Q3 2024 Nomad Foods Ltd Earnings Call
Good day, ladies and gentlemen, and welcome to Nomad Foods third quarter 2024 earnings Conference call.
At this time all participant lines are in a listen only mode.
A question and answer session will follow the formal presentation.
Please note that this conference is being recorded.
Speaker Change: I would now like to turn the conference over to Jason English.
Speaker Change: Of Investor Relations.
Speaker Change: Okay.
Speaker Change: Hello, and welcome to Nomad Foods third quarter 2024 earnings call.
Speaker Change: Jason English head of Investor Relations and I'm joined on the call by Stephane Matchmaker, our CEO and rooftop our CFO by now everyone should have access to the earnings release for the period ended September 32024 that was published at approximately 645 am eastern time.
Speaker Change: This release and Investor presentation are available I know Maximus website at Www Dot Nomad foods Dot Com. This call is being webcast and a replay will be available on the Companys website. This conference call will include forward looking statements. They are based on our view of the company's prospects expectation and intentions at this time actual results may differ.
Speaker Change: Due to risks and uncertainties are discussed in our press release, our filings with the SEC and in our Investor presentation, which includes cautionary language well also discuss non <unk> financial measures during the call. Today. These non <unk> financial measures should not be considered a replacement for and should be right together with <unk> results.
Speaker Change: Users can find the ifr S do not ifr S. Reconciliations within our earnings release and in the appendices at the end on slide presentation available on our website. Please note that certain financial information within the presentation represents adjusted figures for 2023 and 2024, all adjusted figures have been adjusted primarily for sure.
Speaker Change: Payment expenses and related employer payroll taxes, nonoperating M&A related cost acquisition purchase price adjustments exceptional items and foreign currency translation charges or gains unless otherwise noted comments. We're here, we're referring to those adjusted numbers with that I'll hand, it over to Stephane.
Thank you Jayson.
Stephane Matchmaker: <unk> delivered another quarter of solid top and bottom line performance.
Speaker Change: I'm pleased with the progress our teams continue to make in accelerating profitable volume growth.
Speaker Change: The third quarter was our ninth consecutive quarter of organic sales growth.
Speaker Change: Second consecutive quarter of volume growth.
Speaker Change: The growth continues to be concentrated beyond all profitable machine bottles and growth platforms.
Speaker Change: Which are yielding healthy margin mix benefits.
Speaker Change: The mixed data with <unk>.
Speaker Change: Combined with productivity and price net of cost benefits due to promotional timing super busy.
Speaker Change: Gross margin of 390 basis points year over year, Jordan, you all time quarterly high of 32, 3%.
Speaker Change: Adjusted EBITDA rose, 19% year over year, and adjusted EPS Rose, 28% year over year to 55 Euro cents as a results.
Speaker Change: The solid margin performance gives us the fuel we need to reinvest back into the business to keep the commercial flywheel that we first introduced to you last year's meeting.
Speaker Change: The investments associated with the flywheel are beginning to bear fruit.
David by a return to market share growth this quarter.
Speaker Change: The third quarter results are even more impressive.
Speaker Change: When put in context, the greater the unexpected temporary headwinds.
Speaker Change: Oh, yeah, the implementation as we faced in the quarter.
Speaker Change: Service level, so football period of time.
Speaker Change: Those are to reduce in market support to dampen demand and limited out of stocks.
Speaker Change: I'm proud of both teams ability to overcome these obstacles and I'm happy to report that those service levels are returning to near normal levels.
Speaker Change: We were able to nimbly adapt to the challenges and delivered strong bottom line results. This quarter as we pulled back promotions and change the volume price mix at the top line.
Speaker Change: The impact of wafer that's caused us to lower our full revenue outlooks.
Speaker Change: We will not cut down on the investments on our brands and business and therefore modestly lowered our full year EBITDA and EPS all to get the results.
Speaker Change: We will continue to fuel our growth for both the short and the long term recovery into positive market share in the third quarter is a result of our commitment to invest behind our categories brands products and people.
Speaker Change: Oh volume sales and share growth up accelerated further so far in the fourth quarter.
Speaker Change: We are seeing improved momentum in market no not committed to spending behind this momentum to ensure that it translates into more robust organic sales growth in the fourth quarter and into 2025.
Speaker Change: As we detailed at the recent conference also remains growth advantage.
Speaker Change: We are in a relatively healthy market.
Speaker Change: Unlike the U S European consumers pulled back meaningfully during the course of the evening clauses.
Speaker Change: Which weighed on the industry volume and boosted private label share.
Speaker Change: European consumers know rebounding of that pullback.
Speaker Change: Volume for the <unk> industry is growing across all major European markets year to date.
Speaker Change: Labour games, a slowdown brand have accelerated.
This backdrop becomes even more favorable when you zoom into a product category.
