Q1 2024 Nomad Foods Ltd Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to Nomad Foods' first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. To give everyone the opportunity to participate, please limit yourself to one question and one follow-up.

Good day, ladies and gentlemen, and welcome to do not see this quarter 'twenty to 'twenty four earnings conference call.

At this time, all participants are in listen only mode.

A question and answer session will follow the formal presentation.

To keep if you want the opportunity to participate.

Please limit yourself to one question and one.

One follow up.

Operator: If you should require operator assistance during the conference, please press star zero on the telephone keypad. Please note that this conference is being recorded. I would now like to turn the conference over to Amit Sharma, please give him a heads up.

Speaker Change: If you should require operator assistance during the conference. Please press star zero and he's kind of been key pad.

Speaker Change: Please note that this country is being recorded.

Speaker Change: I would now like to turn the conference 50, Amit Sharma. Please go ahead Sir.

Amit Sharma: Hello, and welcome to Nomad Foods' first quarter 2024 earnings call. I'm Amit Sharma, Head of Investor Relations, and I'm joined on the call by Stefan Descheemaeker, our CEO, and Samy Zekhout, our CFO. By now, everyone should have access to the earnings release for the period ended March 31, 2024, that was published at approximately 6.45 a.m. Eastern Time. The press release and investor presentation are available on Nomad Foods' website at www.nomadfoods.com. This call is being webcast, and a replay will be available on the company's website.

Speaker Change: Hello, and welcome to the Nomad Foods first quarter 2024 earnings call I'm, Amit Sharma head of Investor Relations and I'm joined on the call by Chiffon dish maker, our CEO and send me the code our CFO.

Speaker Change: By now everyone should have access to the earnings release for the period ended March 31, 2024 that was published at approximately 645, a M eastern time.

Speaker Change: The press release and Investor presentation are available on Nomad foods upside.

Speaker Change: Www Dot Nomad foods Dot com.

Speaker Change: This call is being webcast and a replay will be available on the company's upside.

Amit Sharma: 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. However, actual results may differ due to risk and uncertainties, which are discussed in our press release, our filings with the SEC, and in our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for IFRS results but should be read together with IFRS results.

Speaker Change: This conference call May include forward looking statements that are based on our view of the company's prospects expectations and intentions at this time.

Speaker Change: Results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and in our Investor presentation, which includes cautionary language.

Speaker Change: We will also discuss non <unk> financial measures during the call today.

Speaker Change: These non <unk> financial measures should not be considered a replacement for and should be read together with <unk> results.

Amit Sharma: Investors can find the IFRS to non-IFRS reconciliation in our earnings release and in the appendices at the end of our slide presentation, available on our website. Please note that certain financial information within this presentation represents adjusted figures for 2023 and 2024. All adjusted figures have been adjusted primarily for share-based payment expenses and related employee payroll taxes. Non-operating M&A-Related Costs, Acquisition Purchase Price Adjustments, Exceptional Items, and Foreign Currency Translation Charges and Gages.

Speaker Change: Investors can find the IFA rescued non ifr S reconciliation within the earnings release and in the appendices at the end of our slide presentation available on our website.

Speaker Change: Please note that certain financial information within this presentation represents adjusted figures for 2023 and 2024.

Speaker Change: All adjusted figures have been adjusted primarily for share based payment expenses and related employee payroll taxes.

Speaker Change: Nonoperating M&A related costs acquisition purchase price adjustment exceptional items and foreign currency translation charges and gains.

Amit Sharma: Unless otherwise noted, comments from here on will refer to those adjusted numbers. With that, I will hand the call over to Stefan. Thank you.

Speaker Change: Unless otherwise noted comments from hereon will wrap up to those adjusted numbers with that I will hand, the call over to Stephane.

Stephane: I mean, we.

Stefan Descheemaeker: We'd like to begin by offering a few highlights from our first quarter as we made a solid start to the year. I will then offer a few comments on our accelerated growth outlook. As we deploy our growth flywheel before handing it over to Samy for a detailed review of our quarterly financial results, and we did on June 24, Nomad Foods delivered another quarter of solid top and bottom line performance.

Stephane: We'd like to begin by offering a few highlights from our first quarter as we made a solid start to the year.

Stephane: We then offer a few comments on the accelerated growth outlook as we deploy our growth flywheel before handing it over to Sammy for a detailed review of our quarterly financial results and we did weaken default at Luke.

Stephane: Nomad foods delivered another quarter of solid top and bottom line performance.

Stefan Descheemaeker: First quarter net sales increased by 1.1%, including organic sales growth of 0.3%, or the seventh consecutive quarter of positive organic sales growth. Our volume trends improved substantially, both sequentially and on a year-over-year basis, which is very encouraging given our clear focus on returning to positive volume growth in 2021, or accelerating volume trends during the quarter, validate the difficult choices we made over the past 18 to 24 months. Protect the long-term health and growth potential of brands.

Sammy: First quarter net sales increased by one 1%.

Sammy: Including organic sales growth of 0.3%.

Sammy: Our seventh consecutive quarter of positive organic sales growth.

Sammy: Our volume trends improved substantially.

Stephane: Both sequentially and on a year over year basis.

Stephane: Which is very encouraging given our clear focus on returning back to positive volume growth in 2024.

Stephane: Oh actually reading volume strength during the quarter.

Stephane: Validate the difficult choices, we've made over the past 18 to 24 months.

Stephane: To protect the long term health and growth potential for brands.

Stefan Descheemaeker: We made targeted investments during the quarter to further boost this recovery. These investments are being fueled by a favorable cost and productivity agenda, which we believe will position us to deliver higher margins and strong profit growth through the rest of the year. We paid our first quarterly cash dividend during the quarter and remain opportunistic buyers of our stock, supported by your strong cash generation.

Stephane: We made targeted investments during the quarter to further boost this recovery.

Stephane: These investments are being fueled by favorable cost or productivity agenda, which we believe will position us to deliver higher margins and strong profit growth through the rest of the year.

Stephane: We paid our first quarterly cash dividend during the quarter and remain opportunistic buyers of our stock supported by our strong cash generation IMAX.

Stefan Descheemaeker: I'm excited about building momentum as our initiatives to drive sustained, profitable growth begin to take hold and our volume recovery begins to accelerate. As a result, we are reiterating our 2024 guidance, including net sales growth of 3-4% with positive volume and share growth, adjusted EBITDA growth of 4% to 6%, and adjusted EPS in the range of 1.75 to 1.80 euros, which implies 9% to 12% growth. With that in mind, let me provide a few highlights on our First Border Guide performance. First quarter net sales increased by 1.1% as favourable forex complemented organic growth of 0.3%.

Stephane: I'm excited about building momentum, although initiatives to drive sustained profitable growth begin to take hold in a volume recovery begins to accelerate.

Stephane: As a result, we are reiterating our 2024 guidance, including net sales growth of 3% to 4% with positive volume and share growth adjust.

Stephane: Adjusted EBITDA growth of 42, 6% and adjusted EPS in the range of $1 75 to $1 80, Euro, which implies 9% to 12% growth.

Stephane: With that let me provide a few highlights on our first quarter Guy whose performance first quarter net sales increased by one 1%.

Stephane: Favorable forex complemented the organic growth of 0.3%.

Stefan Descheemaeker: Quarterly volume declines moderated significantly from last quarter, accompanied with a strong product and customer mix, as we began to deploy our Revenue Growth Management Toolkit across key markets and categories. As expected, contribution from pricing moderated as we lapped strong year-ago pricing action. First quarter gross margins declined by 200 basis points.

Stephane: Quarterly volume declines moderated significantly from last quarter, accompanied with strong product and customer mix as we begin to deploy our revenue growth management toolkit across key markets and categories.

Stephane: As expected contribution from pricing moderated as we lapped strong year ago pricing actions.

Stephane: First quarter gross margins declined by 200 basis points.

Stephane: 26, 9%.

Stefan Descheemaeker: 26.9%, as the expected one-time margin headwind. Due to balance sheet inventory evaluation, more than offset higher in the line margin. Samy will provide more details about the revaluation impact, but I'm pleased with the improving trajectory of our underlying margin, which is being driven by a clear focus on lower cost, productivity, favorable mix, and optimized promotion. Given our expectations of a more favourable cost environment ahead, we remain confident in delivering high growth margins for the full year, enabling us to continue to invest in our brand.

Stephane: Expected onetime margin headwind due to balance sheet inventory revaluation more than offset higher underlying margins.

Stephane: Sami will provide more details about the revaluation impact, but I'm pleased with improving the trajectory of our underlying margins.

Stephane: Which is being driven by clear focus on lower cost.

Stephane: The activity favorable mix and optimize promotions.

Stephane: Even though expectations of a more favorable cost environment ahead.

Stephane: We remain confident in delivering higher gross margins for the full year, enabling us to continue to invest in our brands.

