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spk09: Greetings. Welcome to the Nomad Foods third quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to your host, Anthony Bucalo, head of Investor Relations. You may begin.
spk05: Hello, and welcome to the Nomad Foods third quarter 2023 earnings call. I am Anthony Bucalo, Head of Investor Relations, and I am joined on the call by Stefan Deschmaker, 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 presentation. 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 and 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 represents adjusted figures for 2022 and 2023. All adjusted figures have been adjusted for exceptional items, acquisition-related costs, share-based payments, 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.
spk01: Thank you, Tony, and thank you for joining us on the call today. Nomad posted a solid top and bottom line performance in the third quarter, following our excellent results from the first half of the year. Sales grew organically by 1.6%, our fifth consecutive quarter of organic sales expansion. Additionally, we generated strong adjusted free cash flow, successfully refinanced $700 million of our debt to lower interest charges, and bought back 66 million euros for own shares at attractive prices. We have bought back more than 4% of our shares in the first nine months of the year. Our teams accomplished this while deploying new strategic commercial investments to drive growth and bring us back to positive volumes. Boosted by our share repurchases, we are again raising our annual adjusted EPS guidance. We're closely watching the development of weight loss drugs globally and the possible impact on food industry volumes. The long-term impact of these treatments is still under examination. However, in any scenario, we believe Nomad is an excellent position due to our unique portfolio of products which are on target for consumers looking to eat healthy. Nomad is a highly resilient company And over the past several years, we have effectively managed through several crises. Through those challenges, we have protected our cost and margin structures to ensure that we maintain the right level of investment in our business. In reaction to historic inflation last year, we adjusted our price in 2022 and 2023, knowing that we would lose volumes. We've lost volumes. but this was a necessary decision to safeguard the integrity and strength of our business. Now that we have stabilized our business, returning to volume growth is our most important strategic objective. We made progress in the third quarter, but we also made some difficult but necessary decisions with a few of our retail partners across several markets. This resulted in some volume losses that were outside of our original plan. Absent these dislocations, our volume progress would have been consistent with our sequential volume improvement plan. The majority of these discussions have been addressed, and we expect that these losses will reverse in the fourth quarter and in the first quarter of next year, bringing us back on track. Consistent with our objective to return to share and volume growth, we activated our A&P investment plan raising our A&P spend in September to 5% of sales from 3.5% of sales last year. Utilizing these resources, we launched new advertising across Europe and we have strengthened our media profile, leveraging the iconic captain in our advertising for Nomad's leading fish brands across our key markets. Additionally, we've stepped up our in-store execution with new and exciting promotional activity across Europe. placing or leading brands directly in shoppers' line of sight. This heightened visibility is compounding the effectiveness of our advertising and driving demand. The initial results of our dynamic ANP program are highly promising. We expect our volume and share trends to improve in the fourth quarter, ultimately returning to growth in 2024 and beyond. While our ANP program will be crucial to driving growth, we also remain laser-focused on our other strategic plans. We are harvesting our supply chain cost savings to redeploy in marketing. Additionally, we continue to expand our revenue growth management capabilities. We have made significant progress on both initiatives, and this is helping drive pull from consumers leading to volume and market share recovery. Looking ahead to the end of the year and next year, We are excited about our growth prospects. We expect to see an improvement in performance in Q4, which would carry well into 2024 and beyond. With that, I'd like to recap our third quarter key financial metrics, beginning with revenues. Our reported sales grew 1% and grew 1.6% on an organic basis. This result was ahead of our original expectations. Gross margin was 28.4%, with cost pressure offset by our pricing initiatives and cost control programs. Adjusted EBITDA was 140 million euro, while adjusted EPS came in at 43 euro cents per share, both ahead of market expectations. Current dollar spot rates, or Q3 adjusted EPS, was 45 US dollar cents per share. In Q3, sales grew by 1.6% on an organic basis, with strong pricing offsetting volume and mix declines, consistent with our expectations. For the first nine months of the year, we grew organic sales 6%, and we remain on track to deliver our guidance of mid-single-digit growth for the full year. Our supply chain delivered excellent results, and we remain in a positive cycle of customer service and cost management. Its