Speaker Change: As we illustrate on slide four volume growth for the protein category continues towards base over and food industry.
Speaker Change: Why are we so category volume growth during the quarter against tougher prior year comparisons we are beginning to see reacceleration in the fourth quarter.
Speaker Change: Yes, I think I referred to in volume and value growth was up 2% and two 6% respectively.
Speaker Change: In the most recent four week periods.
Speaker Change: And O'brien.
Arriving muscle this growth while private label share is no constructing bras.
Speaker Change: Regain market footprints.
Speaker Change: As we just wait on slide five Oh actions I've been turned on market share growth in the third quarter.
Speaker Change: We show a baidu shell this job and the story is the same through the bottom lines.
Speaker Change: Our marketing merchandising and innovation efforts are driving these results and the improvement is even more impressive.
Speaker Change: Even though we got the in market activity in the UK and Ireland this quarter to limit auto stocks as a result of the.
Speaker Change: I'll be disruption.
Speaker Change: We're achieving the success with concentrated marketing merchandising and innovation efforts beyond the work that forms which.
Speaker Change: It's growing net sales by 11% in the third quarter and the must win battles, where sales rose 2% this quarter. Despite the ERP disruption in the UK and Ireland.
On slide six you can see a handful of innovation that have just recently been launched across our western European markets. The team continues to build on our successful must win battle in U K with new chicken shop items.
Speaker Change: By investing in a potential growth platform with the launch of <unk>.
And why potential as a growth platform in the UK the must win battles in France, and you can see the season that items, we are bringing to market.
Speaker Change: Under the fitness brands.
Speaker Change: Italy, We're building all know early bullshit success with the launch of new chicken currencies in the third quarter, while also expanding our range of premium fish products, which is a growth platform for us in this market.
Speaker Change: And in Germany, where fish is the must win battle.
Speaker Change: Investing beyond the recently launched regionally inspired varieties.
Speaker Change: Such as military and Mexicana Crusted fish.
Speaker Change: In Belgium, we launching exciting vegetable which means projects in a bold and launching what's what base vegetable meat solutions in Portugal.
Speaker Change: These twin engine of innovation.
Speaker Change: Must win battles and growth platform.
Speaker Change: You speeding up in also eastern European markets as well.
As a reminder, we entered so eastern Europe with the acquisition the acquisition of faulty Nobody's group frozen food business in late 2021.
I go prior M&A. This has proven to be a great deal for us.
Speaker Change: 24 cities, not just EBITDA and saw decent Europe.
Trucking high teens above our forecast at the time of the acquisition.
Speaker Change: Momentum is sustained with net sales up 8% year to date.
Speaker Change: In part via innovation, we have.
Speaker Change: Highlight some of these new products on slide seven.
We command a leading share of the ice cream market in the region and I'll focus early this year was on maintaining that strength into the peak summer season.
Speaker Change: Our team has achieved just stopped looking.
Speaker Change: King Brian hit a record high share of the impulse ice cream category into Asia, driven by innovation and the highly effective marketing campaign.
Speaker Change: We're seeing great growth behind it Brian in Serbia, as well with a similar playbook.
Innovation is driving this growth and getting recognized more broadly.
Speaker Change: And this year International ice Cream consortium conference.
Speaker Change: King Supreme and layers. One first this is the best ice cream category, while the King obsession layers, one second place for most innovative ice cream.
Speaker Change: We're winning awards and more importantly, winning more seats.
Speaker Change: Our differentiated innovation behind the brand is driving shade, the multi serve segment as well.
Speaker Change: We are successfully growing our business is south eastern Europe.
With new premium offerings, and gaining share from brands like Ben <unk>, Jerry's Hagen Dazs and Magnum.
Speaker Change: And our investment is not isolated to ice cream.
Speaker Change: Premium efficient prepared vegetables ought to have a growth platform in the squads in these markets, where we are lifting our product concepts and capabilities from other markets to launch here.
Speaker Change: For context, the average household penetration for fish fingers and certain pleasure is half of what it is in Germany, while being on your third focal disease.
Speaker Change: Frozen fish segment this market.
Speaker Change: Historically been dependent on lower margin natural fish, and we are changing that with innovation over the past year. We have invested in a full 360 degree campaign centered around premium innovation and it has yielded results.
Speaker Change: Year to date, the officer safety, Croatia, uplift, 16% year over year and 30% in Serbia.
The fourth quarter, we leverage also in eastern European boats or direct store delivery network.
Speaker Change: 120000 old stories of that retail.
Do we pick any success in vegetables.
We plan vegetables have gone from more than one quarter of the fruit and vegetable markets in western Europe, but are virtually nonexistent and southeastern Europe.
Our research tells us that the demand is there and we intend to unlock it with marketing innovation, including the new projects the new product.
Speaker Change: Products you see on the slide.
