Nomad Foods Limited

Greetings and welcome to the Nomad Foods fourth quarter and full year 2022 earnings call. At this time, all participant lines are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Anthony Bucalo, Investor Relations. Please go ahead.

Hello, and welcome to the Nomad Foods fourth quarter 2022 earnings call. I'm Anthony Bucalo, head of Investor Relations, and I am joined on the call by Stefan Deschirmaker, our CEO, and Sami Zikoud, our CFO. Before we begin, I would like to draw your attention to the disclaimer on slide two of our presentations. This conference call may include 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. It should be read together with 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 and 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, comments from here on will refer to those adjusted numbers. With that, I will hand you over to Stéphane.

Thank you, Tony, and thank you for joining us on the call today. I'm pleased to report that 2022 marked our sixth consecutive year of generating record sales, adjusted EBITDA and adjusted EPS. I would like to thank all the dedicated people at Nomad who made this possible under historically challenging conditions. Last year, we made significant adjustments to our business model as we evolved to mitigate the impact of COVID-19 and the Ukraine war. Importantly, we maintained our strong foundations based on world-class people, iconic brands in a great category, and healthy financials. that will allow us to continue investing for the long term. Frozen food remains a great value for consumers with sustainable growth expected ahead. Frozen food is high in nutrition, low in waste, and the best value for money across the food category. During periods when consumers are looking for value in nutrition in their food choices, frozen meets those needs and more. As the category leader, Nomad is positioned to deliver that value to our millions of consumers. In 2020 and 2021, our business excelled during COVID lockdowns as consumers pantry-loaded and ate more meals at home, adopting many of our products into their everyday lives. I'm happy to say that we have held on to most of these gains. In 2022, We started the year with the supply chain still under pressure from COVID impacts. The war in Ukraine further complicated the situation, creating historic input cost increases and consumer uncertainty. We took four major steps to successfully mitigate the short- and long-term disruptions. First, we de-risked our fish supply by diversifying our species and geographies while wrapping up high-quality farm sources. Second, we leveraged our powerful supply chain to build inventories of key ingredients to protect against any shortages. Third, we successfully priced our products to close the gap with this rate of inflation. Finally, we refinanced our debt portfolio in November, extending our debt maturities to mid-2028 and 2029. We believe that 2023 is setting up to be a transitional year to a more normalized consumer environment. With the improvements we implemented in our business last year, the plans we have in place for this year, we have the right path to meet our financial objectives and maintain our growth. We also have the right plans in place to capture market share boosted by our great brands, communication, and innovation. We plan to strengthen our brand by increasing investment in AMP. And it is especially crucial as conditions normalize. We will also be broadening our affordable choices to address inflationary pressures on consumers. We will manage our supply chain for greater efficiency and use those cost savings to help fund top-line growth. Finally, we plan to maximize the value of our portfolio through prudent pricing and improved revenue growth management strategies. This will help drive our efforts to recoup the cumulative impact of two years of record-setting cost inflation. Revenue growth management will be especially important as we maximize the value of our portfolio and we market share by placing the right products at the right place and at the right price. Taken together with the expected rebounding of our cash flow and the increased visibility of extended debt maturities, we believe we will have significant flexibility to return cash to shareholders while positioning our business for growth beyond next year. We will be taking a deeper dive into our strategy later today at Cagney, and we hope you will join us again. With that, I'd like to recap our 2022 key financial metrics, beginning with reviews. Q4 organic reviews grew 7.7%, our third sequential quarter of improving sales trends. Our full-year organic reviews grew 1.8%, as our price increases in the back half of the year, offset volume declines. This low single-digit organic sales performance is in line with our guided expectations from the beginning of the year. Adjusted gross margin declined 80 basis points to 25.7% in the fourth quarter and declined 120 basis points for the year. We saw sequential improvement in gross margin trends in the second half due to our pricing initiatives. Adjusted EBITDA was up slightly at 130 million euros in June 4, and grew 8% to €524 million for the