Q2 2026 Monde Nissin Corp Earnings Call

August 12, 2026

Speaker #1: Good afternoon, and welcome to Monde Nissin's first half 2026 earnings call. I am Mike Pasca, Head of Investor Relations. On today’s call with me are Henry Sosanto, Chief Executive Officer; Jesse Tail, Chief Financial Officer; and from the Quorn team, we have with us David Flochel, Chief Executive Officer; and Nick Cooper, Chief Financial Officer.

Michael J. Paska: Good afternoon, and welcome to Monde Nissin's H1 2026 earnings call. I am Mike Paska, Head of Investor Relations. On today's call with me are Henry Soesanto, Chief Executive Officer, Jesse Teo, Chief Financial Officer, and from the Quorn team, we have with us David Flochel, Chief Executive Officer, and Nick Cooper, Chief Financial Officer. By now, everyone should have access to their earnings press release and presentation. These are all available on the PSE EDGE website, posted earlier today. This information can also be found in the investors section on Monde Nissin's website. Finally, before we begin, please note that the financial information being presented is unaudited. During the course of this call, management may make forward-looking statements based upon current assumptions and expectations. These are not guarantees of future performance. I encourage everyone to read the disclaimer in today's presentation.

Mike Paska: Good afternoon, and welcome to Monde Nissin's H1 2026 earnings call. I am Mike Paska, Head of Investor Relations. On today's call with me are Henry Soesanto, Chief Executive Officer, Jesse Teo, Chief Financial Officer, and from the Quorn team, we have with us David Flochel, Chief Executive Officer, and Nick Cooper, Chief Financial Officer. By now, everyone should have access to their earnings press release and presentation. These are all available on the PSE EDGE website, posted earlier today. This information can also be found in the investors section on Monde Nissin's website. Finally, before we begin, please note that the financial information being presented is unaudited. During the course of this call, management may make forward-looking statements based upon current assumptions and expectations. These are not guarantees of future performance. I encourage everyone to read the disclaimer in today's presentation.

Speaker #1: By now, everyone should have access to their earnings press release and presentation. These are all available on the PSE Edge website, posted earlier today.

Speaker #1: This information can also be found in the Investor section on Monde Nissin's website. And finally, before we begin, please note that the financial information being presented is unaudited, and during the course of this call, management may make forward-looking statements based upon current assumptions and expectations.

Speaker #1: These are not guarantees of future performance, and I encourage everyone to read the disclaimer in today's presentation. Now, I would like to turn the call over to Henry to discuss first-half 2026 business performance.

Michael J. Paska: Now, I would like to turn the call over to Henry to discuss H1 2026 business performance. Henry.

Mike Paska: Now, I would like to turn the call over to Henry to discuss H1 2026 business performance. Henry.

Speaker #1: Henry?

Speaker #2: Thank you, Mike. And good afternoon, everyone. Before we get into the details, I want to share the key takeaways for this earnings call. For APAC PFP, top-line growth was driven by our biscuits category and our strategic growth category.

Henry Soesanto: Thank you, Mike, and good afternoon, everyone. Before we get into the details, I want to share the key takeaways for this earning call. For APAC BFB, top-line growth was driven by our biscuits category and our strategic growth category. This is formerly known as others, which we will discuss later. Gross margin improved year-on-year, reflecting impact from pricing actions and our cost management initiatives. However, it declined by over 200 BPS sequentially due to the normalization of contra revenue spending and higher energy-related input costs. For Quorn, we saw continued positive trajectory driven by UK retail and snacking. We also saw another period of increased gross margin with our year-on-year gross margin progression driven by transformation benefits, lower inventory, and targeted selling price increases. Lastly, our H1 EBITDA exceeded our full year 2025 EBITDA, and EBIT continued to stay positive for a second consecutive quarter.

Speaker #2: This was formerly known as "Others," which we will discuss later. Gross margin improved year on year, reflecting the impact from pricing actions and our cost management initiatives.

Speaker #2: However, it declined by over 200 bps sequentially, due to the normalization of contra revenue spending and higher energy-related input costs. In addition, we saw a continued positive trajectory driven by UK retail and snacking.

Speaker #2: We also saw another period of increased gross margin, with our year-on-year gross margin progression driven by transformation benefits, lower inventory, and targeted selling price increases.

Speaker #2: Lastly, our first half EBITDA exceeded our full-year 2025 EBITDA, and EBIT continued to stay positive for the second consecutive quarter. All in all, our first half resulted in a record core net income attributable to the shareholders, as well as a solid operating cash flow that is 77% higher than the cash flow for the same period a year ago.

Henry Soesanto: All in all, our H1 resulted in a record core net income attributable to the shareholders, as well as a solid operating cash flow that is 77% higher than the cash flow for the same period a year ago. Now, let us move on to our H1 business updates. Next slide, please. Our consolidated revenue increased by 4.6% year-on-year in Q2, and 6.8% in H1. Our APAC BFB business, which comprises 83% of top line, grew by 3.1% year-on-year in Q2 and 5.9% in H1. Noodles market share was stable in Q2. On macro level, our noodle business performed in line with the category as our gains in wet pouch was offset by the softness in dry pouch and cups. We continue to see the K-shaped recovery at play as we enjoy good share growth in wet pouch.

Speaker #2: Now, let us move on to our first half business updates. Next slide, please. Our consolidated revenue increased by 4.6% year on year in Q2, and by 6.8% in the first half.

Speaker #2: Our APAC PFP business, which comprises 83% of top-line, grew by 3.1% year on year in Q2, and 5.9% in the first half. Noodles market share was stable in Q2. On a macro level, our noodle business category gains in wet pouch were offset by softness in dry pouch.

Speaker #2: And cups. We continue to see the K-curve at play, as we enjoy good share growth in wet pouch. The increasing share by premium players in the dry pouch and cup segments also supports this.

Henry Soesanto: The increasing share by premium players in the dry pouch and cup segment also supports this. Our value share remains steady even as we gain 50 BPS in volume share. Volume share gains are due to our recovery in the wet pouch segment, while we have challenges in dry pouch due to the rise of imported premium players. We also lost some ground in cups with our Q2 shares slightly down. To participate in the growing premium segment, we launched Lucky Me! Jjamppong in selective chains in Q1, which continues to perform well. The launch targets growing the demand of flavors beyond the usual, leveraging Jjamppong's strong Korean equity and number 1 cup flavor position while expanding in the dry pouch segment. We will continue our brand building by communicating recipes and pairing ideas to increase usages and rolling out digital campaigns and regional activities. Next slide.

Speaker #2: Our value share remains steady even as we gain 50 basis points in volume share. Volume share gains are due to our recovery in the wet pouch segment, while we have challenges in dry pouch due to the rise of imported premium players.

Speaker #2: We also lost some ground in cups, with our Q2 shares slightly down. To participate in the growing premium segment, we launched Lucky Nissin Fried Jampong in select chains in Q1.

Speaker #2: Which continues to perform well. The launch targets: the launch targets growing the demand of flavors beyond the beyond the usual leveraging jampong strong Korean equity, and number 1 cup flavor position.

Speaker #2: While expanding in the dry pouch segment, we will continue our brand building by communicating recipes and pairing ideas to increase usage, and rolling out digital campaigns and regional activities.

Speaker #2: Next slide. So, for biscuit, market share remained stable at 27.2–27.8%. Sorry. Our biscuit business underperformed the category, driven by softness in the cracker segment. In particular, our MY San Grahams products were challenged as the high inflation environment shifted consumer priorities, which may have affected at-home dessert consumption.

Henry Soesanto: For biscuit market share, demand, market share remained stable at 28.7%. Our biscuit business underperformed the category, driven by softness in the cracker segment. In particular, our M.Y. San Grahams product was challenged as high inflation environment shifted consumer priorities, which may have affected at-home dessert. While we return to our number 2 challenger position in Q2, our priority is to recover shares in crackers by intensifying distribution and in-store execution in under-penetrated areas supported by local communications. Our SkyFlakes in particular, we have improved the product, making it crunchier than ever. We will also continue scaling our sandwich segment through Bingo and Sumo and rebuilding M.Y. San Grahams by broadening dessert occasions through digital content, strategic partnership, and seasonal programs. Next slide, please. For oyster sauce, our market share improved 360 BPS and hit a record 64.8%. Mama Sita's continue to drive penetration and consumption for the category.

Speaker #2: While we returned to our number two challenger position in Q2, our priority is to recover shares in crackers by intensifying distribution and in-store execution in under-penetrated areas, supported by local communications.

Speaker #2: Our SkyFlix, in particular, has been improved, making it crunchier than ever. We will also continue scaling our sandwich segment through Bingo and Sumo, and rebuilding MY Sun Graham by broadening dessert occasions through digital content, strategic partnerships, and seasonal programs.

Speaker #2: Next slide, please. For oyster sauce, our market share improved by 360 basis points and hit a record 64.8%. Mamacita's continued to drive penetration and consumption for the category.

