Q3 2023 Nomad Foods Ltd Earnings Call
Greetings and welcome to the Nomad Foods third quarter 2023 earnings call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Now I'll turn the conference over to your host Anthony Carlo Head of Investor Relations you may begin.
Hello, and welcome to the Nomad Foods third quarter 2023 earnings call I'm, Anthony, but Carlo head of Investor Relations and I'm joined on the call by Stephane desk maker, our CEO and Jamie <unk>, our CFO before we begin I would like to draw your attention to the disclaimer on slide two of our presentation. This conference call May include forward looking statements.
Based on our view of the company's prospects expectations and intentions at this time.
Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our Investor presentation, which includes cautionary language. We will also discuss non I S. R. S financial measures during the call today.
He's not a I F. R. S financial measures should not be considered a replacement for and should be read together with I F. R. S results users can find the I F. R. S. Two non I F. R. S. Reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website.
Please note that certain financial information within this presentation represents adjusted figures for 2022 and 2023, all adjusted figures have been adjusted for exceptional items acquisition related costs share based payment and related expenses as well as noncash FX gains or losses, unless otherwise noted comments from hereon will refer.
To those adjusted numbers with that I will hand, you over to Stephane.
Thank you Tony and thank you for joining us on the call today.
Newmont posted a solid top and bottom line performance in the third quarter following.
Following excellent results from the first half of the year.
Sales grew organically by one 6% our fifth consecutive quarter of organic sales expenses.
Additionally, we generated strong adjusted free cash flow successfully refunding 700 million U S dollars for debt to lower interest charges.
<unk> 66 million euros for own shares at attractive prices.
We have bought back more than 4% of all shades in the first nine months of the year.
Our teams accomplished this while deploying new strategic commercial investments to drive growth and bring us back to positive bookings.
Boosted by our share repurchases, we are again, raising our annual adjusted EPS guidance.
We are closely watching the development of weight loss drugs globally, and the possible impact on the food industry volumes.
The long term impact of these treatments is still under examination.
Waiver in.
In any scenario, we believe no Maggie the Nixon position due to our unique portfolio of products, which are on target for consumers looking to eat healthy.
Nobody has a highly resilient company and over the past several years, we have effectively managed through several crises.
Through those challenges, we have predictable cost and margin structures to ensure that we maintain the right level of investment you know business.
In reaction to Easter week inflation last year, we had just don't price in 2022 and 'twenty 'twenty suite, knowing that we would lose volumes.
We've just volumes, but this was a necessary decision to safeguard the integral and strength of our business.
No. There's we have stabilized the business returning into volume growth is our most important strategic objectives.
We made progress in the third quarter.
We also made some difficult but necessary decisions with the fuel for retail partners across several markets.
This resulted in some voting lawsuits. That's we're all excited about recent plan.
Absent these dislocations or voting progress would have been consistent with our sequential quarterly improvement plan.
The majority of these discussions have been addressed and we expect that these losses will reverse in the fourth quarter ended the first quarter of next year.
<unk> got us back on track.
Consistent with our objective to return to share and volume growth.
We activated the A&P investment plan raising away and be spending in September two 5% of sales from three 5%. Obviously this last year.
Utilizing these resources, we launched new advertising across Europe, and we have strengthened our media profile.
Leveraging the iconic captain you know advertising for nomad, leading piece brands across all key market.
Additionally, we've stepped up or in store execution, with new and exciting promotional activity across Europe.
Placing a leading brands directly and shop us line of sight.
These heightened visibility is compounding the pick these municipal advertising and driving demand.
Yeah.
The initial results of our dynamic A&D program a highly promising.
We expect a good human shades share trends to improve in the fourth quarter ultimately returning to growth in 2024 and beyond.
While the A&P program, we'd be crucial to driving growth.
We also remain laser focused on all the strategic plan.
We are harvesting or supply chain cost savings to really blow in marketing.
Additionally, we've continued to expand our revenue growth management capabilities.
We have made significant progress with boost initiatives and this is helping dry food from consumers leading to volume and market share recovery.
Looking ahead to the end of the year and next year, we are excited about our growth prospects.
We expect to see an improved performance in Q4, which should carry well into 'twenty 'twenty four and beyond with that I'd like to recap our third quarter key financial metrics beginning with revenues.
