Nomad Foods Limited

Good day, ladies and gentlemen, and welcome to Nomad Foods Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I would now like to turn the conference over to Jason English, Head of Investor Relations. Please go ahead.

Hello, and welcome to Nomad Foods' fourth quarter 2024 earnings call. I am Jason English, head of investor relations, and I'm joined in the call today by Stefan Deschmaker, our CEO, and Ruben Baldu, our CFO. By now, everyone should have access to the earnings release for the period ended December 31, 2024, that was published at approximately 6.45 a.m. Eastern Time. The press release and investor presentation are available on Nomad Foods' website at nomadfoods.com. This call is being webcast in a replay and will be available on the company's website. This conference call will 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 the risks and uncertainties which are discussed in our press release, our findings in the SEC, and 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 replacement for and should be read together with IFRS results. Users can find the IFRS and 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 2023 and 2024. All these adjusted figures have been adjusted primarily for share-based payment expenses and related employer payroll taxes, non-operating M&A-related costs, acquisition purchase price adjustments, exceptional items, and foreign currency translation charges or gains. Unless otherwise noted, comments from here will refer to those adjusted numbers. With that, I'll hand it over to Stefan.

Thank you, Jason. I'm happy to report that Nomad Foods had a strong finish to 2024 with impressive volume-driven organic sales growth, and robust margin expansion.

But before I go too deep into results, I want to step back and reflect on where we are in our journey.

As you can see on slide three, we have now delivered nine consecutive years of sales and adjusted EBITDA growth. While this growth has been aided by M&A, organic growth has also been a strong and consistent contributor to this growth over time. In fact, in 2016, we have grown our organic sales at a nearly 3% target, with growth in every year other than 2021, when we will have the COVID demand spike. We are now entering our 10th year as a public company, and are well positioned to continue to deliver sustainable growth including another year of organic growth in 2025, while generating considerable shareholder value.

We have created an enviable company since embarking on this journey in 2015.

We have assembled a portfolio of iconic brands with superior equity and strong market share positions, and we have accomplished this while remaining focused building a pure-play processed food business that now spans both developed and developing markets across Europe. And we have acted with purpose, creating a portfolio of high-quality, great-tasting, convenient food that is good value and good for you. Roughly two-thirds of our portfolio is comprised of vegetables, fish, and groceries. And 93% of our UK and Western European revenue is generated from products deemed a healthy meal choice by the UK government.

And we've done this in a responsible way.

I'm happy to share that Nomad Foods has been including the annual Dow Jones Sustainability Europe Index for the fourth consecutive year, while receiving a maximum score of 100 in health and nutrition,

for the sixth consecutive year. We are well positioned for the trends that are reshaping this industry.

We have a clear portfolio advantage, and we also have a people advantage. In recent years, we have reshaped the organization. We have rewired how we work to improve efficiency, agility, and ID sharing. And we have upgraded our talent pool by promoting high performance from within, by selectively hiring externally to fill knowledge and capability gaps when necessary.

This has helped us own our strategy-energized organization and improve our execution.

And lastly, we've been able to lean in and arm our team with the tools they need to further strategy and initiatives. Our supply chain organization has delivered meaningful productivity over the past two years, while our strategic focus on driving growth in our profitable investment battles and growth platforms is delivering margin-mixed benefits that have allowed us to increase investment in our products or advertising in our installed merchandising, while building capabilities in areas such as revenue growth management and cyber security, among others. Even all of this, I feel great about how we positioned as we enter our 10th year as a public company. And I'm confident we will deliver our 10th consecutive year of top and bottom line growth in 2025.

Recent results only embolden my confidence in this.

It became clear to us in 2023 that the period of outsized inflation-induced revenue growth was nearing an end. We knew that growth would become more dependent on growing gains, market share expansion, and effective revenue growth management initiatives. It was then that we introduced our new commercial flywheel and innovation framework, while beginning to increase our investment in our products, advertising and merchandising. Our EMP spend increased by 14% in 2023, and then again by high single digits last year to 4% of net sales. This places us in the top tier of our peer group, and we expect A&P growth to once again outpace sales growth in 2025. And I'm excited to share some of our new creative with you later this year.