efficiency is helping support on UANP investments. Our service levels rose to 98.6%, up 160 basis points. The hard work we've done on supply chain transformation is paying dividends at a crucial time. As volume demand picks up and commodity prices stabilize, our efficient supply chain execution will be critical in filling new customer and consumer needs. We have benefited throughout the year from a strategy of selectively assessing the risk profile of each individual raw material category we buy, making our buying more efficient. Looking ahead, we have begun the process of covering for next year, and we have good visibility on key commodity trends heading into 2024. Our value share was down about 1% a quarter, consistent with our expectations. However, our new E&P investments were rolled out towards the end of Q3. We expect an improving share trend moving forward. With our business performance on track with our expectations and our share repurchase, we are raising our adjusted 2023 EPS guidance to 1.57 to 1.60 euro per share from our previous range of 1.54 1.57 euro per share. This represents an adjusted EPS range of $1.66 to $1.69 per share at current spot rates. This guidance excludes the impact of any potential future capital allocation. While on the topic of capital allocation, we are pleased to share significant developments in our capital allocation strategy. Creative capital allocation is crucial to our long-term goals at Nomad. We deployed 66 million euros to repurchase our share in Q3. In the first nine months of the year, we have invested a total of 118 million euros, reducing our share count by more than 7.6 million. As you may recall, in August of 2021, we announced a $500 million share repurchase program. which was successfully utilized and is set to expire at the end of this year. Proceeding with our share repurchase efforts, our board of directors has approved a new $500 million share repurchase program, which will expire by the end of 2026. In addition to our share repurchase program and subject to approval by our board of directors, we intend to initiate in early 2024 a regular quarterly dividend which we expect will be a key means of delivering reliable value to shareholders going forward. We will share further details early in 2024. This enhanced framework for shareholder return, bolstered by our strong free cash flow profile, underscores our commitment to maximizing shareholder returns. Since 2022, it has been our plan to raise our median promotion spending in the second half of this year to drive volume and share momentum. This quarter, we launched many new initiatives to reignite growth, such as our back-to-school bird's eye campaign in the UK, our television sponsorship with Crucibat in France, and our Captain Adventures TV and digital activation in Italy. We launched new fish shapes in Austria, Netherlands, and Belgium, green cuisine chicken and cheese nuggets in Germany, and a wave of modern meal solutions in vegetables across Europe. We debuted new advertising with a cap 10 across our markets, connecting even more with our consumers and bringing attention to our delicious fish products. Fish makes up just under 40% of our sales, and we are the leader across most of our markets. To win at the point of sale, we've stepped up our promotion in supermarket aisles, bringing consumer attention to our high-quality branded products. With our new promotion plans in place, the price gaps with our private label competitors have stabilized. Frozen food is a resilient category, and there are plenty of green shoots across Europe. Frozen is back in volume and value growth. September trailing 12-week data shows 1.5% volume growth in the category, and there is growth in 12 out of the 16 markets tracked. Additionally, the category is performing ahead of total food in volume terms across several key markets. Consumer behavior is showing signs of improvement as well. In the UK, for example, we see consumers putting more frozen food products on their plates, for instance, adding peas to fish fingers. For Nomad, the quarter is still in early stages, but we are seeing improving value share and volume trends in some of our biggest markets, UK and Italy especially. There were many great commercial developments at Nomad during the quarter. In the UK, we launched a back-to-school master brand campaign with Bird's Eye to capture the attention of families settling back into the school year after summer breaks. We reached more than 90% of households with our Bird's Eye brand advertising during the period. In the Adriatic region, we posted record ice cream sales driven by our excellent portfolio and supported by good weather, high service level, and an acceleration in our point of sales program. We benefited from our investment in supply chain, marketing, and innovation. We also launched fish fingers in the region, and the initial results are highly promising. Following the 60th anniversary of Findus in Italy, We are now celebrating the 25th birthday of Carlito, a brand icon chameleon for Sofficini, our beloved pancake product. We celebrated with the introduction of a short movie about his life at the prestigious film festival for kids, creating significant media coverage from national newspapers and TV. Finally, green cuisine remains our plant-based pillar for Iglo and keeps growing value share. In Germany, one of our core markets for the brand, our value share was up 7% in Q3. This was driven by focused activation behind the new campaign, as