Speaker Change: These products began to hit store shelves in October.
Speaker Change: This could become more than 30 million Euro Leu segment in the category if it evolved to look like Western Europe overtime.
Speaker Change: We have a lot of actions and the way to keep our momentum in southeast Eastern Europe going.
Speaker Change: These are just some of the examples I've made me excited about our future.
Speaker Change: On the grill category, leading brands that are lined with secure convenience nutrition value with these strengths, we are investing to maximize our growth potential and I'm pleased to see the commercial flywheel delivering market share growth.
Speaker Change: Our marketing and the <unk>.
Speaker Change: And I think is improving and our innovation framework is only just beginning deliberate multiyear pipeline of products to market.
I'm pleased with the progress we're making in confidence you know growth trajectory.
Speaker Change: With that.
Speaker Change: Let me turn it to our CFO Robin, but you walk through our quarterly results and outlook in more detail.
Robin: Thank you Stefan and good morning, everyone.
I'm approaching my five month anniversary with concrete and can honestly say that I'm increasingly confident that our major acquisition to join us.
Robin: We are in a great category and testing nutritional credentials and a great team thought that our brands are strong and our plans to drive growth with compelling innovation impactful marketing and the leveraging of our platform are robust.
Robin: We are well positioned to continue delivering strong results in a sustainable manner.
Robin: Before I go too deep into the results, let me address the transitory headwinds we faced this quarter.
Robin: As we discussed last quarter, we began to upgrade our ERP system to ask for Hana as our UK and Ireland.
Robin: Including add four factories in the August.
Robin: As with all major ERP transformation, we had a planned shutdown of operation. However, we faced some challenges with assistant changeover relating ramping up again of our production capabilities.
Robin: To minimize out of stocks, we began to curtail in market promotional activity I'm.
Robin: I'm happy to say that we have successfully been working through these problems. Our service levels are getting back to near normal levels and we see progress on various processes week. After week. So we believe we have worked through this let's also be absolutely clear that we are capturing the learning learning cell based to prevent repetition.
Future.
Robin: First of all.
Robin: Albeit painful we have gone live on our EPA system in our biggest business, including four factories future ways will be smaller.
Robin: Secondly, the learnings we are seeing on the system and processes will be of great value for the implementation of the rest of the plan.
Robin: Allowing us to improve.
Robin: <unk> processes and system application, we noticed since the much better now and this will help us enormously.
Lastly, we will re plan go lives both ways with other countries in factories in a way that we believe will help us to ensure that the transition goes more smoothly and the future <unk>.
In short we have suffered some growing pains with the first wave of upgrades the implementation, but we have worked through them and taken steps to ensure we learned from that.
Robin: Turning to results as you can see on slide eight or nine quarters third quarter reported net revenues increased by <unk>, 8% to 717 million Europe.
Robin: Organic growth was <unk>, 3%, which marked our ninth consecutive quarter of organic growth. Despite an estimated two 5% headwind related to our ERP implementation.
Robin: Online growth therefore, nearly 3% shows that our strategy in the market is successful and working.
Robin: Volume growth remained positive for the second consecutive quarter rising plus <unk>, 7%.
Robin: Price mix was minus <unk>, four offset volume growth.
Robin: The ERP transition cost us to rebalance promotions, resulting in less of a price mix headwind than we had initially expected.
Robin: The lower promotional support combined with favorable mix and ongoing net productivity to drive gross margin plus 390 basis points year on year to a new quarterly record high of 32, 3%.
Robin: Roughly 200 basis points of gross margin expansion. This quarter came from more favorable price net of cost than we had expected as we curtail promotional support to mitigate ERP disruption.
Robin: It was driven by a combination of mix benefit as we wind our must win battles and also from our supply chain productivity airports.
Robin: This quarter's robust gross margin drove a 15% increase in gross profit, which was amplified by a more modest 7% year on year increase in SG&A to drive a 90% increase in adjusted EBITDA.
Robin: A&P was roughly flat year on year as some of our planned investment plus deferred for the fourth quarter, while interest expenses rose less than expected due in part to a bonus accrual adjustment given the weaker than expected revenue growth and various other cost control efforts.
Robin: Adjusted net income rose, 22% year on year, while adjusted EPS Rose, 28% to 55 Euro cents.
Robin: Our diluted share count shrunk, 5% year on year.
Robin: Turning to slide 10, our strong profit performance continues to translate into healthy cash flow that we are increasingly returned to shareholders in the form of a recently established dividend.
Robin: Year to date adjusted free cash flow was 105 million Euro, which was down year on year, mainly due to higher working capital.
Robin: Working capital seasonally rose as we acquired what proved to be strong harvest inventory and began to rebuild production inventory late in the quarter ahead of fourth quarter sales.
