Q3 2019 Earnings Call

Thank you for standing by this is the conference operator.

That doesn't know mats food third quarter 2019 earnings conference call.

They're in line there.

Then fair in listen only mode.

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Great. Thanks, Carl and thank you all for joining us to review our third quarter 2019 earnings results with me on the call today are Chief Executive Officer stuff on desk maker, and Chief Financial Officer Sami's It could.

Before beginning I would like to draw your attention to the disclaimer on slide two of our presentation.

Conference call. It may make forward looking statements that are based in our view of the company's prospects at this time and actual results may differ due to risks and uncertainties uncertainties, which are discussed in our press release.

Filings with the FCC and this slide in our Investor presentation, which includes cautionary language.

We will also discuss non IRS financial measures during the call today is not for us financial measures should not be considered or a precedent for and should be read together with <unk> results.

Users can find the I FRS Tonight for us reconciliations in our earnings release, adding dependency is at the end of the <unk> of the slide presentation available on our website.

Please note that certain financial information within this presentation represents adjusted figures for 2018 and 2019 not all the adjusted figures have been adjusted for exceptional acquisition related share based payment and related expenses as well as noncash FX gains or losses.

All comments from here on will refer to those adjusted numbers.

Finally use there should be aware that 2019 figures have been presented in accordance with the IRS 16, the new standard for leases.

Such certain financial metrics may not be directly comparable to 2018 figures.

However, we have disclose the impact of this change in the press release, where the impact on comparability husband deemed material.

With that I will hand, the call over to Stefan.

Thank you the portion thank you all for joining us on the call today.

Oh here today, we reported so for the 29 <unk> earnings results and now rolled all <unk> guidance.

Highlights from the third quarter includes organic revenue growth of 2.5% driven by 4% increase from price.

Sit by 1.5% declining volume and mix.

Adjusted gross margin expansion up 110 basis points to 29.5%.

Adjusted EBITDA of 96 million euro representing growth of 14%.

No just a D.S. off 25 euros centsper share.

We're pleased with also <unk> results.

Which demonstrate the healthy balance between topline growth.

Gross margin expansion.

Spending discipline that cash generation.

Oh I'm proud to sit adult business has no deliberate 11 consecutive quarters, all organic revenue growth.

Reinforcing the strength of all brands the focus of both people and assisting the beat the off a business model.

The only because it depends on the quotes are we continued to see strong momentum in oak golf portfolio, which grew 5% in Q3.

And the represent 68% they'll get to these revenues.

We didn't know cool.

Fish being goes spinach and open market categories performed particularly well.

Importantly, we continue to effectively manage the rest of all boats for you bought off which is being replaced by call skews.

In aggregate the non core business posted the declined low single digits, an improvement versus a mid single digit declined during the first half of the.

Most of all countries grew during the third quarter.

Including UK, Italy, and France, which each achieved organic revenue growth of 4%.

[noise] performance was strongest in Germany, Spain in Netherlands, which each grew more than five to send you in the quarter.

As we anticipated the nordics experienced organic revenue decline I was with the list low margin and non core products with the long term objective of strengthening golf business model in profitability.

These strategically important region.

As you know execution of a mother requires us to make strategic choices, which intern allows us to invest behind the highest returning area as a business.

You Sports video strategy has been fundamental to a success since day, one and the will continue to govern well and the whole we invest.

By nature of these approach we have resulted in positive when they get the vote Liars.

It's always a very clear objective to drive sustained oak sustained organic revenue growth and mockups expansion.

So let's walk through organic revenue growth reflects its growing contribution from innovation well strategy is no more targeted intentional and intentional as we invest behind a limited number of big bets.

With the objective of building sustainable platforms.

This year Big bets included all season, and your line of fees product with innovative and on trend coatings.

Veggie ball were more than planned or veggie mixes, which launched in 2018 and has since been extended across the network and Green cuisine, Oh plant protein range, which recently launched in the UK and we'd be involved doors across Europe .

[noise], we're pleased with what we have seen across these platforms, which have achieved solid distribution with retailers and encouraging trial with consumers.

Why do each innovation will have its own unique proposition all strategic intent is to introduce new projects, which margin accretive.

Implementer each will go into line with macro trends suggest convenience sustainability and attrition.

Green cuisine has a great example, the type of innovation that we bring to all consumers.

This range, which was launched in UK earlier. This year is middle fees grew up in which all Brian hop incredibly rich.