Speaker #2: The resurgence in home cooking continued as Filipino consumers adapt more cautious spending habits. We will continue to emphasize the overall value advantage of oyster sauce over soy sauce to drive category and brand relevance.

Henry Soesanto: The resurgence in home cooking continued as Filipino consumers adopt more cautious spending habit. We will continue to emphasize the overall value advantage of oyster sauce over soy sauce to drive category and brand relevance. For beverages, yogurt drink shares declined to 83.9%, while cultured milk shares improved to 27.9%. For yogurt drinks, despite high single-digit sales growth for Dutch Mill, our Q2 sales share, value shares is down versus year ago. There is a new competitor making inroads and gaining shares. We will prioritize share visibility while reinforcing consumer preference on our flavors. For cultured milk, growth was driven by improved product availability and geographic expansion. Lastly, for packaged cakes, we are growing number 3 in the overall category, but dominate in the premium segment with over 65% market shares. This was driven by our Monde Special Mamon Classic rounded cakes format.

Speaker #2: For beverages, yogurt drink shares declined to 83.9%, while cultured milk shares improved to 27.9%. For yogurt drinks, despite high single-digit sales growth for Dutch Mill, our Q2 sales value share is down versus a year ago.

Speaker #2: There's a new competitor making inroads and gaining share. We will prioritize share feasibility while reinforcing consumer preference for our flavors. For cultured milk, growth was driven by improved product availability and geographic expansion.

Speaker #2: Lastly, for packaged cakes, we are growing and are number three in the overall category, but we dominate in the premium segment with over 65% market share. This was driven by our Monde Classic rounded cakes format.

Speaker #2: Additional capacity and expanded distribution will support wider availability of both our rounded and bar cakes. Next slide, please. So, the 'Other' category now comprises 24% of our APAC PFP business.

Henry Soesanto: Additional capacity and expanded distribution will support wider availability of both of our rounded and bar cakes. Next slide, please. The other category now comprises 24% of our APAC BFB business. From less than 20% around the time we did the IPO. Our beverage, culinary, and packaged cakes that makes up the category we used to call others, have grown mid to high single, high teens CAGR during the period. As the category represent itself as a key pillar and drivers of our overall business, we are repositioning and calling it as strategic growth category to better reflect its growth potential in terms of sales, profit, and ROIC. Next slide, please. Our protein business, which comprises 70% of the group's top line for Q2, has strong quarter with growing sales and positive profit at the EBIT level.

Speaker #2: For less than 20% from less than 20% around the time we did the IPO. Our beverage culinary and packaged cakes that makes up the category we used to call others have grown mid to high single high tins CAGR during the period.

Speaker #2: As the category represents itself as a key pillar and driver of our overall business, we are repositioning and calling it a strategic growth category.

Speaker #2: To better reflect its growth potential in terms of sales, profit, and ROIC. Next slide, please. Our protein business, which comprises 70% of the group’s top line for Q2, had a strong quarter with growing sales and positive profit at the EBIT level.

Speaker #2: We continue to build a corn snacking business with eight consecutive quarters of growth, which was powered by the UK launch of Protein Bites, supported by a targeted marketing campaign.

Henry Soesanto: We continue to build the Quorn snacking business with an 8 consecutive quarter of growth, which was powered by the UK launch of Quorn Protein Bites, supported by targeted marketing campaign. This brings our snacking portfolio to around 15% of our protein business in terms of value. The launch of Quorn Protein Bites, which offer healthy protein and fibers, follow a new trend of the consumers who combine their snacks and meals to reduce the overall food consumption. This put Quorn snacks in a food-to-go featured at the front of the stores. We are seeing these new products building good potential, playing into new convenient retail format for single consumption, catering to much wider audience even beyond UK and Europe.

Speaker #2: This brings our snacking portfolio to around 15% of our protein business in terms of value. The launch of Protein Bites, which offer healthy protein and fiber, follows a new trend of consumers who combine their snacks and meals to reduce overall food consumption.

Speaker #2: This put corn snacks in a food-to-go feature at the front of the stores. We are seeing this new product, new products building good potential, playing into new convenient retail formats for single consumption, catering to a much wider audience beyond the UK—even beyond the UK and Europe.

Speaker #2: We also believe that this is a scalable new part of the portfolio, where taste, convenience, and health are rewarded with a higher price point.

Henry Soesanto: We also believe that this is a scalable new part of the portfolio where taste, convenience, and health are rewarded with higher price point, which will be accretive to our gross margin of protein portfolio as a whole. With that, I will hand it over to JC to talk in more details about our H1 financial performance. JC, please.

Speaker #2: Which will be accretive to our gross margin of the protein portfolio as a whole. With that, I'll hand it over to JC to talk in more detail about our first half financial performance.

Speaker #2: JC, please.

Speaker #3: Thank you, Henry. And next slide, please. I'm very glad to report the financial headline, which is very strong bottom line growth. Where we where we have a record first half that continues our our trend of booking record profits, recall we book record profits in the in the first quarter as well.

Jesse Teo: Thank you, Henry, and next slide, please. I am very glad to report, the financial headline, which is very strong bottom line growth, where we have a record H1 that continues our trend of booking record profits. Recall, we book record profits in the Q1 as well. This profit translated to cash profit as our cash flow is more than 100% of our core net income, and grew close to 80% versus same period a year ago. This was supported by balanced sales, modest but balanced sales, across the two segments. Both APAC Branded Food and Beverage and Protein business contributed to sales growth. Consolidated sales was up 4.6%, bringing H1 revenue growth to 6.8%. APAC had a modest 3.1%. We had categories performing really well with strategic growth leading the way. Biscuit had positive elasticity despite the pricing challenges, price increase.

Speaker #3: And this profit translated to cash profit as our cash flow is more than 100% of our net income, and grew to about 80% versus the same period a year ago.

Speaker #3: This was supported by modest but balanced sales across the two segments. Both APAC Branded Food and Beverage and the Protein business contributed to sales growth.

Speaker #3: Consolidated sales were up 4.6%, bringing first-half revenue growth to 6.8%. APAC had a modest 3.1%. We had categories performing really well, with strategic growth leading the way.

Speaker #3: Biscuits had positive elasticity. Despite the pricing challenges, our price increase performed well, while noodles struggled with elasticity during this pricing period. We'll talk about that later on.

Jesse Teo: While noodles struggled with elasticity during this pricing period. We will talk about that later on. For our protein business, we had a very strong top-line growth on a peso basis, 12.3%. Much bulk of the 12.3% is FX related, but on an organic basis, we grew a respectable 2.7% from 1.7% of volume growth. This brings H1 growth to 12% on a peso basis. With the performance in the H1 on top line, protein business now accounts for 17%, while 83% is made up of APAC Branded Food and Beverage. Next slide, please. On gross profit, both APAC Branded Food and Beverage and Protein business contributed to gross margin accretion versus a year ago. Overall, our gross margin improved by 250 basis points for the quarter, for the Q2, and by more than 190 basis points for the H1. Gross profit grew in line with that.

Speaker #3: For our protein business, we had very strong top-line growth on a peso basis of 12.3%. Much of the 12.3% is FX-related, but on an organic basis, we grew a respectable 2.7%, from 1.7% of volume growth.

Speaker #3: This brings first-half growth to 12% on a peso basis. With the performance in the first half on the top line, the protein business now accounts for 70%, while 80% is made up of APAC branded food and beverage.

Speaker #3: Next slide, please. On gross profit, both APAC Branded Food and Beverage and Protein business contributed to gross margin appreciation versus a year ago. Overall, our gross margin improved by 250 basis points for the quarter, and by more than 190 basis points for the first half.

Speaker #3: Gross profit grew in line with that. Core net income increased stronger than gross profit because of the good positions that we have in our US dollar stockpile. Recall, we have a US dollar short position in our operations.

Jesse Teo: Core net income increased stronger than gross profit because of the good positions that we had in our US dollar stockpile. Recall, because we have a US dollar short position in our operations, we deliberately keep our cash in US dollars in order to act as natural hedge. This worked really well for us when the peso depreciated, and we realized the gains from the FX weakness. This brings H1 profit up by 6.1% versus a year ago. Reported net income has an even higher growth of 26.4%. This is due to a more stable valuation of the guarantee asset, as well as reduced restructuring spending in our protein business. Again, we would like to guide everyone to judge our bottom line performance on core net income attributable to shareholders. Next slide, please. As I mentioned earlier, our profit translated to cash.

Speaker #3: We deliberately keep our cash in US dollars in order to act as a natural hedge. This worked really well for us when the peso depreciated and we realized the gains.

Speaker #3: From the FX weakness, this brings first half profit up by 6.1% versus a year ago. Reported net income has an even higher growth of 26.4%.

Speaker #3: This is due to a more stable valuation of the guaranty asset, as well as reduced restructuring spending in our protein business. Again, we would like to guide everyone to judge our performance—our bottom line performance—on core net income attributable to shareholders.