year. And finally, adjusted EPS was €0.33 per share in Q4, flat versus last year. At current US dollar spot rates, our Q4 adjusted EPS was €0.35. Adjusted EPS was impacted by our November refinancing, and we saw an approximately €2 impact on earnings for Q4 and for the full year. Despite the historically challenging macroeconomic environment, we delivered another record financial performance in sales, adjusted EBITDA, and adjusted EPS. Since 2016, we have increased our total revenues by more than 50%, adjusted EBITDA by more than 60%, and doubled our adjusted EPS. We have generated more than 1.7 billion euros in adjusted free cash flow during that period as well. Our organic revenues returned to growth as successful price increases exceeded meeting the legit declines in full-year volume and mix. In the fourth quarter, we further narrowed the gap between price and input costs, a gap which has widened after the outbreak of the war. When looking ahead to this year, our dialogue remains active with retailers regarding further updates to our pricing. Adjusting pricing will allow us to recover our costs while protecting the business with steps of investment in EFP and innovation. Excellence in execution is the hallmark of Nomad and our supply chain has a great performance. Our service levels ended the year at 96.6%, a 30 basis point improvement. As of today, we have more than 50% of raw material costs covered for the coming year. We believe our supply chain is a source of competitive strength and a source of savings to sustainably help fund top-line growth this year and beyond. Last year, we raised prices to protect our margins and ensure that we have the appropriate profitability to invest in our business. Many of our private label competitors did not follow our pricing. As a result, we've seen volume declines and margin losses in market share. However, this was predicted in its part of a broader process We believe volume and market share losses are short-term in nature, which we expect to rebound this year, as we will discuss at Cagney later today. We successfully extended our debt-match rate profile in November. We refinanced our $960 million term loan B due mid-2024, with two-term loan B totaling to $830 million due 2029. Our debt portfolio is now secured until mid-2028 and 29 at the competitive interest cost and is 75% fixed. With our maturity extended, we now have significantly more latitude in executing our use of cash strategies. This year, we're taking important steps to make Snowmats strong in the market and better positioned for long-term growth. First, we refinanced our debt in November to give us greater visibility on how we invest our cash. Commercially, we are investing in our brands with greater NP to ensure that we have the resources to innovate and grow our leadership position. When accounting for higher interest charges and stepped-up investments, we are establishing our 2023 Adjusted EPS Guidance at the range of €1.50 to €1.55 to reflect those investments. This represents an adjusted EPS range of €1.61 dollar to $1.66 at current US dollar spot rates. The guidance excludes any impact of capital allocation. Excluding the impact of incremental interest in investment in E&P and PIPO for 2023, our forecast adjusted EPS range for this year would have been in the range of 1.70 euro to 1.75 euro. This would also have excluded any positive impact from capital allocation. We made significant adjustments to our business model as we navigated last year's volatile macroeconomic environment. First, we completed a major initiative to protect our fish supply. Throughout the year, we continually sold alternative sources for our signature fish products. We also secured new high-quality found fish, and we expect to see the benefit of that early this year. We believe this protects the security of high-quality supply for sourcing but also provides opportunities to exercise pricing power when purchasing fish in the future. Second, we leveraged our world-class supply chain to address volatile markets against unprecedented cost increases. Procurement was a key source of strength in 2022 as we built raw material inventories to protect against possible shortages. Our service levels improved over the full year, delivering consistently for our customers and consumers. We continue to improve our supply chain efficiency through intensive internal cost control programs, and we expect much of our savings to be reinvested in top-line growth this year. Finally, we prized to close the gap in inflation. In a typical year, we prized once in the first quarter. However, with the outbreak of the war in Ukraine, with rapid increases in raw material prices, and we were compelled to act. We took pricing through the year where appropriate and made significant progress in closing the gap between price and cost. We will enter this year with the improving margins needed for investment in our brands. Alongside a vigorous revenue growth management strategy, we will continue to price consistently with the inflationary market dynamics as they occur. With that, I will now hand the call over to Samy to review our financial results and guidance in more detail. Samy?