Q2 2024Nomad Foods Ltd Earnings Call
Stefan Descheemaeker: Thank you for watching
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Unknown Executive: Good day, ladies and gentlemen, and welcome to Nomad Hood's second quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.
Operator: Good day, ladies and gentlemen, and welcome to Nomad Foods' second quarter 2024 earnings conference call.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: To give everyone the opportunity to participate, please limit yourselves to one question and one follow-up.
Unknown Executive: To give everyone the opportunity to participate, please limit yourselves to one question and one follow-up. Please note that this conference is being recorded.
Speaker Change: Please note that this conference is being recorded.
Jason English: I would now like to turn the conference over to Jason English. Please go ahead.
Speaker Change: Hello folks and welcome to Nomad Foods second quarter 2024 earnings call.
Jason English: Hello folks and welcome to Nomad Food's second quarter, 2024 earnings call. I'm Jason English, interim head of investor relations, and I'm joined at the call by Stefan Doshmaker, RCEO, and Ruben Baldu, RCEO. By now, everyone should have access to the earnings release for the period ending June 30, 2024, that was published at approximately 6:45 a.m. Eastern time. The press release and investor presentation are available on Nomad Foods' website at nomadfoods.com. This call is being webcast, and a replay will be available on the company's website.
Jason English: Hello, folks, and welcome to Nomad Foods' second quarter 2024 earnings call. I'm Jason English, Interim Head of Investor Relations, and I'm joined on the call by Stefan Descheemaeker, our CEO, and Ruben Baldew, our CFO. By now, everyone should have access to the earnings release for the period ending June 31st, 2024, that was published at approximately 6.45 a.m. Eastern Time. The press release and investor presentation are available on Nomad Foods' website at nomadfoods.com. This call is being webcast, and a replay will be available on the company's website.
Speaker Change: I'm Jason English, Interim Head of Investor Relations, and I'm joined on the call by Stefan Descheemaeker, our CEO , and Ruben Baldu, our CFO .
Speaker Change: This call is being webcast and a replay will be available on the company's website.
Jason English: This conference call will include four looking statements that are based on our view of the company's prospects, expectations, and intentions at this time. Actual results may differ due to risk around certainties, which are discussed in our press release, our filing to the SEC, and our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures here in the call today. These non-IFRS financial measures should not be considered a replacement for; it should be read together with IFRS results. Users can find the IFRS to non-IFRS recommendations within our earnings release and in the appendices at the end of the slide presentation available on our website.
Jason English: 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 risks and uncertainties, which are discussed in our press release, our filings with the SEC, and our investor presentation, which includes cautionary language. We'll also discuss non-IFRS financial measures during the call today. However, these non-IFRS financial measures should not be considered a replacement for, and should be read together with, IFRS results.
Jason English: Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within our presentation represents adjusted figures for 2023 and 2024. All adjusted figures have been adjusted primarily for share-based payment expenses and related employer payroll taxes, non-operating M&A-related costs, acquisition purchase price adjustments, exceptional items, and foreign currency translation charges or gains. Unless otherwise noted, comments from here will refer to those adjusted numbers. With that, I will hand over to Stephane.
Jason English: Please note that certain financial information within our presentation represents adjusted figures for 2023 and 2024. All of the adjusted figures have been adjusted primarily for share-based payment expenses and related employer payroll taxes, non-opera MNA related costs, acquisition purchase price adjustments, exceptional items, and foreign currency translation charges or gains. And let's otherwise notice comments from here or refer to those adjusted numbers.
Speaker Change: With that, let me hand over to Stefan.
Unknown Executive: With that, they'll be hand-in-order to follow.
Stefan Descheemaeker: Thank you, Jason.
Stefan Descheemaeker: Thank you, Jason. Nomad Foods telegrams another quarter of solid top and bottom line performance. I'm pleased to report that the volume inflection we previously forecasted has come to fruition, with volume growth of 1.6% in quarter. This is the first period of volume growth since the quarter of 2021, but certainly not the last. Met sales increased by 1.1%, including a 0.6% benefit from forex, as the positive volume growth was only partially mitigated by the surgical price investment we made to drive profitable growth. This marked our eighth consecutive quarter of positive organic sales growth. And we are pleased that we have been able to amplify the top line growth throughout our P&L.
Stefan Descheemaeker: Nomad Foods delivered another quarter of solid top and bottom line performance. I am pleased to report that the volume inflection we previously forecasted has come to fruition. Gross margin expanded by a robust 270 basis points on two primary drivers. Our team's continued success driving supply chain productivity savings and our favorite mix as we are winning our mushroom battle. This Gross Margin Expansion is funding our reinvestment into driving Category Growth. But despite this reinvestment, we were still able to deliver 5% adjusted EBITDA growth in a quarter and a 10% increase in adjusted EBITDA.
Speaker Change: But certainly not the last.
Speaker Change: Net sales increased by 1.1%, including a 0.6% benefit from Forex, as the positive volume growth was only partially mitigated by the surgical price investment we made to drive profitable growth.
Stefan Descheemaeker: Gross margin expanded by a robust 270-bit basis points on two primary drivers. Our teams continue to success driving supply chain productivity savings, and our favorite mix as we are winning our machine battles. This gross margin expansion is funding our reinvestment into driving category growth with a mature increase in AMP this year. But despite its reinvestment, we were still able to deliver 5% adjusted EBDA growth in quarter and a 10% increase in adjusted EPS. And while the top line improvement seen this quarter has been a bit slower and more gradual to material that we first expected at the start of the year, the evidence that the inflection has now begun, that our investments are generating increasing returns, bolsters our confidence in our ability to achieve the profitable volume growth acceleration that our second half outlook is based on.
Stefan Descheemaeker: And while the top-line improvement seen this quarter has been a bit slower and more gradual to materialize than we first expected at the start of the year, it bolsters our confidence in our ability to achieve the profitable volume growth acceleration that our second half outlook is based on. Let me elaborate a bit more on what gives us this concept.
Stefan Descheemaeker: Let me elaborate a bit more on what gives us this confidence. First, while the European consumer remains pressured, the headwinds from the cost of leaving quietly that where they were under have begun to ease. Consumer confidence is inching up, and price sensitivity appears to be lessening, as evidenced by the modest shift we are beginning to see towards premium products. The environment is still challenging, but a bit less challenging than we have seen in recent years. And while it is happening, we are reminded that we play in a great category. As we just read on slide 4, while growth can vary peer to peer, volume growth for frozen food has generally outpaced total food for the last 18 months.
Speaker Change: First, while the European consumer remains pressured, the headwinds from the cost-of-living crisis that they were under have begun to ease.
Stefan Descheemaeker: First, while the European consumer remains pressured, the headwinds from the cost-of-living crisis that they were under have begun to ease. Consumer confidence is inching up, and price sensitivity appears to be lessening, as evidenced by the modest week shift we are beginning to see towards premium products. The early read in July suggests that the momentum has continued. The story of relative health performance is the same through a value lens as we support the domestic battles and growth platform.
Speaker Change: The environment is still challenging, but a bit less challenging than we have seen in recent years.
Speaker Change: And while it is happening, we are reminded that we play in a great category.
Speaker Change: As we illustrated on slide 4,
Speaker Change: While growth can vary period to period, volume growth for frozen food has generally outpaced total food for the last 18 months.
Speaker Change: And that relative oil performance has only grown of late, with frozen food posting a robust 6% volume increase in the most recent period.
Stefan Descheemaeker: And that's where the tip of the performance has only grown up late, with frozen food posting a robust 6% volume increase in the most recent period. The early re-in July suggests that the momentum has continued. And while we do not show it on the slide, possibility is fake; the story of reddip of the performance is the same through. We are leaning in to drive these growths with the retail partners, and on slide five, we illustrate a few of these investments. OMP spent rose 30% year-on-year exporter as we supported our mushroom battles and growth platforms. An example of this is in our chicken pot for you, where we have been executing behind a full 360 degree campaign in the UK, and we will bring it, we bring it, competing innovation under the bird-eyed chicken stock brand in quarter three, with the launch of new loaded burgers, chicken wings, and buttermilk tenders.
