Q3 2025 Nomad Foods Ltd Earnings Call - Q&A
Speaker #1: Greetings and welcome to the Nomad Foods Ltd quarter of 2025 conference call . At this time , all participants will be in a listen only mode and should you need any assistance on today's call , please signal a conference specialist by pressing the star key , followed by zero after today's presentation , there will be an opportunity to ask questions .
Speaker #1: To ask a question , you may press star , then one on your telephone keypad . And to withdraw a question , please press star .
Speaker #1: Then two . Also , please be aware that today's call is being recorded . I would now like to turn the call over to your host , Jason English , Head of Investor Relations .
Speaker #1: Please go ahead .
Speaker #2: Hello and welcome to Nomad Foods third quarter 2025 earnings question and Answer session . We've posted the Associated Press release , prepared remarks , and investor presentation on Nomad Foods website at Nomad Foods Ltd .
Speaker #2: Com . I hope you've all had a chance to review them . I'm Jason English head of Investor Relations and I'm joined by Stefan Descheemaeker , our CEO Ruben Baldew , our CFO , and Sir Martin Franklin , our co-founder and co-chairman .
Speaker #2: During this call , we'll make forward looking statements about performance that are based on our view of the company's prospects , expectations and intentions at this time .
Speaker #2: Actual results may differ due to risks and uncertainties discussed in our press release . Our filings with the SEC and in our investor presentation , which includes cautionary Language .
Speaker #2: We'll also discuss non-IFRS financial measures during the call today . These non-IFRS financial measures should not be considered a replacement for , and should not be read together with IFRS results .
Speaker #2: Users can find the IFRS to 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 the presentation represents adjusted figures .
Speaker #2: All adjusted figures have been adjusted primarily for , when applicable , share based payment expenses and related employer payroll taxes . Exceptional items .
Speaker #2: Foreign currency translation charges or gains unless otherwise noted . Today's comments from here will refer to those adjusted numbers . With that operator , let's open the line to questions .
Speaker #1: We will now begin the question and answer session . To ask a question , you may press star , then one on your telephone keypad .
Speaker #1: If you're using a speakerphone , please pick up your handset before pressing the keys . To withdraw your question , you may press star , then two on today's call , we ask that you please limit yourself to one question and one follow up during Q&A .
Speaker #1: At this time , we will pause this momentarily to assemble our roster . And our first question will come from Andrew Lazar with Barclays .
Speaker #1: Please go ahead .
Speaker #3: Great . Thanks so much . And welcome to Dominik . Maybe to start one for you , Martin . Nomad discussed quite a bit at our September conference about medium term goals , productivity and even some of the company expected to deliver positive EBITDA growth in 26 .
Speaker #3: Obviously , since then , Nomad has changed CEO's and investors I think , are rightfully asking whether those commitments sort of are still relevant as oftentimes a new CEO appointment can signal the need for some form of a profit reset .
Speaker #3: So I guess my question is whether Nomad still stands by those those recent comments at this stage .
Speaker #4: Thank you for your question . I would say a few things . First of all . These commitments and I feel like internal commitments and , and and goals are ones that are proved and studied by our entire board , not just , you know , our CEO .
Speaker #4: We made a few commitments that I think are are important , that are consistent . And what we've talked about already in our prepared remarks .
Speaker #4: Our €200 million , multi-year efficiency target , obviously , is still still stands . And it's still actively being worked on , I think quite successfully .
Speaker #4: The second our medium medium term goals to compound EBITDA in low single digits , those goals continue continue to be in place , in place , and you have to excuse me , I have a cold and and third , accelerating free cash flow growth by delivering EBITDA and also and importantly well reducing exceptional items .
Speaker #4: So I think all of these goals are in place . Obviously , when we bring in a new CEO , it's our CEO's prerogative to to evaluate everything .
Speaker #4: In fairness to Dominic is in he's in the company for three days . He doesn't take over as CEO until the year end .
Speaker #4: But we brought in Dominic because of his growth , orientation and in the business . So I'm excited to have him and only see this as being a positive in terms of our metrics of performance .
Speaker #3: All right . Thank you for that . And then maybe as a follow up , I know I think private label trends tends to lag branded price increases when when nomads led with them .