Speaker #3: Next slide, please. As I mentioned earlier, our profit translated to cash. In fact, our operating cash flow is more than our current income, and even if you subtract out the $1.6 billion that we spent on capex, our net cash flow after capex is still higher than our current income.

Jesse Teo: In fact, our operating cash flow is more than our core net income, and even if you subtract out the PHP 1.6 billion that we spent on CapEx, our net cash flow after CapEx is still higher than our core net income. This is why our cash and cash equivalent is just down PHP 1 billion. This is after paying out PHP 7.1 billion in dividends and spending PHP 1.6 billion in CapEx. We have a robust cash balance, and we continue to see our superior ROIC in play as we translate profit to cash. For our retained earnings, the retained earnings of our list co., which is Monde Nissin Corporation, as of end of June, is at PHP 10.4 billion, with our other main entity, Monde Nissin, at PHP 1.5 billion. This brings a subtotal of our retained earnings for the two key entities to PHP 11.8 billion. Next slide, please.

Speaker #3: This is why our cash and cash equivalents are just down $1 billion. This is after paying out $7.1 billion in dividends and spending $1.6 billion in capex.

Speaker #3: We have a robust cash balance and we continue to see our superior car ROIC in play as we translate profit to cash. For our retain earnings, the our retain earnings of our LISCO, which is Monde Nissin Corporation, is at as of end of June is at 10.4 billion pesos.

Jesse Teo: We have a robust cash balance, and we continue to see our superior ROIC in play as we translate profit to cash. For our retained earnings, the retained earnings of our list co., which is Monde Nissin Corporation, as of end of June, is at PHP 10.4 billion, with our other main entity, Monde Nissin, at PHP 1.5 billion. This brings a subtotal of our retained earnings for the two key entities to PHP 11.8 billion. Next slide, please.

Speaker #3: With our other main entity, Monde and Moisan, at $1.5 billion, this brings the subtotal of our retained earnings for the two key entities to $11.8 billion.

Speaker #3: Next slide, please. On our revenue side, while we had modest growth and a buyers' reaction to the pricing changes that we have made, we were not firing on all cylinders.

Jesse Teo: On the revenue side, while we had modest growth and various reaction to the pricing changes that we had made, we were not firing on all cylinders. Noodles was weak at -2.3% for the quarter, bringing H1 growth to only 1.5%. Net pricing helped by 3.8%, but we suffered 6.1% decline in terms of volume. Biscuits performed well and enjoyed positive elasticity. Even with the 3.9% increase, we managed to increase volume by 0.9. As Henry mentioned on strategic growth, it continues to be a key driver of our top line, growing volume by double digits, both for the quarter and for H1. Next slide, please. On key bottom line concerns, wheat, which is 14% now of our APAC BFB COGS, is fairly locked in for the entire year. We have 100% locked in for our requirements in Q3 and circa 75% locked in in Q4.

Speaker #3: Noodles was weak at negative 2.3% for the quarter, bringing first half growth to only 1.5%. Net pricing helped by 3.8%, but we suffered a 6.1% decline in terms of volume.

Speaker #3: Biscuits performed well and enjoyed positive elasticity. Even with the 3.9% increase, we managed to increase volume by 0.9%. And as we mentioned—as Henry mentioned—on strategic growth, it continues to be a key driver of our top line.

Speaker #3: Growing volume by double digits, both for the quarter and for the first half. Next slide, please. On key bottom line concerns, which is 14% now of our APAC BFP COGS, it is fairly locked in for the entire year.

Speaker #3: We have 100% locked in for our requirements in Q3, and approximately 75% locked in for Q4. These locked-in positions are very favorable versus the current market prices.

Jesse Teo: These lock-in positions are very favorable versus the current market prices. Current market prices as of today are hovering around 90-plus percentile on a one-year basis, and we are enjoying prices much lower than that. There are some upticks, especially in Q4 versus a year ago, but we will be well below what the market is selling right now. The same is true for palm oil, which is 7% of our APAC BFB COGS. We have good lock-in positions. Again, our requirements for Q3 are fully locked in. In Q4, we have both locked in contracts and swaps that protects us from escalating costs. Palm oil, again, if you look at the prices today, are trading at over 80 percentile on a one-year basis. We are getting much lower cost than the current trading prices. Next slide, please.

Speaker #3: Current market prices as of today are hovering around the 90-plus percent, or 90-plus percentile, on a one-year basis. And we are enjoying prices much lower than that.

Speaker #3: There are some uptakes, especially in Q4 versus a year ago. But we will be well below what the market is selling right now. The same is true for palm oil, which is 7% of our APAC PFB COGS.

Speaker #3: We have good luck in positions. Again, our requirements for Q3 are fully locked in. And for Q4, we have both locked-in contracts and swaps that protect us from escalating costs.

Speaker #3: Palm oil, again, if you look at the prices today, they are trading at over the 80th percentile on a one-year basis. We are getting much lower cost than the current trading prices.

Speaker #3: Next slide, please. On coconut oil, there has been some recent softness, and we have taken advantage of that softness by locking in most of our Q3 requirements.

Jesse Teo: On coconut oil, there has been some recent softness, and we have taken advantage of that softness by locking in most of our Q3 requirements. There are no practical ways to swap CNO, so we are not able to extend this further. But we are trying to move quickly whenever there are dips in the prices of coconut oil. The rainy season should help with the supply, and we hope to getting better prices in the next few months as well to complete our requirements for Q4. Next slide, please. On gross profit, we are up by 212 basis points a year ago due to our pricing action and cost initiatives. Some of our pricing actions. A lot of our pricing actions happened in May, and then some of them in June. So this is not yet the full year effect of our pricing action.

Speaker #3: There are no practical ways to swap CNO. And so we are not able to extend this further. But we are trying to move quickly whenever there are dips in the prices of coconut oil.

Speaker #3: The rainy season should help with the supply, and we hope to get better prices in the next few months as well, to complete our requirements for Q4.

Speaker #3: Next slide, please. On gross profit, we are up by 212 basis points for the year-to-date due to our pricing action and cost initiatives.

Speaker #3: Some of our proxy actions, and a lot of our pricing actions, happened in May, and then some of them in June. So this is not yet the full-year effect of our pricing actions.

Speaker #3: However, as Henry mentioned, our gross margin declined by 200 basis points sequentially. This is due to the normalization of our contra revenue spending. Normally, we develop our plans with the trade in Q1.

Jesse Teo: However, as Henry mentioned, our gross margin declined by 200 basis points sequentially. This is due to the normalization of our contra revenue spending. Normally, we develop our plans with the trade in Q1, so the spending starts off slow, and then they pick up steam in Q2. The normalization is part of the quarter-on-quarter decrease because of the contra revenue. Because it is contra revenue, it affects the sales price per unit, which then affects the GM. On energy-related upcharges, we felt the immediate impact of energy-related charges in our manufacturing expenses. We use coal, we use LPG, and the prices of these energy-related costs immediately increase, putting pressure in our manufacturing expense. On A&P, we have a slight increase of 20 BPS versus same period a year ago on the quarter, and 50 BPS for the H1.

Speaker #3: And so the spending starts off slow, and then they pick up steam in Q2. The normalization is part of the quarter-on-quarter decrease.

Speaker #3: Because of the contra revenue. That's because it's contra revenue, it affects the sales price per unit, which then affects the GM. On energy-related upcharges, we felt the immediate impact of energy-related charges in our manufacturing expenses.

Speaker #3: We use coal and LPG, and the prices of these energy-related costs immediately increase, putting pressure on our manufacturing expenses. On AMP, we have a slight increase of 20 basis points versus the same period a year ago for the quarter.

Speaker #3: And 50 bps for the first half. Recall that we said that our first quarter AMP was higher than a year ago, as we had volume capacity issues then.

Jesse Teo: Recall that we said that our Q1 A&P was higher than a year ago as we had volume capacity issues then, so we were controlling spending in order for us not to spur demand, which we cannot supply last year. We have now more normal supply and yes, we are advertising more consistently this year. Core EBITDA went up by 2.7%, smaller than increase in gross profit, not only because of the higher A&P spend, but also because of logistics spend. Transportation, in particular, had an immediate impact as we have to adjust our rates to our truckers, especially when diesel prices went up higher than PHP 100 per liter. Core net income, as I mentioned, benefited from our USD hedge position.

Speaker #3: So, we were controlling spending in order for us not to spur demand, which we could not supply last year. We now have a more normal supply, and we are advertising more consistently this year.

Speaker #3: EBITDA, core EBITDA, went up by 2.7%, which is smaller than the increase in gross profit. This is not only because of the higher AMP spend, but also because of increased logistics spend.

Speaker #3: Transportation in particular had an immediate impact, as we had to adjust our rates to our truckers. Prices went up, higher than ₱100 per liter.