Speaker Change: The early read in July suggests that the momentum has continued.
Speaker Change: And while we do not show it on this slide, for simplicity's sake,
Speaker Change: We are leaning in to drive this growth with our retail partners and on slide 5 we illustrate a few of these investments.
Speaker Change: An example of this is in our chicken portfolio, where we have been executing behind a full 360-degree campaign in the UK, and we will be bringing compelling innovation under the Birzeit Chicken Shop brand in quarter 3.
Stefan Descheemaeker: An example of this is in our chicken portfolio, where we have been executing a full 360-degree campaign in the UK, and we will be bringing competing innovation under the Birdseye Chicken Shop brand in Q3, with the launch of new loaded burgers, chicken wings, and buttermilk tenders. This is resulting in strong and accelerating growth in this mushroom battle. And in Germany and Italy, where chicken is an early development growth platform for us, we have a fully integrated advertising, promotion, and merchandising plan that has been supported by innovations such as the quarter one launch of chicken burgers under the Fiddlers brand in Italy and the upcoming quarter three launch of Iglo-branded Sapporo Mixed Chicken Nuggets in Germany. We love this subcategory.
Stefan Descheemaeker: This is resulting in strong and accelerating growth in this mushroom battle. And in Germany and Italy, where chicken is an early development growth platform for us, we have a fully integrated advertising, promotion, and merchandising plan that have been supported by innovation such as the quarter one launch of chicken burgers under the fitness brand in Italy, and the upcoming quarter three launch of Eagle of Brandes, separate mixed chicken nuggets in Germany. We love this subcategory. It is large, profitable, and we have a clear right to win. Of Brandes, which are legacy heritage in bread and fish, are proven that they can extend in two bread and chicken and rely on the competitive dynamics.
Speaker Change: and the upcoming for the pre-launch of Iglo-branded Sapphire Mixed Chicken Nuggets in Germany.
Speaker Change: We love this subcategory.
Speaker Change: It is large, profitable and we have a clear way to win.
Stefan Descheemaeker: It is large, profitable, and we have a clear way to win. Brands that have a legacy heritage in breaded fish have proven that they can extend into breaded chicken. We are the only manufacturer investing with this level of advertising and innovation. Volume for the overall chicken platform is up double digits year to date.
Speaker Change: Our brands, which have legacy heritage in breaded fish, have proven that they can extend into breaded chicken.
Speaker Change: We are the only manufacturer investing with this level of advertising and innovation.
Stefan Descheemaeker: We are the only manufacturer investing with this level of diving and elevation, and the actions we are taking to modernize and premiumize the category are driving revenue and margin growth for both us and our retail partners. Volume for overall chicken platform is up the digits yet to date, and growth profits growth for the platform is of paving volume and review as of premium innovation mixes or margin higher. This is one of many examples we have of our investments bearing fruit, and we are excited about innovation and distribution expense plans that we are secured in the second half.
Speaker Change: Volume for overall chicken platform is up double digits year-to-date, and gross profit growth for the platform is outpacing volume and review as of premium innovation mixes or margin higher.
Speaker Change: This is one of many examples we have of our investments bearing fruit.
Stefan Descheemaeker: This is one of the many examples of our investments bearing fruit, and we are excited about the innovation and distribution expansion plans that we have secured in the second half. It is because of this that we are confident that the positive volume inflection and improving market share performance in this quarter is just the beginning. We will deliver further acceleration and expect our exit rate this year to be especially strong, given the timing of our initiative. We are confident in our ability to deliver on our reiterated guidance and excited about the momentum that we will build in 2020.
Speaker Change: We are excited about the innovation and distribution expansion plans that we have secured in the second half.
Speaker Change: It is because of this that we are confident that the positive volume inflection and improving market share performance in this quarter is just the beginning.
Stefan Descheemaeker: It is because of this that we are confident that the positive volume inflection and improving market share performance in this quarter is just the beginning. We will deliver further acceleration and expect our exit trade this year to be especially strong given the timing of our initiatives. We are confident in our ability to deliver on our rated guidance and excited about the momentum that we will build in 2025.
Speaker Change: We will deliver further acceleration and expect our exit rate this year to be especially strong given the timing of our initiatives.
Speaker Change: We are confident in our ability to deliver on our reiterated guidance.
Stefan Descheemaeker: With that, let me turn it to the new CFO, ribbon banjo, to walk through our quarterly results and all look in more details. But before I do so, I want to thank Sami Zaykut for all the accomplishments he achieved in getting our company to respond during his tenure as CFO, and I also want to thank him for generously committing his time and energy to ensure a smooth end-up in recent months. These are Heps Ruben, he's a grown running, and I'm pleased to see Ruben already making a positive impact on the business.
Stefan Descheemaeker: Let me turn it to our new CFO, Ruben Baldew, to walk through our quarterly results and outlook in more detail. But before I do so, I want to thank Samy Zekhout for all the accomplishments you achieved in getting our company to this point during this tenure as our CFO. And I also want to thank him for generously committing his time and energy.
Ruben Baldew: Ruben. Thank you, Stefan, and good morning, everyone. I'm pleased to be presenting here today for the first time as the company's CEO.
Speaker Change: Thank you Stefan and good morning everyone. I'm pleased to be presenting here today for the first time as the company's CEO . I joined the organization for various reasons.
Ruben Baldew: I joined the organization for various reasons. First, I believe in the first foot category. The benefit is category delivers both from a nutritional perspective, as well as the positive impact on the environment, because global waste, alignment, macrocosumer threats. And I believe those strong benefits will continue to drive future category growth. Secondly, I believe in the role Nomad has been playing and will continue to play as category leader with a diverse portfolio that spans vegetables, fish, poultry, and healthy meals. Lastly, I love the quality of its brand, the strength of Nomad's supply chain, and the level of talent among the people at the company.
Ruben Baldew: First, I believe in the frozen food category because of the benefit this category delivers both from a nutritional perspective as well as the positive impact on the environment because of lower waste, in line with macro-consumer trends. Secondly, I believe in the role Nomad has been playing and will continue to play as category leader with a diverse portfolio that spans vegetables, fish, poultry, and healthy foods. Finally, I love the quality of its brand, the strength of its supply chain, and the level of talent among the people at Nomad.
Speaker Change: Secondly, I believe in the role Nomad has been playing and will continue to play as category leader with a diverse portfolio that spans vegetables, fish, poultry and healthy meals.
Speaker Change: Lastly, I love the quality of its brand, the strength of Nomad's supply chain and the level of talent among the people at the company.
Ruben Baldew: Now that I've been at the seat for nearly two months, I'm even more confident that I made the right decision. As second quarter results illustrate, I've joined the company at the beginning of an important inflection point, and I'm excited about the contribution I will be able to make to accelerate profitable growth in the quarters I had, while generating outside shareable value. As you can see on slide six and seven, for the second quarter reported net revenues increased by 1.1% to 7 on a 53 million euro. Organic growth improved further to 0.5%, while favorable forage contributed 0.6% to the quarter visuals.
Ruben Baldew: As the second quarter results illustrate, I have joined the company at the beginning of an important inflection point, and I am excited about the contribution I will be able to make to accelerate profitable growth in the quarters ahead while generating outside shareholding. Organic growth improved further to 0.5%, while favourable forage contributed 0.6% to the quarterly growth. Volume growth accelerated to plus 1.6% year-on-year from a decline of 2.2% last quarter and was partially offset by a minus 1.1% price mix as we retained the vast majority of the 20.6% price mix increase we achieved in the same quarter last year while surgically reinvesting a small portion of the prior increase to support growth.
Speaker Change: As you can see on slide 6 and 7, for the second quarter, reported net revenues increased by 1.1% to €753 million. Organic growth improved further to 0.5% while favourable forex contributed 0.6% to the quarterly sales.
Speaker Change: Volume growth accelerated to plus 1.6% year-on-year from a decline of 2.2% last quarter.