It is some of the best I have ever seen from Not My Food.

Renovation, meanwhile, jumped from 4.2% in 2023 to 4.8% in 2024, and we expect it to easily exceed 5% in 2025. And when we combine innovation with renovation, we expect a renewal rate or percentage of sales where our products are new or refreshed to double from high single digits in 2024 to mid to high teens in 2025. We are grading our food and packaging to achieve superiority across an increasingly large percentage of our business.

All of this is helping our commercial flywheel to spin faster and faster while delivering solid returns. As you can see on slide five, we have now delivered three consecutive quarters of boiling broth. Broth can move around for a quarter. where the trend line is leaning in the right direction.

And while it helps that our European frozen food category is healthy, we are controlling much of our own destiny as our investments are supporting category growth while driving share growth.

As you can see on slide six, we have now achieved market share growth in the last two quarters.

And impressively, we accomplished this by expanding our gross margin. In fact, our gross margin in the last nine months of 2024 modestly exceeded the pre-COVID level we achieved in 2019. Focus has been a key contributor to our success, and focus will continue to define how we go to market in the future. We continue to concentrate a disproportionate amount of our time, energy, and investment in our mushroom battles. These are the core category country combinations that are critically important to our success, are marginally creative, and where we have a clear right to win. The top 25 mushroom battles accounted for more than half of our sales last year and an even larger share of our gross profits. and grew net sales by 2.7% over the year and 3.5% in the quarter.

While our focus remains on our optimization battles, recently we have been strategically investing behind select growth platforms.

These are primarily areas where we see opportunities to leverage the capability in one market to expand our presence in another market with a lift and launch approach. Our organic sales for our growth platforms grew by 16% in 2024 and 40% in the fourth quarter. Over the past year, we have been highlighting poultry as one example. We have more than doubled our poultry sales in the UK over the past five years, and it has gone from a growth platform to a mushroom battle for us, given the success.

Our goal? is to make all of our growth platforms into machine battles over time.

Italy and Germany are two more recent markets where we have made poultry into a growth platform, seeking to replicate our success in the UK. The frozen prepared poultry segment is underdeveloped in Italy, and we began to invest in developing the segment there in early 2024.

I'm happy to say that it is working.

The fourth quarter of retail sales for prepared poultry in Italy rose 98% year-on-year, with our market share growing from 8% in Q4'23 to 15% in Q4'24. The category, meanwhile, is now growing 6% in Italy with Nomad accounting for more than 100% of the category growth.

It is a great story for both. us and our retail partners.

In the back half of 2024, we turned our attention to Germany, where the frozen prepared poultry market is large and well-developed, but dominated by a private label.

Here are strategies to create a premium tea in the segment.

I'm happy to say that we're finding success here too. It is early, but in the fourth quarter, Our retail sales for prepared grocery rose 35% year-on-year in Germany. We reached 2.7% market share in the fourth quarter, at the 70 basis point higher than the prior year, and illustrates how long the runway could be for us in this market. The other growth platform we highlighted last year was potatoes.

As a leading frozen fish company, it's only proper that we be a leading frozen chip company as well.

In Belgium, we already have a strong market share position in potatoes, but we are leaning in to make it a bit stronger and grow our market share by 420 basis per year on year in quarter four. And we're happy to report that we became the category leader in Belgium last year, climbing from number two to number one in value share. In France, our share grew 550 basis points to 16.1% in the quarter. In the UK, where the market is very large, our share grew 70 basis points year-on-year to 8.9%.

A great accomplishment, even if it's not keeping pace with the fantastic results in France and Belgium. Turning to 2025, our playbook will not look meaningfully different.

Our strategy is working, and we will stay the course by championing frozen food. We will continue to focus on our investments beyond our merchant battles and targeted growth platforms. But we will do it with more advertising, more innovation, more renovation, and more revenue growth management initiatives. Ongoing productivity realization from across organizations is purely an investment in growth, allowing us to deliver un-stopped and bottom-line growth. And, as has always been the case with Nomad Foods, we will deploy capital in ways that create value for shareholders and goes above and beyond organic growth. I'm excited to celebrate our 10th year as a public company with you in 2025. With that, let me turn it over to Ruben, tell you more about what we expect and provide some more detail on what we achieved last quarter. Ruben?