Stefan Descheemaeker: Adjusted EBITDA of €122 million and adjusted EPS of €0.37 per share, both declined from the year-ago quarter, generated nearly 49 million euros of adjusted free cash flow in the first quarter, a significant improvement from 25 million euros in the year-ago quarter.

Stephane: Adjusted EBITDA of 122 million and adjusted EPS of <unk> 37 Euro cents per share both declined from the year ago quarter.

Stephane: We generated nearly 49 million euros adjusted free cash flow in the first quarter of <unk>.

Stephane: <unk>, improving from 25 million euro in the year ago quarter.

Stefan Descheemaeker: As retail sales levels, as reported by Nielsen IQ, of volume and shared trajectory continue to show significant improvement and even turned positive in many of our key markets during the quarter, including UK and Austria, this recovery is being driven by the full activation of our renewed and upgraded flywheel to bring consumers back to the frozen aisle and to drive greater engagement with our brand. Winning with consumers, winning with our brands, and winning with customers are the key pillars of our flywheel, and we made the intended investment in the first quarter to achieve this.

Stephane: As the retail sales level as reported by Nielsen IQ of volume and share trajectory continues to show significant improvement and even turn positive in many of our key markets during the quarter, including UK and Austria.

Stephane: This recovery is being driven by the full activation of our renewed and a greater flywheel to bring consumers back to the frozen aisle and to drive greater engagement with our brands.

Stephane: Winning with consumers, winning with our brands and winning with customers are the key pillars of our flywheel and we made the intended investment in the first quarter achieve it Oh A&P spending increased by more than 20% as we expanded our master brand campaign to additional markets to drive greater engaged.

Stefan Descheemaeker: Our A&P spending increased by more than 20% as we expanded our master brand campaign to additional markets to drive great engagements with consumers and to remind them of the most relevant and loved aspects of their relationship with our iconic brand. We timed our first quarter pricing and promotion activities to maximize benefits from favorable seasonality and align them with greater consumer interest in the frozen island.

Stephane: <unk> with consumers and to remind them that.

Stephane: Most relevant and loved aspects of their relationship with our iconic brands.

Stephane: We signed our first quarter pricing and promotional activities to maximize benefits from favorable seasonality and to align it with greater consumer interest in the frozen ice.

Stefan Descheemaeker: At the same time, our ongoing investment in data, analytics, capabilities, and people helped us execute better ourselves, enabling our ongoing business transformation project. Our Centers of Excellence are delivering deeper data-driven insights to our local markets to optimize their promotion spend, reallocating resources to the largest potential opportunities, and winning additional merchandising events in stores. Our comprehensive Revenue Growth Management Toolkit is enabling us to fine-tune our promotion frequencies and depth at a much more granular level.

Stephane: At the same time, our ongoing investments in data analytics capabilities and people helped us execute better by itself.

Stephane: Enabled by our ongoing business transformation project or <unk>.

Stephane: Center of excellence are delivering deeper data driven insights to our local markets to optimize the promotional spent reallocating resource to the largest potential opportunities in <unk>.

Stephane: Winning additional merchandising events in stores.

Stephane: Comprehensive revenue growth management toolkit is enabling us to fine tune, our promotional frequency and depth at a much more granular level.

Stefan Descheemaeker: We are customizing our strategies at country and category level to support our consumers and deliver attractive price points to bring them back to the frozen aisle and to our brand. As I discussed at a recent Kagni presentation, the key driver of our anticipated volume recovery is our increasing focus on our best and biggest opportunities. The top 25 of these mushroom battles.

Stephane: We are customizing, our strategy that country and category level to support our consumers and deliver attractive price points to bring them back to the frozen aisle into our brands.

Stephane: As I discussed at the recent Cagny presentation, a key driver of our anticipated volume recovery is our increasing focus on our best and biggest opportunities.

Stephane: The top 25 of these must win battles accounted for nearly two thirds of our sales.

Stefan Descheemaeker: Accounted for nearly two-thirds of all sales and an even greater share of our gross profits in the port. As planned, these top mushroom battles received a disproportionately large share of our growth investment. And, as expected, delivered sales growth and gross margin far in excess of overall business, including positive volume growth in 15 of the top 25 Muslim countries. Let me highlight a few of these success stories from the quarter. The first one is a strong rebound in our fish finger business in Italy.

Stephane: And an even greater share of our gross profit in the quarter.

Stephane: As planned we stopped must win battles received a disproportionately large share of our growth investments.

Stephane: And as expected delivered sales growth and gross margin fine access of overall business, including positive volume growth in 15 of the top 25 must win battles.

Speaker Change: Let me highlight a few of these success stories from the quarter.

Speaker Change: The first one is a strong rebound in our fish fingers business in Italy.

Stefan Descheemaeker: After a difficult 2023, we deployed all elements of our growth flywheel to regain volume growth and drive greater penetration. The initial results from this initiative have been outstanding. Fenders, a frozen fish brand in Italy, delivered a strong turnaround in all key performance metrics, including a material improvement in our value and volume growth trends.

Speaker Change: After a difficult 2023, we deployed all elements of our growth flywheel to regain volume growth and drive greater penetration.

Speaker Change: The initial results from this initiative have been outstanding.

Speaker Change: Vendors of frozen fish, Brian in Italy delivered a strong turnaround in all key performance metrics, including a material improvement in our value and volume growth trends.

Stefan Descheemaeker: Our market share is rebounding along with the improving rate of sale by bringing consumers back to the category. Our strong performance in our largest market, the UK, is another example of a focused approach, as our first quarter volumes in the UK were up strongly, and we even gained volume share. Positive momentum was driven by a number of strategic promotions backed by strong media activation. We supported our UK vegetable portfolio with the continuation of our Sweet Pea Guarantee campaign to highlight the superiority of our, and We launched a series of influencer-led content highlighting the great relative value of frozen as part of the 100 years of frozen celebration. And we highlighted poultry as a lean, affordable protein for consumers with our Chickenworth dipping campaign.

Speaker Change: Our market share is rebounding along with improving rate of sale.

Speaker Change: In fact, this is lifting the velocity and penetration of the entire frozen fish segment by bringing consumers back to the category.

Speaker Change: Our strong performance in our largest market U K is another example of four focused approach as our first quarter volumes in the UK were up strongly and we even gaining volume share.

Speaker Change: Our positive momentum was driven by a number of strategic promotions backed by strong media activation.

Speaker Change: To drive consumer awareness, we supported our UK vegetable portfolio with the continuation of our suite C guarantee campaign to highlight the superiority of <unk> PS We launched a series of influenza led content highlighting the great relative value of frozen as part of the 100 years of pro.

Speaker Change: Celebration and we highlighted poultry is a lean affordable protein for consumers with a chicken was dipping campaign. My final success story to highlight is Austria, where <unk> brand is showing an outstanding turnaround leading to a nearly 80 basis points volume share expansion.

Stefan Descheemaeker: My final success story to highlight is Austria, where the Oiglo brand is showing an outstanding turnaround, leading to a nearly 80 basis points volume share expansion and stabilizing value share in the first quarter. Our value and volume sales growth in Austria meaningfully outperformed our overall portfolio as we secured more promotion slots while leveraging our life-well-fed campaign to drive greater consumer engagement. Our strong performance in these high priority opportunities is a testament to the power of our growth flywheel and gives us greater confidence in our outlook as our flywheel starts to spin fast.

Speaker Change: And stabilizing value share in the first quarter.

Speaker Change: Our value and volume sales growth in Austria meaningfully outperformed the overall portfolio as we see crude more promotional slots, while leveraging our life well fed campaign to drive greater consumer engagement.

Speaker Change: Our strong performance in these high priority of opportunities is a testament to the power of our growth flywheel and gives us greater confidence in our outlook as a flywheel starts to spin faster.

Stefan Descheemaeker: A renewed growth flywheel is enabled by a productivity agenda, particularly across our supply chain, which continues to operate in a highly effective manner. We are operating with greater agility and nimbleness and building even greater flexibility in our coverage plans to take advantage of the underlying volatility in many of our quick commodities. At the same time, we continue to raise the bar in terms of meeting our customers' demand, with our service levels rising to record highs during the quarter.

Speaker Change: Our renewed growth flywheel is enabled by our productivity agenda.

Speaker Change: <unk> across our supply chain, which continues to operate in a highly effective manner. We are operating with greater agility, and nimbleness and building even greater flexibility in our coverage plans to remain well positioned to take advantage of the underlying volatility in many of our commodities.

Speaker Change: At the same time, we continue to raise the bar in terms of meeting our customers' demand with our service levels rising to record highs during the quarter.