Ruben Baldew: Volume growth accelerated to plus 1.6% year-on-year, from a decline of 2.2% last quarter, and was partially offset by a minus 1.1 price mix, as we retained the false majority of the 20.6 price mix increase we achieved in the same quarter last year, while surgically we investing a small portion of the prior increase to support growth. In this context, and despite the surgical investment, second quarter growth profit rose by nearly 11% year-on-year, with gross margin climbing to 30.9%, a 270 basis point increase from the year-ago quarter. Let me spend a few minutes on our gross margin performance during the quarter.
Speaker Change: As we retain the vast majority of the 20.6 price-mix increase we achieved in the same quarter last year, while surgically reinvesting a small portion of the prior increase to support growth.
Speaker Change: Let me spend a few minutes on our gross margin performance during the quarter.
Ruben Baldew: Let me spend a few minutes on our gross margin performance during the quarter. While pockets of inflation persist, the outside cost pressures seen in recent years have eased, which is allowing the strong mixed benefits of our RGM efforts and Muslim battles to become more evident.
Speaker Change: While pockets of inflation sustain, the outside cost pressures seen in recent years have eased, which is allowing the strong mixed benefits of our RGM efforts and Muslim battles to become more evident.
Ruben Baldew: While pockets of inflation sustain, the outside cost pressures seen in recent years have eased, which is allowing the strong mixed benefits of our RGM efforts and Muslim battles to become more evident. Roughly two-thirds of our gross margin expansion this quarter came from mix as we win our Muslim battles and skill our growth platforms. The remainder of our gross margin expansion is partly coming from our supply chain productivity or effort. Our organization has worked hard to unlock cost savings, and the success seen here today is accompanied by a large pipeline of programs that will support future efficiency-grade gains.
Speaker Change: Roughly two-thirds of our gross margin expansion this quarter came from mix as we win our must-win battles and scale our growth platforms.
Ruben Baldew: Our organization has worked hard to unlock cost savings, and the success seen here today is accompanied by a large pipeline of programs that will support future efficiency-grade gains. And, as Stefan mentioned, the strong gross margin is giving the organization the fuel it needs to reinvest in our growth plan. Adjusted operating expenses rose 15% year-on-year in the quarter, as we funded a 30% increase in A&P while investing in organizational capabilities.
Ruben Baldew: And as the firm mentioned, the strong gross margin is giving the organization the fuel it needs to reinvest in our grow flywheel. Adjusted operating expenses rose 15% year-on-year in the quarter, as we funded a 30% increase in AMB while investing in organizational capabilities. Despite the reinvestment, we were able to deliver robust adjusted EBDA growth of 5.3%, and a healthy year-on-year adjusted net incoming fees of 5%. A lower share count is we continue to return capsule shareholders and provide that growth to 10% at the adjusted EBS line, yielding an EBS figure of 44 euro cents. Turning to slide 8, our strong profit performance continues to translate in healthy cash flow that we have increasingly yielding turned cash to shareholders in the form of our recently established dividend.
Speaker Change: Adjusted operating expenses rose 15% year-on-year in the quarter as we funded a 30% increase in A&B while investing in organizational capabilities.
Ruben Baldew: Despite the reinvestment, we were able to deliver robust adjusted EBDA growth of 5.3% and a healthy year-on-year adjusted net income increase of 5.3%. A lower share count, as we continue to return cash to shareholders, amplified that drop to 10% at the adjusted EPS line, yielding an EPS figure of €44. Turning to slide 8, our strong profit performance continues to translate into healthy cash flow from which we have increasingly returned cash to shareholders in the form of our recently established dividend.
Speaker Change: A lower share count as we continue to return cash to shareholders.
Speaker Change: amplified that growth to 10% at the adjusted EPS line, yielding an EPS figure of €0.44.
Speaker Change: Turning to slide 8, our strong profit performance continues to translate in healthy cash flow that we have increasingly returned cash to shareholders in the form of our recently established dividends.
Ruben Baldew: Year-to-date adjusted free cash flow was 42 million euro, which was down year and year made due to higher working capital needs and cash interest. The timing of receivable phasing was ahead within the quarter, but ones that we expect to reverse as we progress through the year and the same hope for cash interest expenses, which were more from that loaded this year and will be a more moderate use of cash in the second half. Turning to our guidance for 24, slide 9, we are pleased with our first half performance and our building momentum, enabling us to reiterate our full year guidance.
Ruben Baldew: Year-to-date adjusted free cash flow was €42 million, which was down year-on-year mainly due to higher working capital needs and cashing out. The timing of receivable phasing was ahead within the quarter, but one that we expect to reverse as we progress through the year. The same holds for cash interest expenses, which were more front-end loaded this year and will be a more moderate use of cash in the second quarter. Turning to our guide, which is for 24 on slide 9.
Speaker Change: The timing of receivable phasing was ahead within the quarter, but one that we expect to reverse as we progress through the year, and the same holds for cash interest expenses, which were more front-end loaded this year and will be a more moderate use of cash in the second half.
Ruben Baldew: We are pleased with our first half performance and our building momentum, enabling us to reiterate our full year guidance. Our organic revenue growth is accelerating on the back of a powerful volume inflection, and while the organic sales acceleration has taken a bit longer than we expected, we remain confident in achieving our full year net revenue growth range of 3-4%. This revenue outlook implies acceleration in H2, where we will be cycling much lower organic growth than we faced in the first half, while reinvesting our H1 profit over delivery to support this growth. We have line-of-sight to strong retail programs and distribution gains behind a robust pipeline of innovation, promising growth platforms, and Muslim investments.
Speaker Change: Our organic revenue growth is accelerating on the back of a powerful volume inflection. And while the organic sales acceleration has taken a bit longer than we expected, we remain confident in achieving our full year net revenue growth range of 3-4%.
Ruben Baldew: Our organic revenue growth is accelerating on the back of a powerful volume inflection, and while the organic sales acceleration has taken a bit longer than we expected, we remain confident in achieving our full year net revenue growth range of 3 to 4%. This revenue outlook implies acceleration age 2 where we will be cycling much lower organic growth than we faced in the first half while reinvesting our H1 profit over the delivery to support this growth. We have line-up side to strong retail programs and distribution gains behind a robust pipeline of innovation, promising growth platforms, and most win medals.
Speaker Change: This revenue outlook implies acceleration H2, where we will be cycling much lower organic growth than we faced in the first half, while reinvesting our H1 profit over delivery to support this growth.
Speaker Change: We have line-of-sight to strong retail programs and distribution gains behind a robust pipeline of innovation, promising growth platforms and must-win battles.
Speaker Change: We will be leaning in during Q3 to strengthen this momentum and expect the returns of that investment to be most evident as in Q4 as we exit the year and build strong momentum into Q25.
Ruben Baldew: We will be leaning in during quarter 3 to strengthen this momentum and expect the returns of that investment to be most evident as in quarter 4 as we exit the year and build strong momentum into 25. Despite this investment, we remain confident in delivering a full year adjusted EBDA growth guidance of 4 to 6% and adjusted EPS of 1 euro 75 cents to 1 euro 80 cents per share. The US dollar euro exchange rate of August 1st are adjusted EPS guidance translated into $1.89 cents to $1.94 adjusted earnings per share and applies 9 to 12 cents year of year growth.
Ruben Baldew: We will be leaning in during Q3 to strengthen this momentum and expect the returns of that investment to be most evident in Q4 as we exit the year and build strong momentum into Q4. Despite this investment, we remain confident in delivering a full-year adjusted EBDA draw-off guidance of 4-6% and adjusted EPS of €1.75 to €1.80 per share. Based on the US dollar-euro exchange rate of August 1st, our adjusted EPS guidance translates into $1.89 to $1.94 adjusted earnings per share and applies 9-12% year-over-year growth.
Speaker Change: Despite this investment, we remain confident in delivering a full year adjusted EBDA draw-off guidance of 4-6% and adjusted EPS of €1.75 to €1.80 per share.
Speaker Change: 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.
Ruben Baldew: We are on track to deliver 90 to 95 cents per just free cash flow conversion for the full year and remain committed to returning capital to shareholders. Year today we have returned 64 million euro to investors of 12 million euro year as we have now returned 45 million euro year today through our newly established dividends. We declared our third quarterly cash dividend of $50 per share last week, highlighting our strong, consistent cash flows and our commitment to consistently return cash to shareholders. I'm pleased with our momentum in the first half. It's a testament to the hard work and dedication of our talented workforce.