Thank you, Stefan, and good morning, everyone. I've been with the company now for roughly eight months, and I'm increasingly confident in the opportunities that lie ahead of us. We have an amazing portfolio in a great category with top-tier talent and nutritional tailings at our back. Our playbook is working. and the innovation, renovation, and marketing plans we have to drive sustainable growth in 2025 and beyond are compelling. Turning to results, as you can see on slide seven and nine, for the fourth quarter, reported net revenues increased by 4.3% to €793 million. Organic growth was 3.1%, which marked our 10th consecutive quarter of organic growth. Oil growth remained positive for the third consecutive quarter, rising by an impressive 4.7%, while price mix was a negative 1.6% offset to volume growth, as we reinvested some of our margin upside to drive impactful merchandising at retail. The net price investment was an 80 basis point headwind to gross margin and was more than overcome by 40 basis points of favorable mix and 160 basis points of productivity, thanks to efficiency gains. This quarter, Robust gross margin and healthy revenue growth delivered a 9% increase in gross profit, which was amplified by a 2.6% year-on-year decrease in SG&A expenses to result in a 17.6% increase in adjusted EBITDA. The lower SG&A expense was driven by lower A&P expenses, as we led the sharp increase in prior year investment and benefited from a more even investment cadence throughout the year. A&P investment rose high single digits for the year on top of global digit increase in 2023. Interact investment growth slowed to low single digits in the quarter as we began to cycle the capability investment that began in late 2023 and carried through to 2024. Adjusted profit rose 28% year-on-year, while adjusted EPS rose 31% to €0.42 as our diluted share count shrunk 3% year-on-year. For the full year, we delivered our ninth consecutive year of sales and adjusted EBDA growth. As you can see on slide 8 and 10, full year revenue grew 1.8%, with organic sales rising 1% as volume returned to growth, gaining 1.3% year-on-year. Gross margin rose 140 basis points for the year to 29.6%, nearly reaching the 30% peak COVID gross margin we achieved in 2019. Investment in price and promotion was a 70 basis point year-on-year headwind to our full year gross margin, which was more than upset by 110 basis points of favorable margin mix and 100 basis points of net productivity realized by our supply chain teams. Our teams have a robust pipeline of productivity initiatives, and I expect these benefits to continue funding our growth investments going forward. Our SG&A expenses grew 7.4% for the full year as we increased our A&P and indirect investment each by high single digits. The higher A&P was a continuation of the reinvestment plans that we started in 2003 and continued in 2024. We expect even more reinvestment in 2025. The higher indirect expense was due to a combination of underlying inflation and capability investments in areas such as cybersecurity and revenue growth management. With these investments now behind us, we expect much more moderate growth in indirect expenses going forward. Despite these investments made in 2024, we were still able to grow our adjusted EBITDA by 5.6% for the year, delivering near the high end of our initial 4% to 6% EBITDA growth guidance range that we gave this time last year. A full-year EPF of €1.78 was also near the high end of our initial €1.75 to €1.80 range. Turning to cash flow now, strong fourth quarter results helped us over deliver on our full year cash flow guidance with free cash flow conversion of 101% coming in well above our initial 90 to 95 conversion guidance. We saw nice working capital inflows in the fourth quarter due to the normal seasonal timing of inventory balances and an unwind of the higher receivable balances that were ahead in the third quarter due to timing dynamics. The strong free cash flow allowed us to return €208 million to shareholders in 2024 versus €171 million we returned to shareholders in 2023, therefore more than a 20% increase. Last year, we returned the cash in the form of a $60 cent per share annual dividend in share repurchases. We finished the year with 156.1 million basic shares outstanding, a 4% reduction from where we finished 2023. Over the past two years, we've now repurchased 290 million euros of our shares. Turning to our guidance for 25 on slide 12. We are pleased with the progress our commercial team has made, improving market results and restoring our market share to growth. We are happy to see our supply chain team delivering healthy productivity savings. This gives us strong momentum into 2025, which will be our 10th year as a public company and is also expected to be our 10th year of positive revenue and adjusted EBITDA growth. We continue to expect organic sales growth of 1% to 3% for the year and adjusted EBITDA growth of 2% to 4%. We had a stronger than expected finish to 2024, which means we now expect a higher absolute level of adjusted EBITDA. And as a result, we have raised our full year adjusted EPS range to 1.85 to 1.89 from the initial 1.81 to 1.85. And recent exchange rates, this translates into US dollar denominated EPS of $1.94 to $1.98. And lastly, we continue to expect full year adjusted free cash flow conversion of at least 90%. We expect to use this cash flow to create incremental value for shareholders that goes above and beyond organic growth. A still relatively new dividend is a great example of this. As you may have seen in our announcement last month, our Board of Directors has approved a 13% increase in the first quarter of 2025 as dividends to $0.70 per share from the $0.15 quarterly payout in 2024. As we think about the shape of the year, we expect growth to be somewhat choppy quarter to quarter, even in the facing of investments, prior year comparisons, and some seasonal movements. Nonetheless, we expect the underlying trend line of improvement to hold throughout the year in totality. While our advertising investment growth will be meaningful in late quarter one, our new innovation-fueled distribution gains and associated merchandising activity is expected to be more faced into quarter two and quarter three this year. This, in combination with Easter falling into quarter two this year versus quarter one last year, will lead to revenue headwinds in the first quarter. At this moment, we therefore expect organic sales to mostly decline in quarter one. These are just timing dynamics and not a reflection of the underlying health of the business. In fact, our shipments are moving around. We are happy to see our retail sales growing in 1% to 2% range over the past two months, despite the later phasing of our activity. Overall, I'm pleased with the progress we are making. We returned the business to profitable volume and market share driven growth last year, and I'm confident that we can keep the momentum going in 2025. And with that, I will now turn the call back to the operator to open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Andrew Lazar with Barclays. Please go ahead.