Further.

We have fold, we need to these projects, which I'm money foxwoods in the house with the goal of didn't bring on both taste and attrition.

As you May know green cuisine, Burgos I've, a fraction of the saturated fat content of many of the competing products into markets.

We actually visit Green cuisine. It was a great advertising campaign, which has driven strong below 60 across industries skews brokers meet Bose its dosages.

It seems very early days, but we encouraged by with what we have seen enough plans to further develop offering in the UK and beyond.

Before turning to go to send me I'd like to share some updated thoughts on our balance sheet any debt that uses of capital.

You know, we raised $400 million I've got that the audio this year.

As a result, we ended the third quarter with all of a 700 million euro of cash on hand, and leverage off 2.8 times.

With that said acquisitions, how can you bought off a growth story and not worry out where we intently focused on driving shareholder value.

Over the past several months, we've been pursuing acquisitions, which meet those strategic and financial criteria.

Finally, we currently have a handful of situation.

Which we are actively evaluating.

Oh strong cash balance allows us to <unk>, they're made from a position of strength and we look forward to updating you when the time is right.

In the meantime, it should be clear, that's we're committed to continuing growing organically and through smart and disciplined M&A.

In summary, we are pleased with the third quarter results, which have us on pace to achieve another year of strong growth and cash generation.

With that are we tend to go over to semi to these good the financials and guidance in more detail Sammy.

Thank you Stephanie Thank you all for your participation on the call today.

Turning to slide six I will provide multi dead on all key third quarter operating metrics, beginning with revenues, which increased 2% to for 540 million euro driven by 2.5% organic revenue growth.

Well there I just see gross margin expanded meaningfully by 110 basis points to 29.5%.

This was attributable to three factor for us and improved.

The harvest because this off your which helped on margin and will increase up de supplies for the fourth season.

Second improving gross margins, we didn't know recent acquisition good fit out then on disease.

So the pricing actions in response to a higher piece prices, which we have expense while the year.

We are pleased with our gross margin progression for the first nine month of the Euro and remain on track to achieve MME gross margin expansion for the 40 Europe , excluding the impact of economics.

The team has done an exceptional job navigating these you're correct, saying piece prices, mainly and you know that's gotten pollock.

So the first nine month of the Euro. These actions have resulted in a relatively stable gross margin at all base business combined with a 4% increasing price and a 2% seeking declining volume.

The relationship between pricing volumes and gross margin is one that we will continue to grow three money to our.

Along with the evolution of <unk>, our market share on penetration at the consumer level.

It is critical that we as an organization remains strategic you know approach whenever you get the inflation, while maintaining our ability to sustained organic revenue growth and that market share expansion of at both the medium and long term. This will require an increase the GTR not Bob I'd Wanna is greater contribution.

So it's an area of the business, namely productivity and innovation.

On productivity.

We have made significant progress over the past year, and we lean more on supply chain as an upsets to inflation.

This will be achieved through a combination of procurement savings and manufacturing efficiencies.

And on innovation as you heard from Stefan we have seen a strong early signs on the launches that we brought to the market and we look to further investing a coming years to ensure that all brands remain at the forefront of evolving consumer trend with convenience sustainability and nutrition.

Three fundamental paid off.

Moving down through the rest of the PNM adjusted operating expenses increased 1% year over year reflected the plan shift in media spend from Q2 Q3.

Such and be increased 3% why in direct expenses flat to last year.

Adjusted EBITDA was 96 million Euro and as expected that included a 4 million euro benefit related to I. Fysixteen, then you send out on lease accounting effective this year.

Excluding this benefit adjusted EBITDA grew 10% versus the prior year.

I, just cdps with 25 euros sent public water declining 4%, reflecting the offering of 20 million shares in Moscow 2019.

Fysixteen did not have a material impact on EPS during the third quarter.

Turning to cash flow on slide seven we generated 170 million euro adjusted free cash flow through the first nine month of the euro as compared to 97 million Euro generated in the same period last year.

Factors contributing to adjusted free cash flow performance, including them.

Adjusted EBITDA of 316 million Euro at 15% year on year increase.

The working capital outflow of 96 million.

Capex and cash taxes of 20 529 million a piece.

And cash interest another a 45 million your two prime muddy the reallocation of the lease payment from operating cash flow through financing Castro as a result of I fivesixty.

Free cash flow conversant with 58% of adjusted profit through the first nine month of the Euro.