Well, we bought the sales grew 1% and grew one 6% on an organic basis.
This result was ahead of original expectations.
Gross margin was 28, 4% with cost pressure offset by our pricing initiatives and cost control programs.
Adjusted EBITDA was 140 million euro.
While adjusted EPS came in at 43 cents per share both ahead of market expectations.
Scarborough and daughters spot rates or Q3, adjusted EPS was <unk> 45 U S dollar cents per share.
In Q3 sales grew by one 6% on an organic basis with strong pricing offsetting volume and mix declines consistent with our expectations.
For the first nine months of the year, we grew organic sales, 6% and we remain on track to deliver or guidance of mid single digit growth for the full year.
Oh supply chain delivered excellent results.
And we remain in a positive cycle of customer service and cost management.
These efficiencies, helping support don't you wouldn't be investments or service levels rose to 98, 6% up 160 basis points.
The hard work, we've done on supply chain transformation is paying dividends at a crucial time.
I suppose if demand picks up and go with the deep prices stabilize.
Oh efficient supply chain execution will be critical in filling new customer and consumer needs.
We have benefited throughout the year from our strategy of selectively assessing the risk profile of each individual rule match, you would get the good we'd be buying.
Making or buying more efficient.
Looking ahead, we have begun the process of covering for next year and we are.
Have a good visibility on key commodity trends heading into 2024.
Well Budd you share it was down about 1% in the quarter.
Consistent with our expectations.
Oh wait for our new E&P investments, we had rolled out towards the end of Q3, we.
We expect an improving share trends moving forward.
With our business performance on track with your expectations and or share repurchase we are raising our adjusted 2023 EPS guidance to 157 to $1 60 Euro vishay from a previous range of $1 54 to $1 57 in Europe. This year.
This represents an adjusted EPS range of $1 66 to $1 69 per share at current spot rates.
This guidance excludes the impact of any potential future litigation.
Why does topic of capital allocation, we are pleased to share significant developments, you know capital allocation strategy.
[noise] accretive capital allocation is crucial to our long term goals at nomad.
We deployed 66 million euro to repurchase all shape your sweep.
The first nine months of the year, we have invested a total of 118 million euro reducing or shake on by more than $7 6 million.
As you May recall in August of 2021, we have noticed is fiber that million dollars share repurchase program, which was successfully utilized and is set to expire at the end of this year.
Proceeding with our share repurchase efforts our board of directors has approved a new 500 million dollar share repurchase program.
Which will expire by the end of 2026.
One two a share repurchase program.
And subject to approval by our board of directors, we intend to initiate in early 'twenty 'twenty four.
Our regular quarterly dividend, which we expect will be a key means of delivering reliable value to shareholders going forward.
We will share further details early in 2024.
These enhanced framework for shareholder return.
Bolstered by our strong free cash flow profile underscores our commitment to maximizing shareholder returns.
She is 2022 it hasnt been a plan to raise our media and promotion spending in the second half of this year to drive volume and share momentum.
This quarter.
We launched many new initiatives to reignite growth.
So back to school bodes I can't opinion U K.
Oh, TV sponsorship with Christy Buck in France.
And it kept an adventurous T V digital activation you need to.
We launched new fish shapes in Austria, Netherlands, and Belgium grew.
Green cuisine, chicken and cheese Nuggets in Germany.
In a wave of modern meal solutions and vegetables across Europe.
We debuted a new advertising with the captain across all markets connecting even more with our consumers and bringing attention to a delicious fish products.
Fish makes up just under 40% of policies and the way.
The leader across most of our market.
To win at the point of sale, we've stepped up promotion in supermarkets is bringing consumer attention to a high quality branded products.
With a new promotion plans in place the price gaps with our private label competitors have stabilized.
Food is a resilient category.
There are plenty of green shoots across Europe.
Frozen is back in volume and value growth.
September trailing 12 week data shows one 5% volume growth in the category.
And there is growth in 12 of the 16 markets tracked.
Additionally, the categories performing ahead of total food volume terms across several key markets.
Consumer behavior is showing signs of improvement as well.
In the U K for example, we see consumers, putting more frozen food products on their plates.
For instance, adding piece to fish fingers.
