Nomad Foods Limited

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.

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.

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?