well as product innovation. We've gotten many questions from investors and analysts about how the retail trade looks with our new promotion plan now in full swing. We've got some great examples here of in-store execution in four of our top markets. We are combining our best-selling and most loved products in a high-visibility ice freezer to give consumers combined meal ideas. This provides a great takeaway experience at an affordable price. We've lined up our fish fingers with Green Cuisine, Goodfellas, and Aunt Bessie. We also have our famous potato waffles in the mix. In France and Spain, we've ramped up Goodfellas distribution in recent months. In France, we've got a good example here of how we are catching the consumer's attention for what is a new brand in the country. Notice the high visibility of the display, giving details on the product for new consumers first learning the benefits of this great brand. Since acquiring our Adriatic business, the addition of ice cream to our portfolio has been a great success. In Croatia, we have an example of our king ice cream promotions, especially our highly profitable single-serve versions. In Germany, we are on offense with our fish fingers and vegetables. In this ice freezer, we've got our key spinach products on promotion next to our oil fish fingers, both mushroom battles in that market. We have many more examples across our business. and I'm happy to report that the reactions from these programs have been strong so far. With this in-store execution driving sales along with our new media, I'm highly optimistic about the outlook for the rest of the year and beyond. With that, I will now hand the call over to Sami to review our financial results and guidance in more detail. Sami?
spk03: Thank you, Stéphane, and thank you all for your participation on the call today. Turning to slide 9, I will provide more detail on our key third quarter operating metrics, beginning with reported revenues, which increased roughly 1% to €764 million. Sales grew organically 1.6%. Third quarter revenues were negatively impacted by 1.1% of unfavorable effects. We delivered gross margin of 28.4%, supported by pricing and cost controls. This result was ahead of our plan. As previously discussed, Q3 was the most challenging quarter for gross margins for the year due to the comparison from the third quarter of 2022. Looking out to Q4, we remain on track to deliver stable gross margin for the year. This will be supported by an improving volume trend, pricing, strong cost discipline, and robust RGM execution. Moving down to the rest of the P&L, our gross profit came at €217 million in the third quarter. Cost of goods sold increased to €547 million, an increase of 2%, up €8 million versus last year. Adjusted operating expense of €100 million was up 11% year-over-year, reflecting stepped-up ANP investments. As a result, adjusted EBITDA was €140 million, with adjusted EBITDA margin at 18.3%. Finally, we posted adjusted EPS of €0.43 per share in Q3. This translates to $0.45 per share at current spot rate. Turning to cash flow on slide 10. We delivered strong cash flow in the first nine months of the year, driven primarily by working capital improvements and EBITDA growth. Additionally, we've been highly focused on effective inventory management and cash collection, helping our working capital performance. We are well on track for annual adjusted cash flow guidance target of €250 million at a conversion rate of 90% to 95%. Maintaining this high level of conversion is paramount as we consider our capital allocation strategies for the year and beyond. In the first nine months, we generated €125 million of adjusted free cash flow for a conversion ratio of 56%, our highest first nine-month conversion rate since 2020. Working capital decreased €151 million to €68 million, more than offsetting a €44 million increase in cash interest driven by our refinancing and repricing activities. CAPEX of €59 million was up €4 million versus last year, as we remain highly disciplined on supporting long-term strategic investments within our business. Changes in cash tax increased €9 million to €53 million, while cash interest was up €44 million to €113 million, driven by last year's refinancing. With that, Let's turn to slide 11 to review our 2023 guidance, which we are updating today. This guidance is based on foreign exchange rates as of November 1, 2023. First, we are again maintaining our organic revenue projection of mid-single-digit growth for 2023, with our pricing more than offsetting volume declines. As our current ANP investment takes hold in the market and we approach 2024, our expectation is that we will develop a more balanced mix of price and volume. We expect to see the beginning of volume recovery in Q4 rolling into 2024. We are keeping our adjusted free cash flow guidance of approximately 250 million euros. We expect our cash conversion ratio to be in the range of 90 to 95%. consistent with historical averages. As Stéphane spoke to earlier in the presentation, with our underlying business performance in line with our expectations and our share repurchase across the first nine months of the year, we are raising our 2023 adjusted EPS guidance last updated in August. We now expect adjusted EPS in the range of 1.57 to 1.60 euro per share or $1.66 to $1.69 per share at current spot rates. This excludes any additional impact of potential future capital allocation. I will now turn the session over to Q&A operator back to you.