Speaker #3: Core net income, as I mentioned, benefited from our US dollar hedge position. We continue to watch the exchange rate, and whenever there are dips, we take advantage of them to build up our stockpile to ensure we are protected from our US dollar short position.

Jesse Teo: We continue to watch the exchange rate, and whenever there are dips, we take advantage of them to build up our stockpile to ensure we are protected from our USD short position. Next slide, please. For protein business, the Transform to Win program is clearly working. It is not only supporting top-line growth, which on peso terms is 12.3%. This translates to 2.7% on a constant currency basis and 1.7% in volume terms. Transparency, we are not firing still on all cylinders. Our most important business, which is UK retail, is growing very strong, and that is very good news for us. However, there are opportunities in other channels, particularly food service. We will work to make sure that we have a more balanced growth across the channels in order to support further top-line growth for the protein business.

Speaker #3: Next slide, please. For the protein business, the Transfer Transform to Win program is clearly working. It is not only supporting top-line growth, which on faster terms is 12.3%.

Speaker #3: This translates to 2.7% on a constant currency basis and 1.7% in volume terms. Transparently, we're not firing on all cylinders. Our most important business, which is UK retail, is growing very strong.

Speaker #3: And that's very good news for us. However, there are opportunities in other channels, particularly food service. We will work to make sure that we have more balanced growth across the channels.

Speaker #3: In order to support further top-line growth for the protein business, gross margin again delivered as promised—nearly 500 basis points improvement through the transportation benefits.

Jesse Teo: Gross margin, again, delivered as promised, nearly 500 basis points improvement due to the transformation benefits. We have been doing the transformation program, right-sizing the organization, lowering inventory, and doing targeted selling prices in order to improve our gross margin. EBITDA is very positive as well. Our H1 EBITDA exceeded our full year EBITDA last year by 15% on peso terms and by 9% on GBP terms. This strong EBITDA performance translated to a second consecutive positive EBIT. Both our segments are now contributing to top and bottom line. Next slide. Lastly, on our CapEx guidance, we reiterate our CapEx guidance of PHP 6.5 billion, bulk of which will be spent in APAC, primarily Food and Beverage, of which majority will go to our new plant for biscuits in the north. Protein business will be spending less than PHP 1 billion in CapEx for the year.

Speaker #3: Coal, we have been implementing the transformation program—right-sizing the organization, lowering inventory, and pursuing targeted selling prices in order to improve our gross margin.

Speaker #3: EBITDA is very positive as well. Our first half EBITDA exceeded our full year EBITDA last year by 15% in peso terms and by 9% in GBP terms.

Speaker #3: This strong EBITDA performance translated to a second consecutive positive EBIT. Both our segments are now contributing to the top and bottom line. Next slide.

Speaker #3: Lastly, on our CAPEX guidance, we reiterate our CAPEX guidance of $6.5 billion, the bulk of which will be spent in APAC branded food and beverage.

Speaker #3: Of which, the majority will go to our new plan for biscuits in the North. The protein business will be spending less than ₱1 billion in CAPEX for the year.

Speaker #3: This ends our prepared remarks. We are now ready for your questions.

Jesse Teo: This ends our prepared remarks. We are now ready for your questions.

Speaker #1: Thank you, Jesse. Questions can be submitted via your chat box. We will attempt to address as many as possible, time permitting. The first question is for David.

Michael J. Paska: Thank you, Jesse. Questions can be submitted via your chat box. We will attempt to address as many as possible, time permitting. The first question is for David. David, can you comment on the launch of Protein Bites and Q2 snacking performance?

Mike Paska: Thank you, Jesse. Questions can be submitted via your chat box. We will attempt to address as many as possible, time permitting. The first question is for David. David, can you comment on the launch of Protein Bites and Q2 snacking performance?

Speaker #1: And David, can you comment on the launch of Protein Bites and Q2 snacking performance?

Speaker #2: Thank you, Mike. Yes, sure. In Q2, we launched in UK retail our protein bites—in the meat-free fixture, but also in the food-to-go fixture.

David Flochel: Thank you, Mike. Yes, sure. In Q2, we launched in UK retail our Quorn Protein Bites in the meat-free fixture, but also in the food to go fixture, where people shop their lunch and get lunch deals at the front of the store. By doing so, we are stretching the core business beyond meat-free and into new consumer occasions, new implementation, positioning the brand as a real positive protein brand proposition, which is very important for us as we know. It is early days, but the rate of sell is very good and very promising to a point that has been helping us to unlock even further distribution for the H2 of the year. This is a key driver of the continuous double-digit growth in snacking that we have been enjoying in Q2, which was already mentioned several times by Henry and Jesse.

Speaker #2: Where people shop for their lunch and get lunch deals—at the front of the store. By doing so, we are stretching the core, the core business, beyond meat-free.

Speaker #2: And into new consumer occasions. New implementation positioning the brand as a real, positive protein brand proposition, which is very important for us, as we know.

Speaker #2: It's early days, but the rate of sale is very good and very promising—to a point that has been helping us unlock even further distribution for the second half of the year.

Speaker #2: This is a key driver of the continuous double-digit growth in snacking that we've been enjoying in Q2, which was already mentioned several times by Henry and Jesse.

Speaker #2: This launch, combined with the Q2 snacking campaign overall, has helped us reach the highest awareness for the brand, as well as the highest purchase intent.

David Flochel: This launch, combined with the Q2 snacking campaign overall, has helped us to reach the highest awareness for the brand, but also the highest purchase intent for the future, which gives us confidence that that platform is a very solid and strong platform for future growth. In summary, Quorn Protein Bites plays a key role for us to reach new consumers, to double our implementation in retail stores, meat-free and food to go. It is also an opportunity, as Henry mentioned, to expand distribution into convenience, into out of home in the UK, but also in the future international markets with one new platform, which will help us again in terms of velocity and productivity in supply.

Speaker #2: For the future, which gives us confidence that, you know, that platform is a very solid and strong platform for future growth. So in summary, protein bites play a key role for us to reach new consumers.

Speaker #2: To double our implementation in retail stores. Meat free and food to go. It is also an opportunity as Henry mentioned to expand distribution into convenience into out of home in the UK but also in the future international markets.

Speaker #2: With one new platform, which will help us again in terms of velocity and productivity in supply. And it is margin-accretive and sales-accretive.

David Flochel: It is margin accretive and sales accretive, and both are very important because it is positioning us again as category leader to be able to shift from meat-free into positive protein with that healthy, tasty, convenient proposition.

Speaker #2: And both are very important, because this positions us again as category leader to be able to shift from meat-free into positive protein, with that healthy, tasty, convenience proposition.

Speaker #1: Thank you, David. David, I have another question for you. Can you update us on how the food service business is performing?

Michael J. Paska: Thank you, David. David, I have another question for you, and this is, can you update us on how the food service business is performing?

Mike Paska: Thank you, David. David, I have another question for you, and this is, can you update us on how the food service business is performing?

Speaker #2: So this is a different situation, really, here. When we launched Transform to Win Together a year and a half ago, we said pricing—number one—was obviously retail UK as a core business to be fixed.

David Flochel: This is a different situation really here. When we launched Transform to Win Together a year and a half ago now, we said priority number one was obviously retail UK as a core business to be fixed. We are doing significant progress on that front. The second big element to be delivered was the transformation of the supply chain and the improvement of gross margin, being able to reinvest behind the brand, especially for UK retail. This works well. The third point was to get food service back into growth. I have to say, we have some challenges here. Food service is only 18% of the business, but it is an important business for us. -5% in Q2, which is disappointing. Our clear priority remains to stabilize the top line gradually over time. What we are seeing are more structural challenges than expected.

Speaker #2: We are making significant progress on that front. The second big element to be delivered was the transformation of the supply chain, and the improvement of gross margin, being able to reinvest behind the brand.

Speaker #2: Especially for UK retail, this is working. The third point was to get food service back into growth, and I have to say we had some challenges here.

Speaker #2: Food service is only 18% of the business, but it is an important business for us. Minus 5% in Q2, which is disappointing. But our clear priority remains to stabilize the top line gradually over time.

Speaker #2: What we are seeing are more structural challenges than expected. Let me name the main ones. The first one is significant cost pressure from operators and distributors in this market.

David Flochel: Let me name the main ones. The first one, significant cost pressure from operators and distributors in this market. Second one, QSR. There is lower demand in the QSR we are working with in Europe. Third point, in schools, in education in the UK, there is a new regulations coming in, which has also been challenging the menu cycles. Historically, we have been relying too much on education sector and a few limited numbers of QSRs. What we are doing now, we are driving further leadership changes, and I am taking direct control of the business channel. We are implementing what I call back to basics, focusing on execution, as we did previously in UK retail, I think quite successfully. We are applying the same recipe here going forward.

Speaker #2: Second one, QSR, there's lower demand in the QSR we're working with in Europe. Third point, in schools and education in the UK, there are new regulations coming in, which has also been challenging for the menu cycles.