For the quarter is still in the early stages, which we are seeing improving value share and volume trends in silverpop biggest markets U K and Italy, especially.
There were many great commercial developments during the quarter.
In the U K.
We launched our back to school Master brand campaign with bauxite.
To capture the attention of family settling back into the school year after summer breaks.
We reached more than 90% of who sold with all birds eye brand advertising during the periods.
In the Atlantic region, we posted record ice cream sales driven by excellent portfolio and supported by good weather high service level.
And an acceleration you know point of six program.
We benefited from our investment in supply chain marketing and innovation.
We also launched fish fingers in the region and the initial results are highly promising.
Following the six just anniversary of seamless in Italy, we are no celebrating the 25th boost El Kalay too.
Brian I Couldnt come millions, possibly chini ill be locked banking products.
We celebrated with the introduction of a short movie about his life.
The prestigious themed festival for kids, creating.
Creating significant media coverage from national newspapers and television.
Only green cuisine remains or plant based pillar for igloo, it keeps growing value share.
In Germany went up local markets with the brand's value share was up 7% in Q3.
This was driven by focused activation behind the new campaign.
Well as product innovation.
We've gotten many questions from investors and then at least about the hard the retail trade looks with a new promotional plan knowing full suite.
We've got some great examples here of in store execution in four different markets.
In the U K.
Combining our best selling and most loved products in the high BBT ice previously.
To give consumers combined meal ideas.
This provides a great takeaway experience at an affordable price.
We've lined up or fish fingers with green cuisine would fill us in on basically.
We also have hobbled famous potato waffles in the mix.
France, and Spain, we've ramped up good spirits distribution in recent months.
In France, we've got a good example of how we are catching the consumer's attention for what is a new brand in the country.
Northeast the high visibility of the display giving details on the program for new consumers first learning the benefits of these great brands.
Since acquiring or dressing business. The addition of the ice cream to our portfolio has been a great success.
Great job, we have an example for king ice cream promotions, especially all highly profitable single serve versions.
In Germany, we are on the offense with a fish fingers and vegetables.
And this is freezer, we've got those key Spanish books on promotion mix too little fish fingers, both must win battles in that market.
We have many more examples across our business.
And I'm happy to report that the reaction from these programs have been strong so far.
With these in store execution driving seats, along with all new media.
I'm highly optimistic about the outlook for the rest of the year and beyond.
With that I will now hand, the call over to Sami to review, our financial results and guidance in more detail Sami.
Thank you Stephane and thank you all for your participation on the call today.
Turning to slide nine I will provide more detail on our key third quarter operating metrics, beginning with reported revenues, which increased roughly 1% to 764 million euro.
Sales grew organically one 6%.
Third quarter revenues were negatively impacted by 1.1% unfavorable FX.
We delivered gross margin of 28, 4% supported by pricing and cost control.
This result was ahead of our plan.
As previously discussed Q3 was the most challenging quarter for gross margins for the year due to the comparison from the third quarter of 2022.
Looking out to Q4, we remain on track to deliver stable gross margin for the year.
This would be supported by an improving volume trend pricing strong cost discipline and robust all G M execution.
Moving down to the rest of the P&L.
Our gross profit came at 217 million euro in the third quarter.
Cost of goods sold increased two 5% and 47 million euro and increase of 2%, but 8 million euro versus last year.
Adjusted operating expense of 100 million Euro was up 11% year over year, reflecting stepped up A&P investment.
As a result, adjusted EBITDA was 140 million euro with adjusted EBITDA margin at 18, 3%.
Finally, we posted adjusted EPS of 43 euro cents per share in Q3.
This translates to 45 U S got off since per share at current spot rates.
Turning to cash flow on slide 10.
We delivered strong cash flow in the first nine months of the year, driven primarily by working capital improvements and EBITDA growth.
Additionally, we've been highly focused on effective inventory management and cash collection, helping our working capital performance.
We are well on track for annual adjusted cash flow guidance target of 250 million Euro at a conversion rate of 90% to 95%.
Maintaining this high level of conversion is paramount as we consider our capital allocation strategy for the year and beyond in the first nine months, we generated 125 billion euro of adjusted free cash flow for a conversion ratio of 56% our highest first nine months of conversion rate since.
2020.