Ruben Baldew: 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. Year-to-date, we have returned €64 million to investors, up €12 million year-on-year as we have now returned €45 million year-to-date through our newly established, We declared our third quarterly cash dividend of $0.50 per share last week, highlighting our strong, consistent cash flows and our commitment to consistently return cash-to-share returns.
Speaker Change: Year-to-date we have returned €64 million to investors, up €12 million year-on-year, as we have now returned €45 million year-to-date through our newly established dividend.
Speaker Change: We declared our third quarterly cash dividend of $0.50 per share last week, highlighting our strong, consistent cash flows and our commitment to consistently return cash to shareholders.
Speaker Change: I'm pleased with our momentum in the first half. It's a testament to the hard work and dedication of our talented workforce.
Ruben Baldew: I'm pleased with our momentum in the first half, 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 24 months. I will now turn the call over to the operator for your questions.
Speaker Change: Our growth strategies are working, and we are even more confident in delivering top-tier, top- and bottom-line growth in 24 years.
Ruben Baldew: Growth strategies are working, and we are even more confident in delivering top tier top and bottom line growth in 24 meals.
Unknown Executive: I will now turn the call over to the operator for your questions. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad.
Operator: Thank you. Ladies and gentlemen, we will now be conducting the question and answer session. A confirmation tone will indicate that Petty Law is in the question queue.
Unknown Executive: Ladies and gentlemen, we will not be conducting the Christian in all position. If you have last asked the question, please press starved in one on a telephone keypad. A confirmation turn will indicate that a lot is in the question queue. Give me a press star and then two to leave the question queue. For participants making use of speak equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: A confirmation tone will indicate that your line is in a question queue.
Speaker Change: You may press star and then 2 to leave the question queue.
Speaker Change: For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Just a reminder, to give everyone the opportunity to participate, please limit yourself to one question and one follow up.
Unknown Executive: Just a reminder: to give everyone the opportunity to participate, please limit yourself to one question and one follow-up.
Speaker Change: Our first question comes from Andrew Lazar of Barclays. Please go ahead.
Andrew Lazar: After this question comes from Andrew Lazar or Parklays, please go ahead. Great, thanks so much.
unknown: Great. Thanks so much.
Andrew Lazar: Hi Stefan, nice to meet you, Ruben, and great to hear from you, Jason. Morning Andrew. Good morning. I wanted to, I guess, come back to sort of organic growth expectations for the back half. I think that's where, obviously, a lot of the focus will be. To hit the low end of the 3 to 4% organic sales growth range for the full year, organic sales would need to accelerate from 0.4% in the first half to more than 5% in 2H. And to the extent that price continues to be a modest drag, given some of the surgical reinvestment, it would mean, obviously, an even greater acceleration and volume to hit that target.
Andrew Lazar: Hi Stefan. Nice to meet you, Ruben, and great to hear from you, Jason. Morning, Andrew. Good morning.
Andrew Lazar: I wanted to, I guess, come back to sort of organic growth expectations for the back half. I think that's where, obviously, a lot of the focus will be. To hit the low end of the three to 4% organic sales growth range for the full year, organic sales would need to accelerate from call it 0.4% in the first half to more than 5% in 2H. And to the extent that price continues to be a modest drag given some of the surgical reinvestment, it would obviously mean an even greater acceleration in volume to hit that target.
Andrew Lazar: I wanted to, I guess, come back to sort of organic growth expectations for the back half. I think that's where obviously a lot of the focus will be.
Speaker Change: More than 5% in 2H.
Stefan Descheemaeker: And obviously, you saw a nice sequential improvement in volume from 1Q to 2Q. But the full year guide certainly requires a whole lot more. And I realize you have better momentum, easy comps, and some margin flexibility to reinvest. But I was hoping maybe you could come back to maybe a little bit more depth around why you held that range and what gives you that level of sort of visibility to sort of get there. Thanks, Andrew. Well, I guess we will agree that Q2 is some sort of inflection point in terms of volume. You talked about the 0.5 to 5.5, but you may remember that Q3 last year we were at minus 13.
Andrew Lazar: And obviously, you saw a nice sequential improvement in volume from 1Q to 2Q. But the four-year guide certainly requires a whole lot more, and I realize you have better momentum, easy comps, and some margin flexibility to reinvest, but I was hoping maybe you could come back to maybe a little bit more depth around. Thanks, Andrew. Well, I guess we will.
Andrew Lazar: But the four-year guide certainly requires a whole lot more, and I realize you have better momentum, easy comps, and some margin flexibility to reinvest, but I was hoping maybe you could come back to maybe a little bit more depth around
Speaker Change: Thanks Andrew. Well, I guess we all agree that Q2 is some sort of inflection point in terms of volume. You talked about the 0.5 to 5.5, but you may remember that Q3 last year we were at minus 13, we moved to minus 8.
Stefan Descheemaeker: Thanks, Andrew. Well, I guess we all agree that Q2 is some sort of inflection point in terms of volume. You talked about 0.5 to 5.5, but you may remember that in Q3 last year we were at minus 13. So move to minus eight for the quarter.
Stefan Descheemaeker: We moved to minus 8, to minus 2% in Q1. And then now we're in positive volume business territory. A bit ahead of what we announced last time. So that's the first piece. Second piece is you see that the growth margin is doing fine. So it gives us obviously space and ammunition to invest behind all top line programs. And in terms of top line programs, we have a lot in terms of innovation. We also have a youth of what we call the growth platform, like called feedbacks in Germany and Italy, that are really starting. Together with the NB, I think we are the increase in terms of the NB and it's going to be on a fully basis.
Stefan Descheemaeker: The second piece is that gross margin is doing fine, so it gives us obviously space and ammunition to invest behind our top-line programs. And in terms of top-line programs, we have a lot in terms of innovation. We also have the use of what we call the growth platforms, like Call3, for example, in Germany and Italy, that are really starting now. Together with A&P, I think we are increasing in terms of A&P, and it's going to be on a four-year basis.
Speaker Change: And in terms of top-line programs, we have a lot in terms of innovation.
Speaker Change: I mean, it's much, much higher than it used to be. So all these elements, what we call the flywheel between price, if needed, or promo, more specifically, together with innovation, growth platform, A and B, and obviously also the right momentum that we see with the category, yes, we think we can do it. As we said, you know, we think it's going to be probably more challenging to get to the high end of the range.
Stefan Descheemaeker: I mean, it's much, much higher than it used to be. So all these elements, what we call the flywheel between price, if needed, or promotion more specifically, together with innovation, growth platform, A&P, and obviously also the right momentum that we see with the category, yes, we think we can do it. As we said, we think it's probably going to be more challenging to get to the high end of the range, but to get to this range is the goal, and the 3% to 4% is really something we think we can achieve, based on what we see, obviously, ahead of us, and also the encouraging results of July.
Stefan Descheemaeker: I mean, it's much, much higher than it used to be. So all these elements, what's because the flywheel between flies if needed or promo more specifically, together with innovation, growth platform, NB, and obviously also the right momentum that we see with the category. Yes, we think we can do it. As we said, you know, we think it's going to be probably more challenging to get to the high end of the range. But to get to this where the range is arranged and the three to four percent is really something we think we can achieve with, based on what we see obviously ahead of us.
Speaker Change: But to get to this, a range is a range, and the 3-4% is really something we think we can achieve, based on what we see, obviously, ahead of us, and also the encouraging results of July .
Stefan Descheemaeker: And also the encouraging result of the line. And then if I heard you write, it sounds like a bigger step up an investment would be 3Q, and then you'd expect, I guess, a further or greater acceleration in organic top line really in 4Q if I heard that right. A quarter of investment, but also based on the strong margin, which allows us obviously to go that way. Don't forget the ice cream is really booming, and Q3 is a good quarter for this. So all he thinks indeed is leading us to a strong Q4 and then leading obviously, which should help us obviously to start the year next year obviously on a very, very healthy equipment.