spk09: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing these star keys. Our first question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.
spk07: Hey, good morning, folks, or perhaps good afternoon where you're at. Thank you for slot me in. And great news on the dividend. I look forward to more details to come in terms of payout ratio, magnitude, et cetera, early in the new year. On the quarter itself, I was surprised by retail disputes. It's a strange time of year to see retail disputes. And looking at your P&L, price growth accelerated on a two and three-year stack basis. So is it fair to assume that you've implemented new price increases in the quarter? Those are the cause of the disputes. And if so, can you give us a sense of order of magnitude?
spk01: Thanks, Jason. Thanks for the question. Well, you know, I think the world has changed a bit. In the past, in Europe, you know, we had the one negotiation per year at the beginning of the year. And then, you know, you have these volatile times with inflation going up. And you remember last year, we increased the price three to four times. So instead of one negotiation, you had the two to three to four negotiations. So this year is a bit the other way around. You know, obviously, inflation is coming down, which is great for all of us. But still a volatile time. So I'm not surprised. that we have this conversation, healthy conversation, instead of conflict, because we never stop the dialogue with these guys. So I think it's absolutely unavoidable and to some extent sometimes necessary to make sure that we have the integrity in terms of pricing. I think the key piece for us is, how can I say, is we've decided to do this way because we want to protect the long-term integrity of the business. And sometimes, you know, it's obviously not easy because we list it and, you know, you have a quarter coming in. That should not prevent us from making the right decision in terms of negotiation. And that's absolutely fundamental for us and for the future and for retailers. So that's what we had. In terms of what it did in Q3, in terms of revenues, around 2% plus revenue. of revenues were quote-unquote lost with these negotiations. I think most of these negotiations are over. We still have a bit of left ahead of us. Q4, you will have obviously the remaining, it's going to obviously during the first month, but then if it leads, we're going to put positive impact Q4 and definitely even more so for Q1 with the right level of margin. So that's that. So the world is changing, Jason, and I think probably it's going to be a bit more stable in the future. But, you know, the number of negotiations has increased.
spk07: Okay. One thing that's also changed in the last year or so is the private label was no longer following you as closely or as quickly as they had been in the past with price increases. And you note in the slides that private label price caps remain stable. So I assume that they still, A, still haven't followed on sort of your last rounds. And now if you're putting through more, are you seeing them? It was suggested in the slide that you're seeing them follow if price caps are stable. But can you confirm that's the case? And then the second part of it, you're talking about a lot more merchandising activity on the forward, which makes a lot of sense as you look to improve volume. But between that and rectifying some of the disputes of retailers, is there any sort of net price that you're effectively having to give back to fund that merch or rectify the tension with the retailers?
spk03: Jason, sorry for my voice. I have a bit of a voice extension, but I'll try to answer your question. On the private level point, I think what's really important is that we have effective stabilization, but with a gap that is now, frankly, reaching a point where we think we can still operate while effectively leveraging all of the other aspects of RGM, namely promotion, in order for us to restate competitive versus them and reignite growth from that basis. So if you recall, the price gap was double digits, then double digits increased versus the prior gap. Then it started to go down, and it has reached a level, let's say, of 5% plus percent. And within that, really what we are taking, what the action we are taking right now is effectively acting at the promotion level, beefing up our INP, and at the same time as well taking into consideration the change in the inflation dynamic that we see for the future. And this is where the negotiation and the conversation ought to play there. We clearly want to reignite share growth. We want to revert the volume trend, which it has already. stabilize amine at this stage, and on its way back to effective recovery by Q1, Q4 will see an improvement, and Q1 will see effectively a turnaround at that point in time.