Working capital decreased 151 million Euro to 68 million euro more than offsetting a 44 million euro increase in cash interest driven by our refinancing and repricing activities.
Capex of 59 million Euro was up 4 million Euro. This is last year as we remain highly disciplined on supporting long term strategic investments within our business.
Changes in cash stocks increased 9 million euro to 53 million Euro while cash interest was up 44 million to 130 million Euro driven by last year's refinancing.
With that let's turn to slide 11 to review, our 2023 guidance, which we are updating today.
This guidance is based on foreign exchange rates as of November one 2023.
First we are again, maintaining our organic revenue projection of mid single digit growth for 'twenty 'twenty suite without pricing more than offsetting volume declines.
Although current A&P investment takes hold in the market and we are post 2024, our expectation is that we will develop a more balanced mix of price and volume.
We expect to see the beginning of volume recovery in Q4 rolling into 'twenty 'twenty four.
We are keeping our adjusted free cash flow guidance of approximately 250 million euro.
We expect our cash conversion ratio to be in the range of 90% to 95% consistent with historical averages.
A stefan spoke to earlier in the presentation with our underlying business performance in line with our expectations and I'll share repurchase across the first nine months of the year. We are raising our 2023 adjusted EPS guidance last updated in August.
We now expect adjusted EPS in the range of $1 57 to $1 60 euro per share.
Or adult off 66 to $1 69 per share at current spot rates.
This excludes any additional impact of potential future capital allocation.
I will now turn the session over to Q&A operator back to you.
Thank you at this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from the line of Jason English with Goldman Sachs.
Proceed with your question.
Hey, good morning, folks or perhaps good afternoon, where you are at.
Thank you for slipping me in.
Great news on the dividend I look forward to more details to come in terms of payout ratio magnitude et cetera early in the new year.
On the quarter itself I was surprised by retail disputes a strange time of year to see retail disputes.
And looking at your P&L price growth accelerated on a two and three year stack basis. So is it fair to assume that you've implemented new price increases in the quarter. Those are the cause of the disputes.
And if so can you give us a sense of a sense of order of magnitude.
Thanks, Thanks, Susan Thanks for the question what do you know I think the water sensors.
In the Boston Europe, even though we had the one negotiation for you at the beginning of the year and then you know you have these volatile times, we think with inflation going up and you remember last year, we increased price three to four times. So we set up one negotiation and you had the choice of three to four negotiations. So this year, it's the other way around because obviously.
<unk> is coming down which is great for all of us, but still hold at that time, so I'm not surprised because we have this conversation healthy conversation he set up country, because we never stopped the data with these guys. So I think it's absolutely you know an avoidable and to some extent, sometimes you don't necessarily need to make sure.
We have you can think of his team in terms of pricing I think the key piece for US is how can I say is we've decided to do it this way because we want to protect the long term integrity of the business and sometimes you know, it's obviously not easy because we leased. It then you know you have it.
Coming in that should not prevent us from making the right decision in terms of negotiation and that's absolutely fundamental Ah full for us and for the future and for retailers. So that's what we had in terms of what it did in Q3 in Q3 in terms of revenues.
Around 2% plus of our revenues were quote unquote lost.
And you know with with these with these negotiations.
I think most of these.
Negotiations are over.
You'll have a bit left ahead of US Q4, you will have understood. The remaining it's going to obviously doing the first the first month, but then if he at least we're going to put a positive.
But it did impact Q4, and definitely more even more so for Q1 with the right the right level of margin. So that's not so that's a well.
Wireless sensing Jayson I think probably it's got to be a bit more stable in the future, but you know that the number of negotiations that have increased.
Okay.
One thing that's also changed in the last year or so is private label was no longer following as closely as quickly as they had been in the past with price increases.
You know in the slides that private label price gaps remain stable. So I assume that there is still a still haven't followed on sort of your last rounds and now if you're putting through more.
Are you seeing them.
It's I would suggest in the slides, you're you're seeing them fall off price gaps are stable, but can you confirm that's the case and then the second part of it.
You're you're talking about a lot more merchandising activity on the Ford, which makes a lot of sense and helix can provide them.
But between that and rectifying some of the disputes of retailers is there isn't any sort of price the net price that you're effectively having to give back to fund that march or rectify the potential with the retailers.