Robin: We also saw a drag on our receivables due to shipments on August sales in certain markets were negatively impacted by ERP and we began to catch up later in September which caused some timing distortion in receivables.
Robin: Both of these working capital dynamics are expected to reverse in the fourth quarter.
Robin: Turning to our guidance for 2004 on Slide 11, we are pleased with the progress. The team has made improving in market results and restoring our market share to grow.
Robin: We however, do not expect to recover the ERP related sales, which we lost in the third quarter.
Robin: Which combined with some disruption that carried over into the fourth quarter and slightly more conservative growth assumption, that's caused us to lower our full year organic sales forecast two plus two plus two from 3% to 4% previously anticipated.
Robin: And as Stefan mentioned, we remain committed to investing behind our patients and they have not pulled back on the investments, resulting in a modest reduction in our profit outlook.
Robin: We believe that the decision to maintain our investment level to.
Robin: To be the right one over time.
Robin: We now expect full year, adjusted EBITDA growth to be within a 3% to 5% growth range and adjusted EPS of one year of 72 to 177, implying growth obsessed with 10%.
Robin: Based on US dollar Euro exchange rate as of November the seventh this translate into 24, adjusted EPS of $1 86 to $1 91.
Robin: In regards to the fourth quarter guidance implies meaningful sequential acceleration in sales growth, but also a sequential step down profit margin as a reminder, our fourth quarter has a seasonally lower gross margin than our full year average given small gave us a smaller contribution from our high margin. So.
South Eastern European business.
Robin: The favorable gross margin benefits promotional timing are also expected to reverse in the fourth quarter and we expect the combination of sequentially higher A&P and indirect due to some effects of bonus accruals and facing opportunities to translate into low single digit year on year increase in total SG&A expense for the quarter.
Robin: Still at the midpoint, our guidance implies EBITDA and EPS growth of roughly 10, and 19% respectively in the fourth quarter, which I'm sure you will agree our healthy growth rates.
Robin: Cash flow, 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 almost 10 million euro to investors as we have now returned 67 million year on year to date through our newly established dividend and 43 million.
Through our share repurchase program.
Robin: We declared our fourth quarterly cash dividend of <unk> 15 per share two weeks ago, highlighting our strong consistent cash flow and our commitment to consistently deploying cash in value, creating ways for our shareholders. Overall I'm pleased with the progress we are making our teams did a fantastic job overcoming hurdles.
Robin: <unk> and I want to personally thank them for their hard work and accomplishments, we exited the quarter or more firm footing and are off to a strong start to the fourth quarter.
Speaker Change: With that I will now turn the call back to the operator to open the line for questions.
Speaker Change: Thank you.
Speaker Change: We'll now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question.
Speaker Change: Please press Star then two.
Speaker Change: <unk>.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Andrew Lazar with Barclays. Please go ahead.
Andrew Lazar: Great Good morning, everybody.
Andrew Lazar: Yes.
Andrew Lazar: Can you hear me Stefan.
Speaker Change: Yes, we can hear you loud and clear. Thank you very much excellent. Thank you I guess in the Pea.
Andrew Lazar: Last few weeks.
Andrew Lazar: Bunch of packaged food companies, while not providing detailed guidance yet for 25.
Andrew Lazar: Ive sort of said they already know enough to know that next year, you're still going to be a sort of below algorithm year for a lot of them.
Speaker Change: I know, Matt excluding the ERP impact in <unk> and looking at your implied organic sales guidance for <unk>.
Speaker Change: Organic growth would already be within your 3% to 4% long term algorithm in the back half of this year.
Speaker Change: So I guess my question is.
Does that give you sort of the visibility that this sort of trajectory can continue into next year, even though I know you're not likely prepared to give sort of formal 25 guidance yet.
Speaker Change: Let me start with your father would that represent.
Speaker Change: This away from giving any guidance will reflect this.
Speaker Change: <unk>.
Speaker Change: Frozen food in Europe is a great category.
Speaker Change: It's it has delivered you know nice sales growth year after year <unk> you take the last 10 years.
Speaker Change: Obviously with pluses and minuses, it's been around 3%.
Speaker Change: Obviously, when inflation is higher to be higher with lower volume and vice versa. So we getting all of these high inflation. So we more than the subdued inflation. So probably you know.
The market is slightly below this is 3% with on top of that to your points on top of that you know we have all of our programs.
Speaker Change: They are delivering well.
Speaker Change: To your point I think there was this one off that you see.
Speaker Change: What we're doing for the last four months.
Speaker Change: Hum.
Speaker Change: We started to regain market share and in terms of value and in terms of volume in <unk> eight which is equivalent of mid July mid August we started not in P. Eight.
Speaker Change: We increased the issue and P&I around 30 basis points.
10, 40 basis points.
And we just received was around 95% of all 11, two Florida market's missing.
