Nomad Foods Limited

participants are in the listen only mode. A question and answer session will follow the formal presentation. Please note that this conference has been recorded. I would now like to turn the conference over to Mr. Jason English, head of Investor Relations. Please go ahead.

Hello and welcome to Nomad Foods first quarter 2025 earnings call. I am Jason English, head of Investor Relations and I'm joined on the call by Stefan Deschmacher, our CEO and Ruben Baldu, our CFO. By now, everyone should have access to the earnings release for the period ended March 31st, 2025 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 and a replay 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 risk and uncertainties which are discussed for the SEC and our investor presentation which includes cautionary language. We will 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 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 the first quarter of 2024 and 2025. All adjusted figures have been adjusted primarily for, when applicable, share based payment expenses and related employer payroll taxes, exceptional figures and foreign currency translation charges or gains. Unless otherwise noted, comments from here on refer to those adjusted numbers. With that, I will hand it over to Staphane.

Thank

you, Jason.

Nomad Foods has now entered its 10th year as a public company and the environment in which we celebrate our 10th anniversary is so far proving to be anything but boring. The good news is that we have built a resilient organization and portfolio that is well-equipped to weather the current economic environment. Our leading brands remain healthy and, as I will illustrate in a few moments, our category in Europe is strong. Furthermore, I remain confident in our strategy. Our commercial flywheel is spinning at a good rate, producing attractive innovation, impactful merchandising and compelling advertising. And while performance can be choppy month to month or even quarter to quarter, I think you will agree that the trend line of our underlying pre-improvement highlights the strength of our business model. And with that, let me turn my attention to result on slide 3. Our retail sales threw rows modestly in the quarter, which was in line with expectations. Recall last quarter that we guided through a slower start of the year, given the timing of our growth initiatives as well as the later Easter this year. This margin played out as expected. And I'm pleased that our organization was able to deliver another quarter of gross margin expansion. This, as well as over-read savings that we are just now beginning to realize, helped fund a double digit increase in ANP this quarter. And our strong cash flow has allowed us to continue returning cash to shareholders and reinvest in our business. In fact, in the first quarter, we repurchased 49 million euro of shares and paid our 25 million euro of dividends. This collective 74 million euro in the first quarter marks a 152% increase versus what we returned to shareholders in the first quarter last year. We have a lot to celebrate, but at the same time I recognize that our industry is facing headwinds to overcome. Our net sales, for example, lagged our sales through by a larger than expected amount in the first quarter, as we see greater than expected retail inventory destocking across Europe. Meanwhile, we are seeing some increased value-seeking behavior by our consumers and our input cost outlook has modestly increased. We will offset this cost pressure with targeted pricing, as we have successfully done in the past, but these increases will take time to fully implement. And rather than curtail investment to mitigate some of these headwinds, we continue to invest behind our brands and products for the long-term health of our business. Based on these factors, we believe it is prudent to lower our full-year organic revenue, adjusted DPS growth ranges for the full year 2025. Ruben will share more details on the quarter and full year outlook in a few minutes. I do not want this native volatility in retail inventory destocking to detract from the bigger picture. As you have heard us say before, we have a category in portfolio advantage that positions us for long-term success. As you can see on slide 4, the frozen category in Europe remains healthy. Growth of the category slowed in 2024, but it has recently accelerated driven by improved volume and value gains and is once again outpacing the overall food market. We expect the category growth in the near term to remain choppy, especially in markets like the UK, where industry-wide promotion activity is being reduced to offset inflation. But we do believe the category's outperformance versus the overall food industry is a long-term dynamic. The frozen category has outgrown the overall food industry by nearly one percentage point over the past decade, and we are happy to see it resuming its leadership position. The category continues to benefit from the particular trends of convenience, sustainability, value and great tasting food. In fact, with the adoption of air fryers, we are increasingly able to deliver restaurant-quality food from the freezer with lower preparation times and higher consumer satisfaction than prior preparation methods, while saving consumers substantial money relative to the restaurant's alternatives. We are excited about the long-term growth of portentino category, and we especially appreciate how our portfolio