Jason sorry for my voice, a little bit of a.
I've always considered the kind of tried to go into the your question on the private label point I think with three important is that we.
We have if it is cannibalization between our GAAP and that is now reaching a point, where we think we can still operate why do you think he leveraging all of the yoga I've picked about him many promotion in order for three stay competitive versus them and reignite growth from that basis. So if you recall the price gap was double digit.
Double digit increases to the prior gap then you started to go down. He has reached 11, 5% and we didn't really what you are thinking what the actually we are picky right now he's.
I think at the promotional level beefing up our E&P and at the same time as well taking into consideration to changing the inflation dynamics that we see for the future and this is where the negotiation and the compensation or to play there. We clearly want to reignite share growth, we want to revert the volume trend, which he has any of that these days.
And on its way back to a figure recovery Bye Bye Q1, and Q2 for we see an improvement in Q1, we see effectively a turnaround at that point in time.
Very helpful. Thank you very much I'll pass it on.
Yeah.
Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.
Good morning, Thanks for the question.
Stefan.
It looks as though in this in this latest run of Nielsen data Nomad seeing some market shares improve across a number of countries, but Italy is still soft and I think that's one where the pricing the relative pricing has been more troublesome.
Think about the time required you know once you're in market for consumers to shop, the Isle become aware of the promo and take advantage of it I mean, I guess, what sort of the natural purchase cycle for your categories is it four weeks six weeks, just trying to better understand the willingness and ability for consumers to take advantage of promo once it's in market.
But to your point I think you know frozen nowadays is it is it obviously is it's more something like a destination that such and average country by country, but lets say give or take is around four to five times per year. So you can imagine.
<unk> at the moment, just starting with your promotion and the impact it has in the market. It takes a bit of time. So what do we see you know we need to leave it seems you know we see some green shoots it seems very much in line with what we were expecting and then you know basically we go with the last thing we need to do is to change course, so we're thinking that's the country, we've started or are.
GM program.
Say the fastest.
Let's say it was a very deep, especially in fish and what are we starting to see some green shoots but definitely you know it's got to be complemented by ANP on top so big that you know on top of the four to five sites or so with a stabilization of Cogs stabilization of forced labor.
Cost is starting to increase which to some extent in terms of cost of living is going full blast as well, especially in a country like Italy and then if we see that you know they definitely end up before the end of Q4, this water and and did the same thing.
Next year with the with E&P. We we are very confident that he said, even though we froze the tracks, which is which is what they studying to do especially in fish.
Okay, and then thinking more about the macro into 'twenty 'twenty, four and the persistent inflation in Europe and the impact on consumers budgets and you shipped some food spending when you were lining up these brand investments how are you thinking about I guess the competition just alternatives for consumers are you mostly focused on winning in store against other frozen.
[noise] categories is there also an angle here to try and capture some food spend from outside the home I guess, what are your expectations for how or where you'll source of incremental volume going forward.
The first thing is you know we've lost some market share and so definitely the reason there was a.
Piece of that that we want to regain that's the first thing that we think the area that we think that with the programs. We have we can do this but also we believe that you know we have this program must win battle, that's supposed to get two pizza grow you know in a disproportionate way compared to to be I'll. Just that's what we've been doing one more thing you will see as well as we go.
To start in a very selective way.
Our work on new categories on a country by country very far from what happened something like 10 years ago, which was a bit of everything but definitely where we think that in a country. You know this category would be false reading some countries could be pizza and another you know we have the right to win we're going to do it he says he's going to be long.
Investment so that's a combination of different things when you think about poultry.
Thinking about Pizza for example, definitely you have a contest there's competition with not only with frozen but also with kids. So that's that's going to be the framework for us So definitely focused on the old machine bottles with our G M, whereas obviously A&P and with that you know.
Think that within this framework going to gain market share and then on top of that should be starting something which is again very focused behind new categories. It definitely impacts the frozen food, but definitely also above and beyond for this one.
Which in and of it says by the way he's doing well compared to many other categories.
Okay. Thanks.
Youre welcome.
Yeah.
Our next question comes from the line of Rob Dickerson with Jefferies sheet Jefferies. Please proceed with your question.