Speaker Change: And then, if I heard you right, it sounds like a bigger step up in investment would be 3Q and then you'd expect, I guess, a further or greater acceleration in organic top line really in 4Q, if I heard that right.
Stefan Descheemaeker: And then, if I heard you right, it sounds like a bigger step up in investment would be 3Q, and then you'd expect, I guess, a further or greater acceleration in organic top line really in 4Q. If I heard you right. That's correct. That's correct.
Stefan Descheemaeker: That's correct, that's correct. We're going to keep investing on a full year basis, but to your point, I think Q3 is going to still be in terms of flywheel, and starting with the EMP is going to be a quarter of investment, but also based on the strong margin, which allows us, obviously, to go that way. Don't forget ice cream is really booming, and Q3 is a good quarter All these things are indeed leading us to a strong Q4, which should help us to start the year on a very healthy footing.
Speaker Change: I think Q3 is going to still be in terms of flywheel and starting with the ENB is going to be a quarter of investment, but also based on the strong margin.
unknown: And then last, just, I'd love to get a better sense of what's happening sort of in the marketplace in terms of the frozen category, you know, in your key geographies, and in terms of consumer behavior, competitive environment with respect to private label, you know, where price gaps are, seems like maybe you've done a lot of work, obviously, to sort of bring those back to, I think, what are closer to more normal ranges, but just kind of, you mentioned that there's some shifting to premium, which is encouraging, a little bit of better sense on the competitive environment and what you're seeing in terms of consumer behavior. Thanks a lot.
Stefan Descheemaeker: And then last, just I'd love to get a better sense of what's happening sort of in the marketplace in terms of the frozen category, you know, in your key geographies and in terms of consumer behavior, competitive environment with respect to private label, you know, where price gaps are. Seems like maybe you've done a lot of work, obviously, to sort of bring those back to, I think, what are closer to more normal ranges. But just kind of you mentioned that there's some shifting to premium, which is encouraging. A little bit of better sense on the competitive environment and what you're seeing in terms of consumer behavior.
Stefan Descheemaeker: Thanks a lot. Well, I think to me a point I think it's good to see Europe doing well. By the way, I remember at some stage in the past, you know, where it was not so nice to be in Europe. I think you know it doesn't mean that it's easy; never nothing is easy, and the environment is still challenging. But we're starting to see the things that are easy across the base. Again, country by country, but overall, if you take Europe as a global market, it's making, it's making definitely making progress from that standpoint. So that's what we see. We see also that the category, as you have seen from the presentation, is moving ahead of global food. We love it because definitely we think that frozen food is great food, and it's good food. From the nutrition standpoint, it's great; it's affordable as well.
Speaker Change: Well, I think, to your point, I think it's good to see Europe doing well, by the way.
Speaker Change: I remember some stage in the past, you know, where it was not so nice to be in Europe .
Speaker Change: Nothing is easy, and the environment is still challenging, but we're starting to see the things that are easy across the base, again, country by country, but overall, if you take Europe as a global market, it's making, it's definitely making progress.
Speaker Change: from that standpoint. So, that's what we see.
Speaker Change: As you have seen from the presentation, it is moving ahead of global food.
Speaker Change: We love it because definitely we think that frozen food is great food.
Speaker Change: It's good food, it's nutrition, from the nutrition standpoint it's great, it's affordable as well, let's not forget, you know, I think we're premiumizing things.
Stefan Descheemaeker: Let's not forget you know I think we premiumizing things, but at the same time, you know it still remains affordable.
Stefan Descheemaeker: So this is, you know, it has all the attributes of a great category, not only short term but also in the long term. And well, with the margins we have and the capacity to reinvest any innovation, and also in terms of A and B, we think we have the right, we have the right recipe. Anything else for Muslim? Okay, that's where that's where we stand. And well you know after after two interesting years we're starting to see some interesting issues. Thank you seeing a couple weeks. Absolutely looking forward very soon and room.
Speaker Change: Thank you. See you in a couple of weeks.
Rob Dickinson: Next question comes from Rob Dickinson of Jeffries. Please come ahead. Thank you so much. Maybe just a question on the volume side. Just maybe in the markets that aren't doing as well. Like, you know, I did here, sounds like, you know, must win battles, which are decent percent, I believe, of the business. Revives 4%, I heard chicken portfolio, double digit, and then some of the growth platforms, maybe around 20%. So clearly a little bit of a disconnect from some of the focus areas, maybe relatives of some of the less focused areas. If you could just touch on that.
Operator: Our next question comes from Rob Dickinson of Jefferies. Please go ahead.
Speaker Change: Thanks so much. Maybe just a question on the volume side.
Robert Dickerson: Maybe in the markets that aren't doing as well, like it's, you know, I did hear sounds like, you know, must-win battles, which are a decent percent of the business. Group volume is 4%. I heard chicken portfolio double-digit, and then some of the growth platforms, maybe around 20%. So, clearly, a little bit of a disconnect in some of the focus areas, maybe relative to some of the less focused areas. If you could just touch on that, that'd be great.
Speaker Change: Group volume is 4%. I heard chicken portfolio, double-digit, and then some of the growth platforms.
Rob Dickinson: That'd be great.
Stefan Descheemaeker: OK, well, thanks, Robert. But you've known us for quite a few years now, and you see that, you know, you remember, we know that we always have been focused on a Muslim background. That's where it matters. So we really want to win there, which represents, you know, the first 25 top Muslim-Muslim battles represent around 50% of our business, and more in terms of margin. And that's where we want to invest. We did it, you know, years and years ago during the turnaround. We have never stopped.
Stefan Descheemaeker: Okay, well, thanks, thanks, Robert, but you know, you know us for quite a few years now, and you see that you, you remember, we know that we always have been focused on muscle battles. That's where it matters. So we really want to win there, which we present, you know, the first 25 muscle, muscle, muscle, muscle, muscle, muscle battles represent the wrong 50% of our business and more in terms of margin, and that's where we want to invest. We did it, you know, years and years ago during the turnaround. We have never stopped and obviously know all of this crisis. You know, it's kind of things we're going to do on top of also the growth platform, which are the platform that, you know, two or three, four years on the road, we'll also become new business in battles, like all three, for example, in other countries.
Speaker Change: And more in terms of margin, and that's where we want to invest. We did it, you know, years and years ago during the turnaround. We have never stopped. And obviously now out of this crisis, you know, it's the kind of things we're going to do. On top of also the growth platform.
Stefan Descheemaeker: And obviously, now out of this crisis, you know, it's the kind of things we're going to do. On top of the growth platform, which are the platforms that, you know, two, three, four years down the road will also become new big Muslim battles, like poultry, for example, in other countries. A great example in the UK, it used to be a $150 million category. A few years ago, it was $150 with great margins.
Speaker Change: which are the platforms that, you know, two, three, four years down the road will also become new big merchant battles, like poultry, for example, in other countries. Great example in the UK, it used to be a 150 million category, a few years, now it's 150 with great margins. So that's exactly what we want to do.
Stefan Descheemaeker: Great example in the United States. It's used to be a 150 million category, three years. No, it's 150 with a great margin. So there's exactly what we want to do. So now if you're looking about the difference to your points, when I'm taking, for example, H1, well, muscle battles, terms of volume are wrong, trust the, trust the A muscle battles without a key, the key muscle battles the way I defined it, it's around just 2.6%. So, as opposed to obviously a lower number for the global business, it means that, yes, we're losing volume, for example, in private labor. You know, that we still have a bit of private labor, while we're losing it.
Stefan Descheemaeker: So that's exactly what we want to do. So now, if you're talking about the difference to your point, when I'm taking, for example, H1, well, Muslim battles in terms of volume are around plus the A Muslim battles, which are the key Muslim battles, the way I define them. It's around plus 2.6%. So as opposed to, obviously, a lower number for global business, it means that, yes, we're losing volume, for example, in private labor. You know that we still have a bit of private labor. Why are we losing it? Well, you know what? That doesn't wake me up at night.
Speaker Change: So, as opposed to, obviously, a lower number for the global business, it means that, yes, we're losing volume, for example, in private label, you know, that we still have a bit of private label. Why are we losing it? Well, you know what, that doesn't wake me up at night.