is positioned within it. As a reminder, two-thirds of our revenue is generated from lean proteins and lean vegetables, and 94% of our UK and Western Europe revenue is generated from products deemed a healthy meal choice by the UK government. We believe we are well positioned to meet consumers' evolving nutritional needs. We believe this potential advantage, combined with our effective strategy and -to-market playbook, was a key contributor to the improved market share performance we achieved over the last six months of 2024, as you can see on slide 5. These share gains have stalled in the first quarter of 2025, but this was largely as expected. As I mentioned earlier, many of our key growth initiatives are scheduled to begin the second quarter. These initiatives are centered around our mushroom battles, especially fish, while our investment behind our growth platforms has continued at a steady pace. And that investment is paying off. Net sales for our growth platforms rose 36% -over-year in the first quarter. Chicken remains a success for us, and the team has also delivered impressive wins in other categories. In the UK, for example, we now have a nearly 2% share of the frozen sheep market versus 0% this time last year. In Germany, we have doubled our retail sales of prepared meals -on-year in the first quarter. We will continue to invest behind these growth platforms to keep our momentum going, but at the same time, we will not lose focus on our mushroom battles. So let's pivot to our acceleration plans behind our mushroom battles. We have exciting plans to drive growth behind all our mushroom battles, but I'm especially excited about the new news we have this year to grow our core fish portfolio. Fish is critical to our success. It accounts for a third of our revenue and is margin-equitive. We are fortunate that this nutrition profile plays so well into the evolving consumer nutrition demands as a nutrient-rich source of lean protein that tastes great. It is our job to ensure that it remains exciting and -of-mind for consumers, and we have a fully integrated playbook designed to do just that. Starting with advertising, later this year we will be launching a new master brand advertising campaign that reinforces the taste appeal and positive nutrition profile of our frozen food brands. And of course, our fish portfolio will be one of the stars in the campaign. As these ads are airing, we will simultaneously be executing impactful marketing activity to drive impulse purchase at retail while ensuring the optimal value equation for consumers. And we are investing in our products. Renovation plays an important role. We are committed to always delivering the best quality and are currently investing in renovating our fish fingers to deliver more taste, more crunch, more delight. These new and improved products will be rolling out through this year. Innovation is also a critical part of the plan, and we have a long history of developing better tasting, more appetizing offerings that are proven to drive consumer demand. We remain on track to increase our innovation as a percentage of sales ratio again in 2025, and fish is an important part of this plan. On slide six, you can see the new Captains Discovery line that has recently launched in the UK. These products are anchored in flavor excitement and help us keep our food for the modern with great tasting products and new varieties for consumers to spice up their dinner. Also on this slide, you can see our fish bar sub-brand of products that we relaunched in Italy last year. Italy is an interesting case study for us. This time last year, the country management team was embarking on the same path that we are now pursuing across many markets. They sought to accelerate fish growth with a playbook very similar to what I have been describing. Our Italian team leaned in with a fully integrated plan. Strong media investment was overlaid with impactful merchandising events that hit relevant price points while being integrated with thematic promotions such as our Playmobil event. And it was supported by both renovation and innovation behind our fish bar sub-brand. You can see some of these products on this slide. And results speak for themselves. Growth improved for both us and our categories. Retail growth was 9% in the first quarter of last year and rose 9% in the first quarter of this year. And while we're gaining share, we're also supporting category growth which is up 6% so far this year. Fish bar has been a meaningful contributor to this growth and the brand is helping us expand categories consumption with offerings for snack or mini-meal occasion. Occasions where fish and especially fish fingers has not historically been considered an attractive option. We are seeing the brand's buy rate among existing fish consumers grow while at the same time fish bar is attracting new consumers to the category. We are growing penetration with younger and higher income consumers. We are breathing new life and relevance into fish fingers in Italy and I'm excited to see what we can accomplish in other markets this year. So while the environment is not easy and we are facing some headwinds, we have a lot to look forward to. We are confident that organic sales will return to growth beginning in the second quarter and we expect to achieve profitable growth for the remainder of the year and beyond. With that, let me turn it to Ruben to take you through our results and not look in more detail.