Speaker #2: And historically, we've been relying too much on the education sector and a few, limiting number of QSRs. What we're doing now is driving further leadership changes, and I'm taking direct control of the business channel.

Speaker #2: We are implementing what I call 'back to basics,' focusing on execution as we did previously in UK retail. I think quite successfully. So we're applying the same recipe here going forward.

Speaker #2: And as much as we are protecting the core business, we are also planting the seeds for future growth with the launch of blended meat—our ultimate B2B solution.

David Flochel: As much as we are protecting the core business, we are also planted the seeds for future growth with the launch of blended meats with ultimate B2B solution for food service, not only for school and education, but also for business and industries as we want to shift the core food service business outside of education and healthcare into business and industry, as I just mentioned. The second launch is Quorn Protein Bites, which we will launch in QSRs, because we see a lot of versatility for operations in that sector as well, and also opportunities. In summary, in the long term, I remain convinced and confident that we can drive positive contribution and growth for that channel. However, short term, there is still a lot to be fixed with clear focus. The plans are now in place. It is about execution.

Speaker #2: For food service, not only for schools and education but also for business and industries. As we want to shift the core food service business outside of education and healthcare into business and industry, as I just mentioned.

Speaker #2: And the second launch is Protein Bites, which we will launch in QSRs because we see a lot of versatility for operations in that sector as well.

Speaker #2: And also opportunities. So, in summary, in the long term, I remain convinced and confident that we can drive positive contribution and growth for that channel.

Speaker #2: However, short-term, there's still a lot to be fixed with clear focus, and, you know, the plans are now in place. It's about execution.

Speaker #2: But it's probably going to get worse before it gets better, before returning to growth. However, UK retail will drive the growth, and they only need to grow year to go.

David Flochel: It is probably going to get worse before it gets better before returning to growth. However, UK retail will drive the growth and continue to grow year to growth.

Speaker #1: Thank you, David. Next question. The next question is for Nick. And Nick, for IAS 36 impairment testing, are we on a glide path for no further impairment at Corn?

Michael J. Paska: Thank you, David. The next question is for Nick. Nick, for IAS 36 impairment testing, are we on a glide path for no further impairment at Quorn? Related to this, do you expect sales momentum and gross margin expansion to continue in the H2?

Mike Paska: Thank you, David. The next question is for Nick. Nick, for IAS 36 impairment testing, are we on a glide path for no further impairment at Quorn? Related to this, do you expect sales momentum and gross margin expansion to continue in the H2?

Speaker #1: And related to this, do you expect sales momentum and gross margin expansion to continue in the second half?

Speaker #3: Yeah, thanks, Mike. So, I think you can see through the past couple of quarters of results, the past few quarters of results, that we're starting to see the traction from the Transform to Win Together program that we launched about 18 months ago.

Nick Cooper: Yeah, thanks, Mike. I think you can see through the past couple of quarters of results, past few quarters of results, that we're starting to see the traction from the Transform to Win Together program that we launched about 18 months ago. I think looking forwards, we expect that progress to continue, but it won't be a completely linear progression. I think we've spoken about that before. We see growing momentum in UK retail. David talked about that, and I expect the H2 of the year in UK retail to be as strong as or even stronger than the H1. But at the same time, as David has mentioned, we have a lot of work to do in food service, and that will be a drag in the H2 of the year and is likely to get worse before it gets better.

Speaker #3: And I think, looking forward, we expect that progress to continue. But it won't be a completely linear progression. I think we've spoken about that before.

Speaker #3: We see growing momentum in UK retail. David talked about that. I expect the second half of the year in UK retail to be as strong as, or even stronger than, the first half.

Speaker #3: But at the same time, as David has mentioned, we have a lot of work to do in food service, and that will be a drag in the second half of the year.

Speaker #3: And it is likely to get worse before it gets better. That, combined with the help we had in Q2 from the slightly depressed comparator a year ago, means that at the moment I expect the second half performance, especially Q3 on the top line, to be softer than we saw in Q2.

Nick Cooper: That, combined with the help we had in Q2 from the slightly depressed comparator a year ago, means that at the moment, I expect the H2 performance, especially Q3, on the top line, to be softer than we saw in Q2 in spite of that further progress in rebuilding the foundations for the business. On gross margin, I think Jesse mentioned it before, most of the tariff-related costs are in inventory at the end of Q2 and will be a stronger drag on the gross margin in Q3 and Q4. But I do expect that to be substantially offset by those further transformation savings that we anticipate through our supply chain. Put all of that together, as I say, progress continues. We're confident in the underlying performance of the business and the progress that we're making on the transformation.

Speaker #3: In spite of that progress, there is further progress in rebuilding the foundations of the business. On gross margin, I think Jesse mentioned it before. Most of the Iran-related costs are in inventory at the end of Q2.

Speaker #3: And it will be a stronger drag on the gross margin in Q3 and Q4. But I do expect that to be substantially offset by those further transformation savings.

Speaker #3: That we anticipate throughout the supply chain. Put all of that together, as I say, progress continues. We're confident in the underlying performance of the business and the progress that we're making on the transformation.

Speaker #3: It won't be a completely linear path from where we are, but the glide path that we're looking at at the moment does say that we're on track to meet the projection that we set out in the IS36 at the end of last year.

Nick Cooper: It won't be a completely linear path from where we are, but the glide path that we're looking at at the moment does say that we're on track to meet the projection that we set out in the IAS 36 at the end of last year, and therefore avoid further impairment.

Speaker #3: And therefore avoid further impairment.

Speaker #1: Thank you, Nick. Jesse, the next question is for you, and this is for the noodle segment. Other than Jampong, are there plans for further premiumization efforts?

Michael J. Paska: Thank you, Nick. Jesse, the next question is for you, and this is for the noodle segment. Other than Jjamppong, are there plans for further premiumization efforts?

Mike Paska: Thank you, Nick. Jesse, the next question is for you, and this is for the noodle segment. Other than Jjamppong, are there plans for further premiumization efforts?

Speaker #2: Yes. First of all, let me talk about the premium segment. Actually, it's quite chunky right now. Our estimates, based on Nielsen, are that it is, on a retail basis, ₱4 to ₱4.5 billion in value.

Jesse Teo: Yes. First of all, let me talk about the premium segment. Actually, it is quite chunky right now. Our estimates based on Nielsen is that it is, on a retail basis, PHP 4 to 4.5 billion in value. In dry pouch, it is close to PHP 2 billion in value. The volume is small, obviously, because the price per unit is high. But the contribution value is big. This is why I think we are stronger in our volume share than our value share. We do recognize the opportunity for us. We are starting to play with Jjamppong stir-fried. We like what we see. We are lining up more programs to participate. Our share, obviously, on this premium segment is small, so we view it as a bit of an upside for us, not only in terms of sales, but also on margins. We cannot give specifics.

Speaker #2: In dry pouch, it is close to $2 billion in value. So, the volume is small, obviously, because the price per unit is high. But the contribution value is big.

Speaker #2: This is why I think we are stronger in our volume share than in our value share. We do recognize the opportunity for us. We started a play with jampong stir-fried.

Speaker #2: We like what we see. We are lining up more programs to participate. Our share, obviously, in this premium segment is small, so we view it as a bit of an upside for us.

Speaker #2: Not only in terms of sales, but also on margins. We cannot give specifics, so I'm not at liberty to share those with you for competitive reasons.

Jesse Teo: I am not at liberty to share with you specifics for competitive reasons. But rest assured, we are planning more entries so that we can have our fair share on this growing subcategory.

Speaker #2: But rest assured, we are planning more entries so that we can have our fair share in this growing category—subcategory.

Speaker #1: Thank you, Jesse. Another question for you is if you can elaborate a bit further on the share decline in yogurt drinks.

Michael J. Paska: Thank you, Jesse. Another question for you is if you can elaborate a bit further on the share decline in yogurt drinks.

Mike Paska: Thank you, Jesse. Another question for you is if you can elaborate a bit further on the share decline in yogurt drinks.

Speaker #2: Yeah, so the yogurt drink category and milk category are actually growing quite fast, right? As Henry mentioned earlier, we actually enjoyed 9% growth on our yogurt and Dutch Mill yogurt business.

Jesse Teo: Yeah. The yogurt drink category and milk category is actually growing quite fast. As Henry mentioned earlier, we actually enjoyed 9% growth on our yogurt, Dutch Mill, the yogurt business. However, there is a new entrant from outside, I will not name it, that is growing much faster and shaking up the categories and improving category value. We like competitors that expand the category. When category expands through competition, we benefit as the majority share leaders. But we do have to watch out that this new entrant does not eat a big enough share for us to gain scale. So we are closely watching. We are happy with the progress of the category. We are happy that the new competitor is helping expand the category, and we are benefiting from it. But we need to make sure that we retain our strong number 1 position.