Great. Thanks, so much yes, Stefan maybe just to kind of follow up on what you. Just said you know I think in the prepared remarks, you'd stated volume growth was kind of back for the broader frozen category in 12 out of 16 markets.
I mean, clearly I guess.
Things going on in Q3 that no.
You're not pushing the volume growth, but then also it sounds like there is some incremental pricing thats going through the market. So like as we get through Q4 excuse me.
As you say you think the volume trajectory improves I mean are you into Q1 should we be thinking that you know hopefully as you get towards the end of the quarter that you start to see volume stabilized and therefore, there could actually be volume growth next year, despite the pricing.
Cause of ongoing higher A&P and must win battles.
To your point I think you know we have the programs we have with the combination of them. It's a more stable macros definitely we believe that we are going to come back to the previous I'd go with which was based on obviously volume growth. Then you oversee how would you say is then obviously definitely how EBITDA and then the.
These EPS. So that's that's what we want to come back with where the combination of that as we said ANP Adrienne, which is really something that we have we haven't invested a lot and my Israeli say macro that's the idea. The concept of do we believe that we are going to gain market share and gains.
Getting back to volume growth next year, absolutely, what do you think thats happening and which which week I've got to tell you that right now, but definitely then we were very confident that we're going to gain market share and have begun to gain.
Volume next year.
Alright, Super and then I guess.
Sami just on the gross margin I think you had said in our queue.
For gross margin kind of in line.
Gross margin essentially flat for the year I think that kind of implies Q4 gross margins essentially flat.
But at the same time, it I'm hearing some stuff about pricing and our G M initiatives and get out.
I'm sure there's productivity.
So I'm just curious like you know kind of with some pricing coming through it sounds like maybe that is clearly offsetting some higher cost otherwise I kind of think gross margin would be up thanks.
You you haven't.
Do you have any cause and effect is going to mix. Because you know we had ice cream in Q3, and then we don't have any screen in Q4. When you look at the trends from the first three quarters into the fourth quarter, but <unk> got to see some improvement there, which is going to conform to the prediction of it see that.
Gross margin that we see for the year. So technically this cycle has been that the first three quarter, where like you go to the 20% and then they figure in Q4 is gonna be secured for an average of you. That's gonna be Fad. This is true. So it's clearly definitely the investments we're making in terms of productivity in terms of investment behind our Cobra.
And particularly your mix in our core category and must win battle in particular are going to start to pay off we see effectively the trajectory starting to improving to the nature of it for this year with different key maintain a flat gross margin for the year.
Alright, good enough. Thank you guys.
Thanks.
Our next question comes from the line of Steve Powers with Deutsche Bank. She proceed with your question.
Hey, great. Thank you very much.
On the gross margin actually while we're here.
Mentioned that three Q came in ahead of US is that what was the source of the upside was it was it was a better ice cream sales or were there other drivers of the upside versus your expectations.
But this is this is the expectation I think we'd be we'd be slightly higher as you know because if we had a bit of a better performance on the top line you should really look at that with expectation and yes ice cream has been doing really well there. There's a mix factor there Andrew continuation effectively of the Retuning puts ingrid getting it behind all of it.
And productivity initiatives as you know, we're putting a lot of focus and a lot of effort in Cogs in particular, but it's a combination of element that D. C. I mean, a lot of that it's not only just the saving in itself, but you really have a good combo and focusing on must win battle stepping up effectively the mix by investing behind the mystery battle algae and stuff.
Motion on that which is giving us a bit of a breathing space, there, which we expect to continue to maintain and again securing a hypothesis and now projected for the year up to about flat gross margin.
Yes, Okay, very good and you mentioned, 100% coverage and strong visibility on Cogs into 'twenty. Four is there anything you can offer us in terms of.
All cost outlook or any.
Any color on expected yeah.
Kind of timing of the cost curve into the next year.
Yeah, we do you know what I'm going to give the guidance that because frankly I have the savings. So far of course, indeed have covered them in for the year. That's obviously, because we are now frankly into where.
We are but getting into the nature, we are starting to look at some.
Some of the deals available in the market. There is if activity some deflation in fish some slight inflation on some of the veggies I mean, some of them more than others and we are really trying to look at the market dynamics to frankly make sure that we remain competitive versus the other players in the market and frankly, we have a cost structure.