Stefan Descheemaeker: We are accomplishing it with an increasing focus on efficiency and productivity. We are optimizing our manufacturing, warehouse, and logistics network. We are reevaluating many of our co-packer relationships and reducing complexities throughout our supply chain. Our supply chain has been a key enabler for product savings, and we expect it to deliver an even greater contribution in 2024, particularly as the expected volume recovery lifts or fixed costs areabsorbed. In conclusion, 2024 is off to a solid start.

Speaker Change: We are accomplishing it with increasing focus on efficiencies and productivity.

Speaker Change: <unk> supply chain.

Speaker Change: We are optimizing our manufacturing warehouse and logistic network, we are reevaluating menu for co packer relationships and reducing complexity throughout our supply chain.

Speaker Change: Our supply chain has been a key enabler for productivity savings and we expect it to deliver even greater contribution in 2024.

Speaker Change: Particularly as the expected volume recovery lifts or fixed cost absorption.

Speaker Change: In conclusion 2024 is off to a solid start our quarterly volume and share trends improved sequentially and as I reflect on our performance. We believe it is clear that we are positioned for even better trajectory heads our growth flywheel is working and we are fueling it to spin even faster by making disciplined investments.

Stefan Descheemaeker: Our quarterly volume and share trends improve sequentially, and as I reflect on our performance, we believe it's clear that we are positioned for an even better trajectory ahead. Our growth flywheel is working, and we are fueling it to spin even faster by making disciplined investments in our brands, in our capabilities, in our operations, and in our people. We are reiterating our full-year guidance. Over the longer term, Nomad Foods is well-positioned. Delivering Attractive Top-Tier Top and Bottom-Line Growth, coupled with our balanced capital allocation strategy will lead to superior returns for our shareholders. With that, let me hand the call over to Samy to review our first quarter results in greater detail. Okay, Samy?

Speaker Change: And our brands and our capabilities in operations and in our people. We are reiterating our full year guidance over the longer term Nomad foods is well positioned to deliver attractive top tier top and bottom line growth.

Speaker Change: Which coupled with our balanced capital allocation strategy will lead to superior returns for shareholders with that let me hand, the call over to Sami to review, our first quarter results in greater detail semi.

Sami: Thank you Stefan and good morning, everyone I am pleased to present another quarter of solid performance at Nomad foods.

Samy Rene Zekhout: Thank you, Stefan, and good morning, everyone. I am pleased to present another quarter of solid performance at Nomad Food. For the first quarter, reported net revenues increased by 1.1% to 784 million euros, while organic sales increased by 0.3%. While favorable effects contributed 0.8% to quarterly sales, higher price mix contributed 2.5% during the quarter as we lapped year-ago pricing and benefited from favorable customer and product mix. Quarterly volume was down 2.2%, a marked improvement from down 8% in the fourth quarter, as we returned to volume growth in many of our key markets and remain on track to deliver positive volume growth for the full year. First quarter growth profits declined by 5.9% to €211 million.

Sami: For the first quarter reported net revenues increased by one 1% to 784 million Euro.

Sami: Organic sales increased by 0.3%, while favorable effects contributed 0.8% to quarterly sales.

Sami: Your price mix contributed two 5% during the quarter as we lapped year ago pricing and benefited from favorable customer and product mix.

Sami: Totally volume were down two 2% a marked improvement from down 8% in the fourth quarter.

Sami: As we return to volume growth in many of our key markets and remain on track to deliver positive volume growth for the full year first quarter gross profit declined by five 9% to 211 million Euro.

Samy Rene Zekhout: As expected, our first quarter gross margin decreased by 200 basis points from the year-ago quarter to 26.9%. Let me spend a few minutes on our gross margin performance during the quarter. As I mentioned on our last earnings call, our first quarter gross margins were pressured by the anticipated impact from balance sheet inventory revaluation to account for year-over-year changes in inflation. This change is purely mechanical and impacts only our first quarter margins as we reset our inventory unit cost in January.

Sami: As expected first quarter gross margin decreased by 200 basis points from the year ago quarter to 26, 9%.

Speaker Change: Let me spend a few minutes on our gross margin performance during the quarter.

Speaker Change: As I mentioned on our last earnings call. Our first quarter gross margins were pressured by the anticipated impact from balance sheet inventory revaluation to account for year over year changes in inflation.

Samy Rene Zekhout: This change is purely mechanical and impact only our first quarter margin as we reset our inventory unit costs in January.

Samy Rene Zekhout: On an underlying basis, our gross margin benefited from moderating costs, increasing productivity, higher margin mix, and optimized promotion. We expect these drivers to continue through the rest of the year and enable us to deliver a higher gross margin for the full year. Adjusted EBITDA decreased by 16.4% to €122 million in the quarter due to lower growth profits and higher operating expenses. Our adjusted operating expenses increased by 11.5% from the year-ago quarter due to the planned step-up in our NP investments, which increased by more than 20%. First quarter indirect expenses increased by 6.4%, including a 2% FX headwind, as we continue to invest to upgrade our capabilities and absorb wage and other non-commodity inflation.

Speaker Change: On the underlying basis, our gross margin benefited from moderating costs, increasing productivity higher margin mix and optimize promotions.

Samy Rene Zekhout: We expect these drivers to continue through the rest of the year and enabled us to deliver a higher gross margin for the full year.

Speaker Change: Adjusted EBITDA decreased by 16, 4% to 122 million euro in the quarter due to lower gross profits and higher operating expenses.

Samy Rene Zekhout: Our adjusted operating expense increased by 11, 5% from the year ago quarter due to the planned step up in our E&P investments, which increased by more than 20%.

Samy Rene Zekhout: First quarter indirect expenses increased by six 4%, including 2% FX headwind as we continue to invest to upgrade our capabilities and absorbed wage and northern non commodity inflation.

Samy Rene Zekhout: Adjusted net income declined by 25%, and adjusted earnings per share declined by €0.09 to €0.37, largely due to the margin dynamic I described earlier. We repurchased a little less than half a million of our ordinary shares for nearly $8 million. We have $492 million left under our current $500 million share buyback authorization.

Samy Rene Zekhout: Adjusted net income declined by 25% and adjusted earnings per share declined by nine <unk> to 37, <unk> largely due to the margin dynamic I described earlier, we repurchased a little less than half a million of ordinary shares for nearly $8 million.

Samy Rene Zekhout: We have $492 million left under our current $500 million share buyback authorization.

Samy Rene Zekhout: Our cash flows are off to a very strong start in 2024. We generated €49 million of adjusted free cash during the quarter as a strong working capital improvement more than offset higher cash interest. Specifically, working capital was a 76 million euro benefit to the quarterly cash flows as our days of inventory declined substantially. Business transformation project-driven capabilities have enabled a much more robust inventory management even as our volumes improved and our service level increased to record high levels. On the other hand, the phasing of our cash interest expense was a nearly 30 million euro headwind, driven mainly by the timing of our term loan reprice.

Samy Rene Zekhout: Our cash flows are off to a very strong start in 2024.

Samy Rene Zekhout: We generated 49 million euro of adjusted free cash during the quarter as our strong working capital improvements more than offset higher cash interest.

Samy Rene Zekhout: Specifically working capital was 76 million euro benefit to the quarterly cash flows as our days of inventory declined substantially.

Samy Rene Zekhout: Business transformation project driven capabilities have enabled a much more robust inventory management, even as our volumes improved and our service level increased to a record high level.

Samy Rene Zekhout: On the other hand phasing of our cash interest expense was nearly 30 million euro headwind driven mainly by the timing of our term loan repricing.

Samy Rene Zekhout: CapEx of 19 million euros decreased modestly from last year as we delivered 81% free cash flow conversion during the quarter. We declared our second quarterly cash dividend of 15 cents per share last week, highlighting our strong, consistent cash flows and our commitment to effective capital allocation to deliver enhanced shareholder returns. Turning to our guidance for 2024, we are pleased with our first quarter performance and our building momentum, which enables us to reiterate our full year guidance.

Samy Rene Zekhout: Capex of 19 million Euro decreased modestly from last year as we delivered 81% free cash flow conversion during the quarter, we declared our second quarterly cash dividend of <unk> 15 per share last week, highlighting our strong consistent cash flows and our commitment to effective.

Samy Rene Zekhout: Capital allocation to deliver enhanced shareholder return.

Samy Rene Zekhout: Turning to our guidance for 2024, we are pleased with our first quarter performance in our building momentum, enabling us to reiterate our full year guidance.

Samy Rene Zekhout: We continue to expect net revenue growth of 3 to 4 percent, adjusted video growth of 4% to 6%, and adjusted EPS of 1 euro 75 to 1 euro 80 per share, and adjusted free cash flow conversion in the 90 to 95% range.

Samy Rene Zekhout: We continue to expect net revenue growth of 3% to 4%.

Samy Rene Zekhout: Adjusted EBITDA growth of 4% to 6%.

Samy Rene Zekhout: And adjusted EPS of one year of 75 to one euro per share and adjusted free cash flow conversion in the 90% to 95% range.