Great. Thanks so much. And good morning, good afternoon, everybody.

Good morning, Andrew.

Good morning. Stephan, maybe to start off, what is your 1% to 3% organic sales growth forecast for full year 25 predicated on, you know, with respect to your expectations for category growth and market share performance?

Well, as you may have seen, you know, we are in the low inflation environment and we've come up with the 1% category growth as the first piece. And the second piece is ourselves, obviously. It's overall, as we said, it's growing. But also, very interestingly, you know, our portfolio is really two-thirds is poultry, fish, vegetables, which are growing very nicely. The commercial flywheel is working nicely. Innovation, as we said, is around 5%. So the rest of the 1% to 3% is coming from this market share mix. And a bit of some net ERP, I would put it that way. Andrew, you remember that in Q3, we suffered of an ERP disruption in the UK, which is the biggest business for us. So obviously, we keep going with ERP, which is the right thing to do. But this year, as we said, we decided to slow down the process, come up with a smaller part of the business, and also all the lessons. So that's why I'm using the word net ERP. So will there be some disruption? Maybe much, much, much more limited than in Q3 last year. So that's where the 1%, 2%, 3% is coming from.

Great. No, that's helpful. And then you mentioned in the fourth quarter you reinvested some of the upside. in some of the sort of promotional activity, getting sort of distribution and some retail work and whatnot, and that obviously benefited volume pretty nicely. As you move through the first quarter, I realize there's some impact on volume, as you talked about, due to a later Easter and such. How would you expect sort of the price mix piece to come in now that you're two months through the first quarter? Would it be consistent? on a year-over-year basis, as an impact with what you saw in 4Q, or more modest, do you think, again, on the price mix side? Thanks so much.