spk07: Very helpful. Thank you very much. I'll pass it on. Thank you.
spk09: Our next question comes from the line of John Baumgartner with Mizuho Securities. Good morning. Thanks for the question.
spk08: Stefan, It looks as though in this latest run of Nielsen data, Nomad is seeing some market shares improve across a number of countries, but Italy is still soft. I think that's when the relative pricing has been more troublesome. How do you think about the time required once you're in market for consumers to shop the aisle, become aware of the promo, and take advantage of it? What's the natural purchase cycle for your categories? Is it four weeks? Is it six weeks? Just trying to better understand the willingness and ability for consumers to take advantage of promo once it's in market.
spk01: But to your point, I think, you know, Frozen Isle is obviously more something like your destination as such. And the average country by country, but let's say give or take, is around four to five times per year. So you can imagine, you know, between the moment you're starting with your promotion and the impact it has in the market, it takes a bit of time. So what we see, you know, in Italy, it's, you know, we see some green shoots. It's very much in line with what we were expecting. And then, you know, basically, the last thing we need to do is to change course. So we've taken that to the country. We've started our RGM program, let's say, the fastest, let's say, with very deep, especially in fish. And what we're starting to see is some green shoots, but definitely, you know, it's going to be complemented by ANP on top. So take that, you know, on top of the four to five times, also with a stabilization of COGS, stabilization of obviously labor cost is starting to increase, which to some extent in terms of cost of living is good for us as well, especially in a country like Italy. And then we see that, you know, definitely end of this quarter, end of Q4 this quarter, and definitely next year with the ALP, We are very confident that Italy will reverse the trends, which is what they're starting to do, especially in fish.
spk08: Okay. And then thinking more about the macro into 2024 and the persistent inflation in Europe and the impact on consumers' budgets and ships and food spending, when you're lining up these brand investments, how are you thinking about, I guess, the competition, just alternatives for consumers? Are you mostly focused on winning in store against other frozen or fresh categories? Is there also an angle here to try and capture some food spend from outside the home? I guess, what are your expectations for how or where you'll source that incremental volume from going forward?
spk01: Well, the first thing is we've lost our market share, and so definitely there is a piece of that that we want to regain. That's the first thing. That's within the area, and we think that with the programs we have, we can do this. but also we believe that we have this program of Muslim battle. They're supposed to grow in a disproportionate way compared to the others. That's what we've been doing. One more thing you will see as well is we're going to start in a very selective way to work on new categories on the country by country. Very far from what happened something like 10 years ago, which was a bit of everything, but definitely where we think that in a country... You know, this category could be poultry in some countries, could be pizza in another. You know, we have the right to win. We're going to do it. So there's going to be a long-term investment. So that's a combination of different things. When you think about poultry or you think about pizza, for example, definitely you have a contest and competition with not only with frozen, but also with chilled. So that's going to be the framework for us. So definitely focused on the all-Muslim battles with RGM. with obviously A&P. And with that, you know, we think that within this framework, we're going to gain market share. And then on top of that, we're starting something which is, again, very focused behind new categories. And that will impact the frozen food, but definitely also above and beyond frozen food, which in and of itself, by the way, is doing well compared to many other categories.
spk02: Thanks, Stéphane.
spk01: You're welcome.
spk09: Our next question comes from the line of Rob Dickerson with Jefferies. Jefferies, please proceed with your question.
spk06: Great. Thanks so much. Yes, Stefan, maybe just to kind of follow up on what you just said. You know, I think in the prepared remarks you'd stated, volume growth was kind of back for the broader frozen category in 12 out of 16 markets. You know, I mean, clearly, I guess, you know, a few things going on in Q3 that, you're not posting the volume growth, but then also sounds like there is some incremental pricing that's gone through the market. So as we get through Q4, as you say, you think the volume trajectory improves. I mean, are you into Q1? Should we be thinking that hopefully as you get toward the end of the quarter that you start to see volume stabilize and therefore there could actually be volume growth next year despite the pricing because of ongoing higher A&P and mushroom battles.