Rob Dickinson: Well, you know, what, that doesn't wake me up at night. Fair enough. I mean, it sounds like the areas you're focused on are doing well, which then dies momentum in the back half.
unknown: Fair enough. I mean, it sounds like the areas you're focused on are doing well, which then drives momentum in the back half. So maybe you could also, though, touch on
Rob Dickinson: So maybe you could also know touch on. That'll be when we talk about the new market, the opportunity, the growth platform. I heard you mention a retic in nuggets in Germany. Yes, morning. Yes, heard you speak easily about maybe there is kind of an outside, you know, opportunity and, you know, we're thinking a longer term here, you know, just given, you know, even earlier this year, you had raised that top line growth, Algo, right in the back half. That's even above for a new Algo, and then as you think forward, it's okay. Well, if we can stabilize the portfolio, win the battles, but then clearly there needs to be kind of that other bucket, which is what is also driving kind of outside gross relative to food.
Speaker Change: This is an outside opportunity. We're thinking longer term here. Just given, even earlier this year you had raised that top line growth algo in the back half.
Speaker Change: That's even above long-term new algo and then as you think forward, it's okay, well, if we can stabilize the portfolio, win the battles, but then clearly there needs to be kind of that other bucket, which is what is.
Speaker Change: Also driving kind of outsized growth relative to food, so maybe if you could just like touch on Germany as kind of a proxy as to kind of what could happen with like chicken entering a new country. Thanks a lot.
Stefan Descheemaeker: So maybe if you could just like touch on Germany as kind of a proxy as to kind of what could happen with like chicken entering a new country. Thanks a lot.
Stefan Descheemaeker: Yeah, well, chicken is, you know, as I said, chicken is a fantastic category. It's, you know, we, we today we have around 1.1 billion of all say this fish. And then around 0.3 billion is, is, is, is for free mostly, mostly UK, by the way, between both of you are mostly UK with great margin. And so we really have, we consider this as an, you know, interesting innovation for other countries, between innovation with the low risk because it's a proven model. It's a proven, obviously, platform. And so with all the experience from the UK, we are, we've worked a lot with the different countries, mostly Italy and Germany, which are the countries number two and number three.
Speaker Change: And so we really have, we consider this as an interesting innovation for other countries, with innovation with a low risk, because it's a proven model, it's a proven obviously platform.
Stefan Descheemaeker: And we've delivered, we have delivered, you know, great innovation platform for the poultry, very long what we have in the UK, but also sometimes adaptation, sometimes not always adaptation to the local, the local taste. And so then with Italy is ahead of Germany, which was expected, by the way. And so we've launched it, and what we've seen is very encouraging. The story is a bit different in Europe, in Italy, if you are developing a new category, because it's mostly chilled and fresh. In Germany, it's mostly in the end of, of private labour. And what we want to do, and we're going to do it, we're doing it; it's extremely well received by the trade. Is we want to premiumize the category, which is going to be good for everybody.
Stefan Descheemaeker: Adaptation to local taste. Italy is ahead of Germany, which was expected by the way, and so we've launched it, and what we've seen is very encouraging. The story is a bit different.
Speaker Change: The story is a bit different in Italy. You are developing a new category because it's mostly chilled and fresh.
Stefan Descheemaeker: In Italy, you are developing a new category because it's mostly chilled and fresh. In Germany, it's mostly in the hands of private labels, and what we want to do, and we do it very well, it's extremely well received by the trade, is we want to premiumize the category, which is going to be good for everybody. For us, for the retailers, and for the consumers, at an affordable price. So this is a great example. So it has already proven itself in Italy, and what we see at the early stage in Germany is also very good.
Stefan Descheemaeker: For the, for us, for the retailers and for the consumers, at an affordable price. So this is a great example, so already proven in Italy, and what we see early, early stage, you know, in Germany is also very...
Speaker Change: For the retailers and for the consumers at an affordable price. So this is a great example. So already proven in Italy and what we see early stage in Germany is also very good.
Rob Dickinson: All right, great. Thanks, Stefan, and welcome, Ruben. Good to hear from you, Jason. Bye-bye.
unknown: All right, great. Thanks, Stefan. And welcome, Ruben. Good to hear from you, Jason. Bye-bye. Thank you. Thanks for having me.
Speaker Change: Thank you. Thanks for having me.
Unknown Executive: Thank you.
Unknown Executive: Thanks, Rob.
John Baumgartner: The next question comes from John Baumgartner of Mizzou Securities. Please go ahead. Thank you, Warren. Thanks for the question. Hi, John. Hey, Stefan. I wanted to go back to Q2, the retail data. You know, the quarter started off barely soft, and then the June data was really strong. Can you speak to any nuances there? Was there something that occurred in the transition from winter to summer, where there was a temporary dip in promoactivity or ROI, where maybe you transition from, you know, supporting fish to vegetables? And was there anything in terms of shipment timing moving into these new distribution points that started to be realized in the takeaway data as you close the quarter?
Operator: The next question comes from John Baumgartner of Mizzou Securities. Please go ahead.
Speaker Change: Bye, John .
Speaker Change: Hey, Stefan. I wanted to go back to Q2, the retail data. The quarter started off fairly soft, and then the June data was really strong.
Speaker Change: Can you speak to any nuances there? Was there something that occurred in the transition from winter to summer where there was a temporary dip in promo activity or ROI, where maybe you transitioned from, you know, supporting fish to vegetables? And was there anything in terms of
Stefan Descheemaeker: Shipment timing moving into these new distribution points that started to be realized in the takeaway data as you close the quarter
Stefan Descheemaeker: Well, it's a bit of all these points, by the way, because by definition, when you see this inflection, it can never be one only as opposed to the others. So yes, we saw during Q1, Q2 that we have some space in terms of, you know, margin to further invest in promo, and we've done it. It's something that can be done faster in some countries, and we have the space, and also, compared to the past, with all the RGM expertise that we build, we can be much, much, much more surgical in terms of promo from one quarter to another.
Stefan Descheemaeker: It's a bit of all these points, by the way, because by definition, when you see this inflection, it can never be one only as opposed to the others. We saw during Q1, Q2, that we had some space in terms of margin to further invest in promotion, and we've done it. It's something that can be done faster in some countries. We had the space, and also compared to the past, with all the RGM expertise that we built, we can be much, much, much more surgical in terms of promotion from one quarter to another. So that's the kind of thing that you can do, and definitely it had an impact. At the same time, the rest is, well, I would say, as expected.
Stefan Descheemaeker: So that's the kind of thing that you can do, and that's definitely entirely packed. At the same time, the rest is, well, I would say unexpected. You know, we're investing, and by definition takes more time than promo than the right thing to do, or whatever. And you've seen that we already started to invest in the late Q3 last year, Q4, Q1, and at some stage, you'll see things are starting to ramp up.
Stefan Descheemaeker: We're investing. A&P, by definition, takes more time than promo. That's the right thing to do, however, and you've seen that we already started to invest in A&P late Q3 last year, Q4, Q1, and at some stage, obviously, things are starting to ramp up. Then also, we're also starting to come up with, again, innovation programs, the one I mentioned to Rob, like Paltry in Italy. So all these things, obviously, are at some stage starting to ramp up, and that's what we've seen. Maybe just to build on that.
Stefan Descheemaeker: And then also, we were also starting to come up with, again, innovation programs, the one I mentioned to Rob, like the Q3 in Italy. So all these things, obviously, at some stage, are starting to ramp up, and that's what we've seen.
Ruben Baldew: Maybe just, yeah, maybe just to build on that. I mean, Stefan spoke a couple of times on our most-wing battles. Anyway, Stefan said, not only for ourselves, but also the retailers and the Drive RDM. And we've used that to reinvest, and that reinvestment, as you can see, is mainly in 18, but it can also be a bit surgical on the shop floor. And then to your question over the evolution in quarter two, the big drivers for H2, as Stefan said, R8 is reinvestment. B is the distribution gains linked to innovation, and C is the fact that we have a software comparator, like H1 last year was around 8%.
