentum until the second half of the year after we take our next round of pricing on top of our first round from Q1. Traditionally, we take pricing once annually, acting early in the year. We are in a period of unprecedented cost inflation, and we will be taking more pricing mid-year to recover costs. We're planning at least one more wave of pricing for the second half of the year, starting earlier in the UK. This should boost our top line and help offset the record inflation we are experiencing. Just to be clear, there is always a time lag between COGS increases, which are linear, and our price increases to the retailer, which are staggered. What matters to us is the long-term evolution of our margin, and we believe it is imperative to recover gross profit dollars and margin this year to position us appropriately for next year. We are on track to deliver that recovery in 2023. Our market share trends were highly encouraging in the quarter. Overall, we grew value share 10 basis points across all of our markets. However, we grew share 60 basis points on average in our top four markets, which represents more than 60% of our sales. These are the must-win battles where we define our commercial success. Higher input costs weigh on our gross margins and profit in Q1. However, we are well prepared for the rest of 2022 with roughly 85% of our raw material haste. On energy, we are effectively covered for 2022 and have begun edging for 2023. In edible oils, we have had no shortage to date, and we've taken cover position on all our requirements for 2022. With this supply crisis, we have accelerated the execution of our risk mitigation strategies, and we have taken steps to diversify our sourcing portfolio across key ingredients. We're also adjusting our product formulations wherever appropriate while still meeting our high-quality standards. We're also quickly taking steps to reduce the volume of Russian waters fish we use in our products, further de-risking our business. In the year to date, we have been highly encouraged by the performance of our new business in the Atlantic region, driven by an outstanding team across the eight markets. Our Easter performance was strong, giving us confidence of a return to pre-COVID tourism levels for the summer selling season when ice cream consumption peaks. The integration program is progressing well, and we are confident we will meet our €15 million synergy target by 2024. In August 2021, we announced a $500 million buyback program, which expires in August 2024. In Q1, we repurchased nearly €27 million in shares, and we continue to regard share repurchase as highly a creative option to drive shareholder value. Turning to slide five, this is not the first time Nomad has been tested during a period of uncertainty. Over our history, we've passed through multiple challenges and have come out a better company on the other side. After Nomad's creation in 2015, we turned the company around and created a growth culture and must-win battle focus which is now at the center of who we are today. We managed through the unique challenge of Brexit in 2019 and then the COVID-19 pandemic in 2020 and 2021. We will be challenged this year by high inflation and the war in Ukraine, but I believe we have robust plans in place and are well positioned to deliver to our commitments and come out a strong organization. In these difficult environments, We are continuing to provide security of supply for retail partners, and I'm especially pleased with how our supply chain has evolved to meet these new challenges. In 2020 and early 2021, we navigated the exceptional COVID demand growth when our facilities were running at higher than 90% capacity. Through late 2021 and this year to date, we have stepped change of capacity to source, convert, and supply at the highest quality despite global shortage of raw materials and exceptional inflationary pressures. Our current service level improved significantly from a year ago, finishing the first quarter of 2022 at a 96% fill rate, an improvement of 300 basis points versus the same period last year. Additionally, we've maintained our focus on innovation, and we are actively evolving our portfolio to reflect new market realities. This is especially important in light of the rapidly climbing costs for all of our proteins. Our flagship green cuisine plant protein line is gaining share, and we have more innovation planned for the second quarter with that brand. We are also pleased that in the Grosser Gold Awards for 2022, green cuisine has been shortlisted for Food Brand of the Year. In addition, our Pro to Power Team GB for the 2020 Tokyo Olympics campaign has also been shortlisted for consumer initiative of the year. Finally, it is worth noting that even with this difficult backdrop, we are resolute in our focus on our social responsibility commitments. We've maintained our efforts on meeting our ESG goal, especially in the area of net carbon neutrality. When looking out to the balance of 2022, we believe we are on track to deliver against our most important financial metrics. As Samir will discuss later in more detail, we are guiding to grow our business in line with what we have achieved in recent years. I believe it is important to look at what we have accomplished in the creation of this business in 2015. After consolidating Bird's Eye, Igloo and Findus, we've grown revenues from 1.9 billion euros to 2.6 billion euros in 2021, with a run rate this year of 2.9 billion euros, including a full year of our new adretics business. We expect to have more than double adjusted EPS from 2016 to the end of 2022. We have successfully integrated more than 1 billion euros for creative acquisitions, including Goodfellas, OnBesties and Finder Switzerland, and we plan to add more value-creating strategic assets in the future. There is volatility in the situation, including our supply chain. and we expect to see some elasticity in our sales this year. But we are confident that our business is well positioned to produce good results under difficult conditions. I also am confident that our growth will accelerate when this period of uncertainty eases. Supported by our excellent team across Europe, a strong brand portfolio and a proven track record of deploying capital in an optimal way, driving value for our shareholders. With that, I will now hand the call over to Samy to review our financial results and guidance in more detail. Samy?