Speaker #2: However, there's a new entrant from outside—I will not name it—that is going much faster and shaking up the categories, improving category value.

Speaker #2: We like competitors that expand the category. When the category expands, the competition benefits us as the majority share leaders. But we do have to watch out that this new entrant does not take a big enough share to gain scale.

Speaker #2: So we’re closely watching. We’re happy with the progress of the category. We’re happy that the new competitor is helping expand the category, and we’re benefiting from it.

Speaker #2: But we need to make sure that we retain our strong number-one position.

Speaker #1: Thank you. Jesse, another question—can you elaborate a bit on the domestic gross margin quarter-over-quarter compression, given that most of our commodities are hedged?

Michael J. Paska: Thank you. Jesse, another question is, can you elaborate a bit on the domestic gross margin quarter-over-quarter compression, given that most of our commodities are hedged?

Mike Paska: Thank you. Jesse, another question is, can you elaborate a bit on the domestic gross margin quarter-over-quarter compression, given that most of our commodities are hedged?

Speaker #2: Yeah. So, the reason I stated is the normalization of our contra revenue—contra revenue spending. Contra revenue is a reduction to sales; that's why it affects gross margin.

Jesse Teo: Well, the reason I stated is the normalization of our contra revenue spending. Contra revenue is a reduction to sales. That is why it affects gross margin. As I mentioned earlier, normally we are still finalizing plans in Q1 for our trade spend with our trade partners. Spend is muted at the start of the year. Then it picks up steam in the second half. This is a trend yearly. We do expect some higher contra revenue in Q2 and Q3 compared with Q1. That is expected. Also, as part of contra revenue, the trade where we are paying distribution center fees when we deliver to their warehouse, have increased their DC fees because of fuel prices going up.

Speaker #2: As I mentioned earlier, normally we are still finalizing plans in Q1 for our trade spend with our trade partners, so the spend is muted at the start of the year.

Speaker #2: Then it picks up steam in the second half. And this is a year over this is a trend yearly. So we do expect some higher contra revenue in the second quarter and third quarter compared with the first quarter.

Speaker #2: So that is expected. Also, as part of contra revenue, the trade where we are paying distribution center fees when we deliver to their direct warehouse have increased their DC fees.

Speaker #2: Because of the fuel prices going up, we also have to support our distributor on their logistics costs because of the very high logistics costs in Q2.

Jesse Teo: We also have to support our distributor on their logistics costs because of the very high logistics costs in Q2, and that contributed to higher contra revenue, which means depressed sales that lowers the gross margin. In addition to that, energy-related input costs for manufacturing, we are talking about coal, LPG, these went up together with diesel prices. That has a direct hit on manufacturing conversion costs, and that was the key upcharge that we saw for Q2. The good thing is we have not really seen the full impact. Most of our price increase went up mid-May, so we have a half a quarter effect for the full quarter. We also have a tranche of pricing in June. Only one third impact for the quarter for that. In the subsequent quarters, obviously, we will have full quarter impact of those pricing actions.

Speaker #2: And that contributed to higher contra revenue, which means depressed sales that lower the gross margin. In addition to that, energy-related input costs for manufacturing—we're talking about coal, LPG, right?

Speaker #2: These went up together with diesel prices, so that has a direct hit on manufacturing conversion costs. And that was for Q2. The good thing is we haven't really seen the full impact—most of our price increase went up mid-May.

Speaker #2: So, we have half a quarter of effect for the full quarter, right? We also have a tranche of pricing in June, so only one-third impact for the quarter.

Speaker #2: For that, in the subsequent quarters, obviously we'll have the full quarter impact of those pricing actions. That will cushion the blow for us on these upcharges.

Jesse Teo: That will cushion the blow for us on these upcharges. Diesel prices, while we cannot say that they will permanently be lower, they are much lower than the Q2, than the over PHP 100 per liter prices. That should help on a quarter-on-quarter comparison. Just like Nick said, we have high price packaging materials. We guided on that, the packaging materials were going up because a lot of them are derivatives of oil. Most of that higher packaging prices that we bought in Q2 are still in inventory, and so they will be released to P&L in Q3. Hopefully we can offset with our cost savings program, and our full quarter pricing that I talked about earlier.

Speaker #2: Diesel prices while we cannot say that they will primarily be lower. They are much lower than the Q2 than the over 100 peso per liter prices.

Speaker #2: So that should help on a quarter-on-quarter comparison. Just like Nick said, we have high-priced packaging materials. We guided that the packaging materials were going up because a lot of them are derivatives of oil.

Speaker #2: Most of that higher massaging prices are that we bought in Q2 are still in inventory. And so they will be released to P&L in Q3.

Speaker #2: So that hopefully we can offset this with our cost savings program and our full-quarter pricing that I talked about earlier.

Speaker #1: Jesse, any feedback on the decline in noodle volume after increasing prices in the second quarter?

Michael J. Paska: Jesse, any feedback on the decline on noodles volume after increasing prices in Q2?

Mike Paska: Jesse, any feedback on the decline on noodles volume after increasing prices in Q2?

Speaker #2: Yes, so I guess people are trying to contrast the difference between the positive elasticity of biscuits, where we grew unit price and volume at the same time.

Jesse Teo: Yes. I guess people are trying to contrast the difference between the positive elasticity of biscuits, where we grew unit price and volume at the same time, and noodles, where we grew unit price by 3.8% but declined 6.1%. I think partly because since noodle is the higher velocity product, probably people were, when the trade was expecting price increases in May, they loaded up on the higher velocity product. We do have the Q1 versus Q2 effect of noodles felt in Q2. I think that plays a big part on the difference between our two categories on volume for the quarter.

Speaker #2: And noodles, where we grew unit price by 3.8%, but the client 6.1%. I think, partly because since noodles is a higher velocity product, probably people were, when the trade was expecting price increases in May, they loaded up on the higher velocity product.

Speaker #2: So, we do have the Q1 versus Q2 effect of noodles felt in Q2. So, I think that plays a big part in the difference between our two categories on volume.

Speaker #2: For the quarter.

Speaker #1: Jesse, assuming there's no force majeure on any of our main commodities, what is the outlook for dividends in the second half?

Michael J. Paska: Jesse, assuming there is no force majeure on any of our main commodities, what is the outlook for dividends in the H2?

Mike Paska: Jesse, assuming there is no force majeure on any of our main commodities, what is the outlook for dividends in the H2?

Speaker #2: Yeah. So the likelihood of force majeure is now very small. I think we have seen the worst parts. Most of our suppliers for the key raw materials and packaging materials have said that we shouldn't have any disruption in supply.

Jesse Teo: Yeah. The likelihood of force majeure is now very small. I think we have seen the worst parts. Most of our suppliers for the key raw materials and packaging materials have said that we should not have had disruption in supply. That is the good news. And we have shown that we are very resilient amidst the Middle East challenges, booking record bottom line not only in Q1, but also H1. So we are confident in our programs to continue to offset the many challenges that could come our way, energy related, Super El Niño, and all the other things that will come our way. Our brands also have good pricing power, and so any level playing field change where everybody has to adjust, our brands are able to hold up reasonable price increases with our consumers still supporting us. Sorry, again, Mike, what was the specific?

Speaker #2: So that's the good news. And we have shown that we are very resilient at meeting the Middle East challenges, booking record bottom line not only in Q1 but also in the first half.

Speaker #2: So we are confident in our programs to continue to offset the many challenges that could come our way—energy-related, Super El Niño, and all the other things that could come our way. Our brands also have good pricing power.

Speaker #2: And so, any level playing field change, where everybody has to adjust, will mean our brands are able to hold up reasonable price increases, with our customers still supporting us.

Speaker #2: Sorry again. Mike, what is the specific question? I think I went over it in the intro. What was the specific question again?

Jesse Teo: I think I went over on intro. What was the specific question again?

Speaker #1: Oh. Well, no, I think you answered it. But I guess related to this, can you elaborate on what is driving the divergence in elasticities of noodles and biscuits?

Michael J. Paska: Well, no, I think you answered it. I guess related to this, can you elaborate on what is driving the divergence in elasticities of noodles and biscuits?

Mike Paska: Well, no, I think you answered it. I guess related to this, can you elaborate on what is driving the divergence in elasticities of noodles and biscuits?

Speaker #2: Oh, I mentioned that. I think it's because of the higher velocity of noodles, as there was a very public request from the government to hold the price increases.

Jesse Teo: I mentioned that. I think because of the higher velocity of noodles. There was a very public request from the government to hold the price increases until a certain time. Most of the manufacturers did time their price increase after that period, which is mid-May. Since the trade was able to anticipate that, they stocked up more on the higher velocity product, which is noodles. I think that is a big contributor. That is one of the key reasons for the divergence on elasticity.

Speaker #2: And also, at that time, most of the manufacturers did time their price increases after the period, which is mid-May. Since the trade was able to anticipate that, they stocked up more on the higher velocity product, which is noodles.