Stefan Descheemaeker: The big drivers for H2, as Stefan said, are A, this reinvestment, B, the distribution gains linked to innovation, and C, the fact that we have a softer comparator. Whereas H1 last year was around 8%, H2 last year was below 2%. And you see the buildup of also in quarter two, and if you look at external data, that also this reinvestment as well, distribution points gain, and we see a recovery of that more in the back half of this quarter.
Ruben Baldew: H2 last year was around 2%. And you see the build-up of also quarter two, and if you look at external data, that also this reinvestment as well, this push points gain. So we see a recovery of that more in the back half of this one.
Speaker Change: With this reinvestment as well distribution points game wishing a recall for you of that more in the back half of this one.
John Baumgartner: Thanks for that. And then just a follow-up, you know, just thinking with Italy and your existing portfolio there. That was a market that comprised the bulk of your volume decline, I think, prior to the revitalization you instituted in the fourth quarter. You invested in pricing, the retail programming. And I'm curious, as you go into the back half now, how do you see Italy at this point? Are you comfortable with where the price gaps are, the indoor activity? Is that where you'd like it? Just trying to get a sense to how much more incremental investment you think Italy still needs at this point.
unknown: Thanks for that. And then, just a follow-up, you know, just sticking with Italy and your existing portfolio there. That was a market that comprised the bulk of your volume declines, I think, prior to the revitalization you instituted in the fourth quarter. You've invested in pricing, retail programming, and I'm curious, as you go into the back half now, how do you see Italy at this point? Are you comfortable with where the price gaps are, the in-store activity, is that where you'd like it? Just trying to get a sense of how much more incremental investment you think Italy still needs at this point. Thank you.
Speaker Change: Thanks for that and then just a follow up just sticking with Italy and in your existing portfolio there.
Speaker Change: That was a market that comprise the bulk of your volume declines I think prior to the revitalization you instituted in the fourth quarter, you've invested in pricing the retail programming and I'm curious as you go into the back half now how do you see Italy at this point or are you comfortable with where the price gaps are the in store activity is that where you'd like it just <unk>.
Speaker Change: To get a sense to how much more incremental investment you think Italy, you'll still need at this point. Thank you.
Stefan Descheemaeker: Thank you. The answer is yes; we do feel comfortable with what we've done. It's been a bit of a reset in Italy. I think, as you know, the margins in Italy are, among the big countries, one of the best margin overall independently from the category. And so we came to the conclusion, especially during this, let's say, inflation war, inflation crisis, especially in fish. We came to the conclusion, yes, in some fish categories, we were just too high. And well, it's never nice to come to that conclusion, but you have also to be fact-based, and that's what we've seen.
Speaker Change: Well the answer is yes, we do feel comfortable with what we've seen to be a bit of a.
Speaker Change: Resetting Italy.
Speaker Change: As you know the margins in Italy.
Speaker Change: Among the become the large countries.
Speaker Change: <unk> is one of the best margin overall independently from them from the category and so we came to a conclusion, especially during this let's say inflation wall inflation try these especially in fish, we came to the conclusion, yes in some fish categories. We were just too high.
Speaker Change: Well you know, it's never nice to come to that.
Stefan Descheemaeker: And despite that, it's very interesting to see how RGM helped us. Because anyway, we've been very surgical again in terms of price elasticity. See what we need to do in promo, in price points in terms of fish, and it has responded extremely well. So, at this stage, obviously it's a very dynamic environment, but at this stage, I don't see the necessity to invest further in price in Italy. And margins remain obviously quite very good.
John Baumgartner: So that's, that's, that's that. And what we've seen is, yes, we're gaining market, we're gaining volume, and soon market share and market share as well in Italy now in PC, in PC, which is extremely encouraging. Thanks, Stefan. Thanks, Ruben.
Unknown Executive: Thanks, Erwin.
Steve Parviz: The next question comes from Steve Parviz of Deutsche Bank. Please go ahead. Hello, everybody. Thanks, Stefan. Welcome, Ruben. Hello, Jason. Thank you. Great. So I wanted to pick up a little bit more on the second half inflection. Over the past couple of quarters, we've talked about the year from your perspective, originally at least being the goal being a nice balance between volume on the one hand and price mix on the other. So I'm curious, as you go into the back half, do you see price mix through RGM becoming a bigger contributor? Or is the back half composition going to look more like we saw in 2Q, where it's really, really a heavier lean on volume?
Ruben Baldew: Yeah, maybe to answer that, it's good to give context a bit on the price mix what happened in the last quarter because I think that was a help moving forward. So a bit of context, and I think it was also spoiler earlier. I mean, we delivered the volume recovery and the price, although it was negative, and it needs to be seen in a comparator where last year in quarter two, we took 20.6% price box. Not only the percentage in absolute terms, that's 140 for men comparator, and out of that 144 men, we kind of held 95%.
unknown: Well, earlier, I mean, We've delivered volume recovery and price, although it was negative, it needs to be seen in a comparator with last year in quarter 2. We took 20.6% of the price, well, it's not only the percentage; in absolute terms, that's 144 million comparator, and out of that 144 million, we kind of held 95%, and I think that comes to maybe more important points rather than the context, which is what we will continue to do in quarter 3 and quarter 4. We will continue to drive. Margin Mixed and to potentially reinvest some of that in Shop4 and in our brand.
Ruben Baldew: And I think that comes to maybe more important points rather than the context. Is what will continue to do in quarter three and quarter four. We will continue to drive. The positive mix, because again, the big part of our margin increase was a result of us driving Muslim vessels, which with more profitable margins and driving RGM. That is what we will continue to do, and we chose in quarter two to say, okay, some of that we reinvested the shop floor, some of that, the 30% of the AMD, we invest in AMD, for those of you that we invest in in the organization.
Ruben Baldew: And the output of that has been clear with what Stefan said: the minus 13 quarter three volume, minus eight, minus two in quarter one, and now plus 1.6. And that's also how we will look at that in quarter three and quarter four, to continue to drive margin mix and to reinvest some of that potentially in shop floor and in our brands.
Ruben Baldew: Okay, that's very helpful. And maybe as a follow-on to that, Ruben, for you, when I talked to Stefan a few months ago with Sammy about your arrival, one of the topics we talked a lot about was revenue growth management, and not only the progress made over the past several years, but also the potential going forward and really the idea of taking it to the next level. And I think Stefan can validate; he felt like your arrival was going to be a big catalyst for that. But maybe your perspective on where revenue growth management disciplines are today, as you come into Nomad, and what your objectives are over the next couple of years.
Ruben Baldew: Yeah, so let me be clear on the objective. Objective is ready to continue the great work, which was done by Stefan and also by Sammy on the RGM. And the experience I have here, you know, come in from Unilever, and a smaller company, but especially Unilever, I would say RGM is a very high level. But, as with always, with everything you do, there's the opportunities. I think great progress has been made on mix on promotional effectiveness now. It's also what we look at surgically to see how we can optimize. But there are more drivers of the RGM, so what can you do with the overall trade term, and optimize that.
Ruben Baldew: So we will definitely continue to drive that. I think it's at a good level, but that doesn't mean we're out of opportunities. And there are more lives to pull here. That's all I can say after the first six, seven weeks now.
unknown: I think it's a good level, but that doesn't mean we're out of opportunities, and there are more leaders to pull from here. That's all I can say for the first six, seven weeks now.
Stefan Descheemaeker: Okay, very good. Thank you so much. I mean, the good news, Steve, perfection doesn't exist. There is always a way to improve. Yes, indeed.
Unknown Executive: Thank you very much.
John Tanwanteng: The next question comes from John Tanwanteng of Teacher is Securities. Please go ahead. Good morning. Hi, Stefan, and welcome, Ruben, and it's great to see the return of volume growth and also healthy margins underneath.
Stefan Descheemaeker: My question to you is, could you break out what percentage of revenue was Muswin products in the quarter, and then following that, what is the margin differential between an A-grade Muswin product, maybe a B-grade one, and then maybe the rest that you're defocusing. John, can you do me a favor? Can you repeat the first part of the question? Yeah, what percentage of your revenue today is Muswin products? Okay, well, as we said, you know, you take the top 25 Muswin battles, and 15% of all sales. Now, if you're taking your adding the, let's say, the B-Muswin battles in the region of 2-3rd, it's a never-ending story, John, because when we started this journey, well, there was no Muswin battles.