This reflect the seasonal nature of the working capital cycle, which tends to be during the third quarter due to the timing of the harvest.

With that said, we are pleased to report improve conversion versus a year ago, and I'm, making progress on the actions that we've identified to drive improved cash flow efficiency during the remainder of the year.

With that let's turn to slide eight to review, our 2019 guidance, which is based on foreign exchange rates as of November the FY 2019.

Well the 40 years 2019 with two month remaining into Europe , we are narrowing our guidance to the upper end of our engine and now expect to achieve adjusted EBITDA of approximately 425 to 430 million Euro and adjusted EPS of one point 20 year old to one point 22 year old.

For your guidance continues to assume organic revenue growth.

The low single digit, but something right.

Based on current foreign exchange rates, we expect FX translation to represent approximately 30 basis points help our reported revenue growth into fourth quarter ended Roggow 20 basis points for the full year.

That concludes our remarks I'll now turn decision over to Q anyway. Thank you operator back to you.

Thank you Sir.

Well now begin the question answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear a tolling acknowledging a request if you're using your speakerphone. Please pick up your handset before passing any key.

The draw your question. Please press Star then too.

We will Pos for a moment as callers trying to Q.

The first question comes from Jason English of Goldman Sachs. Please go ahead.

Hey, good morning folks thanks, a lot ma'am.

[laughter] [noise].

I wanted to I want to.

Come back to the pricing narrative you guys have obviously done of phenomenally good job navigating all the cost pressures that you face or this year and demonstrated strong ability of price.

I I heard in your prepared remarks, the de emphasis on the need to maybe lean heavier on productivity lean heavier and innovation. If we look at some of the M. the Nielsen data, which should just we know has plenty of imperfections.

It does suggest that private label, particularly in the UK in categories like fish is finding.

Another leg of momentum and it begs the question of whether or not you may be reaching some upper limits on the ability to push price even further so I loved I'd love your thoughts on that.

What you're seeing in terms of need to push more pricey I know, it's a moving target, giving you the pound volatility.

And then your your ability to push pricing if needed to further in that market.

Okay. Thanks isn't so it's obviously, it's a it's long question with a with a different aspects I would I would first contextualize your idea the Nielsen numbers as you know, it's it's it barely covered or something like a bit more than 50% of photos that saves. So so it's it's obviously an interesting.

Good Guy, but it's it's just part of it. So that's that's one thing.

This being said you know in terms of pricing to your point. It's it's a it's a never ending story, we always have to find the balance between price volume Mccutcheon margin and I don't think it's good to changing needs in though in the anytime soon or into in the future. So are the same time I think the private label guys do have to do the same thing.

I think it was going to be key for us what has been keeping that will be key for us is to remain.

Right.

But definitely we have demonstrated its you know overall, obviously and then some exceptions, but we've demonstrated an interesting pricing power in 2019, which again.

Oh, it doesn't come by chance, it's a combination of innovation in investment behind the brands in order to thing, but I think the key wasn't Jayson is is is agility be ends and finding the right balance between between the these these different elements long term long term you know it's it's it's rice you.

Even though the story as much as I as we do it's all about the Bofa brands and though we need to be paranoid, a we'd been people and and we need to invest to keep investing you don't behind these my there's a never ending story is obviously private label reinforces what she's SD by the way forces to two.

Raise the game.

Okay. All right. Thank you I'll pass on.

The next question comes from Steve's Tracheal out of you me Yes. Please go ahead.

Hi, good morning.

Just.

Pick out what Jason was was threading on.

How do we think about the price gap piece of it Stefan you know given your background and where your board member you're very familiar with the pricing model and we saw that it didn't work out so well for for Kraft.

What should I know, you're not a part of but just wanted to understand.

It's price gaps something you're being very mindful of and I think the spirit of what people want to know is should we expect to volumes to start improving based off the innovation that you're seeing in the marketplace can you help us think about it I'm not asking about Nielsen, but just more broadly speaking across your business and then up a quick follow up.

During the first question, Brian It's absolutely. So it's a fund them, it's a fundamental good-bye for us.

And we do this definitely first full machine by both the keys skews and we checking where we stand and again overall.

Again country by country Channel bunch I know they may differ but it's it's a husband why didn't you know it said that suky be sometimes takes a bit more time, because obviously people have different hedging you know two situations. So they they overseas sometimes the comedy Bryce is easy backing them a bit later and they did.