Speaker #3: And sometimes that's led to some temporary market share weakness in the past . I guess how is Nomad balancing sort of the pricing that you're going to be taking next year with keeping share momentum and maybe can your higher level of productivity help offset some of the inflation , such that maybe more modest pricing can be enacted than otherwise might have had to have been the case ?
Speaker #3: Thank you .
Speaker #5: Yes . Thank you . Andrew . Let me let me take that question . So first , the kind of price slack and dynamics , if we look at the last three months , the last six months , the last nine months , we've seen our price index versus competition and our competition mainly private label , slightly go down .
Speaker #5: So , you know , two , 3% , which is helpful in the context that we have to take pricing . I do have to say that's the average of an average .
Speaker #5: So of course you always have to go a bit more in the detail per country . And the specific product . But there has been a bit of catching up of , of of private label .
Speaker #5: So that's that's one thing . I think more importantly , and you were already giving half of the answer is , you know , what are we seeing for next year ?
Speaker #5: And we've been clear that the inflation really seeing most of the pricing we're going to take in quarter 126 . Now a couple of things there .
Speaker #5: The inflation in total is not the same level of inflation . We said that before like two years ago . We're looking around cost price inflation of around single digits .
Speaker #5: And that's probably at this moment what we're looking at . Second point also when you compare and that's also probably the question behind your question on competitiveness and not going to aggressive in terms of pricing and losing share .
Speaker #5: Our capabilities versus two three years are in a better place . And we said it before , we will do this very surgically .
Speaker #5: Third point is what you alluded to . We've launched this cost competitiveness program . And Martin also mentioned of 200 million . And we still passionately stand behind it .
Speaker #5: And by the way , this is not only forward looking program . You also heard in our remarks that in quarter three , but also in quarter two , we are delivering lower overheads , compensating for inflation .
Speaker #5: Even when you correct for the bonus release . So that cost competitiveness program , we will drive forward and that will help for us to make the right trade offs in how much should you price versus where actually do we have some offsets in savings ?
Speaker #5: We will also look at pricing , how that links with the renovation . So if we're looking at some , you know , renovation with different superiority , different product quality , we try to link that to pricing .
Speaker #5: So there's also new news both for retailers as well as consumers . And the last remark , just to be clear , I think it's just too early days to really see what the effects are .
Speaker #5: We are sending out the price list as we speak . It's already sent to certain customers in certain countries . There's a bit of difference overall , and we can come back more on that when we release our quarter four results in the new year .
Speaker #3: Thanks so much .
Speaker #1: And our next question will come from Scott Marx with Jefferies . Please go ahead .
Speaker #6: Hey , good morning . Thanks so much for taking our questions . I just wanted to follow up on a question that , that that Andrew asked about , you know , reiterating some of the medium term targets .
Speaker #6: I think as we think about 26 with pricing coming in , Dominic taking over and some of the other dynamics that you've laid out , just wondering how we should be thinking about 26 preliminarily in terms of maybe cadence of the year or when when we should be thinking about some of these newer initiatives , kind of kicking in .
Speaker #6: Thanks .
Speaker #4: Ruben , do you want me to take that or .
Speaker #5: I well , I can do . I let me just build on what Martin already said . So I think what Martin just said , and it's also your question , Scott .
Speaker #5: We launched a program strategy in September , which is not only , you know , the program of of Stefan or of a CEO .
Speaker #5: It's something endorsed by the by the entire board . And our whole internal program . But Martin just said , look , we will drive to 200 million competitiveness program .
Speaker #5: We will see the benefits of of cash flow . But it would also be unfair to make a lot of additional comments concretely , on 26 with with Dominic just just coming in into the role .
Speaker #5: But there is , you know , clear focus on the top line recovery and some of the effects . We're we're seeing this year will help also for next year .
Speaker #5: And overall we expect results to be better next year than this year . How much that will be concretely is more for when we announce our full year results in in early next year .
Speaker #6: Okay , appreciate the answer . And then a second question from me would be you called out obviously some challenging dynamics in the UK with the expectation for for some of those to stabilize , you know , as we think towards , you know , the Q4 and low end of the guide , if results were to come in , let's say below what your anticipating or above what you're anticipating , maybe what what would be the reasons for that ?
Speaker #6: How should we be thinking about kind of like the , you know , the the risks and the potential upside risks as well .