Speaker #2: I think that is a big contribution. That's one of the key reasons for the divergence on elasticity.

Speaker #1: And can you share which subsegment mostly drove the volume drop in noodles?

Michael J. Paska: Can you share what sub-segment mostly drove the volume drop in noodles?

Mike Paska: Can you share what sub-segment mostly drove the volume drop in noodles?

Jesse Teo: It's dry pouch and cups. We have good recovery in our wet pouch, as can be seen from our share.

Speaker #2: It's basically share. It's rice pouch and cups. We have good recovery in our wet pouch, as can be seen from our share.

Speaker #1: And Jesse, here's a question on product innovation. Can you provide any updates on product?

Michael J. Paska: Jesse, here's a question on product innovation. Can you provide any updates on product-

Mike Paska: Jesse, here's a question on product innovation. Can you provide any updates on product-

Speaker #2: Oh, let me just add a comment. Right, so there are obviously disruptions in the pattern of when people buy. I think the most important thing to consider is the underlying demand.

Jesse Teo: Oh, let me just add a comment. There are obviously disruptions on the pattern of when people buy. I think the most important thing to consider is the underlying demand. From an underlying demand standpoint, as we mentioned, we are steady on a value share standpoint. We are increasing on a volume share standpoint. I think if you look at underlying health, you strip out all the volatility of ordering and inventory, we should be viewing that more than the actual sales, which is affected by some speculations and buying ahead, adjusting inventory, et cetera.

Speaker #2: And from an underlying demand standpoint, as we mentioned, we are steady on a value share standpoint, and we are increasing on a volume share standpoint.

Speaker #2: So I think if you look at underlying health, you strip out all the volatility of ordering and inventory. That should be—we should be viewing that more than the actual sales, which are affected by some speculations and buying ahead, adjusting inventory, etc.

Speaker #1: And Jesse, this next question is on innovation: can you provide any product innovation in APAC BFB, and are there any segments that we're particularly excited about?

Michael J. Paska: Jessie, this next question's on innovation, if you can provide any product innovation in APAC BFB. Are there any segments that we're particularly excited about?

Mike Paska: Jessie, this next question's on innovation, if you can provide any product innovation in APAC BFB. Are there any segments that we're particularly excited about?

Speaker #2: Yes. As I mentioned earlier, I think our most important biscuit brand is, and already is, our Skyflakes brand. We made our crunchy Skyflakes, which is known for its crunchiness, even more crunchy—so it's the crunchiest ever Skyflakes.

Jesse Teo: Yes. As Henry mentioned earlier, I think our most important biscuit brand is SkyFlakes. The key innovation that is out already is we made our SkyFlakes brand, which is known for its crunchiness, even more crunchy. So it is the crunchiest ever SkyFlakes. We are giving what people want in SkyFlakes into a higher level. So we are pretty excited about that. In the vernacular, actually, SkyFlakes is known as "Malutong kahit anong ipatong," right? Ito, mas malutong. Mas malutong na. So even more crunchier. We expect to get good progress from that initiative.

Speaker #2: We are giving what people want in Skyflakes to a higher level, so we are pretty excited about that. In the vernacular, actually, Skyflakes is known as 'malutong kahit anong ipatong.'

Speaker #2: Right. Ito, mas malutong. Mas malutong na. So even more crunchy. We expect to get good progress from that initiative.

Speaker #1: And Jesse, here's another question on pricing. When did the company start increasing pricing for APAC, and what is the average price increase year-to-date? And just related to that, what is our strategy for price increases going forward?

Michael J. Paska: Jesse, here is another question on pricing. When did the company start increasing pricing for APAC? What is the average price increase year to date? Just related to that, what is our strategy for price increases going forward?

Mike Paska: Jesse, here is another question on pricing. When did the company start increasing pricing for APAC? What is the average price increase year to date? Just related to that, what is our strategy for price increases going forward?

Speaker #2: So, our strategy for price increases is to tranche the price increases. We don't believe in one-time, big-time price increases, even if we take a temporary price margin hit.

Jesse Teo: Our strategy for price increases is to tranche our price increases. We do not believe in one time, big time price increases. Even if we take a temporary price, a margin hit, we want to cushion the blow to our loyal consumers. Our price increases range from 1% to 5%, depending on the specific products. The average price increase that we saw for the quarter was just 2.5%. So there are some more full quarter benefits from pricing that we did not see in Q2. On the timing, I think I mentioned earlier, most of it was implemented mid-May, then we have another tranche in June.

Speaker #2: We want to cushion the blow to our loyal consumers. Our price increases range from 1% to 5%, depending on the specific products. The average price increase that we saw for the quarter was just 2.5%.

Speaker #2: So there's some more full-quarter benefits from pricing that we did not see in Q2. On the timing, I think I mentioned earlier, most of it was implemented mid-May, and then we have another tranche in June.

Speaker #1: Okay. Jesse, for APAC, can you say anything about how July and August so far are going?

Michael J. Paska: Okay. Jesse, for APAC, can you say anything about how July and August so far is going?

Mike Paska: Okay. Jesse, for APAC, can you say anything about how July and August so far is going?

Speaker #2: Oh, it's better than the Q2 average, so that's good. The rains are also falling. Rains usually mean better noodle demand, so we're hoping for that.

Jesse Teo: Oh, it's better than the Q2 average. So good. The rains are also falling. Rains usually mean better noodle demand, so we're hoping for that. It was a rather dry July, but August seems to be bringing rains, so that is generally helpful for noodle demand.

Speaker #2: It was a rather dry July, right? But August seems to be bringing in rains, so that is generally helpful for noodle demand.

Michael J. Paska: Jesse, related to gross margin, how do you see the H2 of the year, given that both wheat and palm oil are on the uptrend?

Mike Paska: Jesse, related to gross margin, how do you see the H2 of the year, given that both wheat and palm oil are on the uptrend?

Speaker #1: Jesse, related to gross margin, how do you see the second half of the year given that both wheat and palm oil are on the uptrend?

Speaker #2: Yes. So we have locked in positions, which protects us from the 90th percentile on a one-year basis on wheat and the 80th percentile on palm oil.

Jesse Teo: Yes. We have locked in positions, which protects us from the 90 percentile on a 1 year basis on wheat and 80 plus percentile on palm oil. We will go in to buy at much lower than that. But our coverage is not forever. We hope that these commodities go down soon. But we are in good position for the H2. It'll be increasing because even our lock-ins are increasing. So it's better than market, but slightly increasing because the prices of medium have gone up. We have just managed the rate of increase. Packaging, as I mentioned also, the Q2 packaging, because of the Middle East crisis, went up, shot up quite sharply. That's in stock right now and will be released P&L in Q3. But we do expect with oil prices stabilizing, that packaging prices will go down and normalize by Q4.

Speaker #2: So we will—we will be going to buy at much lower than that. But our coverage is not forever. We hope that these commodities go down soon.

Speaker #2: But we are in a good position for the second half. It'll be increasing, it'll be increasing because even our lock-in side is increasing. So, it's better than the market but slightly increasing.

Speaker #2: Because the prices have really gone up, we have just managed the rate of increase. Packaging, as I mentioned, also in Q2—packaging because of the Middle East crisis—went up, shot up quite sharply.

Speaker #2: That's in stock right now, and we'll be releasing P&L in Q3. But we do expect, with oil prices stabilizing, that packaging prices will go down and normalize by Q4.

Speaker #2: Pricing, as I mentioned, should help cushion the blow. We also have a very strong cost savings program. We have our own version of Transform Twin.

Jesse Teo: Pricing, as I mentioned, should help cushion the blow. We also have very strong cost savings program. We have our own version of Transform to Win. That should also help with our gross margin management. In summary, there will be challenges. There are challenges. Obviously, some headwinds that we all face. But we are working hard to offset and recover back a lot of margins that we squeezed by the headwinds.

Speaker #2: So that should also help with our gross margin management. In summary, there will be challenges. There are challenges—obviously, some headwinds that we all face.

Speaker #2: But we are working hard to offset and recover back a lot of margins that would be squeezed by the headwinds.

Speaker #1: Thanks, Jesse. Can you provide more details on how big the premium segment of noodles is versus the rest of the overall category?

Michael J. Paska: Thanks, Jesse. Can you provide more details on how big the premium segment of noodles is versus the rest of the overall category?

Mike Paska: Thanks, Jesse. Can you provide more details on how big the premium segment of noodles is versus the rest of the overall category?

Speaker #2: I think the overall category is over 50. So as I mentioned, about 4.5—so close to 10%, about 8 to 10% of the category in value.

Jesse Teo: I think the overall category is over 50. So as I mentioned, about 4.5. So close to 10%. So 8% to 10% of the category in value. Of course, much smaller in volume.

Speaker #2: Of course, much smaller in volume.