Yeah, let me answer that, Andrew. And hopefully, you know, you appreciate that we cannot and will not give clear kind of guidance, outlook between separate line items of the P&L and price volume. But let me do try to give you some context. So you're absolutely right. If you look at the last three quarters, you've seen positive volume. especially where we almost had 5% positive volume growth. And volume will remain important to us. It's important from a consumer perspective, retailer perspective, but also how it drives leverage in our factory. So we're not all overnight going to change that strategy where we drive efficiencies and reinvest that in volume. So that's one thing. To the point of Stafford, so we've seen in the last two, three months lower inflation. And maybe that's also a separate question. If we look at kind of the full year, and we're not fully hedged yet, but we might see a bit more inflation into this year. How that exactly plays out is still to be seen. But then we would need to take some pricing back. And again, if we see inflation and cost price, let's be absolutely clear, first of all, it's really to be cost competitive. So we'll continue all our efforts we've done in terms of saving programs on procurement, continue to drive efficiencies in our factories, but also to drive efficiencies in indirects. But there might be that a ladder is a remainder which we need to do with price. Now, how and when that price comes through is still to be seen. So, you know, at this moment, and, you know, we've only had one month of actuals, we still see volume and a bit of pressure on price. Throughout the year, it could be that price comes back. So I think that is the context we can use at this point.

Thank you very much.

And the next question comes from Steve Bowers with Deutsche Bank. Please go ahead.

Great. Thank you. Good morning. Good afternoon, everybody. Stefan, the stepped-up innovation and renovation activity that you mentioned in your prepared remarks, I'm curious as to how much of that you expect to be focused on existing must-win battles as opposed to some of the new and emerging growth platforms that you talked about in 2025 and just how you think about striking that balance.

Well, the thing is, To your point, it's going to be mostly, let's say, Muslim battles and growth platforms. But let's put it that way. The Muslim battles are still very much the biggest piece of our business. So it's around 50% of our business. And that's where the bulk of innovation is going to go. This being said, at the same time, growth platform, which is, let's say, north of 100 million at this stage, is growing very nicely, very fast. There's going to be a lot of lift and launch, which is great. So it's going to be probably take proportionally a bigger part, but obviously applied on the smaller part of the business. But that's where the innovation is going to go. First and foremost, Mustang battles, then obviously growth platforms.

Okay, very good. And then you would also, you know, you talked about the organizational changes and the rewiring efforts that you've done to improve overall execution and agility, et cetera. To what extent do you feel that mission is sort of accomplished versus there being more work to do? And what would be the priorities in 25 on that front?

Well, let me start with my statement. It is never finished. That's the first piece. Never finished. Because, well, you may know me as I'm never fully satisfied anyway. So that's... You'll never hear me something like fantastic and all these things because these words don't exist in my book.

Pardon me, ladies and gentlemen. Please stand by while we reconnect the speaker lines. Hi, this is the operator. We have now brought in the speaker line, and we can proceed.

Thank you very much. So, Steve, sorry for the interruption.

I could feel your passion. Your passion was so great.

I'm not pleased with what happened right now, I can tell you. No, no, no. But fine. So, my point is, no, it's never finished. But this being said, we have I mean, we have really simplified the organization big time last year. So you remember that we had, you know, at some stage, 22 countries, and they're reporting a bit, you know, it was a bit, I wouldn't say it was optimal. Now we have all these guys reporting to one person, six clusters, and I think it's a big, it's a big, big change. In the meantime, we have obviously invested heavily in things like, like growth, like, like, like revenue growth management, innovation as well, in service of obviously these clusters. Supply chain is really, it's a never-ending process anyway, restructuring, improvement, making sure that these savings are going to come back, and then be in a position to invest behind ANP and gross margin ultimately. So my point is, it's never finished, but let's say what we have accomplished last year was really meaningful. Now, obviously, we also have to remain very, very cost-conscious because basically what I want to do to achieve is to put most of our, let's say, savings behind A&P and innovation and then obviously in service of short-term and long-term EBITDA. But that's how we want to be. So lean in terms of indirect after having restructured and clarified the whole structure and then making sure that obviously our top line will be served the right way.

Very good. I appreciate all that. I'll pass it on. Thank you.

Thank you.

And the next question comes from Rob Dickerson with Jefferies. Please go ahead.