The decision to be by the consumers on the rest of it so that's a.

I would be that's where that's the key piece for us.

And your second question long term, we are committed to volume growth.

Profitable volume growth, obviously, so that's a that's a key.

So keegan situation for US obviously, the you might have even though you know some some some bumps in the roads.

But overall definitely something we want to do and innovation is playing an increasing role in with that you know we what we were talking about green cuisine. It's it's a very important Boeing for us.

And we believe that you know with this kind of projects. These kind of new innovations, we have what he thinks to do wins with the consumers.

Thanks, a lot and as a quick follow up can you give us a an update as to what's happening with call. It. The two acquisitions you've done more recently, where are we in the turnaround to their businesses or at call. It the progression of those integrations and then to your comment on M&A from earlier.

Do we think that Brexit complicates, how you would look at closing on ideal given some of the cross border implications or to be safe to say that maybe we're focused on just mainland Europe , where are you don't have maybe as much cross UK versus you exposure. Thank you.

Let me answer the second question first.

The answer is no we didn't have backed in the with Brexit didn't impact all thinking process and all potential acquisitions, you know a potential no, but then but let's say a bogey. These in continental Europe in this way. So that's that's outside the that's wasn't really a consideration.

Beyond obviously, when they're going to come at the moment further.

In terms of the future back to the Boston to presence with the two acquisitions I would say we are we are pleased with both.

The integration is moving very swiftly, but why do we as an example, we have I think thats what three days ago. We we know how to fully integrated it'd be system for the organization so forth for own betsy's full.

For goods fill us in full birds eye switches grade by the way in terms of is easy for US. Because then you have exactly the right systems numbers.

I would be that's way over or you know in terms of results. We are we are really I mean generally in line with the results maybe it'd be thermal maybe a bit more cost savings a bit less of top line.

He and day, we had the one delisting for example, which is you know off the temporary nature, we believe because we up with brands, but the overall, though we very pleased with both and they do well.

Oh I feel good you mentioned by the way or something that you never gotten gone into a business plan as we mentioned.

Phil as I remember someone told me I mean, you in including anything you can incentive on euro in Continental Europe and the remember my answer was at the time of course not.

And you know whats.

We are doing things no in both the goal and it's a it's doing well we know how the you know if it's after a few months. It's early days, but that's a few months, we have a 4% market share in both together with Ziegler wasn't Brandon with the was is that coming from islands.

The next question comes from Bill Chappell Suntrust. Please go ahead.

Thanks, Good morning.

Good morning, Bill if I'm, just just to go back to your and good morning.

Your commentary on M&A you know.

It's a lot stronger both in the press release, and what you're saying than than you've said before usually you kind of dismissive. It will come from time to time is it fair to say that you were hoping to have something to announce but today, where did that close to the finish line and then any kind of.

Color you can give us on terms of size of deals you're looking at is there one very large deal or is it more kind of bite sized deals that you've been doing so far.

So the answer to your first question is no we were not expecting to sign anything right now obviously, we have differences.

We were quite active in terms of pipeline different level, obviously of Oh advance on those events, we always have different fives and in terms of side are we not Miss every comment on the size you anything I would say is if you just at this stage focus some frozen food in Europe .

Basically you know, we really looking at let's see opportunities on the coffee basis category and channel.

Okay I'll stay tuned and then in terms of just looking back to the kind of question on price as we look to next year with volume kind of flattish to down a and most of the growth being driven by price do you expect another round of pricing next year to drive growth or would you expect volume to start to.

Pick up the slack.

70 than on high I, just want to reiterate the fact that I think you were very keen on the buckets <unk> on the market's interesting there will be inflation weeping planning for that and what we're trying to achieve a let's say in a you know sweat disease balancing if you wanted to focus on the on pricing.

The inflation and Vicki, making sure that I'll share is progressing the right I mean are profitable way, so that we'd be pricing, but I'd say, we're gonna have to make sure that it continues to grow our business and accelerate our growth and create value I mean through that social.

Got it and the last one for me just back on Green cuisine, any sense of where the the.

Plant based meat market stands in western Europe , and opportunity and and what you think it especially got always go into 2020.

Oh, well be by definition, we outgrew the feed by this munition that we're not sitting the comment about the goal designs on the goals, but we are what he is very interesting to see is that there is a lot of enthusiasm.

Across the countries for for a full green cuisine enthusiasm behind the quality of the products.