Ruben? Thank you, Stefan and good morning everyone. Let me get right into the results. As you can see on slide 7 and 8, for the first quarter, reported net revenues decreased by 3% to 760 million euro. Organic sales declined .6% with volume declining minus .7% while price mix inflected into slightly positive territory. Retail sell through was slightly positive in the quarter at plus 0.2%, which means that our selling led sell through by nearly 4% in the quarter. We believe that the later timing of Easter this year accounted for roughly 1% of the gap and we expect to recover that in the second quarter. We attribute the remainder of the gap to retail inventory destructing, which was greater than we had expected. We believe that retailers are likely to keep inventory levels at this now lower level. As a result, we do not expect to benefit from retailers building inventory backup in the future. Despite the top line leverage in the quarter, we were pleased to grow our gross margin by 90 basis points year on year to 27.8%. Productivity savings from our supply chain team contributed to the gross margin expansion as did lepping and negative inventory revaluation had been in the first quarter of 2014. Moving down the P&L, adjusted operating expenses rose 3% year on year in the first quarter. This was entirely driven by a double-budget increase in ANP. In fact, our overhead expense modestly contracted year on year despite underlying inflation. Over the past two years, we have made meaningful investments in areas such as cyber security and revenue growth management capabilities. With these capabilities now established, we have begun to drive inefficiencies out of our overhead expenses. We were happy to see these efforts begin to drive returns this quarter. But despite these savings, our adjusted EBDA decreased .8% year on year to 120 million euro while adjusted EPS fell .4% to 35 euro cents given the net sales contraction. Turning to cash flow on slide nine, higher working capital pressure, free cash flow in the quarter causing our adjusted free cash flow conversion ratio as a percentage of after-tax profits to fall to 24%. The primary driver of the unfavorable working capital was higher finished goods inventories. We produced products for Easter in the quarter, but those did not ship until the second quarter. The greater than expected retailer inventory destocking also contributed to higher inventory levels given the associated sales shortfall. Neither of these dynamics should have an impact on the full year cash flow. Turning to use of cash, as Stefan mentioned, we continue to return cash to shareholders. In the first quarter, we repurchased roughly 49 million euros of shares while paying out slightly more than 25 million euro dividends. The collective return of nearly 75 million euros was 152% higher than the first quarter of 2024. And last week we declared a quarterly dividend of 17 dollar cents, which is 13% higher than the same dividend last year. Turning to our guidance for 2025 on slide 10, as I previously mentioned, we do not expect to recover the sales we lost in the first quarter due to retailer inventory destocking. In addition, the macro uncertainty has caused us to risk adjust our forecast further, especially in the UK where the category is cycling a tough comparison in the second quarter and where we are seeing some downtrending from consumers. As a result, we have lowered a full year organic sales growth outlook to 0 to 2% growth versus our prior outlook of 1 to 3% growth. On top of the lower sales outlook, we also now foresee slightly more cost pressure coming from some of our input costs. We expect to be able to offset much of these higher costs with incremental pricing. As those of you who have followed us for a while know, we have a long track record of successfully taking price to recover cost increases. We expect these increases will take time to implement and the cost price lag is likely to result in cost margin pressure in the near term. We have the flexibility within our P&L to offset the impact of the incremental cost pressure and slightly lower sales growth by curtailing some of our investments in our brands and product renovations, but we are focused on ensuring that we continue to invest in the long term health of our business. As a result, we are lowering our full year adjusted EBDA guidance to 0 to plus 2% year on year growth from a prior outlook of plus 2 to 4% growth. The impact of the lower EBDA outlook is partially offset at the EAPS line by share repurchases. As a result, we have widened our EPS growth outlook at the low end, resulting in a range of plus 2 to 6% growth. This equates to 1.82 to 1.89 or $2.7 to $2.15 at recent exchange rates. Turning to free cash flow, we continue to expect a conversion ratio of 90% or greater as we expect the timing related headwinds to cash flow in the first quarter to reverse throughout the year. All in, while we face some incremental headwinds that we had not expected at the start of the year, we continue to feel good about the underlying health of our business. Our flywheel is working and we have compelling and well funded marketing, merchandising, innovation and renovation plans scheduled for the remainder of the year. We expect these plans to drive resumed top line growth beginning in the second quarter and sustain improved momentum throughout the remainder of the year. While the macro environment has become increasingly uncertain, we believe that our updated outlook affords us the flexibility to navigate incremental headwinds should they arise. With that, I will now turn the call back to the operator to open the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speaker phone, 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 then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Marks with Jeffery. Please go ahead.