Great. Thanks so much. I guess maybe just the first question around gross margin. I think about a year or so ago, kind of the idea was you can gradually get back right, to the 30% gross margin range or somewhere around there, you know, really based on volume recovery, also combined with just all the productivity initiatives and the mixed benefits. You know, as you think through kind of 25 relative to 24, your first question is, like, seems like you're kind of already there, right? Like, as you finish the full year 24, you're pretty close already, right? You know, is there any kind of change to thinking in terms of like what the real gross margin benefit, you know, from here could be on the business, just given really the focus on must-win battles, given the volumes starting to recover, given the productivity initiatives? That's just the first question. Thanks.

Yeah, let me answer that. Thanks for the question. Again, you know, our strategy is, We'll continue in the same way, and no change to that. We will continue, and that's our commitment, to drive efficiencies in supply chain. You've seen that in quarter four, in both the full year, we had full year around 110 base points of supply chain efficiencies. Quarter four, we had supply chain efficiencies. We will continue to drive that, right? And what we then said, we will reinvest those efficiencies together with our continued effort of driving mix into our brands and products. Most of that will be an investment in A&P and into the product, but it could also be that we do some investment in price, as you have seen over the last three quarters. So that is our commitment. We're not, at this moment, going to say this is our guidance for gross margin in 25, whether that will be 30. We're very happy that you see the recovery in 24. We will continue to drive the drivers. But as I said also, there will be a bit of inflation. Again, we need to be cost competitive. We have to take some prices. And that will lead, and we'll see how we then end with the gross margin. On the long term, I think we will continue to drive a further gross margin recovery. How it plays out in 2025 is still to be seen.

Okay, great. Perfect. And then maybe just a bigger question for you, Stefan, just around kind of strategic opportunities, inorganic strategic opportunities, and kind of where you sit now, you know, kind of For a long time, Nomad was clearly acquiring a lot more actively. Lots occurred over the past three, four years that made that maybe a little bit more complicated, maybe valuations even a little lower. I'm just curious, kind of where you sit today. Like, are you kind of, you know, more actively thinking about, you know, acquisition potential? Like if there were something that, you know, were to, you know, were to come up that were attractive, you know, would you still consider that? Or, you know, are you maybe, you know, in a period right now such that, you know, the focus on the core portfolio really is primary number one initiative and you really, you know, kind of think, you know, at some point we'll get back there. But right now, you know, we're really not thinking about acquisition potential at this point. That's all. Thanks so much.

Oh, thanks, Rob. Well, the point is, with or without acquisitions, Rob, the focus has always been, you know, the existing portfolio. That's the first piece. We never deviated, you know, even when we did, you know, the Switzerland or Goodfellas or Bessies or the Adriatics. We never deviated. That's the key piece. And that's the key piece because I don't think you can be a good acquirer if you're not doing the right job with your core business. Because the business model behind acquisitions are always predicated on a very solid model, organic model. And that's why we never did any acquisitions between 15, 16, 17. Because we had nothing to offer. We had first to clean up the whole thing. And then we started. So now, obviously, since... Since basically the 2022, we stopped, to your point, because basically first we need to focus on the business, you know, assets even more. That's one thing. And second, because there was a big difference between sellers and buyers. I think this is reducing. The gap is reducing a bit. In the meantime, no regrets. We keep buying back shares, which is the best acquisitions we can do. But also at the same time, I think what we also see is there are some maybe under the radar screen things, you know, not shiny objects that we could consider in our category, you know, subcategories in some countries where we have a lot of synergies, and that's the kind of things more and more we are considering. Nothing done yet, but obviously I'm not in the business of disclosing any names. That would be the smart thing to do. No guarantee to do anything, Rob, because if you guarantee something, that's the best way to make mistakes, by the way. But definitely, we believe that we have something to offer, which is not necessarily the big names in Europe, but others, add-ons, deals. And I think by doing so, we could create a nice pipeline of M&As. We're also creating a pipeline of innovations.