She was doesn't behind you know the quality of the launches the potential launches. So so that's a that's overall you know very reassuring I would be that way and the consumer reaction in the countries, where where we already have you know head of Oh.

Off a ahead like like you gave for example.

It's a it's very very encouraging so and and still I believe we are very perfect. So we can do much better than what we've seen is it's very good and quite frankly going consolidation to the <unk> team because they've come up with really really good projects quite frankly, and they starting with that and beyond.

Consumers, a you know again and it's not I think those legal I can tell you that retailers are very very excited.

Obviously, you know you're going to have all your original negotiation, but the they're very excited and it's a great starting point.

Great. Thank you.

[laughter].

The next question comes from Brian Hollenden D.A. Davidson. Please go ahead.

Thanks, Good morning, gentlemen.

First question just a follow up again on the pricing side of the equation here, it's always been sort of my understanding that you know given your sort of stated strategy for profitable share capture that would always lead me to believe they did that you'd be a little bit more aggressive in pricing.

Maybe said another way earlier to take pricing that some of your competitors, but you know it's also been my understanding that you get especially on the frozen fish side I believe you you've got some highly levered competitors I know you're not interested in being in the business are predicting what your competitors will do but as you look at the landscape and you kind of have some historical context at least.

Would you expect that and seven I think I heard this from from from what you said earlier, but it is their expectation that the price gaps maybe could narrow not because you'd be pulling back on pricing, but because potentially you know some others, probably still have some pricing to take as that is that fair.

We are clearly a retail we're monitoring effectively our pricing versus competition and more importantly, as are we have money during the reaction of the consumer in line to either a the balance between the value equation of pricing and quality. What we have seen so find the pricing we have realized which is the focus on your question is that I think you the consumer and STC.

He is very much inline with what we had pretty than we'd been markets. So we're not going to come into through a whether one of the screen narrowed down almost because at the end of the day depends as well on the computer, but what's important for us is focusing on the value equation and more importantly is when we then so in other words, making sure that I'll share was gonna grow.

Thanks, <unk> inflation is going to be important and that's going to require GT and that means that it may not just be straight through pricing. It may be as well, although element, which is leveraging our mix leveraging de leveraging all of the element that we have around natural venue management, which will make us each month, which will enable us to leverage the brand and deliver profitable share growth.

Thanks, I appreciate that color on the volume side <unk> forgive me if you addressed this already but.

Any sense, just given some of the innovation, you're bringing to market or have brought to market. It from a cadence standpoint is that a little bit where is that a little bit more Q4 way did such that maybe that was that would help the volume at all is that any factor in what we would what we would see both in Q3 and the softness.

And maybe how Q4 plays out is there anything worth noting there.

No no treaty I mean.

Okay.

Okay and last question for me then is on the currency. Your I guess just kind of on the overall inflation side seems like level of inflation is moderating a p. harvest a as you commented fish are the biggest swing factor. It seems to me would be kind of on the currency side is there any thought up at this point <unk> about how you would.

Manage that obviously, given the uncertainty a that still swirls with Brexit.

How you might try due to mitigate some of that volatility next year.

Well on the on effects were indeed, I mean money tolling that these has an effect and this has been effective reiterating your human there.

Just to make it simple we do we do I think you have a hedging strategy as well to make sure that we need to get the risk moving forward to allow the business to focus on driving efficiency the business strategies.

The effects Sealys, if it gets done any factor and we're just taking this into consideration as we are establishing a execute our hedging strategy. So to answer a question. Yes. It is a factor we're thinking into account and we are taking action against that.

Appreciate it thank you.

The next question comes from Robert Moscow of Credit Suisse. Please go ahead.

Hi, This is Matt on for Robert.

And use of a hard Brexit can you guys prescribe the product lines and input cost that will be most impacted is gonna be calling from fish costs or the finished fish products about are imported from Germany.

And what about you can't vegetables, and you can't ready to eat meals. Thank you.

Okay. So just to make it simple anyway, even if it does have the Brexit you know they will be which obviously is no though.

We think of the table, but still we are we always prepared obviously, but the first thing is to take into consideration is that we'd be subsidies.

From the UK government for quite some time. So that's the biggest the biggest thing. So its overall you know where we can we can have an impact in terms of its in more in terms of supply chain went to relocate some products. So that's kind of things we are getting ready. So I'm. So that's done but it's not necessarily means it's not necessary fish.

And the only thing so.