Speaker #5: Yeah . So we we've said today , you know , we're confirming reiterating the guidance , albeit at the low end of the guidance , the low end of the guidance on the top line implies a quarter for between minus one and a half and minus two .
Speaker #5: And let's just take a step back . If we look at our sell out , our sell out year to date is plus 0.2% .
Speaker #5: If you look at our sell out . And by the way , that's plus 0.2% in a year where we're not happy , it's a year where we've seen the impact of the weather .
Speaker #5: Both as well in our savory business , frozen food in northwestern Europe as well . We're not too happy with with the ice cream performance .
Speaker #5: More in quarter three . Despite that , our sell out . 0.2 we also said part of that is transitory and we see the market recovering and also our own sell out numbers .
Speaker #5: If you look at the last three months , values plus 0.5 , our last three months volume growth is plus 0.7 . So our sell out is not where we want it to be , but it is positive .
Speaker #5: And actually it's slightly improving . And that you have to see then to , you know , implied guidance of minus one and a half , minus two .
Speaker #5: Now what gives us confidence that we're able to hit that ? If you look at our plan and you've also seen that some of the prepared remarks we improved the product quality of our pizza business in the UK .
Speaker #5: That's one we started around September with our new campaign in the UK . Bit too early to tell , but the first positive , first signals are positive .
Speaker #5: We see distribution increases in in Italy , but also in France . So you know , we're now one third of the quarter is now behind us .
Speaker #5: To your question , what needs to go well wrong . What could change it . There's there's a bit where you could look at pricing .
Speaker #5: We've increased the prices of our chicken range in the UK because we have a lot of the pricing will be taken next year .
Speaker #5: It's a bit depending what competition will do . So that could go up or down a bit . But I think those are probably the big ones .
Speaker #6: Appreciate it . We'll pass it on . Thank you .
Speaker #1: And our next question will come from John Baumgartner with Mizuho . Please go ahead .
Speaker #7: Good morning . Thanks for the question . I'd like to stick with private label , but I'm curious more about the competitive aspects because market share has always been high , but it hasn't really increased in your categories for the better part of a decade prior to the cost of living crisis .
Speaker #7: And , you know , even now it seems to have sustained momentum , even as price inflation has moderated . So I'm curious , what are you seeing from retailers ?
Speaker #7: Is private label competing differently aside from price ? Is the innovation more refined ? Is the quality improving ? Are there differences in non-price factors that you're seeing over the past 24 , 36 months ?
Speaker #7: Because it does seem that maybe there's an evolution here from store brands .
Speaker #8: Thanks for the question , John . I think it's a it's a , you know , when you think about this category , frozen food , it's a very good category .
Speaker #8: Categories growing nicely year after year . But definitely , you know , private label is the big thing . And I think the learning from my ten years is .
Speaker #8: Basically you have to be . I mean every day you have to be complacent and you have to make sure that , you know , you have the the right value equation , which is partly price and partly obviously renovation .
Speaker #8: And , and all the rest of it . And when you think about , let's say this year in the UK , for example , we lost it a bit .
Speaker #8: And I think the exactly what Ruben mentioned , you know , in terms of renovation of fish fingers , in terms of innovation of pizza , in terms of some renovations of packaging in peace , for example , that's exactly what we're doing right now .
Speaker #8: Which is to come back with the right , the right value equation that together , obviously with to Ruben's point , which is pricing wise , you know , we are slightly better compared to where we were a few months ago .
Speaker #8: A few quarters ago , I think that's where we think , you know , we can do a better job , but definitely to your point , it's not only pricing , it's a non pricing piece .
Speaker #8: And that piece is when I compare 26 with 25 starting now . Absolutely . I mean or or program is much better . And let's face it , you know , I think we can be hard with ourselves .
Speaker #8: I think 25 I don't think we've been good enough in terms of value , equation . And that's why we're doing all these renovation in pizza , for example .
Speaker #8: And what , what we can see is in the UK . Well , even we compare ourselves with premium . We are we are superior with the takeaways we intend to do the same with the second part , which is which is thin .
Speaker #8: We intend to come with the renovation a superior fish finger , which is a big thing for us . You know , fish finger is is around 40% of our of our of our fish business , which is really big .
Speaker #8: And it's coming , it's going to hit the market together with the sizing in , in Q1 . So that's the kind of things we're doing .