And maybe just to build on that, and I can give credit to Stefan, I wasn't there, but since 2016, end of 2016, this business has deployed roughly 1.2 billion for M&A while shrinking the share count by 13%, 13, 1, 3. And this combined then with our organic growth, you know, has allowed us to increase our EBITDA per share by 97, almost 100%, nearly doubling it from 2016 to 2024. And we were doing this while you've seen the dividends and lowering our net debt to EBITDA leverage. So I think that also tells you something in my humble opinion.

Yeah, of course.

Thank you so much. Very impressive.

Thank you, Rob. And the next question comes from John Baumgartner with Mizuho. Please go ahead.

Good morning. Thanks for the question. Hi, John. Hey, Stefan. Good morning. Good afternoon. Maybe the first question, I wanted to come back to the enterprise-wide transformation. The charges taken for that program in the quarter were fairly sizable. How far along are you in terms of taking these charges at this point, implementing the program? And then on the other side of that, how do you think about the ramp and the related efficiency benefits? I know it's not something you normally discuss in detail, but should that ramp in efficiencies begin in 2025? Is it more 2026? Just any thoughts there?

Yeah, no, let me answer that. It's a good question, John. So a couple of points. You've seen that a bit of it goes on the line. Yeah, maybe you can go, John, a bit of it goes on the line. So the rent in terms of cost was around $5 million, probably in the quarter, as well as if you look at the last year. What we said before in some interaction is we will bring that down, but clearly we're not all of a sudden going to halve that. So can we bring down these loan rates with 20%, 25% That is clearly the aim, and we are working towards that. That's one part. I think the other point is what Stefan said. To come to your question on efficiencies, the other point is what Stefan just said. In terms of not having disruptions again, we will go slower, smaller, and simpler. And slower means one of the lessons is you need proper time to test it, to onboard our teams and our people and our suppliers. That's one point. We will go smaller. So what we're going to put live, At the end of this year, the current plan is that what we went live last year was around a third of our business. What we're going to put live this year is not even 15% of our business. So we'll go smaller. And the third bit is where we can, we're going to simplify. So that's the second point I want to bring in. The third point is the efficiency ramp up. There are elements related to the fact that you need a whole new enterprise system, and that will help us. But the big efficiency gains in terms of what Stefan spoke about, simplifying the organization, in terms of factory optimization, both at a factory as well as on a macro level, in terms of supplier rationalization, nothing is stopping us to do that already in the next quarter and the next one or two years.

Okay, great. Thanks for that. And then a follow-up on the commentary on pricing. I'm curious, as you sort of see the waves of material inflation having passed, and you look back and assess how the volumes are evolving, after the rebasing to these higher price levels for the category, how do you think about everyday value for your frozen categories at this point? And do you sense that anything has changed in terms of maybe property elasticities relative to fresh or shelf-stable options for consumers in the categories?

Well, I think vis-a-vis, let's say, the center store and obviously fresh, it's a bit more difficult to see. The only thing we've seen is during this crisis, as expected, you know, we as category leader, we let the price increases. and the other guys have been a bit slower to react, including the private label. So it's been a great time for private label in terms of market share, as expected, by the way, but we have no regret because that was the right thing to do. I by far prefer, back to Rob's question, where do we stand with growth margin? I can tell you we wouldn't have this. We would not talk about when are you going to go back to 30%. We would have been very far from that. Now what we see is, at least in the category, John, I would put in the category, I think what we see is we are obviously, we're gaining market share. It's a bit choppy still, but we're gaining market share versus private label, which is good because the market, let's say the price has stabilized, which is the good news as well. Now, back to your question, and correct me if I'm wrong, how are we doing versus other categories like fresh or center store? Well, I think overall, you know, I think it's more than ever, frozen has proven to be a very resilient and good category. And I would say with all the things we have ahead of us in terms of long-term trends, in terms of good food, and obviously also waste and all these things, I think it's going to only amplify in the future.

Thank you. You're welcome, John.

And the next question comes from John Tanwanning with CJS Securities. Please go ahead.

Hi, good morning. Thank you for taking my questions, and congrats on a nice quarter. First, just a small one for Ruben. Are there any repurchases assumed in the EPS guidance for the year, or are the capital allocation at all?