Good morning, guys. Thanks so much for taking our questions this morning. Good morning. First question for me is, the retailer D-stock that you mentioned, I know we've heard a lot about that, I think here in the US, maybe not as much in Europe. So just wondering if you can kind of share some color on that in terms of, you know, were there any particular countries or any specific categories of viewers where you saw more of an impact?

Yeah, thank you, Scott. That was indeed an impact

we've seen in the quarter. Having said that, you know, we already before the quarter saw some phasing between, you know, New Year and the old year. So we already said that we expect the quarter to be a bit soft, but it was more something we expected. And back to your question, it was quite broad-based. So in most of our countries we've seen that. We're tracking 15 countries and I would say 12 to 13 of those countries we've seen a D-stocking. It was also quite broad-based, you know, across segments and also across must-win battles. We do track stock. We have actually now also on tracking of stock, look at for must-win battles. So we think also that the vast amount of this D-stocking is now behind us, maybe one or two markets, like potentially the UK. But that's what we've seen. So it was broad-based.

It was broad-based. It was also not limited to December-Jan. I think that took us a bit later in the quarter, which was probably

the part that was unexpected. Understood.

Thanks for that. And then I guess with the new revised outlook for the year, I'm wondering if you can just kind of speak to expectations for category growth. I know you talked about still healthy category, maybe a little choppy given some of the macro uncertainty, but just wondering if you can update us on your outlook for kind of category growth and your market share performance within it for the year. Thanks so much.

Well, the thing is, to your point, I think the category remains healthy,

which is really good news for us. To your point, I think we have slightly reduced our supply, which means that, by the way, as a result, with the starting point, yes, we will see growth in the next quarters and we'll grow market share as well. That's a point. I think what we see is interesting to see is after probably a slightly more difficult quarter in terms of market share, Q4 is starting to be slightly positive in terms of value and in the data at least, it's .3% in volume, which is good news for us. I think the only thing is we know we need to take a bit more time to think about is in the UK, because basically you have also a lot of promo in Q2 last year, so basically the comps are more difficult. And the second something we need to also take into account for the near future is last year, Q2, Adriatic, the weather was fantastic. And as you know, we have a part of our business is the ice cream. We love it, but definitely something we can't plan the same way. But overall, by the way, the ice cream business remains extremely healthy.

Yeah, and just to build on that. So again, as we said before, this remains a strong category, has outperformed total foods in Europe by more than 1%. If you look at more in the longer term, if you look at the kind of year today, we see categories like both we continue to grow very well. We see fish relatively strong growth in the line around 1.5%. So that's also good. But back to Stefan's point, a lot of countries have grown. We see some softness in the UK, also in P4. And then a bit of the ice cream start with the comparableness. Also important to know that

we knew from the start that when we see the quality of the quantity of the activation programs in terms of renovation, innovation, and also obviously at the store level, in terms of price was very much more in Q2, Q3, Q4, as opposed to Q1. So we knew from the start that Q1 was probably over the softest

quarter of the year. Understood. I'll pass it on. Thanks so much.