Stefan Descheemaeker: So, everything was strategic, which is in the middle of itself an aberration. And so, we started by defining, okay, we're going to go with, you know, the most interesting battles, the biggest, the largest, the most profitable margin. And so, we decided, okay, we're going to add, okay, our resources to AD, price, innovation behind; it's two-thirds of our business. And then, for years, what we've seen is this business, unsurprisingly, you know, went up by something like four, five percent, which means that there's a lot third, obviously, was zero or even declining, which is fine because it came up also with the improvement of the gross margin.
unknown: And so we started by defining, okay, we're going to go with, you know, the all-mushroom bottles, the biggest, the largest, the most profitable margin. And so we decided, okay, we're going to allocate our resources to A&P, price, innovation, behind – it's two-thirds of our business.
Speaker Change: Innovation behind it and two third of our business and then four years. What we've seen is these businesses are surprisingly you know went up by something like four 5%, which means that this is the last third obviously was a one zero or even declining which is fine because it came up also with an improvement.
Speaker Change: Of the gross margin well you know what after 6789 years. If you do this with where the two thirds two thirds is becoming in of itself, 90% of the business and so you have to do with the game and that's what we just did that this year is to take the most profitable must win battles and start again from a from a.
Stefan Descheemaeker: Well, you know, after six, seven, eight, nine years, if you do this, when the two-third, the two-third is becoming enough itself, 90% of the business. And so, you have to do it again. And that's what we just did last this year, is to take the most profitable, most important battles, and start again from a two-third to make sure that, you know, the resources we have are going to be properly allocated. Well, we intend, we think that between these two-thirds and the gross platform, this is going to quickly become again, you know, 85%, 90%. And then again, and again, and again, I think that's, you know, the, what, that's, that's, that's allocation in action.
Speaker Change: Two third to make sure that you know the resources, we have are going to be properly allocated it well. We intend we we think that between these two thirds and the growth platform. It is going to quickly become again, you know 80, 590% and then again and again and again I think that's you know what that's what that allocation.
Speaker Change: In inaction.
Stefan Descheemaeker: Got it. No, that's helpful.
unknown: Got it. No, that's helpful. And then I was just wondering, on the margins in each of those categories, and maybe a little bit further, as you go through the year, did you expect most of the margin contribution to be from the improving mix there or underlying margin improvement, or is it just volume leverage off of all of that?
Speaker Change: Got it that's helpful. And then I was just wondering on the margins in each of those categories and maybe a little bit further as you go through the year do you expect most of the margin contribution to be from the improving mix. There are underlying margin improvement or is it just volume leverage off of all of that.
unknown: Ends the game with a category that is doing well during these uncertain times.
Ruben Baldew: And then I was just wondering on the margins in each of those categories, and maybe a little bit further, as you go through the year, did you expect most of the margin contribution to be from the improving mix there, or underlying margin improvement, or is it just volume leverage off of all of that? Yeah, so what you've seen in quarter two is a big benefit of mix. But it's also, we're about to notice that with kind of decent inflation, the benefits of our, you know, supply chain team, what they're doing, in fact, trees as well as logistics, we're going more evidence.
Yes, so what you've seen in quarter two.
Speaker Change: The big benefit of mix.
Ruben Baldew: And that would have been actually already more evidence in quarter one word, not for the inventory revaluation. And that is what we continue to drive. We will continue to drive those mixed benefits, and we'll continue to drive the benefits in the, in the, in the, in the supply chain. We have pretty good line of side now, because at this moment, we're covered around 90% in terms of cost outlook. And we said we see that inflation has eased. There are some pockets, but you always have with some inflation like La Cacao, but it's not the biggest part.
Ruben Baldew: It's only for 20% and the nice thing. So we'll continue to drive the benefits in mix, and in the supply chain contributions. And then again, how we will use those, it could be that some of that, again, we will use surgically for shop flow investment, promotion, or an AP, or in the, in case of ability, in terms of the organization.
Stefan Descheemaeker: Great, thank you. And then last one, if I could, are you expecting to regain share in the back half, just given the growth of the category being as strong as it is? The answer is yes. And again, very much back to my focus behind Muslim battles overall, yes. The answer is yes. But obviously more investment battles than the other categories. Yeah. And to build on that, driven by our ability to invest and link to this pension case.
Unknown Executive: Understood. Thank you.
Peter Saleh: You're way good. Unexquestion comes from Peter Saleh on BTRG. Please go ahead. Great. Thanks for taking the question. Good morning to everyone. I did want to ask if you could just elaborate a little bit on your comments on the European consumer in general. It sounded like they're still pressured, but those pressures have eased.
Stefan Descheemaeker: That just seems like a little bit of a tone shift for maybe what we heard a quarter or two ago, and the modest shift to more premium items. Can you just elaborate on what you're seeing and maybe what's changed for the European consumer over the past couple of months? Well, I think you're getting rid of being too micro because you have a lot of different situations, but overall what we see is, well, interest rates going down a bit. You know, that's one thing: inflation obviously easing, especially in Europe compared to the US. And well, you know, I think it has immediately an impact in terms of consumer confidence, especially with the, let's say, the most important items like food, for example.
Stefan Descheemaeker: So we've seen this, but again, you know, what I think we've calibrated over the right way, which is, you know, improvement, but it's less challenging. That's what the word we're using because we're not fully out of the word yet. But let's say because people have to digest something like a 20% inflation, so that's not something. That's not nothing. Sorry, but at the same time, yes, head of us, head of people see, obviously, salaries are increasing. In the meantime, the salaries are always coming after the first inflation, so people are seeing this, and then they see that it's possibly been income improving, I would put that way.
Stefan Descheemaeker: That's a situation overall that we see in Europe.
Stefan Descheemaeker: And again, with the category that is doing well during these uncertain times.
Ruben Baldew: Understood, and then can you just give us an update on what you're expecting for inflation, for the bounce this year. I believe you're probably mostly contracted at this point for the rest of this year. Any thoughts on early for 2025 at this point? Yeah, so what I said, we're covered now around 90%, 91%, 92%. So we're pretty good line of sight of what will happen this year. And again, once said, you know, we'll continue to drag mix and supply chain efficiencies and then look at the best way of investing, also in the context of driving our flywheel.
Ruben Baldew: I think it's still a little bit too early to get first line of side for 2025. I mean, as Stefan said, the inflation, the big heavy increases overall are behind us, but there’s still some pockets where we see inflation. I think it's too early. Common on that at this point in time. Thank you very much.
unknown: I think it's too early to comment on that at this point.
Unknown Executive: Ladies and gentlemen, we have reached the end of the question-and-answer session.
Stefan Descheemaeker: Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand over to Stefan Descheemaeker for closing remarks.
Stefan Descheemaeker: I will now hand over to Stefan Disha Marker for closing remarks. Thank you very much. And thank you for your participation on today's call. As we committed to you at the start of the year, our growth flag was beginning to spin faster, as evidenced by the positive volume inflection scene this quarter and the commitment to accelerating organics as growth through the second half of the year. This, in turn, we set us up to sustain momentum in 2025 and deliver top-tier, top-end bottom-line growth while continuing to return cash to shareholders.
Stefan Descheemaeker: As we committed to you at the start of the year, our growth flywheel is beginning to spin faster, as evidenced by the positive volume inflection seen this quarter and the commitment to accelerating organic sales growth through the second half of the year. This, in turn, will set us up to sustain momentum in 2025 and deliver top-tier, top- and bottom-line growth while continuing to return cash to shareholders.
Stefan Descheemaeker: Thank you for your time, and I look forward to engaging with many of you in the days and weeks ahead. .
Operator: Thank you for your time, and I look forward to engaging with many of you in the days and weeks to come. Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending.
Operator: Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.
unknown: © BF-WATCH TV 2021 © BF-WATCH TV 2021 ?? ?? ?? ?? ?? ??
Speaker Change: [music].
Unknown Executive: Thank you for watching, and see you next time.