Samy Rene Zekhout: Our 3 to 4% net sales growth in 2024 is expected to be relatively balanced between price mix and volume, with positive volume growth for the full year. We expect continued sequential improvements in the second quarter and consolidated volumes to turn positive by the second half as our renewed growth flywheel begins to turn faster in response to our investments. As I mentioned earlier, our underlying gross margins are tracking well to deliver full-year. We continue to expect relatively flat to modestly low inflation for the full year and are building greater flexibility in our coverage plans to potentially benefit from lower costs in some of our key commodities.

Samy Rene Zekhout: Our fleet to 4% net sales growth in 2024 is expected to be relatively balanced between price mix and volume.

Samy Rene Zekhout: With positive volume growth for the full year.

Samy Rene Zekhout: We expect continued sequential improvements in the second quarter and consolidated volumes to turn positive by the second half as our renewed growth flywheel begins to turn faster in response to our investments.

Samy Rene Zekhout: As I mentioned earlier, our underlying gross margins are tracking well to deliver full year expansion.

Samy Rene Zekhout: We continue to expect relatively flat to modestly lower inflation for the full year and are building greater flexibility in our coverage plans to potentially benefit from lower costs in some of our key commodities.

Samy Rene Zekhout: Our improving volume trajectory reinforces our commitment to continue to invest behind growth. We continue to expect our NP spending to remain elevated in 2024, particularly in the first half. At U.S. dollar-euro exchange rates as of May 1, our adjusted EPS guidance translates into $1.89 to $1.95 earnings per share and implies 9% to 12% year-over-year growth. We are on track to deliver 90 to 95% adjusted free cash flow conversion for the full year and remain committed to returning capital to shareholders through a highly effective capital allocation, including quarterly dividends and opportunistic share repurchases.

Samy Rene Zekhout: Our improving volume trajectory reinforce our commitment to continue to invest behind growth.

Samy Rene Zekhout: We continue to expect our E&P spending to remain elevated in 2020 for particularly in the first half.

Samy Rene Zekhout: At U S dollar Euro exchange rates as of May one our adjusted EPS guidance translates into $1 89 to $1 95 earnings per share and implies 9% to 12% year over year growth.

Samy Rene Zekhout: We are on track to deliver 90% to 95% adjusted free cash flow conversion for the full year and remain committed to returning capital to shareholders through highly effective capital allocation, including quarterly dividends and opportunistic share repurchases.

Samy Rene Zekhout: I am pleased with our momentum in the first quarter. It's a testament to the hard work and dedication of our talented workers. Our growth strategies are working, and we are even more confident in delivering top-tier, top, and bottom line growth in 2024 and beyond. I will now turn the call over to the operator for your question.

Samy Rene Zekhout: I am pleased with our momentum in the first quarter. It is a testament to the hard work and dedication of our talented workforce.

Samy Rene Zekhout: Our growth strategies are working and we're even more confident in delivering top tier top and bottom line growth in 2024 and beyond.

Speaker Change: I will now turn the call over to the operator for your questions.

Speaker Change: Thank you, Sir ladies and gentlemen, we will now be conducting a question and answer session.

Operator: Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please, Sprith, Star 1, only the telephone keypad. A confirmation tone will indicate that there is a lot in the Christian queue. You may press star 2 to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To give everyone the opportunity to participate, please limit yourself to one question and one follow-up. Our first question comes from Rob Dickerson of Jeffries. Please go ahead.

Operator: If you'd like to ask a question. Please press star one.

Operator: Kind of had key pad.

Robert Frederick Dickerson: The combination tangible indicated your line is in question Kim.

Robert Frederick Dickerson: Thank you so much. Good morning, everyone. Hello Stefan, just a quick question. I just heard Samy speak about positive volume growth for the year and then also volume turning positive year over year in the back half of the year. You know, if we go back a couple quarters, originally, I think the expectation was maybe sometime, let's say, late Q1, it seemed like maybe it could kind of go into Q2.

Robert Frederick Dickerson: So, maybe volumes could wind up still being positive toward the end of Q2. It just feels like, you know, it's moved forward a little bit. And I'm assuming that's just, you know, based upon kind of the timing of deployment. So, I'm curious, one, is that correct? And then, two, when would you say you expect to be fully deployed in terms of your, you know, brand building initiatives?

Robert Frederick Dickerson: It seemed like maybe it could kind of go in to Q too. So maybe like volumes could wind up still being positive towards the end of Q2. It just feels like you know, it's it's move forward a little bit and I'm, assuming that just you know based upon kind of the timing of deployment. So I'm curious.

Robert Frederick Dickerson: One is that correct and then to you know what when would you say you expect to be fully deployed in terms of your brand building initiatives.

Stefan Descheemaeker: Let me start with the data, Rob. I think the trajectory of volume is interesting in and of itself. So Q3 last year, minus 13%. Q4 minus 8%. Q1, this quarter, is minus 2%. So this is the first piece.

Speaker Change: Well, let me start with with the data.

Stefan Descheemaeker: I think the the the trajectory of zoom is interesting in the industry itself. So cure three last year minus 13%.

Stefan Descheemaeker: Q for minus 8%.

Stefan Descheemaeker: Q1. This school is minus 2%. So this is the first piece. So the trajectories score then cause very interesting I would think that's way the second busiest what we set up cagney, which is really the the coupon for us and we said, yes. We should expect you know a volume growth, but it crossing the line during the.

Stefan Descheemaeker: So the trajectory is, quote unquote, very interesting, I would put it that way. The second piece is what we said at Cagne, which is really the key point for us. And we said, yes, we should expect, you know, volume growth crossing the line during H2 and being positive overall on a four-year basis. Well, you see the trajectory, by the way, and we're also pleased with the way the trajectory continues in P4. So that's where we are. In terms of resources, to your point, it's really interesting because it's a full deployment of all the elements of the flywheel.

Stefan Descheemaeker: H, two and being positive overall on the full year basis, whether you see you see the trajectory by the way you know where you are so pleased with.

Stefan Descheemaeker: The way the trajectory continues in before so that's that's the way we are in terms of resources to your phone, it's really interesting because it's a full deployment of all the elements of the flywheel.

Stefan Descheemaeker: It started really at the end of Q3 with the NP last year. We really raised the game. We continued in Q4. We continued in Q1 plus something like more than 20% versus last year. And it's going to be even higher, by the way, versus last year in Q2.

Stefan Descheemaeker: It started really end of Q3 with ANP last year, we really raised a game. We continued in queue for we continuing and we continued in Q1, plus something like more than just 120% versus last year, and then you're going to be even higher by the way versus last year in the in queue.

Stefan Descheemaeker: So you can see that, you know, it's really starting to do well. And it has, by the way, a very positive impact on the, you know, machine battles. and I'll come back on that later. So that's the big piece. The second big piece is RGM. And the first two months, you know, were really promotion-based, and it was deliberate. We wanted to make sure that all the consumers would come back in a milder environment in terms of the cost of living, that the consumers would come back to us, and that was really the point.

Speaker Change: You too. So you can see that you know, it's really starting to do well and it has by the way a very positive impact in the in the Muslim battles and they'll come back on that later so that's that's the big the the.

Stefan Descheemaeker: The second big pieces is Adrienne and let's let the first two months you know way really promo base. It was deliberate we wanted to make sure that all the consumers would come back in the in the in the minds of the environment in terms of costly cause a feeling that the consumers would come back to us and that was really the points we wanted to.

Stefan Descheemaeker: We wanted them to come back, and then at some stage, obviously, the other components of the flywheel, like quality, superiority, and innovation, NANP, obviously, would start to kick in. And that's exactly what we're seeing. So from that standpoint, nothing has changed compared to Cagne. We are just reiterating what we said, and we're pleased with this trajectory, not only in terms of volume, by the way, minus 13, minus eight, minus two, but also in terms of mix, because when we see the mix within these volumes, we see that there are different categories.

Stefan Descheemaeker: Them to come back and then at some stage you know obviously the other components of the flywheel like quality superiority and innovation NASP, obviously would start to kick in and that's what exactly what what we seeing so from that standpoint, nothing has changed compared to two cagney. We are just reiterating what we said and.

Stefan Descheemaeker: We pleased with with this trajectory and not only in terms by the way in terms of volume minus 13 minus eight managed to with all due also in terms of mix because when we see the when we see the mix with Vinnie and all these volumes we see that the.

Stefan Descheemaeker: Different categories, let's say to make it simple, but twenty-five missing battles, which is really what matters for us.

Stefan Descheemaeker: To make it simple, the top 25 must win battles, which is really what matters for us. The big things in terms of market share, in terms of gross margin, obviously go faster, to say the least, than, for example, our private labor components. So that's the combination of what we see right now, and that's also what we're going to see in Q2 and beyond.