No, we have not assumed that. What we have assumed is that our share count will stay flat. So there's always a bit of shares issued for share program we have internally. And for that, we assume some buyback. For the rest, it is assumed flat. So additional share buyback could be a tailwind. On the other hand, you also know that in EPS, there might be a bit of headwind, depending what the floating interest rate will do and all of that. So that's the assumption.

Got it. And then second, have you thought about the potential for tariffs from the U.S. and how that might impact European markets and the ability to procure seafood that's denominated in U.S. dollars? And, you know, what the knock-on impacts might be to you and how you might change your strategy to mitigate anything that might flow through there to you?

Yeah, so just because I heard you saying denominated in U.S. dollars, also to be clear, you know, potentially U.S. dollar moves. Our hedging strategy is such that we don't see a big impact into this year of the strengthening of the dollar, you know, strengthening of the dollar, which we've seen over the last one or two months. So just to make that point clear. Secondly, and just to be clear, we don't export into the U.S. And if you look at our buy side, outside fish, which I will come to, we don't import ingredients from the U.S. So we don't see overall big impact on tariffs. Now, if you do look at fish tariffs, Maybe the U.S. Russian fish. There is an executive order that Russian fish is not allowed into the U.S. We think if you look also a bit at the population base from a U.S. perspective, where a lot of that is in Alaska, we don't think that will change. But again, no one knows in these times. What we then see, there is a tariff in Europe, in the U.K., on fish. On that one, for the U.K., we're importing U.S. fish, so not an impact for us. It could be that there's additional tariffs also in Europe, but at this moment we're not foreseeing that, also because you have to look at the overall fish supply, where we would run out of fish if the tariff would go up too much or the sanction would go up too much. So actually we don't see that as a major risk. That doesn't mean we're complacent about it. So I think there's a more strategic work which we've done on looking at diversification of our fish sourcing, that we are sure that in five to ten years we have the right fish sourcing. So I think that's one element. The element which could have an impact, but again, this is also a bit hypothetical or no one knows what will happen, is an impact on the gas prices. But again, that's not the biggest spend of the item in our P&L. We freeze stuff instead of heating stuff, but that could have an impact. You've seen what will happen today with the gas prices. But again, a lot of sentences, the main point is we don't see a major impact of retaliation in terms of tariffs.

Great. Thank you.

And the next question comes from Peter Saleh with the TIG. Please go ahead.

Great. Thanks for taking the question, and congrats on a nice quarter. I just wanted to ask if you guys could provide a little bit more color on the overall consumer environment. in Western Europe. Just given the inflation that you're seeing, the incremental, have you seen any change in behavior at all in some of your core markets, given that you're starting to see a little bit more inflation? Has that flowed through to the consumer already, or are we still a little early on that front? Thank you.

Well, I would put it that way. I think it is, little by little, it's improving, but it remains, you know, it's not where it was before the crisis. But little by little, I think I would. Because when Ruben is talking about increased inflation, it's nothing comparable to what we had in 2022. So it's a bit of a price increase, but nothing major. So yes, I think overall, it remains, as I said, slightly improving, but it takes a bit of time. What we also see, which is good, is private label is losing a bit of market share, which says something about, obviously, people coming back to brands and what they perceive, rightly so, by the way, in terms of quality. So that's good. But, yeah, I think that's where we see it, which is fully reflected in our guidance, by the way.

Thank you very much. You're welcome.

This concludes our question and answer session. I would like to turn the conference back over to Stephane Deschmaker for any closing remarks.

Thank you very much. So I'm proud of the progress our company has made over the past year and confident in our growth outlook going forward. Our strategy is working and our teams are executing our plans well. We have compelling innovation, renovation, advertising, and merchandising plans. slated for 2025, which, when combined with our ongoing productivity programs, give us good visibility to another year of top and bottom line growth. We expect to keep our top and bottom line growth streak going again in 2025, extending the streak to 10 years as we mark our 10-year anniversary as a public company.

Thank you to all our employees and investors who have joined us on this journey. The best is yet to come. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.