Speaker #8: We're doing things with renovating the packaging in peace piece . We have definitely . We have a superior product , but definitely I don't think it can do better in terms of packaging .
Speaker #8: So it's a it's a , you know , it's philosophically it's very simple . I think our job as , as branded people , we need to bring additional value compared to private label .
Speaker #8: And if we don't do that , obviously we lost our relevance . And that's I think the program for 25 , 26 , second half of 25 and 26 is going to be much , much better than what we have .
Speaker #7: Great . Thank you .
Speaker #1: And Please go ahead .
Speaker #1: again , maybe you have a question . You may press star the one to join the queue . Our next question will come from John Tang with KGI securities .
Speaker #9: Good morning . Thank you for taking my questions . I was wondering if you could talk about the decision to keep the majority of your repricing to next year .
Speaker #9: You've previously demonstrated the ability to go to a retailers and make adjustments ahead of that annual negotiation . You know , maybe first , what drove that decision this year not to do so .
Speaker #9: And second , you know , does that give you any incremental leverage or ability to make up a portion of that inflation that you ate in 25 as you talked to your retail next year ?
Speaker #9: And within the context of of end to end elasticity ?
Speaker #8: Well , let me contextualize a bit . You know , this , this , this decision . Put yourself back in 2022 where between March and the June , every month , we had another 50 million additional cogs .
Speaker #8: And so whilst the old negotiations , the Pre-negotiations with all the retailers in Europe were behind us . Well , it was simple .
Speaker #8: It was force majeure and we decided to reopen everything . And by the way , we not only reopened it once , but sometimes twice , even three times .
Speaker #8: And we did it . And and it worked overall , even in countries that are probably a bit more difficult , like France and Germany this time it's very different .
Speaker #8: It's not force majeure , it's just , you know , and additional cogs , you know , that came in the middle of the year and the negotiations were behind us .
Speaker #8: And quite frankly , we took the commercial decision not to take it this year . I think it would have been a mistake to reopen the negotiations for something which was not considered as as hyperinflation .
Speaker #8: So that's why we did it . But definitely now , obviously we need to take a more holistic approach for next year . How much , how much we need to price also combined obviously also with the renovation program and the whole 360 approach .
Speaker #8: That's obviously for next year .
Speaker #9: Okay , great . Thank you . Stefan . And then second , could you talk a little bit more about some of the cost saving items over the next quarter and year and how they phase in and possibly net out between your cost restructure , the resumption of bonus accruals , and then how that nets out with also the savings realizations as well .
Speaker #5: Yeah . So next bit to our overall 200 million program . The 200 million program files . Majority of that sits in supply chain around 170 million in the rest in overheads , overheads .
Speaker #5: You already see some savings coming through this year , which is really about making the organization simpler . She's done restructuring in some of our functional support areas .
Speaker #5: We're also looking at non-people costs , where we also now started with with the indirect procurement team and getting savings out of that one .
Speaker #5: So that's the first part . Then if you look at supply chain , we actually have already been delivering quite a bit . It's a step up in supply chain from our homeland .
Speaker #5: 45 to kind of 180 , 175 . The big step up there is procurement . And it's not that in we're all tomorrow going to have huge consolidation and supply base .
Speaker #5: But if we look at elements like ingredients , like packaging , some other ingredient base , we think we can further consolidate our supplier base .
Speaker #5: And that's the big driver of the savings there . The other part is in our factory footprint , we've we've lost volumes . So there we're going to do three things .
Speaker #5: 22% of our volume still sits at Co-pack . And we think we can insource that . So we'll do that . Secondly , we see some of our bigger factories where we have an opportunity to rightsize both cost and asset base .
Speaker #5: And thirdly , and again , it's not only promising . You've seen in our in our year to date results that we announced the closure in one of our smaller factories , which not only helps our profit perspective , but also from a from a cash perspective .
Speaker #5: So we're doing that and we will continue to do that . How we . Elevate that to the to the penile erection links to the question of Andrew , we're going to be surgical where we think that saving needs to be used not to price for the last piece of inflation .
Speaker #5: And dampen some of the supply chain impact . Or we say , look , in areas like , for example , peach , where we know we have good quality , we're going to invest more in quality in communication or like what Stefan mentioned , we see in fishing is that we have an opportunity to improve quality , and we're going to use those savings to improve product quality .