Stefan Descheemaeker: Big things in terms of market share in terms of gross margin is is obviously goes faster to say the least and for example, or private label components.

Stefan Descheemaeker: So that's the combination of what we see right now and that's.

Stefan Descheemaeker: Also what are we going to see in Q2 and beyond.

Robert Frederick Dickerson: Okay, super. And then for my one follow-up, Samy, just on the gross margin side, clearly I understand the dynamics occurring in this Q1. I do believe there should be gross margin expansion forthcoming, as you said, for the rest of the year, applying each of the quarters Q2 to Q4. At the same time, you usually do have a nice seasonal dynamic in the Q2 to Q3 period relative to the other quarters.

Speaker Change: Okay Super and then for my one follow up Sammy just on the gross margin side, clearly I understand the dynamics occurring in this Q1.

Robert Frederick Dickerson: I do believe there should be gross margin expansion forthcoming I think you said for the rest of the year applying each show.

Robert Frederick Dickerson: The quarters to to to queue for.

Robert Frederick Dickerson: At the same time, you usually do have a nice seasonal dynamic ah in the queue to to Q3 period relative to the other quarters. So I'm. Just curious you know as we move through the year <unk>.

Robert Frederick Dickerson: Including Q too.

Robert Frederick Dickerson: Relative to Q wanted me it sounds like there should be fairly material step up and that gross margin. You know just on a seasonal basis and Q2 relative to Q1, but then in the back half.

Robert Frederick Dickerson: So I'm just curious, as we kind of move through the year, including Q2, relative to Q1, it sounds like there should be a fairly material step up in that gross margin, just on a seasonal basis in Q2 relative to Q1. But then in the back half, the year-over-year improvement is driven partially by seasonality, but maybe also what you're speaking to on the productivity side. So I'm just trying to gauge, essentially, gross margin cadence and the year-over-year expansion potential for the rest of the year. Thank you.

Robert Frederick Dickerson: The year over year improvement is dripping, partially by seasonality, but maybe also what you're speaking to you on the productivity side. So I'm just trying to gauge essentially gross margin cadence and.

Robert Frederick Dickerson: And the year over year expansion potential for for the rest of the year. Thank you.

Samy Rene Zekhout: Rob, your interpretation is absolutely correct. I mean, that's exactly the pattern we're going to have. We've taken these one-time adjustments in Q1, but the dynamic is such that between effective intervention we are making on the top line, and particularly with RGM and the recognition of volume growth, which is helping from a scale standpoint as well, combined with cost savings and intervention we made from a productivity standpoint, is gearing us effectively together with, let's say, stabilizing moderately low, if you want, inflation prices, I mean, there, and potentially even declining on some categories.

Robert Frederick Dickerson: Rob during competition.

Samy Rene Zekhout: Absolutely correct I mean, that's executive pattern, we gonna have we've taken this one time adjustments in queue on but the dynamic he says that between effective intervention were making on the top line and particularly with algae ammons origination of volume growth, which usually helping from a scale standpoint, as well combined with cause.

Samy Rene Zekhout: Savings any dimension, we made from a productivity standpoint, he's giving us effectively together with let's say it's W. Rising moderately low inflation prices I mean, there and potentially even declining on some category when getting to a point where gross margin is intended to grow I mean for the year, we will have that point affected.

Samy Rene Zekhout: We're getting to a point where gross margin is intended to grow for the year. We will have that point effectively in Q2 and Q3 for the seasonality factor that you mentioned. So we will see a step up in Q2 and Q3, let's say a bit lower in Q4, and then leading the whole year to a growth in gross margin that would be effectively an commitment, I mean, for the year.

Samy Rene Zekhout: Q2, and Q3, four and then it effected that you mentioned, so we will see a step up in Q2, and Q3, a little bit lower than Q4, and then leading to a whole year to growth in gross margin that would be effectively upcoming vitamin for the year.

Speaker Change: Super Thank you.

Operator: Thank you, Rob. Thank you, Rob.

Speaker Change: And grew up thank you.

Stephen Robert R. Powers: Our next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Operator: Our next question comes from Steve Thomas.

Stephen Robert R. Powers: Bank He's gonna hit.

Stephen Robert R. Powers: Hey, thanks for the questions. You know, the first question, Stefan, you just spoke again in response to Rob's first question on the sequential improvement you've seen quarter over quarter volumetrically and market share-wise. I guess when I look at the data, at least that we see from the outside, it looks like the month of March was somewhat of a step back from where you were in January and February, and perhaps that corresponds to the recalibration on the promotional.

Stephen Robert R. Powers: Hey, thanks for the questions.

Stephen Robert R. Powers: Yeah. The first question Stefan you just spoke again in response to Rob's first question on the sequential improvement you've seen quarter over quarter Volumetrically market share wise.

Stephen Robert R. Powers: Yes, when I looked at the data that we received from the outside it looks like the month of March was somewhat of a step back from where you were in January February and perhaps that corresponds to the recalibration on promotional investments, but maybe you could talk a little bit about what you've seen through the first start of the year month.

Stephen Robert R. Powers: investments. But if you could talk a little bit about what you've seen through the first third of the year, you know, month over month, that gives you the confidence that that quarterly progression of improvement will continue as we go into Q and then 28.

Stephen Robert R. Powers: Per month.

Stephen Robert R. Powers: Gives you the confidence that that in fact quarterly progression of improvement will continue as we go into government to H.

Stefan Descheemaeker: Well, you know, I think, to your point, I think it's, we knew that it was, it's never linear these things, you know, that's very clear. I think what you need to see is the trend and also the actions that come with it. So we knew that, you know, Q1, P1, P2 were very solid, promo-driven, in line with the renewed growth management. And so that's exactly what we wanted to do. And then there is a bit of, I wouldn't say pause, but at least a lighter phase in terms of promotion in the P3. So that was expected.

Speaker Change: Why do you you know I think to a point I think it's when you have that with what it it's never linear or do you think cause you know that's very clear I think what you need to see the trends and also the actions that come with it. So we knew that you know Q1 P. One P. Two were very solid promo driven.

Stefan Descheemaeker: In line with the with the revenue growth management and so that's that's exactly what we wanted to do and then there is a bit of I wouldn't say pause, but at least a lie to phase in terms of promoting the MP.

Stefan Descheemaeker: In the P. Three so otherwise expect it so that peace is you know obviously, we're going to go month by month, depending on where we stand you know are we going to happen or higher promo, sometimes like to like to promote the big difference with the boss. This every thing though is very much driven by revenue growth management in the party.

Stefan Descheemaeker: So that piece is, you know, obviously, we're going to go month by month, depending on where we stand. You know, we're going to have, you know, higher promo, sometimes lighter promo. The big difference with the past is that everything now is very much driven by revenue growth minus. In the past, it was probably a bit more, let's say, what the country thinks and all these things. So that's very different.

Stefan Descheemaeker: Probably a bit more let's say, what you know the country thinking nobody's things. So that's very different now it's really the the full realization of the flywheel between promo one thing and be really coming started starting to kick him Big time, now obviously innovations coming back we talked about innovation a bit later.

Stefan Descheemaeker: Now, it's really the full utilization of the flywheel between promo, one thing, A&P, really coming, starting to kick big time now. Obviously, innovation coming back, we'll talk about innovation a bit later, hopefully, and then obviously the rest of the flywheel for us. So that's the piece. And what you need to see is the projection. You're talking about the first third of the year. To your point, I think we like the trajectory. So, in other words, April is, we like what we see in terms of trajectory in P4. So that's that. So, yeah, I think the minus 13, minus 8, minus 2 is what you need to see.

Stefan Descheemaeker: Flea and then obviously the rest of the flywheel for us So that's the peace and so what you need to see the projection.

Stefan Descheemaeker: Talking about the first third of the year to your point I think we liked the trajectory to into the Woods April is we like what we see in the in terms of trajectory before so so that that so yeah. I think the minus 38 minus do is what you need to see and and nothing has changed but the country.

Stefan Descheemaeker: And nothing has changed, quite the contrary compared to Kagné and what we said in terms of not only the volume. By the way, volume is absolutely key. And that's why, by the way, we never provide these elements, volume, but we know it's absolutely fundamental. So we see this, but let's not forget, you know, the other piece, which is price and mix, and we like what we see in terms of mix within our portfolio.

Stefan Descheemaeker: Compared to got me and what we said in terms of not only the volume by the way volume is absolutely key and Thats why by the way we give we never provide you know these these these elements volume, but we know it's absolutely fundamental so we see this but let's not forget you know the other piece, which is price and mix and.

Stefan Descheemaeker: We liked what we see in terms of mix.

Stefan Descheemaeker: Within the within our portfolio.