But to make it simple you know, we really wed be bad.

We spend a lot of them against that you are behind you know the Brexit meetings and Ah.

I would be that we had or I know, we chevy the bids, but again the ready to re up due to come back if needed.

[noise] credit is it was there any sort of any individual product that will have more exposure than others.

Oh, well, let's say, maybe a bit of poultry is a bit more boxes.

At this stage, but again, we are taking measures right. Now are we thinking about you know where could we have the right the right level and so again, we're not going to do anything right now which is definitive because again a things are a very fluid, but probably you know I would be more optimistic than there was probably a few months ago.

But again even for these because these these products we already.

Great. Thank you.

The next question comes from John Baumgartner of Wells Fargo. Please go ahead.

Good morning, Thanks for the question.

Moving to.

The final one as we think about your private label, maybe taking it hi, good morning, maybe taking in a in a different direction. It looks like you know private label gaining share in frozen fish it doesn't seem to be on aggressive pricing no other than most of your markets in private label pricing is up at least the category if not.

And it seemed at the leaders of share Oh, the secondary brands. So I'm curious.

In terms of changes in merchandising in the frozen fish case, where maybe retailers are looking to keep the market leader and no bad merchandise more private label and squeeze out some of the secondary Brad is there anything there in terms of the ship in merchandising that we should consider going forward.

I would say, it's a it's really the country by country basis I you know for example in the UK you know we still have a very strong competitors are likely like Young's and they're doing quite frankly, the doing they're doing well, so I'm going with relation to them I would like to see the other we're wrong. That's fine that's life a in other countries probably.

You're right in some other countries you know, it's a mix it but it's a I don't think you should you should focus too much on fish I think it's a global fund them in and then what were you know into in the stores increasingly so you're going to have you know the the private label then the April and maybe be brands and and that's it I think in Europe .

We more advanced than the U.S., where are you still have C and D brands.

That's you know I wouldn't be smoke uncertainty if I, if I were a C or D brands Indians U.S., but I I don't think I would always focus on on fish I think it's a global fund them in and it's all job of is the name brand because we are the brands to keep investing.

We have no choice, we need to keep you know the the space between us and the private label. So that we can win with the consumers.

Okay. Thanks for that and then just you know the follow up thinking about net revenue advantage.

Like 19 is a year, where the whole and our him approach seems to be maybe accelerating into in terms of capability that will continue again next year, but you know it looks like you know across you know your two main categories of the station frozen berries.

Like maybe the fish categories a bit more sensitive you in terms of either volume response to make reductions in promo and I'm curious if your observations you know whether it's no learning anything about how to we'd be lean consumers are buying on your own fish immediate.

Positive read across in terms of resiliency that the veggie category I'm, just kind of high level thoughts into how the and R&D is evolving versus your expectations now it's gonna you inform the strategy going forward.

Oh overall again the way, we very pleased and we're very pleased we stopped early by the way the game with and that's where the management.

We started with a with from what we did up every sequentially. We started with a few more efficiency and the I'm surprised to see you know that we still have a lot of the this is a lot of potential so never ending story. So you seem to have you, though you know buckets of less performing promos that you can you can move and then.

Again, not limited to fish oil veggie I think it goes across the categories No obviously with and that's where the management we have a raise the game a prudent it'd be the oldest necessity last year with a with the right with the Cogs increase and so we've worked a lot with them with.

<unk> pricing <unk>, and and again I think as a semi mentioned overall and again you have exceptions, you know, sometimes dawns and sometimes it up but overall, it's it's worked as a as expected that would be that's way, we still learning a lot, but then the level of Frost <unk>.

As a overall has enough rich is very much in line with or without expectations. It will continue I mean to be a a clear contributor to value creation, but as you say, there's an element where the first during the year away, where you have a lot of low hanging fruits and after that it's not that the out to use our less but the point that.

Thats you are moving a maintenance strategy, where they need to allows you to rebalance the equation between volume and pricing and the overall share growth in a profitable way. So it will continue to be a keep you, though and to be fair in 2019, Oh. It was a really hard resistance that since who really executing.

And now and started in the context of higher inflation and what did prove they think each work and as we move forward the continue to leverage that together with the other activity.

Thank you very much.

The next question comes from Johnson wanting of CJS Securities. Please go ahead.

Good morning gentleman, thanks for taking my questions.

Morning, owning could you start by giving us a little bit more color on them.