Speaker Change: And we have something which is equivalent and by the way interesting to see.
Andrew that even including UK. Despite you know or issues. So that's obviously, it's it's a testament to our program with all must win battles with the gross profit growth platforms, and obviously no. We can see that innovation after lower level last year, which is normal by the way.
Speaker Change: During this time I think we really starting to come back we're doing well lift and launch in many countries sports we're doing well. So yes. We are we are very we're very pleased with what we see and Oh, we can see the next year, but to your point.
Speaker Change: Youll find the words I, particularly obviously offer any guidance for 2025, yeah I understand that.
Speaker Change: And then one last one you did mentioned.
Speaker Change: And Ruben mentioned it.
Speaker Change: In addition to just the ERP issue, which I know you're largely you're largely through.
Speaker Change: You did talk on the in the release about a little bit more of a more conservative growth assumption for the rest of the year.
Speaker Change: So that's kind of separate from anything ERP related and I'm, just curious what's sort of underpinning that thanks, so much.
Speaker Change: Well the thing is when you when you break it down and you take before.
Speaker Change: Yes. It is a range between three and seven but I think everybody will agree that it's still a very much. It's a very these are very healthy numbers.
Speaker Change: So that's I think that's the way I would stop.
Speaker Change: We are very encouraged with what we see for the first six weeks as I said, because it's not only market share gain but it's also the sellouts are doing well.
In PAGP 90, 10 in <unk>.
Kevin: Kevin So that's good.
Kevin: We'll have a bit of spillover of Av.
Speaker Change: Oh ERP.
Speaker Change: And then the thing is and I think it's it happens all the time and we prefer to be a big.
Speaker Change: Cautious because every time they will be getting out of the crisis.
Speaker Change: Markets are more volatile so we prefer to get to be that way and to be comfortable with.
Speaker Change: The numbers, we are providing and should know what grow the range still a very healthy range by the way.
Speaker Change: Yeah. It makes sense. Thanks, so much appreciate it.
You're welcome.
Speaker Change: Thank you.
Speaker Change: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.
Speaker Change: Great. Thank you so much.
Speaker Change: I guess, maybe building on that a little bit just as you describe.
Speaker Change: Yeah, the the ERP experienced this past quarter. It does sound like things are getting back on track with learning is being applied to future waves, which is all great.
Speaker Change: But I'm I'm I'm curious as to you to talk about them as a as a transitory setback.
Speaker Change: But when you when you step back and look at it is it truly transitory or do you think there's been some more lasting.
Speaker Change:
Speaker Change: You know impacts such that it's going to take you a little bit longer to get on the.
Speaker Change: But the acceleration plan and program that you had laid out for yourselves back in July and August I'm trying to figure out how much of this is sort of really just a one and done thing or it really has altered.
Speaker Change: The go forward planning and perhaps related to that you know if you could give us an update on what the overall timeline to roll out S. For Hunter is enterprise wide from here that'd be great.
Speaker Change: Yes. So the short answer is no it has not altered our plans so.
Speaker Change: So just take a step back to clarify what happened and where we are now to what Stefan said I love myself sat.
Speaker Change: As we are getting out of this that I've just shared the 11 shares we've gained market shares in U K.
Speaker Change: That wouldn't be happening if we still would have a major issue. So we got to the weaknesses that we're improving our service level levels are getting back to near normal levels. We had before so we're getting out of it I think that's one point.
Speaker Change: Then to your question into 2025 start two or three elements there.
Speaker Change: First element is we have to go lives like I said on our business and you've seen our interim statement, which is close to the U K business the size, but I can say its roughly a third of our business the size of a billion.
With four factories, after which a couple of big factories future waves will be small so just in terms of the size and the risk profile that will be a different size quite a different size. That's the first one second point. This was the first caller.
Speaker Change: And we'll all go lives and I think you'll also see in other countries for the ERP. This is where you really learn how <unk> works and we really have learned now how the system works and we will apply albeit painful but we will apply these lessons for huge west. So that's just that.
Speaker Change: The third point.
We will also plan and it links to your question.
Future waves in such a way that we can prepare Duke testing do design properly. So that also launched base now that means that there will be a longer transition. So this year.
Speaker Change: Wage boomed and in 2025, I think we it's not here in this call to say and give an exact date, but we will do this properly and make sure that there's no disruption I think the other point you raised.
Speaker Change: Well this ultra plants no.
Speaker Change: <unk> heard Stephane talked about our performance in the market things, we've already done and we have continued to do show like our GM plants, we will continue to drive those into 25% to 26, <unk> tooling, allowing us to better execution at the shop floor, well just continue to do that.
Luca: Cost competitiveness Luca.
Luca: Look at the elements that our factories, we will just continue to do that so we don't see an impact of any plants.
Speaker Change: Okay. That's that's very helpful.