Stephen Robert R. Powers: Very good, very good. And actually, that leads to part of my next question. So, as we go forward, I think your full year guidance, which calls for, you know, a relative balance between volume mix and pricing for the year, implies, you know, less price contribution as we go forward. And I'm curious, you know, is that, from here, is that just more cycling prior year pricing, or do you expect sort of net, you know, above the line investments in promotion from here, perhaps time with innovation, to your point earlier How do we think about the, you've been very clear about the advertising investments you foresee, but I'm curious as to how we think about incremental investments above the line and promotion in price.

Speaker Change: Very good very good and actually that leads to a part of my next question. So as we go forward I think your your your full year guidance, which calls for you know relative balance between volume <unk> and pricing on the year and applause.

Stephen Robert R. Powers: Less price contribution as we go forward and I'm curious.

Stephen Robert R. Powers: From here is that just more cycling prior year pricing or do you expect sort of net.

Stephen Robert R. Powers: Uhm above the line investments and promotion from here, perhaps time with innovation to your point earlier or otherwise, it's how do we think about.

Stephen Robert R. Powers: You've been very clear about the advertising investments you you foresee, but I'm curious as to how we think about incremental investments about the linemen and promotional price.

Samy Rene Zekhout: So, Steve, just one point of clarification, just to be super clear there: we have, let's say, adjusted our net sales, let's say, comments and perspective by highlighting volume and price mix together for the main reason that, effectively, the focus on volume, it was important for us to clearly highlight that variable, hence the numbers that you are, let's say, that Stefan has been sharing with you earlier because you were mentioning volume mix. I think we're looking at volume and we're looking at price mix. So we have provided, actually, in the addendum, a reconciliation of the two, just so that you have the perspective there.

Stephen Robert R. Powers: So is it just the just the one point of clarification just to be Super key in there we have let's say at <unk> Dot net sales.

Samy Rene Zekhout: Let's say comments in perspective by highlighting volume and price mixed together for the main reason that they affect you either focus on volume. It was important for us to clearly highlight that valuable ends the numbers that you are.

Samy Rene Zekhout: Stefan has been sharing with you earlier, because you were mentioning voting mix I think we can't vote humans, but he can't pry speaks so we have provided to actually India then <unk>.

Samy Rene Zekhout: Reconsideration of the two but just so that you have the perspective, there and that enables us to really see the huge dynamic that we see now volume has its own momentum Stefan was anything too. So what we are seeing right now effectively as we laughed now last year into this year and the fact that the environment is becoming more directly if you want to slightly declining on some of the <unk>.

Samy Rene Zekhout: And that enables us to really see the huge dynamic that we see now on volume and the strong momentum Stefan was alluding to. So what we are seeing right now, effectively, as we lap now last year into this year, and the fact that the environment is becoming moderately, if you want, to slightly declining on some of the commodities, we will see less pricing impact here, I mean, from that standpoint. On the other hand, by the sheer fact of focusing our investments behind must-win battles, meaning, let's say, large categories, big countries, highly profitable businesses that are growing, we will have a likely, if you want, stronger mix effect as we move forward.

Samy Rene Zekhout: It is we we see less pricing impact you over yummy from that standpoint on the other side by the sheer fact of focusing our investments beyond missing battled meaning let's say large category big countries highly profitable businesses that are growing we we laugh a lot.

Samy Rene Zekhout: <unk> as we move for awhile. So what you would see you would see these gradual positive development on the volume side, but at the same time, if you want while pricing starts to muddy right, it's not going to be zero always there's gonna be just about everything because it will do some pricing on those areas, where we will see some form of inflation, but we'd have.

Samy Rene Zekhout: So what you will see is this gradual positive development on the volume side. But at the same time, if you want, while pricing starts to moderate, it's not going to be zero, it's just going to be moderate because we will lose some prices. So it's those areas where we will see some form of inflation, but we'll have to do it in a very surgical way. At the same time, we will be promoting RGM, as Stefan was alluding to, and leveraging all of the legs of RGM. But the one thing that is going to come across in a stronger way is mix. And so you have volume starting to clearly develop positively, and price mix that will be skewed more towards mix than price.

Samy Rene Zekhout: To do it in a very surgical way at the same time, we will be promoting throughout <unk> was there anything too and making liberal in all of the legs about him, but the one thing that is going to come across in a stronger rhythmic and so you've got a volume starting to clearly develop positively and price me that we'd be skewed more towards me cause then pricing or.

Stephen Robert R. Powers: Okay, very good. Thank you so much. I will pass it on. I appreciate it. Thank you, Samy.

Speaker Change: Okay very good. Thank you so much I will pass without negotiating in good shape.

Operator: The next question comes from Jonathan Tanwanteng of CJS Securities. Please go ahead.

Stephen Robert R. Powers: The next question comes from John <unk> C. J, a C Q machines, he's gonna hit.

Jonathan E. Tanwanteng: Hi, thanks for taking the questions. Stefan, I was wondering if you could talk about the must-win battles.

Jonathan E. Tanwanteng: Hi, Thanks for taking the questions to find out was wondering if you could.

Jonathan E. Tanwanteng: Talk about the most Mcdonald's it was nice to hear that your group's 15 out of I think 25 of them I was wondering if you could talk about the other 10 out of the 25, we haven't seen the volume growth. Yeah is that just because they haven't been activated or maybe a little bit later to start or do you want to make any adjustments there on that as we go forward.

Stefan Descheemaeker: It was nice to hear that you grew 15 out of, I think, 25 of them. I was wondering if you could talk about the other 10 out of the 25 where you haven't seen volume growth yet. Is that just because they haven't been activated or maybe a little bit later to start, or do you have to make any adjustments there as we go forward?

Stefan Descheemaeker: Well, to your point, I think we know we are classifying things between A, B, and C. So, the Muslim battles, you may remember we started, you know, obviously we started with something like around 70% of our sales. And by the very definition of the focus on these Muslim battles, the 70% has become 80, 85, 90, which means, by definition, you have to do the exercise again.

Stefan Descheemaeker: Well to to your point I think we all we know we are classifying things between the a b and C. So there must have been bought those email you may remember we started you know obviously, we started with something to look around 70% of all shapes and by the very definition of the.

Stefan Descheemaeker: Focused on this is missing bottles, the 70% that become 80, 80, 590, which means by definition you have to do with the exercise again.

Stefan Descheemaeker: And now we are doing it again, and we are much more focused again, and we have A, B, and C. Let's say A represents around 70% of our sales, two-thirds of all of our sales. And obviously, they have the highest margin, they have obviously the highest market share, and also the highest progression. So within, you know, this 1.1% of sales and also minus 2% in terms of volume, obviously, you can imagine that's where we are doing the best, by far. The others, you know, the big private, let's say, Muslim battles are smaller. There's something like 20% of these numbers that are probably wrong.

Stefan Descheemaeker: We're doing it again and we more much more focus again and.

Stefan Descheemaeker: We have a b and C and let's say a represents around.

Stefan Descheemaeker: Two thirds of all of our sales.

Stefan Descheemaeker: Obviously, they have the highest margin they have to deal with.

Stefan Descheemaeker: The the highest market share and also the highest progression. So within you know these 1.1% of sales and also minus 2% in terms of volume obviously can't imagine that's where we are doing the best by.

Stefan Descheemaeker: By far the others.

Stefan Descheemaeker: The beep private let's say must be battles, a smaller dates of something like probably 20% of these these numbers. So they are doing in line I would say with the rest of the business Ah and well, which is which is fine but that's also just very reflective of where we.

Stefan Descheemaeker: So they're doing in line, I would say, with the rest of the business. And, well, which is fine, but that's also just very reflective of where we're putting our money, and in promotion, but also ENP. So in terms of ANP, it's interesting to see we're not only increasing, big time, the A&B but also with this increased amount. We're focusing this increased amount on the A brand, and the AMC bottles, which is a double increase.

Stefan Descheemaeker: Putting our money.

Stefan Descheemaeker: And in promotion, but also E&P. So in in terms of ASB, it's interesting to see we not only increasing.

Stefan Descheemaeker: Big time.

Stefan Descheemaeker: But also with this increased demands we focusing this increase the amount to the a Brian a missing battles, which is a double increase.

Stefan Descheemaeker: And that's the big difference. So, in a nutshell, it doesn't mean that we're neglecting the B, the B must win battles. They represent around 20% of the A must win battles.

Stefan Descheemaeker: And that's the big difference so.

Stefan Descheemaeker: Shell is not me it doesn't mean that we are neglecting to beat the b must be battles they represent around 20% of the missing battles and doing let's say to make it simple as in line with the rest of the business I will put that way. The total business. So there is a difference and that's exactly you know what the local.

Stefan Descheemaeker: And they're doing, let's say, to make it simple, as in line with the rest of the business, I would put it that way, the total business. So there is a difference. And that's exactly, you know, what the allocation of resources is. That's very clear.

Stefan Descheemaeker: <unk> of resources is that's that's very clear.