Thank you. The next question comes from John Baumgartner with Misoho. Please go ahead. Good morning. Thanks for the question.

Maybe to stick with the de-stocking, looking at the Nielsen data, the volumes for the quarter, the categories didn't look too bad. Do you have a sense that it's working capital related or is retailers sort of bracing for incremental weakness going forward? It didn't seem to align with the measure channel data. Maybe it's nomad specific. Any color

on that front? So we've seen,

so just if you take a step back also to understand this quarter, we grew in the quarter in sell-out with plus .2% in sell-out. We did, as you also have seen in the presentation, lost market share in certain categories. We did see some of that was expected in terms of phasing of activities, but we did see that our sell-out has been less than the total category. And to Stefan's point, we see the recovery now in P4 with this context that you gave the overall market a bit more soft and we see ISP. So we did have a difference between us and the category in the quarter and the big difference on the plus 0.2 and what to sell in minus 3.6. A big part of that is, a vast majority of that is de-stocking in our categories.

Okay, thanks Ruben. And then to follow up, in terms of the new products, the innovation, the new geographies, you mentioned you're pulling new consumers, both new to the category, new to the brand. I'm curious at this point, if you have enough information on that, do you have a sense as to, number one, where your consumers are shifting from? Is it from smaller brands or from private label? And then number two, for those consumers new to the category, are those consumers coming to the category from different temperature states, like fresh produce, fresh fish? Or is it from other frozen categories?

Well, the thing is, it's interesting, you know, you know that we're very, very strong, John, in terms of family, me, time. And I think it's what we're seeing right now. And it's very interesting, a lot of innovations, even to some extent, our innovations are going more and more to the snacking side. And we are leading the category, we believe, you know, that frozen food can play a fantastic role in terms of snacking. So we've seen, for example, in Benchip, that's interesting to see, you know, we have a lot of idle skews and we put them together as a category in terms of snacking. So no real innovation, just, you know, put them together. It's working extremely well. Second piece is, well, you know, we have Fish Fingers, which is really the iconic, you know, family meal time across Europe. Now we're moving to what we call Fish Bar, which is much more, you know, a snacking occasion. And we're starting in Italy and it's doing extremely well. So we know that there is a space to begin for us in that category, independently from where they're coming from. You know, first within frozen, but also from obviously from cheese and from ambient. But definitely for us, it's a wide space. And it's a wide space where we have all the intent to gain over time, starting now. But definitely we'll hear more about snacking and the informal eating, whatever the denomination, in the coming

quarters. And to build on what Stefan said, we have proven to do that in Italy, where actually with chicken, we've been able to grow the frozen food category. We really came as growth on top for the retail as well. And we're making steps, for example, with secondary placement of frozen food freezes next to chill to drive that conversion. I mean, that will be step by step so that we can do that on a massive amount in Europe. But we're making those steps to drive total capital growth and transferring consumers from other capital. And

if you are, you know, air fryer, where the penetration in Europe is huge right now, in the UK, I think it's 80 percent. So it's really big. And it is a great high as well. That's the kind of thing that does well for frozen food. So this combination of things, you know, definitely we want to to invest in snacking and we think we have the right to play there.

Thanks for your time. You're welcome. Thanks, John.

Thank you. Again, if you have a question, please press star, then one. The next question comes from John Tanwan with CJS Securities. Please go ahead.

Hi, good morning and thank you for taking my questions. You guys mentioned being able to adjust. Hi, Stefan. You mentioned being able to adjust the intensity of your brand and A&P investment. To be clear, is that included in your guidance already or is it just a lever to pull if you see incremental headwind at this point?