Speaker Change: I, maybe a little bit of a build on that so the 200 basis points of price net of cost favorability that you saw this quarter, we think about.
Speaker Change: The fourth quarter is that do we just now shift back to normal or do you do you anticipate like some makeup where you're going to.
Speaker Change: Invest a bit more than that in the pricing line promotion line to kind of make up for some of the <unk> falloff.
Speaker Change: Yeah. That's a good question. So did you just say if you compare quarter for first quarter for each of you look at margin sequentially, you have to probably noticed but just for the avoidance of doubt.
Speaker Change: That over the last three years, there's roughly 200 basis bonds 200 basis points decrease quarter for first quarter free which has to do with mix because there's a lower element of our ice cream business, which has higher gross margin. So it is around 200 basis points drop on average, which you will see in the last few years. That's the first one the other point is exactly what you said, we had 200 basis point net of.
Speaker Change: Cost benefit out of that hole that basis point was off a different base promo.
Speaker Change: And we don't expect that to continue into into quarter, four and so you're right on that one okay very good. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Rob Dickerson with Jefferies. Please go ahead.
Speaker Change: Okay.
Speaker Change: Great. Thanks, so much.
Speaker Change: Stephane I just wanted to go back to the chart.
Speaker Change: You guys have been kind of showing that at least the past couple quarters I'm just around.
Speaker Change: Frozen.
Speaker Change: It continues to out pace.
Speaker Change: Total food within Europe, and then I think you made the comment earlier, where you said all European markets were actually growing.
Speaker Change:
Speaker Change: So and then the commentary you just kind of round it seems like the consumer staying home with better. So you know while I understand you know there's kind of a shift in Q3 to Q4, you know ERP seems to be.
Clearly better in Q4.
Speaker Change: And you're not guiding for next year.
Speaker Change: When you step back kind of more on the macro basis to where the consumer is like do you feel like there should be some kind of like clear bellbird totally just consumption rates.
Speaker Change: You know kind of as we get through the next six weeks right until we hit 25.
Speaker Change: Such that you know, yes, there should be some momentum just on the base ex ERP kind of ex expansion markets new products, just kind of getting back to a normal level of consumption growth given all the pricing and volume pressure over the past couple of years.
Well.
Speaker Change: Let me start back because that's exactly your question Rob.
Speaker Change: When you do when you're taking the category the frozen food category in Europe.
Speaker Change: And we are the category, we mostly very healthy protein.
Speaker Change: Chicken.
Speaker Change: Fish and then this two third of our business is this which is quite different from what you see in the U S.
Speaker Change: That's the first piece so we definitely represents between frozen food and what we are we really good too and I think this week.
Speaker Change: Together with.
Speaker Change: The affordability together with healthy and tasty, it's really becoming a competitive advantage and I think you know we mentioned that.
Speaker Change: The frozen food has been doing well over the last 10 years has been performing food and I think we keep it that way when you see the fundamentals then.
Speaker Change: Again back to comparison with the U S.
Speaker Change: As we have a long way to go in Europe.
Speaker Change: When you compare to the let's say the the broker that consumption, which is pretty high in the U S.
You gave me the way that you have all the other countries, which are probably something like 50% lower than what you have in in the in.
Speaker Change: In the U S and and it's definitely we've seen this is designated category that is expandable.
Speaker Change: Planning less.
Speaker Change: You know frozen foods learning more all the food. So the combination of all these things, yes, we love we love frozen food I think you know we love Love Love. The fact that we are focused beyond this category.
Speaker Change: Obviously, we think we as a leader we definitely we want to lead the category and then on top of that you obviously have all of our programs in terms of.
Mr battles in terms of growth platforms.
Speaker Change: <unk> chicken, which is a big thing for us.
Speaker Change: Then something that you know, we really lifting up no which is innovation for all these reasons, we are as a category leader in the Grill category. Yes. We are we are we are very positive about this category in the future.
Speaker Change: Okay, Okay good enough.
Speaker Change: And then I guess just coming.
Speaker Change: Coming back to the ERP conversation for a second.
Speaker Change: It sounds like maybe there were some out of stocks right. There is some dislocation.
Speaker Change: Relative to kind of your shipment ability.
Speaker Change: That's pretty Simplistically, how can we think about Q4, maybe the early part of next year like is there is there a need for any kind of inventory build.
Speaker Change: Build I guess, especially it sounds like kind of more focused on the U K or maybe more chicken.
Thanks.
No I don't think it is an inventory build what you've seen and what we've seen in quarter three was the impact on the supply and his epitaph. That's also the reason why we lowered promotion.
Speaker Change: We're getting out of that week. After week, we have positive shares but the mix is not fully yet where we want it to be and we see that in the year to date, we've quite some margin mix benefit maybe quite a four will be a bit different because we're getting out of it but we expect that thing to the next year to be normalized.