spk01: Well, to your point, I think, you know, we have the programs we have with the combination of, let's say, more stable macros. Definitely, we believe that, you know, we're going to come back to the previous algorithm, which was based on, obviously, volume growth. Then you obviously... higher sales, then obviously, definitely higher EBITDA and then double-digit EPS. So that's definitely what we want to come back with. With the combination, as we said, ANP, RGM, which is really something that we have invested a lot, and milder, let's say, macro. That's the idea. The concept of do we believe that we're going to gain market share and get back to volume growth next year? Absolutely. Where is it going to happen? In which week? I can't tell you that right now, but definitely we're very confident that we're going to gain market share and we're going to gain volume next year.
spk06: All right, super. And then I guess, Sammy, just on the gross margin, I think you had said Q4 gross margin kind of in line to have gross margin essentially flat for the year. I think that kind of implies Q4 gross margins essentially flat, right? But at the same time, I'm hearing some stuff about pricing and RGM initiatives and, you know, sure, there's productivity. So I'm just curious, like, you know, kind of with some pricing coming through, it sounds like maybe that is clearly offsetting some higher costs. Otherwise, I kind of would think gross margin would be up. Thanks.
spk03: Yeah, you have a bit, I mean, Rob, you have a bit of an effect as well of mix because, you know, we had ice cream in Q3 and then we don't have ice cream in Q4. When you look at the trend from the first three quarters to the fourth quarter, but versus a year ago, you start to see some improvement there, which is going to comport the projection of, let's say, flat growth margin, I would say, for the year. So technically the cycle has been that the first three quarters were slightly above 28% and then effectively in Q4 it's going to be slightly lower than that, but For an average of the year, that's going to be flat versus a year ago. So it's clearly, definitely the investment we are making in terms of productivity, in terms of, effectively, investment behind our core brand, and particularly on mix on our core category, and must-win battle in particular are going to start to pay off. We see, effectively, the trajectory starting to improve into the next year. But for this year, we definitely maintain our flat growth margin for the year.
spk02: All right.
spk06: Good enough.
spk02: Thank you, guys. Thanks.
spk09: Our next question comes from the line of Steve Powers with Deutsche Bank. Steve, we'll see what your question is.
spk10: Hey, great. Thank you very much. On the gross margin, actually, while we're here, you mentioned that 3Q came in ahead. What was the source of the upside? Was it better ice cream sales, or were there other drivers of the upside versus your expectations?
spk03: Well, versus expectation, I think we've been slightly higher, you know, because effectively we had a bit of a better performance on the top line if you really look at that versus expectation. And yes, ice cream has been doing really well there. There's a mixed factor there. And the continuation, effectively, of the return that we are putting, we're getting behind all of the cost-saving and productivity initiatives. I mean, as you know, we're putting a lot of focus and a lot of effort in COGS in particular. But it's a combination of elements, I think, Steve. I mean, a lot of that. It's not only just the saving in itself, but you really have a little combo on focusing on must-win battle, stepping up effectively the mix by invested behind the must-win battle. RGM starts to get in motion on that, which is giving us a bit of a breathing space there, which we expect to continue to maintain. And again, securing our hypothesis and our projection for the year at about flat close margin. Yes. Okay.
spk10: Very good. And you mentioned 100% coverage and strong visibility on constant to 24%. Is there anything you can offer us in terms of, you know, an overall cost outlook or any color on expected, you know, kind of timing of the cost curve into the next year?
spk03: Yeah, we, you know, at the time we give the guidance there because, frankly, I have to say, I mean, so far, of course, we indeed have covered, I mean, for the year, that's obvious because we are now, frankly, at the level where we are. But getting into the next year, we're starting, effectively, to lock some of the deals available in the market. there is effectively some deflation on fish, some slight inflation on some of the veggies. I mean, some of them more than others. And we are really trying to look at the market dynamics to frankly make sure that we remain competitive versus the other players in the market. And frankly, we have a COGS structure that enables us to adjust the price as necessary through promotion as we move forward to stay competitive there. But definitely after two years of heavy inflation, we are seeing effectively a a flattening and a decline on some of the categories. I mean, fish as an example, and a bit of an increase on the rest. So rest assured, we'll keep you up to date. I mean, at this stage, but we're maintaining the strategy of trying to grasp as much as we can from the market in order to really help create value to invest in business.