Samy Rene Zekhout: But just to complement, Stefan, what you're saying about the execution of the flywheel and when we talk about spinning and accelerating the flywheel in there, we did start with the big one, the most profitable, and little by little, we'll have the coverage of the 25, that's very clear. So there's an element of sequence in there, and what's really important for us is to continue the momentum we established in Q4 and in Q1 and for the rest of the quarter.

Stefan Descheemaeker: But but in just a couple of minutes about I think in the context of what you're saying on the <unk> of the flywheel and when we took about speeding an accident waiting to fly waiting there we did stop at the big one the most profitable and little by Little we will have the coverage of the 25, that's very clear. So there is an element of sick once in there and what's really important for us to continue on the moment.

Samy Rene Zekhout: We established in queue for continuing in queue on and for the rest of the quote but prioritization of the medicine, but that doesn't mean, we are not investing a lot considering the rest. It's a very important part of the portfolio, but when you look at your assets effective in your advertising assets, you really want to do each way.

Samy Rene Zekhout: But prioritizing Muslim investors doesn't mean we are not investing and not considering the rest. It's a very important part of the portfolio. But when you allocate your assets effectively, and your advertising assets, you really want to do it where the growth potential is the highest and where the profitability is maximum.

Samy Rene Zekhout: It's really the highest and where the profitabilities maximize.

Jonathan E. Tanwanteng: That's very helpful. Thank you. And then, both Stefan and Samy, I think you mentioned in your prepared remarks that you've seen lower commodities or inputs. How much decline have you seen so far this year or are you seeing in the future, and kind of... compare that to how much, what percentage of your inputs have you secured so far, and how much room does that leave you to benefit from lower prices as we go to the

Speaker Change: Got it that's very helpful. Thank you and then [laughter].

Jonathan E. Tanwanteng: <unk> I think you mentioned that you've seen lower commodities are inputs in your prepared remarks, how much.

Jonathan E. Tanwanteng: No point in you or are you seeing in the future and kind of.

Jonathan E. Tanwanteng: How many how much what percent of your input to be secure so far and how much will lead you to to benefit from lower prices is because of the year.

Samy Rene Zekhout: So, we have, at this stage, covered about 80% of our full-year commodities, and that helps us, if you agree, let's say, keep some flexibility, balancing effectively the supply requirement we have to make sure that we can produce what we want at the best possible price. But we are left with about 20% uncovered in a context of effectively moderated to effectively slightly declining prices on some of the commodities. So, that puts us in a quite good position if you want to enable us now to, frankly, even manage our RGM intervention, promo intervention, and margin development to allow us, at the same time, to reinvest and improve our performance.

Jonathan E. Tanwanteng: So we have at this stage.

Samy Rene Zekhout: Covered about 80% of off your commodities and and that helps us if you're on breathe. It keeps some flexibility balancing your pinky to supply requirements, we have to make sure that we can produce but we want the best possible price, but we are left with about 20% uncovered you know context of effectively.

Samy Rene Zekhout: <unk> to effectively slightly declining prices on some of the some of the commodity process you know quite good position. If you want to enable us now to Frank even manage all our Jimmy <unk> and Martin development to allow us at the same time to reinvest in to improve our performance overall.

Jonathan E. Tanwanteng: Great, thank you very much. Thank you.

Speaker Change: Great. Thank you very much.

Speaker Change: Okay. Thank you.

Operator: Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then 1 to place yourself in the question queue. The next question comes from John Baumgartner of Mizzou Securities. Please go ahead.

Speaker Change: Ladies and gentlemen, just to remind him.

John Joseph Baumgartner: Half, the Christian viewpoint, which place and then one.

John Joseph Baumgartner: Makes itself into question can.

John Joseph Baumgartner: Thank you. Bye, John.

John Joseph Baumgartner: The next question comes from China, Hong Kong.

John Joseph Baumgartner: <unk> Securities. Please go ahead.

John Joseph Baumgartner: Good morning, Thanks for the question.

John Joseph Baumgartner: Hi, John.

John Joseph Baumgartner: Maybe first, for Stefan, I wanted to touch on promotion and specifically non-price promotion and the lift from display in the portable freezers that you're placing outside the aisle. With frozen fish demand sort of coming up seasonally for the summer, should we expect that non-price promotion also becomes less of a support and price promotion increases in the mix? I guess, how do the demand drivers change seasonally to sustain the volume recovery that we're seeing until you get to Q4?

John Joseph Baumgartner: Uhm, maybe first for Stefan wanted to touch on promotion and specifically non price promotion in the lift from display in the portable freezers.

John Joseph Baumgartner: Placing outside the aisle with with frozen fish demand sort of coming off seasonally for the summer.

John Joseph Baumgartner: We expect that non price promo also becomes less of a support and price promo increases in the next 10 to demand drivers change seasonally to sustain a volume recovery that we're seeing until you get the Q4.

Stefan Descheemaeker: Well, no, I don't think there is going to be a material change. The difference is that now it's more structured than it used to be in the past. So the flywheel is really a great tool.

Stefan Descheemaeker: Well no I don't think there is there is going to be much. It will change you know.

Stefan Descheemaeker: The difference is no it's more structured than it when it used to be in the in the past. So the flywheel really is really a great tool.

Stefan Descheemaeker: We should show this to you one of these days, because it's really a great tool that is not only used at the center, but it's really used at the regional level. And then, depending on where the situation is trade-wise and then, let's say, category-wise, they may decide to go with non-promo or promotion. So it's very different country by country, I would put it that way. But the difference is now that it's really structured the right way.

Stefan Descheemaeker: We should show. This you would do to you one of these days because it's really great tool that is not only use at the center of it but it's really used at the regional level and then depending on the way.

Stefan Descheemaeker: <unk> trade wise, and then let's say category wise. They may decide to go with non promo approval. So it's it's very different country by country with me that way, but the difference is no. They it's really structure. It's the right way. So there are countries, where we're blessed banking unprovoked still working absolutely and the waste working I can tell you.

Stefan Descheemaeker: So there are countries where, quite frankly, non-promo is still working, absolutely. And where it's working, I can tell you where we're using it. There are some countries I can mention, obviously, the Adriatic, for example; the non-promo side is very big. And then we're also testing in some other countries, in other regions.

Stefan Descheemaeker: Where are we using it.

Stefan Descheemaeker: Some countries I can mention obviously the advantage for example, the non promo side is is very big and then we also testing and some other countries.

Stefan Descheemaeker: In in other regions and we are we are quite pleased with the results.

Samy Rene Zekhout: Great. And then, Samy, on the operating expense line, I think Stefan mentioned Q1 A&P spending was up 20%, but total OPEX was only up about 12%. What was the offset there that blunted the rate of total OPEX growth? Was it productivity? Was there a timing shift at all? And if it was efficiencies, what are your expectations for those to sustain for the duration of 2024?

Speaker Change: Great and then see any on the operating expense lineup I think Stefan 19, Q1, ANP spending was up 20%, but total opex was only up about 12% what what was the offset there that blunted the rate of total Opex growth was it was a productivity was there timing shift at all and if it is.

Samy Rene Zekhout: <unk> what are your expectations for them to sustain for the duration of 2024.

Samy Rene Zekhout: So there has been definitely I mean efficiencies I would say overall that we have that we have seen operating I would say from from that end and a bit of phasing I mean there in a way that effectively we are frankly trying to shift our spending where with event I mean in one of the elements within the flywheel that we're trying to do is synchronization of the different elements there which is at the same time we synchronize RGM, ANP and as well the in-store activities and from that standpoint the whole flywheel is being exactly synchronized hence the point of the fact that the trend will be good but then you may have effectively some month-to-month I mean differentiation there but from a productivity standpoint effectively we see now a step up gradual step up across the year now as we have now programs both from let's say on the gross profit side with a cost-saving program from a manufacturing standpoint but as well we are seeing the same effect on below the line effect on operating expense as we move as we move forward the ramp-up of the marketing expense I mean of the ANP is clear it's above 20% increase in Q1 and even more so in Q2 and Q3 and over the year there will be a step change I mean as you as we have alluded to that point and from an indirect standpoint if you know there's a combo of investments combined together with I mean some productivity intervention as we as we look at the total year

Samy: So there has been definitely I mean efficiencies I would say overall that we have that we have seen the operating over except from from that and and a bit of phasing I mean, there is no way that effective we are frankly trying to shift our spinning where we the event and one of the elements within the flywheel that we're trying to do the synchronization of the different elements, there which is.

Samy Rene Zekhout: At the same time, we synchronize the artyem ANP and as well install activities and from that standpoint, the whole flywheel is being exactly synchronized hence the point of the fact that the trend will be good. But then you may have affected some month to month I mean, the transition there, but from a productivity standpoint effective we see now is.

Samy Rene Zekhout: Step up gradual step up across the you know as we have in our programs.