Speaker Change: Okay, Great makes sense. Thank you so much.
Thank you.
Speaker Change: Again, if you wish to ask a question you May Please press Star then one.
Speaker Change: The next question is from John <unk>.
John Gartner: Gartner with Mizuho. Please go ahead.
Speaker Change: Hey, good morning, Thanks for the question.
Speaker Change:
Speaker Change: Hassan I I wanted to come back to the retail sales and you're still on a positive trajectory the market shares growing as you noted and I'm curious as you know lap the increase in reinvestment that you began Q3 Q4 last year. How does the execution change is the plan that brought you to this point in the recovery are those same initiatives poised.
To continue are there changes you have to make in terms of programming size or type of investment that we should expect going forward for the next phase of recovery. How do you think about the marketing investments from here.
Speaker Change: Well I think we said that we're going to grow A&P.
Speaker Change: We started that in Q4 last year and we keep doing it and we have all the intent obviously to make sure that we're going to keep it that way end of the year, but also obviously more.
Speaker Change: Importantly, even in 2025, so so far you know year to date.
Speaker Change: E&P is up something like 17%.
Speaker Change: Which is significant.
Speaker Change: What we want to do is obviously to keep you know this pipeline of E&P for next year. The rest is very much in line with the with the flywheel a great example is Italy in fish.
Speaker Change: We've been through the hole, but the old flywheel, we view that though all fish fingers, where probably a bit too high. So we've reduced pro in price. That's one thing. We also came with a big increase in terms of A&P with renovation with the promo with activation of the store level and we see the numbers. So that's it.
Speaker Change: Really responding extremely extremely well so that's the so that's basically it.
Speaker Change: Fox based and that is basically the same model that we repeat and repeat and repeat of the game.
Speaker Change: Based on this flywheel and the must win battles is the growth platform, which are doing extremely with us even pepsi.
Is there anything to define it in terms of the lift on promotion are you doing different things now putting the shelving into the fresh produce part of the store.
Speaker Change: Thinking back to 2016, when you had the last big increase in marketing and the must win battles has anything changed in terms of lift on promotion or lift on investment anything stand out that positively surprised you over the past year. Just curious how you think about that in terms of the lift on a relative basis.
Speaker Change: I think what we've done is little valleys or the year after year, we have completed.
Speaker Change: The program for example revenue growth management was very much limited to promo observation.
Speaker Change: When we started back in 2016, Jon I think no. It's a full the full story between though obviously price promo priced bonds, obviously trade margin. So and then so again I think it's it's not so it's not that you will see something significant or wherever we can see that.
Speaker Change: The odds are in better shape than before that's absolutely clear because I think it's more fundamentally is this flywheel covering all of the elements that we're tackling and there might be different by the way it category by category, even though it's a must win battles by must win battles the required the requirements are different so.
Speaker Change: That's the I think that the strength of our model by the way.
Speaker Change: And I think the.
Speaker Change: Plus there is the countries of the region.
Speaker Change: Really applying this you know quite rigorously.
Speaker Change: Okay. Thank you.
You're welcome.
Speaker Change: Thank you.
The next question is from the line of John 10, one thing.
Speaker Change: With CJS Securities. Please go ahead.
Speaker Change: Hi, Good morning, Thank you for taking my question.
Speaker Change: That was.
Speaker Change: Hi, I was wondering if you could talk a little bit more about the nature of the ERP headwind and if you did you incur significant cost to fix it.
Speaker Change: The elements of your contracts or S. L. A is there anything that covers offsets any costs that you'd sit there might be there.
Speaker Change: No there were no there were no.
Speaker Change: Material additional cost versus what we had planned I think what we've seen is that the ramping up took longer than planned.
Along with a new system I don't want to go in all details, but you learn assistant can.
Speaker Change: Give one one example for example, how the system interact with third parties, which suppliers and what that means in terms of Onboarding suppliers and third party and that took a bit longer to albeit at a lower than expected and are in the ramping up again that is an example, so it comes back to the point, it's only when you really turn on the new engine in the car.
Speaker Change: Did you learn all that engine works and we parents quite a lot.
Speaker Change: That's where we've got a couple of those learnings and let me also be clear no. We wouldn't have been gaining market share in P. 11, we're now north of a common yeah. So back to your point.
Speaker Change: There were a couple of learnings like you know how do you onboard with third parties, but nothing out of the ordinary and also in terms of cost that is still aligned with what was planned.
Speaker Change: Okay, Great and then I was wondering if you could preview a little bit just your thoughts on pricing both Tommy negotiations with your retail customers and from an input pricing perspective heading into next year, especially as we're seeing a little bit more you know currency movement in.
Speaker Change: The dollar and you know how that side of it.
Speaker Change: Seafood.
Rubin: What I can start and fees Rubin.