Speaker #1: Thank you, Jesse. And this question is regarding 4X gains in corn net income. Would corn net income have grown in line with core EBITDA's low single-digit growth?

Michael J. Paska: Thank you, Jesse. This question is regarding ForEx gains in core net income. Would core net income have grown in line with core EBITDA low single digit growth if you take out the ForEx gains?

Mike Paska: Thank you, Jesse. This question is regarding ForEx gains in core net income. Would core net income have grown in line with core EBITDA low single digit growth if you take out the ForEx gains?

Speaker #1: If you take out the 4x gains?

Speaker #2: Yes, I think we will still have double-digit growth in corn net income even if you strip out 4x gains, so we will still have very strong corn net income without that.

Jesse Teo: Yes. I think we still will have a double-digit growth in core net income, even if you strip out ForEx gains. So we will still have a very strong core net income without that. The core net income delta is quite big because in the H1 last year, we had a loss, $26 million. The peso appreciated. This year, the peso sharply depreciated, so we have over $200 million gain. So the delta is over $300 million.

Speaker #2: The corn net income delta is quite big because in the first half of last year, we had a loss of ₱96 million as the peso appreciated.

Speaker #2: This year, the peso sharply depreciated. So, we have a 200 over 200 million gain. So, the delta is about 3, or is over 300 million.

Speaker #1: Thank you, Jesse. Can you talk about what specific cost-saving measures can be implemented in APAC?

Michael J. Paska: Thank you, Jesse. Can you talk about what specific cost savings measures that can be implemented in APAC?

Mike Paska: Thank you, Jesse. Can you talk about what specific cost savings measures that can be implemented in APAC?

Speaker #2: For competitive reasons, I cannot go into specifics because it relates to some formulations that we have. But what I can guide is we look at the prices of the commodities, and if there are opportunities to make substitutes depending on the different prices of substitutes, we do them.

Jesse Teo: For competitive reasons, I cannot go specific because it leads to some formulations that we have. But what I can guide over is we look at the prices of the commodities, and if there are opportunities to make substitutes, depending on the different prices of substitutes, we do them, depending on which particular commodity is cheaper. We have built that capability, and we are able to, on an agile basis, adjust. This is very important, without compromising the consumer experience.

Speaker #2: Depending on which particular commodity is cheaper, so we have built that capability and we are able to, on an agile basis, adjust without compromising.

Speaker #2: And this is very important, without compromising this consumer experience.

Speaker #1: Jesse, can you give us more detail on raw material trends and hedging?

Michael J. Paska: Jesse, can you give us more detail on raw material trends and hedging?

Mike Paska: Jesse, can you give us more detail on raw material trends and hedging?

Jesse Teo: Raw material trends, as I said earlier, wheat, palm oil are all up, 90% plus. Even the futures are up. Our swaps were in a major in the money position for those because of that. They are up. We have hedge positions until the end of the year. Most of Q4 is locked in. But it is not forever, right? On US dollar, which affects our input costs, we have over $100 million of stockpile that can help protect us from further weakness in the peso relative to the US dollar. Sugar has a nice trend. Sugar is down versus year ago, and we are taking advantage of that. I mentioned earlier, coconut oil. There has been a substantial dip in Q3, and we are taking advantage of that.

Speaker #2: Raw material trends as I said earlier wheat, palm oil are all up 90 plus even the futures are up. Our swaps are have were in a major in the money position for those.

Speaker #2: But because of that, they are up. We have hedge positions until the end of the year. Most of Q4 is locked in. But it's not forever.

Speaker #2: Right. So, on US dollar, which affects our input costs, we have over $100 million of stockpile that could help protect us from further weakness in the peso relative to the US dollar.

Speaker #2: Sugar has a nice trend. Sugar is down versus a year ago, and we're taking advantage of that. I mentioned earlier coconut oil; there has been a substantial dip in Q3, and we are taking advantage of that.

Speaker #2: While we are not able to do non-deliverable swaps for coconut oil, we are buying as much as we can physically store while the prices are cheap.

Jesse Teo: While we are not able to do non-deliverable swaps for coconut oil, we are buying as much as we can, as we can physically store, while the prices are cheap.

Speaker #1: Thank you. Jesse, I think we have time for one further question. And this is: Do you expect any impact from the proposed excise tax on sweets and beverages?

Michael J. Paska: Thank you. Jesse, I think we have time for one further question, and this is: Do you expect any impact on the proposed excise tax on sweetened beverages?

Mike Paska: Thank you. Jesse, I think we have time for one further question, and this is: Do you expect any impact on the proposed excise tax on sweetened beverages?

Speaker #2: I think the main thing is the removal exception for TM1 coffee. Right? I think milk will still be in play. Our beverage is mostly milk-based.

Jesse Teo: I think the main thing is the removal exception for 3-in-1 coffee, right? I think milk will still be okay. Our beverage, mostly milk-based. So unless they reverse that, and I don't know what the proponent is, but if it's for health reasons, generally milk is considered as healthy. So, if it's a revenue-generating measure, then not for health reasons. But we'll be agile. Our brands are strong. I cannot control the legislation, but if it's a level playing field event, our brand is strong. It's over 80 share. It's a level playing field change, we should be able to come out of it strong, unless it's not a taxation that really destroys demand, right? If it's a reasonable level playing field change, we should be able to overcome that with our strong brand position.

Speaker #2: So unless they reverse that, and I don't know what the proponent is, but if it's for health reasons, generally milk is considered as healthy.

Speaker #2: So, if it's a revenue-generating measure, then—but not for health reasons—but we'll be agile. I mean, our runs are strong. I cannot control the legislation.

Speaker #2: But if it's a level playing field event, our run is strong. It's 80 over 80 share. If it's a level playing field change, we should be able to come out of it strong.

Speaker #2: Unless it's a taxation that really just destroys demand, right? If it's a reasonable, level playing field change, we should be able to overcome that.

Speaker #2: With our strong brand position. If I don't think there will be a taxation that will destroy demand because the health people I think the health department will probably want to encourage healthy consumption of milk.

Jesse Teo: I don't think there will be a taxation that will destroy demand because the health people, I think the health department will probably want to encourage healthy consumption of milk.

Speaker #1: Thank you, Jesse. This concludes the Q&A portion of the call. I would now like to turn it back over to Henry for closing remarks.

Michael J. Paska: Thank you, Jesse. This concludes the Q&A portion of the call. I would now like to turn it back over to Henry for closing remarks.

Mike Paska: Thank you, Jesse. This concludes the Q&A portion of the call. I would now like to turn it back over to Henry for closing remarks.

Speaker #3: Thank you, everyone, for your participation in this call and your continued interest in our company. In summary, our APAC BFP business delivered more of this growth in the second quarter.

Henry Soesanto: Thank you, everyone, for your participation in this call and continued interest in our company. In summary, our APAC BFB business delivered modest growth in Q2, led by biscuits and our strategic growth categories. Our disciplined pricing, cost management, and hedging drove year-on-year gross margin expansion. Sequentially, however, gross margin declined by over 200 basis points, reflecting higher manufacturing overhead, particularly energy costs and logistic costs arising from the Middle East crisis. These pressures, together with the higher operating logistic expenses and increased A&P investment, moderated year-on-year earnings growth, partially offset by the significant benefit from our USD hedge position. For protein, we are encouraged by the protein business' continued progress in Q2 and future potentials. Still in protein, revenue grew 2.7% on constant currency basis, driven by growth in the snacking segment.

Speaker #3: Led by biscuits and our strategic growth categories, our disciplined pricing, cost management, and hedging drove year-on-year gross margin expansion. Sequentially, however, gross margin declined by over 200 basis points, reflecting higher manufacturing overhead, particularly energy costs and logistics costs arising from the Middle East crisis.

Speaker #3: These pressures, together with the higher operating and logistics expenses and increased ANP investment, moderated year-on-year earnings growth. This was partially offset by a significant benefit from our US dollar hedge position.

Speaker #3: We are encouraged by the protein business's continued progress in the second quarter and its future potential. In Q2, protein revenue grew 2.7% on a constant currency basis, driven by growth in the snacking segment.

Speaker #3: Gross margin expanded by nearly 500 basic points. And the first half core EBITDA exceeds the business full year EBITDA for the previous years. We remain mindful of ongoing input cost pressures and will continue to manage the business prudently.

Henry Soesanto: Gross margin expanded by nearly 500 basis points, and the H1 core EBITDA exceeds the business full year EBITDA for the previous year. We remain mindful of ongoing input cost pressures, and will continue to manage the business prudently while remaining sensitive to our consumers should further pricing adjustment become necessary. With that, I look forward to speaking to you in November when we hold our first 9 months 2026 earnings call. Until then, stay safe and healthy. Thank you.

Speaker #3: While remaining sensitive to our consumers, should further pricing adjustment become necessary. With that, I look forward to speaking to you in November when we hold our first nine months 2026 earnings call.

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Q2 2026 Monde Nissin Corp Earnings Call

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