On the Nordics, but what does the path for top and Bottomline growth. They are you you know defocusing that region in favour of high return opportunities or are you gonna come back then and kinda execute on maybe someone buying food.

I wouldn't be that's way you know the first thing is which is very important it's a strategic region for us.

By the way to concede the frozen food consumption is higher than the in most of the other countries.

And so which is which is great for us and if we believe that's you know as they are the vanguard of the consumption in the future. It's a it's it's very encouraging then if you. If you I think we're talking about the nordics, but it's it's would be fair to say that ended all these you have Sweden, which represented around 50%.

Oh, the business and the the others, mainly Norway in Finland, which represent another 50 cents.

And the others are performing well with good margin recovery.

We kept saying that you know, yes sales in <unk> in no way a declining but for the but frankly you know it does a week me about nights at all I can tell you because it's a it's really low margin business that we have decided to two two stuff anyway. So it's a bit spectacular in terms of sales.

Instead, you in terms of gross margin, especially knowing that it's a it's not even you know produced by ourselves. So there is not even fixed cost recovery here. Its it's a it's much less spectacular in terms of for gross profits and it's it's a loss. These organizations are really focused on the skews that matters. So it's a perfect it's media.

Thanks, Good application of the mustering bucket concept.

To go away and you see the dynamics in the in note in Norway. It's.

Doing well from from from all the aspects, Sweden is more complicated.

Last year, we had the country like Spain, that's was not doing as expected they've been through a reduction in the wrong with cheap luxuriously refocus behind the key categories also in probably reduce <unk> renewed level of energy, we have no having a new and you leader there.

And I'm I'm confident you know ITSM is going to work pretty much like you're in Spain, but if you take be tough time, and so it's not going to be linear you get there, but they apply you know very much in to the same same the same model, we will we get there.

Okay, great. Thank you for the color and then I just wanted to dive a little bit deeper into the traction momentum you're seeing on a new product side, especially the healthier options first of all what what percentage of revenue are there right now and where do you see them going over the next couple of years and you know maybe from a margin profile, but where do they stand versus corporate average and how are you supply.

Adding them from a marketing investment perspective.

So the first basis, it's as we spent obviously I'm not going to comment on the 2020 into ambition. It fits. It. This this is Steve is smaller because its limited to a bit of UK and and they'll be more in a in the nordics, especially in Sweden. So that's that's small back to the question of.

Oh food margin with margin.

Hey, good margin and the thing is what's important to noise is.

No we starting to get Siguiri. So it seems like it's important to set the price at the right level, where the categories over the more established its obviously a bit more difficult to do go to what you were to come with a prize at these studies that that these two different.

In most of the countries. We just starting so it's a great opportunity and we're working very hard with the teams to make sure that we price are we going to price at the right level and what we've seen as is Oh, well margins ambitions are less likely in a pretty pretty good.

And and the fact is.

You know the brands and we've seen this thing with birds eye re increasing in the okay.

All brands have the credential the credibility to get days. So it's it's it should be incremental so we so we very we very we very bullish with a with with this new let's say these mustering bother to be.

Got it and how quickly can you roll them out on a regional basis or other puts and takes to the different countries and how is that thing or how much of my cost the do that.

Oh, it's just a point I think most of these very much. It's a it's a it's a very then it gets.

Balance between global and local so every loan she is obviously the product of the global comes with the products platform and the and then it's really up to the countries to take into the platform.

Because obviously, they're going to make it work so they need to obviously of the motivation in the everything behind it. So it again its its psychology, but it's very important to have that that's going to thanks.

So with that in terms of investment.

It's a sizable investment in terms of in B, which is normal because you have to stop.

And and the you know, but that's that's it.

And the good news, obviously compared to many due to do or do most of our competitors is we have the distribution muscle in in the frozen area that the nobody has.

Okay, great. Thank you very much.

At this time, we have no more questions and it'll turn the call back to Stephane for closing comments.

Thank you for joining to review all third quarter results, we had another strong quarter.

Marking 11 consecutive quarters of organic revenue growth for the company.

Our growth model is demonstrating our ability to generate sustained top line growth.

It should see steady contribution from innovation as we introduce new and on trend for the to the markets.

Finally, we haven't very well capitalized balance sheet.

And are actively pursuing several opportunities with the objective of driving additional shareholder value by way of M&A.

I have a great day, and I look forward to updating you want to fully on our full year results early next year.

This concludes todays conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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