Rubin: So at this stage, where traditionally we always have one or two disruptions here and there with the whereas with retailers, we're not in that position.
Speaker Change: She is a good thing.
Speaker Change: The second piece is.
As.
Speaker Change: Obviously in a subdued inflation environment, you know you always have a negotiation so that would be.
Speaker Change: [laughter].
Speaker Change: What was strange not to expect the negotiation with the retailers, but definitely when inflation is lower I mean these conversations.
Speaker Change: Obviously a bit different.
Speaker Change: And I think on top of that when we us retail.
Speaker Change: Suppliers, we coming with more innovation with more A&P I think thats. The conversation is changing because it's not limited you remember back in 'twenty, two and 'twenty three it was all about price price and price.
Speaker Change: And people were not interested in innovation.
And the E&P was a bit lower I think we've we changing this.
Speaker Change: And that makes the whole thing much more.
Speaker Change: Much more manageable, we'll definitely.
Yeah and building on that so the dollar euro, which mainly as an impactful fish is an impact which all the European suppliers and customers are also buying private label will know about but then for US can quickly we havent hedging policy and you can see.
Speaker Change: Carrier, we are sufficiently etch. So on the short term, we don't expect an impact and actually kind of look at it from an opportunity perspective, because the dollar is increasing so we'll have a local private label is doing or competitors doing and take it step by step with your question concretely all willing to hit our bottom line on the short term the answer is no simsbury hedged.
Perfect. Thank you.
Speaker Change: Okay.
Thank you.
Speaker Change: The next question is from Peter Sally with BTG. Please go ahead.
Speaker Change: Great. Thanks for taking the question I was hoping maybe you could just comment I don't know if I missed this on the just the health of the consumer in some of your key markets.
Speaker Change: I know that consumer has been under some pressure over the past several years, but I think last quarter. You mentioned you were starting to see some of that is I'm.
Speaker Change: Starting to see some modest mix shift towards more premium products can you just give us an update there are you still seeing some mix shift towards more premium products. What's the health of the consumer are looking like in some of those key markets that'd be helpful. Thank you.
Speaker Change: Youre welcome well the thing is you know when the when you think about this inflation that goes when it goes quiet as I think it's.
Speaker Change: Probably started earlier.
Speaker Change: And then we had an impact definitely in 'twenty two 'twenty three.
And then what we can see is we're getting to be faster and.
And we see this clearly in terms of our global markets, which is which is doing better. So you've seen the numbers, let's say set out is in the region of 45% at this stage, which is which is fine.
Speaker Change: With low inflation, but it's also within the market. We also see private label, losing market share.
Speaker Change: Which is which is for us the good news and again it is exactly in line with what I said, which is we come in with more innovation coming with more NPV.
Sometimes we tweaking a bit the price the way, we did in Italy, but we did it.
Speaker Change: In the food.
Speaker Change: Taking into account the full flywheel with all the other elements and that's working so that's the that's the reason in on top of that you know as I said, you know a frozen food.
Speaker Change: In Europe with with them in a lot of edge a lot of poultry a lot of fish very healthy protein is it's a very good combination.
Speaker Change: Great. Thanks.
Speaker Change: Thanks for that and then I think you mentioned A&P investments up about 17% for this year.
For this year any thoughts on <unk>.
2025, I mean, just the rate of investment next year I'm not sure if youre ready to provide that.
Speaker Change: Well, we're not going to provide a number but definitely you know AMB is definitely something that I think it is the bread and butter of offer let's say of a brand leader.
Speaker Change: Thank you.
Speaker Change: If we are if we don't come up with the right level of innovation the right level of A&P and the right slide we quite frankly, the market is there to remind us that we can't be complacent and so in spite of the components and then we will keep it that way and we are the private the brand leader and we know what that is.
Speaker Change: An important component for not only for us by the way. It's also for the category.
Speaker Change: Understood. Thank you very much.
Speaker Change: Youre welcome.
Thank you.
Speaker Change: This concludes our question and answer session.
Speaker Change: I would like to turn the conference back over to Stephane desk maker for any closing remarks.
Stephane Matchmaker: Thank you operator, so as.
Stephane Matchmaker: As we committed to you at the start of the year.
Stephane Matchmaker: Our growth for flywheel is beginning to spin foster as evidenced by a return to positive volume growth this year will.
Stephane Matchmaker: Our market share has favorably inflected in the third quarter, and we are seeing acceleration retail and net sales growth so far in the fourth quarter.
Stephane Matchmaker: We believe we are on track to finish 'twenty 'twenty four with strong sales growth and I'm excited about the momentum we are building into 2025.
Speaker Change: So thank you for your time and I will now turn it back to you operator.
Speaker Change: Obviously finalizing the conversation.
Speaker Change: Thank you.
Speaker Change: The conference has now concluded.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].