spk10: Okay. That's very helpful. And last question, if I could, you know, there's been, I think everyone's trying to, you know, kind of get a pulse and try to track your, progress on volume recovery and market share improvement as you make good on the investments that you're currently making. As we do that from the outside, is tracked channel data a good barometer of your progress? Or is there a reason to believe that track channel performance will either lead or lag total portfolio performance?
spk01: Well, directionally, it's okay. Absolutely. But then, you know, they have some puts and takes. when obviously you have the difference between sell-in, sell-out. You also have the food service, the piece. Then some countries are not covered as well. But directionally, it's okay. And then definitely with Tony, we can obviously help you to be a bit further, I mean, more precise with the difference between, let's say, the numbers as such that are publicly available and then how to get to the final number. But directionally, it's okay.
spk02: Okay. Very good. Thank you. Thank you very much. Thank you.
spk09: And as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the question and answer queue. Our next question comes from the line of John Tan Wang Tang with CJS Securities. Please proceed with your question.
spk04: Yes. Hi. Good morning. It's Pete Lucas for John. You guys covered most of the stuff here in the prepared remarks and Q&A, but if you could just kind of maybe summarize the biggest puts and takes you're seeing in regards to working capital and cash flow expectations going forward.
spk03: Yeah, I think as we had mentioned, I mean, no longer, I mean, cash flow is absolutely an essential critical measure for us because it drives effectively a lot of the commitment we have to driving shareholder value and to effective capital allocation. So, We clearly have been investing a lot of effort in order to step up our performance in all of the areas of working capital. I mean, let me get them one by one, if you want. I mean, on receivables, it's clearly something where we have to clearly get the perfect match between the overall receivable and the collection. And honestly, at this stage, we're really making a very good progress and have stepped up our performance, I mean, from that end. Not necessarily in the change itself, but in the efficiency of collecting, effectively, money behind a receivable. On inventory and payables, the point there was, as you recall, a year ago, we have stepped up our inventory, I mean, because of all of the conditions we have with the disruption in supply, with war, and with specific supply issues, I mean, relating to some of the ingredients. And we have taken the journey of the supply chain team has done an extraordinary work there to really drive down our inventory in order to support our business requirements. And you see that in a customer service level that are very good. And at the same time, you've seen a step change improvement in our inventory that have been down, together with our receivables that have now integrated, if you want, the one-off effect of the past year, particularly the unfair trade practice that has dragged an impact on the overall payable. So net-net, if you want, receivable, clearly huge focus on a per-market basis to make sure we perform in line with expectation. Inventory on a journey of taking the overall inventory level down. while making sure that we maintain top performance in the area of customer service. And the totality of all of that is really enabling to free up an amount of cash that is enabling your performance. So from a cash flow standpoint, we just reiterate the point. This business is designed to deliver 90% to 95% as free cash flow conversion, which amounts to $250 million for this year. And we intend to continue to do that and to do each and every effort to even generate more cash on top and beyond that in this year and the after years.
spk04: Very helpful. Thanks. And then just last one for me. What is your expected net interest expense following the repricing?
spk03: Following the repricing, we'll get back to you. Let me tell you the net interest expense. will be overall, for the year, we'll be expecting probably around 118, 110, 150 million, I mean, overall. Great, thank you.
spk02: That's perfect. Thank you very much.
spk09: And we have reached the end of the question and answer session, and I'll now turn the call back over to Stéphane Cashmaker for closing remarks.
spk01: Thank you for your participation on today's call. After the unique challenges of 2022, we continue to deliver organic sales growth while protecting our margins and investing in the long-term health of the business. Our NP program is poised to drive growth, our supply chain is in great shape, and our RGM capabilities are expanding with each new quarter. We are already looking forward to an exciting 2024 of volume and market share recovery. Once again, we are on track to deliver our ambitious financial objectives for 2023 and beyond. Thank you all. Operator, back to you.
spk09: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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