It's included in our guidance to make it very simple. So we keep the good job. You know, I think it's obviously there is sometimes a bit more pressure, but definitely, you know, we are brand builders. So we want to keep it that way. But again, you know, we shouldn't limit it to A&P. I think it's a combination of different things. You know, you've seen what obviously our cycle is, you know, 360 approach. So A&P is part of it, but definitely, you know, it's part of it. But it's not it's it's a combination of A&P for sometimes price investments, innovation in some categories, innovation in others. So it's a lot of things, but definitely A&P plays an important role and we have all the intent to keep investing.

OK, great. Thank you. And then just any more color on where your inputs are increasing? Is that a trade or tariff or currency issue or is it something else specific to a specific input?

No, that is not. Thanks for the question. That's not a tariff impact, by the way. Also, on that point, we're not impacted by tariff. You never know what happens in the future. But this moment, we don't see that. You might have no medium long term indirect impact, but also that moment we don't see. The impact we're seeing is much on proteins. So it's in chicken and in red meat. And part of that is demand for proteins. Part of that is also that we've seen in your Asian flu on the policy side impacting us. And as we said, you know, just when going through the presentation, this company has proven to have the pricing power and have taken quite some pricing in the past. But, you know, we've also have chosen not to go into big clashes with trade in here, also because this inflation was creeping up in the last couple of months. So we will take pricing, but a lot of this higher inflation will be compensated.

OK, great. Thank you. Thank you. Anyone who wishes to ask a question, please press star then one.

We have a follow up question

from

John and one thing with CJS securities. Please go ahead.

Hi, thanks for the follow up. Just wanted to follow up on the question of being able to pass pricing through. You mentioned the consumers were trading down a little bit as well at the same time. I'm wondering if there's maybe a little bit more elasticity in your ability to price. You know, as you look forward, number one and number two, just if you have any color on what the private labels and the discounters are doing, that would be helpful as well.

Well, I think to your point, I think when the situation is a bit volatile and uncertain, you know, I think we're indirectly back to this point. You know, I think people obviously are looking a bit more for value. I mean, seeking, seeking obviously price as opposed to anything else. At the same time, as I said, you know, we are we are back to stable to slightly positive market share before, which is which is good news. And our job, you know, is obviously to find the right equation. So sometimes there will be a price investment. We did it last year, for example, in Italy in fish. But that's why the combination of many different things. We also then we never go for any price. It's going to be a combination, obviously, of renovation of obviously a new a new and the diving campaign to put together, obviously, with the insta activation. So that's the kind of things we're going to do. And as I said, you know, we I think what we see right now is, yes, these daughters have been a bit of key way during the first quarter. But, you know, as far as we are concerned, you know, we we back on track in terms of of of market share and slightly positive in terms of volume market

share.

OK, great. Thank you. Just in the outlook, the updated outlook was the zero to two percent organic growth. Is there any specific expectation for volume versus price in there?

Yeah, so you've seen that in

the last year, the buildup of volume and price we expect in quarter two. And we said before that quarter two, there's this phasing of Easter. We think that's about one percent already said the growth of the market. We do also see some softness in the UK and start up the ice cream in April, which doesn't help on the margin mix. But we expect part two to be in the volume and then back to the point in pricing, but also RGM activities that will kick in in the second half of the year. So we expect pricing the growth in the second half to be more in build on price and quarter two more on volume. But overall, it's going to be

a combination of both. Yeah, OK, great. Thank you. Thank you.

Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Mr. Stefan Deschmeeker for any closing remarks.

Thank

you, operator. So, yeah, I'm proud of the progress our company has made over the past nine years and confident that we are on track to deliver another relatively strong year in 2025. Our strategy is working and our team has developed compelling plans to deliver improved growth for the remainder of this year. I look forward to demonstrating that with results when we update you again next quarter. And thank

you for your time and interest in the Mad Foods.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.