It's enabled us to adjust the price as necessary through promotion as we move forward to stay completely keep that but dignity. After two years of heavy inflation, we are seeing effectively a flattening and a decline in some of the category I mean, if you suddenly example, and it would be some increase on the rise. So rest assured we would keep you up to date I mean at this stage but to.
Maintaining the strategy of trying to grab as much as we can from the market in order to really have great value to existing business.
Okay. That's very helpful and last question if I could.
I think everyone's trying to.
Yeah.
I'm trying to get a pulse in and try to track your.
Progress on volume recovery in market share improvement as you as you make good on the investments that you're currently making.
As we do that somebody outside.
Is tracked.
Channel data a good.
Barometer of your progress or is there a reason to believe that tracked channel performance will either lead or lag totaled.
Total portfolio performance.
But directionally, it's OK considerably, but then you know they have some puts and takes are when do you know how do you. Obviously you have the difference between sell in sell out.
However, even though the foodservice piece.
Peace and some countries are not covered as well, but directionally, it's OK and then definitely with with with our with them.
With.
With Tony we can't obviously have you two guys, who could you be a bit further further I mean more precise with our the difference between let's say the numbers are such that you want that became available and then what you want to get to the final number but directionally. It's it's okay.
Okay very good. Thank you. Thank you very much.
Thank you.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad. She joined the question Andy actually Q.
Our next question comes from the line of John Tan Wang Tang with CJ Securities.
With your question.
Yes, hi, good morning, it's Pete Lucas for Jon you guys covered most of the stuff here in the prepared remarks, and Q&A, but if you could just kind of maybe summarize the biggest puts and takes you're seeing.
In regards to working capital cash flow expectations going forward.
Yeah, I think as we go.
As we have mentioned that in order to agree I mean, absolutely inessential critical measure for us because he drives it took you a lot of the commitment we have to driving shareholder value.
<unk> capital allocation. So we clearly have been investing a lot of efforts to step up our performance India right. You know one of the areas of working capital. Let me, let me make it get them one by one if you look I mean on receivables is clearly something that we have to clearly get to perfect match between yogurt, we see people going into connection and honestly at this stage we're really.
We're making very good progress and have stepped up our performance I mean from that and not necessarily in the change itself, but in the efficiency of collecting fiduciary money beyond our receivables inventory and payables. The point there was.
Recall, a year ago, we have stepped up our inventory I mean, because of all of the consumer.
The disruption in supply with war and with specific surprises Nishu I mean relating to some of the ingredients and we have taken the journey of the supply chain team has done an extraordinary work there to really drive down our inventory in order to support our growth requirement.
This requirement and you see that you know customer service levels are very good and at the same time, you've seen a step change improvements now inventory that had been down together with our receivable that have now integrated you've shown the one off effect of the pass through particularly the unfair trade practices that has.
That's what's driving an impact on yogurt payable. So net net if you want receivable clearly huge focus on a per market basis to make sure. We performed in line with expectation inventory on the journey of taking to overall inventory level down while making sure that we maintain top performance in the array of customer service and the totality of all of that is in.
<unk> to free up an amount of candidates.
Performance so from a cash flow standpoint, we just reiterate the point that these business designed to deliver 90% to 95% of free cash flow conversion, which amounts to 250 million Felicia and we intend to continue to do that than to do each and everyday.
So even generate more cash beyond I'm talking to you on that in different realities.
Very helpful. Thanks, and then just last one for me what is your expected net interest expense following the repricing.
We're in the repricing.
Back to you.
Interest expense.
We view overall.
A year, we'd be expecting probably around the one at an 18 110 $115 million.
Okay.
Great. Thank you.
Yeah.
That's perfect. Thank you very much.
And we have reached the end of the question and answer session I'll now turn the call back over to Stephane, Jamaica for closing remarks.
Thank you for your participation on today's call.
After the unique challenges of 2022.
We continue to deliver organic sales growth, while protecting our margins and investing in the long term it has on the business.
Oh A&P program is poised to drive growth.
Our supply chain is in great shape.
Adrienne capabilities are expanding with each new quarter.
We are already looking forward to an exciting 2020 for volume and market share recovery.
Once again, we are on track to deliver ambitious financial objectives for fund between three and beyond Thank you all.
Operator back to you.
Thank you and this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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