Samy Rene Zekhout: Both from let's say on the gross profit side with a with a cost saving program from a manufacturing standpoint, but that's when we are seeing the same effect on the line if you're on the pricing expense that we move as we move for awhile the ramp up of the marketing expense E&P, it's clear that above 20% increase in Q1 and even more so.

Samy Rene Zekhout: Q2, and Q3 and over the year, there would be a step change I mean as you as we have.

Samy Rene Zekhout: To that point and from and and our extent point, if you're on there as a combo of investments combined together with them in some productivity and <unk> is b as we look at the total here.

John Joseph Baumgartner: Great. Thanks, Samy. Thanks, Stefan. Thanks, John.

Speaker Change: Okay. Thanks. Thanks.

John Joseph Baumgartner: Thanks, John. Thanks, John.

John Joseph Baumgartner: Thanks, John John.

Operator: Our next question comes from John Tanwanteng of CJS Securities.

Speaker Change: Our next question comes from China, 10, one thing I've C. J S Securities.

Jonathan E. Tanwanteng: Hi, thanks for the follow-up. Not to focus too much on the month to month as you spoke before, but could you give us a snapshot of volumes in April and how that's trended?

Jonathan E. Tanwanteng: Hi, Thanks for the follow up not to focus too much on a month to month.

Jonathan E. Tanwanteng: Before but could you give us a snapshot of volumes in April and how this trend it should complete [laughter] I would say is that it for those you know the.

Stefan Descheemaeker: I would say it follows, you know, an interesting trajectory. I hate to come up with obviously monthly results, but we're pleased with what we see. I would put it that way. And it's very much in line with what we said at CAC.

Stefan Descheemaeker: An interesting trajectory I I hate to come up with even though obviously monthly monthly result, but it's we pleased with what we see I would put it that.

Stefan Descheemaeker: And it's very much in line with what we say that gagne.

Speaker Change: Okay Fair enough and then just as you head into the unseasonably stronger quarters. The Adriatic are there any you know puts and takes it as we think about a year over year comparisons.

Jonathan E. Tanwanteng: Okay. Fair enough. And then just as you head into the seasonally, you know, stronger quarters for the Adriatic, are there any, you know, puts and takes as we think about the year-over-year comparisons there? You've had two very strong years in a row from there, and does that make it a difficult comparison?

Jonathan E. Tanwanteng: Two very strong years in a row from there does it make it a difficult call.

Stefan Descheemaeker: Well, it's a great question. I would do it that way, too.

Speaker Change: Well, it's it's a it's a great question I would move that way when you see it <unk>. It's a business of two sides, you'll have let's say the ice cream, which is to your point it's quite.

Stefan Descheemaeker: When you see Adreatics, it's a business with two sides. You have, let's say, the ice cream, which is, to your point, quite seasonal, high margin. And they, quite frankly, are really doing well, and they have really performed well during Q1, the end of Q1, starting already in April as well.

Stefan Descheemaeker: It is quite Ah seasonal high margin and.

Stefan Descheemaeker: Quite frankly, they're really doing well and.

Stefan Descheemaeker: Yeah, I was really performed well doing.

Stefan Descheemaeker: Doing a few one end of Q1 studying over the years in April as well and then you also have the the.

Stefan Descheemaeker: And then you also have the rest of the business, which is frozen food, as such, you know, which is fish, which is veg, and all these things. What we've seen in this business over the last two years, and it's on its way to be finalized, we deliberately have switched the business from commoditized, let's say, categories in fish, in vegetable, to something which is much more in line with the rest of our business in terms of fish fingers, in terms of coated fish, and also prepared veg and all these things, which in a nutshell, we're switching the volumes, but we're also increasing the margins.

Stefan Descheemaeker: The rest of the business, which is frozen food assess you know <unk>.

Stefan Descheemaeker: Fish, which is bad you know what do you think what we've seen in this business over the last two years and it's on its way to be finalized.

Stefan Descheemaeker: We deliberately have switched you know the the the business from Commoditized, it's a categories in fish in the in vegetable to something which is much more in line with the with the rest of it with the symptoms of fish fingers in terms of go with the fish and also prepay advantage and all these things which in a nutshell.

Stefan Descheemaeker: We switching the volumes, but you also increasing the margin.

Stefan Descheemaeker: That's a big piece because it was really a business, to your point, where Q2, Q3, big margin, and then Q4 and Q1, let's say low margin because it was more commoditized frozen food. We're changing that. First, what we see is that we try to expand the seasonality of ice cream. That's one thing. Starting earlier, finishing later. And second, within the frozen food business, we are really switching from a low margin to a higher margin. It's a switch that takes time, so you have to change.

Stefan Descheemaeker: That's a big piece because it was really a business to the point, where Q2 Q3 Big margin and then Q3 Q for and the Q1, let's see low margins because it was more commoditized frozen food, we're changing this <unk>.

Stefan Descheemaeker: First with what we see as we tried two weeks, we're trying to expand the seasonality off.

Stefan Descheemaeker: Of ice cream, that's one thing studying earlier, finishing later.

Stefan Descheemaeker: In seconds within the rent and there'll be the frozen food business. We are really switching from low margin to higher margin. It's a switch takes time, so you'll have to change. It doesn't mean that we we are gaining volumes, but we have better volumes and that's what matters and and from that standpoint, what's great by the way as well.

Stefan Descheemaeker: It doesn't mean that we are gaining volumes, but we have better volumes, and that's what matters. And from that standpoint, what's great, by the way, is that we don't have to reinvent the wheel. We just have, you know, the people in Serbia and Croatia, they just have to check, you know, what's available in the rest of the business. And we have great, as you know, we have great fish fingers, we have great coated fish, we have great, you know, vegetable business.

Stefan Descheemaeker: We don't have to reinvent the wheel.

Stefan Descheemaeker: We just have the.

Stefan Descheemaeker: The people in Serbia, Croatia than just have to check you know what's available in the rest of the business and we have great. As you know we have fish fingers, we have great. Good fish, we have great you'll know verse business. So that's.

Stefan Descheemaeker: So that's, in a nutshell, it's really, it's a quick launch, it's a shift and launch. It's innovation, but it's low-risk innovation. So we like the trajectory. And we don't think, you know, that they have maxed out, quite the contrary.

Speaker Change: Sure. It's a it's a it's a really.

Stefan Descheemaeker: It's a quick launch.

Stefan Descheemaeker: Lifting.

Stefan Descheemaeker: Shift at least an inch and and serene and launch.

Stefan Descheemaeker: It's innovation, but it's low risk innovation. So we we liked the trajectory. So we we don't think you know that they have reached today have maxed out but quite the contrary, but it's important to note as well that the margin progress you will see Q2, and Q3 are not only coming from the mix of <unk>.

Samy Rene Zekhout: But it's important to note as well that the margin progress you will see in Q2 and Q3 is not only coming from the mix of the agri-ethics, but it's coming effectively from the base business. That is benefiting from the point I was making earlier on the gross margin impact that you saw in Q1 that is actually, let's say, moving, let's say, translating over for the rest of the year into quite, let's say, an important gross margin improvement given the dynamic that we have on the top line and on the cost as well. Got it. That's right.

Samy Rene Zekhout: But they are coming effective from the day's business, yes that is benefiting from the point I was making earlier on the on the gross margin impact that you saw in Q1 that he's actually let's say moving translating over for the rest of the hearing too quiet, let's say important too gross margin improvements given the dynamics that we have on the top line and older.

Samy Rene Zekhout: Cost as well.

Jonathan E. Tanwanteng: Got it. That's very helpful. Thank you.

Speaker Change: Got it that's very helpful. Thank you.

Jonathan E. Tanwanteng: Thank you John you're welcome.

Stefan Descheemaeker: Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand over to Stefan for his closing remarks.

Speaker Change: Ladies and changed and then we have reached the end of the question and answer session.

Stefan Descheemaeker: Stefan Okay simply Ma.

Stefan Descheemaeker: Thank you, Judith, and thank you for your participation on today's call. We have a proven track record of delivering uninterrupted growth. Our growth flywheel is beginning to spin faster, making me even more confident about our truth. I'm excited by the opportunities ahead of us, and look forward to meeting many of you in the coming weeks.

Stefan Descheemaeker: Thank you.

Stefan Descheemaeker: Thank you for your participation on today's skull.

Stefan Descheemaeker: We have a proven track record of delivering uninterrupted growth.

Stefan Descheemaeker: Or growth flywheel is beginning to spin faster may.

Stefan Descheemaeker: Making me even more confident about the outlook.

Stefan Descheemaeker: Cited by the body needs ahead of us.

Stefan Descheemaeker: And look forward to meeting many of you in the coming weeks.

Operator: Thank you very much, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.

Speaker Change: Thank you very much ladies and canceling that country's Tennessee games. Thank you for attending and even now disconnect your lines.

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