Speaker #9: Okay . Great . Thank you very much .
Speaker #1: And our next question will come from Steve Powers with Deutsche Bank . Please go ahead .
Speaker #10: Hey guys . Good morning . Thank you . Good afternoon . So you've spoken a little bit about this indirectly . But the the the implied fourth quarter guidance , you know does contemplate you a acceleration on , on a , on a two year basis .
Speaker #10: And I guess you spoke a little bit about where your confidence comes from in that . But I guess , you know , just a little bit more clarity or a little bit more color as to how you think you're protected against downside just because the , the , the comparison is a bit more difficult .
Speaker #5: Incentive question maybe it's also good to understand . 24 comparator . And it's how far back do you want to go versus 23 comparator .
Speaker #5: Because we had , you the same discussion I think last year when you know , we delivered a 3% growth in quarter four , where it's the background of your question .
Speaker #5: If you look the year before , actually H1 , the year before was minus two . And and H2 , we had minus eight .
Speaker #5: So you also have to look at the comparator of the comparator , which sounds a bit as we're going back very many years .
Speaker #5: But in the end it's looking at run rates . And we knew that the comparative run rate wasn't as strong . The second point , which for me is a crucial point , we are not happy with this year .
Speaker #5: We know we had the destocking . We had , you know , not the greatest ice cream season , but our sell out is plus 0.2 .
Speaker #5: If you look at the last three months , it's a plus half percent growth in volume plus oh point seven . That is feasible .
Speaker #5: A guidance implied of minus one and a half , minus two . So there's some call it buffer , but some difference there .
Speaker #5: And secondly , if you then look at our activity program for the fourth quarter , there is a lot with additional distribution . There's a lot where we're stepping up quality in pizza .
Speaker #5: There is the strength in UK , in UK specifically because we're not happy with the UK performance . And that's not something which will be solved in 4 to 12 weeks .
Speaker #5: But we see stabilization of shares , which also gives confidence , I think . Yeah , that's probably all the context and color I can give at this moment .
Speaker #10: Perfect . Okay . That makes a ton of sense and is confirming , I guess the other question I wanted to ask about was just around capital allocation priorities .
Speaker #10: I think your comments over the course of time , especially recently , have been pretty consistent about how you plan to deploy capital .
Speaker #10: Obviously , supporting the dividend and prioritizing shared purchases . It seemed like in the prepared remarks that that there was a even more emphasis on that capital allocation prioritization .
Speaker #10: And I do note that , you know , in the recent refinancing that you executed , I think there was an extra 150 million or so raised with that .
Speaker #10: So should we infer that that will be deployed towards buybacks or are there other uses of that extra capital ? Thank you .
Speaker #4: I'll take this one . It's Martin I don't know how many companies you're able to buy at six and a half PE , but I think while we're in that zip code , we're going to be buying back our own stock .
Speaker #4: We see obviously a far higher intrinsic value in the company . Than the equity markets give us credit for . I think we said that in our in our prepared remarks , and obviously the credit markets , you know , really do recognize the strength of the company and its cash flows .
Speaker #4: So we will be continuing to be bought by stuck in the past . We've got to continue to continue to buy back stock until we feel that the markets are fairly valuing the company .
Speaker #4: And obviously the extra 150 million of cash that we have gives us more liquidity to do so .
Speaker #10: Okay . Perfect . Thank you .
Speaker #4: Thank you .
Speaker #1: And with no remaining questions , I'd like to turn the call back over to Stefan Descheemaeker for .
Speaker #8: Well , thank you all for joining us today . This has been my first earnings call with the company , and it will be my last .
Speaker #8: The past ten years have been dynamic with the good , but also challenging times . The company has persevered through it all , emerging from each challenge stronger than before .
Speaker #8: It held true during Brexit . Russia's invasion of Ukraine , the most . The more recent period of hyperinflation . And it will be true again this year .
Speaker #8: This year was more challenging than we initially expected , but I'm already seeing the companies begin to bounce back . The foundation for improvement has been laid , and I'm excited to see Dominik build upon it as the next CEO .
Speaker #8: The best is still ahead for Nomad Foods Ltd , and with that , thank you and goodbye .
Speaker #4: Martin Franklin .